Issuu on Google+

Environmental Friendly Technology

2009 Annual Report G J STEEL PUBLIC COMPANY LIMITED


Quality Steel by Quality People

Contents

Message From The Chairman Audit Committee Report Financial Highlights General Information of Company Nature of Business Risk Factors Shareholding Structure and Management Board of Directors and Management Team Related Transactions Analysis and Explanation of Management Auditor Report of Certificated Public Accountant Financial Statements

2 4 5 6 7 11 13 24 30 35 37 40


Message From The Chairman

Dear Shareholders, It is undeniable that 2009 was our most challenging year since becoming a subsidiary of G Steel Public Company Limited. It was, however, also the most difficult year for almost all steel producers in the global steel industry. The global financial crisis damaged the steel industry more than we could have imagined. Even worse, Thailand was aggravated by its internal political tensions, resulting in disproportionate challenges for steel producers in Thailand relative to the rest of the world. As such, our 2009 financial performance reflects these difficulties. The most fundamental impact of the global financial crisis was that the sharp and sudden decline in both the price of and demand for steel products. Furthermore, as steel industry participants rushed to stock up on raw material inventory in the wake of shortage conditions prior to the global financial crisis, producers found themselves with large stocks of inventory which precipitously declined in value within a matter of weeks following the onset of the crisis. The resulting global inventory destocking and rapid decline in pricing is evidenced in our performance. In 2009, our production levels fell 40.19%, our sales volumes dropped 29.23% and our revenue was slashed 52.8% when compared to 2008.

Notwithstanding all of the bad news in 2009, I am pleased to report that as I write this letter, the worst of the crisis has undoubtedly passed, and we now look to a brighter future. We are now plotting our course for recovery and laying the basis for our long-term business planning. Flat-rolled steel pricing has stabilized, and our customers are showing renewed, albeit slow, return to their pre-crisis purchasing patterns. With our strong alliance with G Steel Public Company Limited, we are confident that our 2010 business performance will show significant improvements when compared to 2009 and demonstrate a more stable future for our investors. Furthermore, we firmly believe G Steel’s recent management changes and commitment to repositioning its balance sheet will further support our business. As we close the chapter on 2009, there is one matter that is getting a significant level of attention as this report goes to print. On January 25, 2010 Thailand’s Securities and Exchange Commission and the Stock Exchange of Thailand announced that our company, together with our partner, G Steel Public Company Limited, is required to perform a special audit with respect to the transactions that led to our auditor’s inability to issue an accounting opinion in regards to our 3 rd quarter 2009 financial statements. The Board authorized management to

2 G J Steel Public Company Limited

Annual Report 2009


work with KPMG for the special audit. KPMG’s special audit report is scheduled to be completed on April 7, 2010. While the special audit is a regulatory mandate, we do see a silver lining as a result of the exercise. We are hopeful that following execution of the special audit KPMG’s confidence in our financial statements will be restored and the financial community will have greater comfort in the information presented. As we focus on improving our business performance and rebuilding for the future, we will never overlook our commitment to the environment. We pride ourselves on our utilization of the world’s most environmentally-friendly technologies for steel production. Specifically, our facility is equipped with Consteel® Technology and Thin Slab Continuous Casting Technology which allows us to engage in steel production with greater energy efficiency. Our Electric Arc Furnace allows us to use

recycled scrap in the process of steel production, thereby making us one of the largest recycling operations in Thailand. This combination of mini-mill technologies permits us to emit significantly less carbon dioxide into the environment. Finally, I would like to express my sincere gratitude and appreciation to our shareholders, stakeholders and, of course, all of our employees who have persevered with us as we were subjected to the most difficult period in the history of the industry. It is this loyalty which will allow us to be successful. Please continue to join me as we take steps in order to position G J Steel Pubic Company Limited as one of the profitable steel manufacturers in Thailand and a proud example to the world’s steel industry. (MR. NIBHAT BHUKKANASUT) CHAIRMAN

3 Annual Report 2009

G J Steel Public Company Limited


Audit Committee Report Year 2009

G J Steel Public Company Limited’s Board of Directors Meeting has appointed the Audit Committee on 23 March 2009. The Committee consists of the independent members as follows: 1. Assoc. Prof. Niputh Jitprasonk Chairman of the Audit Committee 2. Asst. Prof. Dr. Tanawat Ceevaromaya Audit Committee Member 3. Mrs. Arthidtaya Sutatam Audit Committee Member After being appointed by the Board of Directors, the Audit Committee has performed the assigned duties with full capability, therefore I, Assoc. Prof. Niputh Jitprasonk, on behalf of the Audit Committee would like to present the Audit Committee Report year 2009. In The fiscal year ended 31 December 2009, the fundamental impact of the global financial crisis was that the sharp and sudden rise and drop in both the price and demand of steel continuing from year 2008. Besides, the Audit Committee has perceived various observations from the independent auditor and apparently the independent auditor has not expressed the opinions on Financial Statements the

problem of which is required to be submitted to the Company’s Board of Directors to jointly consider in solving the problem in accordance with the observations of

the independent auditor in order to find the ways for the improvement and proper correction or mitigate or eliminate the damage. Moreover verification on the result of internal audit and the adoption of the observations of the independent auditor for improvements and corrections will finally be brought back into the frame of correctness and transparency in the corporate governance. With reference from the observations of the independent auditor, the Securities and Exchange Commission (“SEC”) has ordered the Company to perform

a Special Audit in order to clarify the doubtful issue. Additionally the Audit Committee will review and ensure

the operation transparently and resolve the occurred problems for the benefit of our shareholders. Assoc. Prof. Niputh Jitprasonk Chairman of the Audit Committee

4 G J Steel Public Company Limited

Annual Report 2009


Financial Highlights

Operating Result (in thousand THB)

2009

2008

2007

Total Sale Total Revenue Cost of Good Sold Net Profit / (Loss) Net Profit /( Loss) per Share (in THB) Financial Status (in thousand THB)

12,314,216 14,249,062 16,234,699 (4,593,529) (0.12)

26,115,051 26,889,934 25,066,143 (3,597,984) (0.10)

23,593,313 23,938,192 22,268,120 (176,519) (0.01)

Total Assets Total Liabilities Shareholder’s Equity Book Value per Share (in THB) Financial Policy Ratios

26,624,038 7,811,074 18,812,964 0.47

30,165,220 6,751,997 23,413,223 0.59

31,101,432 9,932,964 21,168,468 0.82

Debt Equity Raito (time) Interest Coverage Ratio (time) Dividend Ratio (%) Profitability Ratios

0.42 14.31 0

0.29 2.95 0

0.47 (0.14) 0

Gross Profit / (loss) (%) Net Profit / (loss) (%) Return on Equity (%) Efficiency Ratio

(31.84) (37.30) (21.76)

4.02 (13.78) (16.14)

5.62 (0.74) (0.87)

Return on Asset (%) Fixed Assets Turnover (%) Assets Turnover (time)

(16.18) (16.11) 0.50

(11.75) (10.17) 0.88

(0.57) 2.05 0.77

5 Annual Report 2009

G J Steel Public Company Limited


General Information of Company

G J Steel Public Company Limited Business Type Symbol Head Office

Factory

Established Registered to be a Public Company Limited Trading Date Authorized Capital Paid Up Capital Common Share Par Value Warrant Share Registrar

Auditor

Legal Adviser

: Public Company Registration No. 0107538000401 (Originally Bor Mor Jor No. 563) : Manufacture of Hot Rolled Coil : GJS : 88 PASO Tower, 24th Floor, Silom Road, Suriyawong, Bangrak, Bangkok 10500 Tel. (66) 0-2267-8222 Fax (66) 0-2267-9048 : Hemaraj Chonburi Industrial Estate, 358 Moo 6 Highway No. 331 Bowin, Sriracha, Chonburi 20230 Tel. (66) 038-345-950 Fax (66) 038-345-693 : January 5, 1994 : August 9, 1995 : July 2, 1996 : Baht 40,478,051,204.94 : Baht 27,394,674,312.60 : 39,702,426,540 Shares : Baht 0.69 : GJS-W1 3,233,879,388 Units : Thailand Securities Depository Company Limited 4, 6-7th Floor, The Stock Exchange of Thailand Building, 62 Ratchadapisek Road, Klongtoey, Bangkok 10110 Tel. (66) 0-2229-2800 Fax (66) 0-2654-5427 : Mrs. Wilai Buranakittisopon Certified Public Accountant Registration No. 3920 KPMG Phoomchai Audit Limited. 48 th Floor, Empire Tower, 195 South Sathorn Road, Yannawa, Sathorn, Bangkok 10120 Tel. (66) 0-2677-2000 Fax (66) 0-2677-2222 : FBLP Legal Co., Ltd. 14th Floor, Silom Complex Building, 191 Silom Road, Bangrak, Bangkok 10500 Tel. (66) 0-2266-5234 Fax (66) 0-2266-5586, 266-5587

6 G J Steel Public Company Limited

Annual Report 2009


Nature of Business

Corporate History

The Company was first registered in 1994 under the name Nakornthai Strip Mill Co., Ltd. with funds substantially provided by a syndicate of Thai banks. Construction of the mill commenced in 1995 and the Company was listed on the SET in 1996 with an IPO price of THB 16 per share with the par value of THB 10 per share. Construction and start-up of the Hot Mill was completed in 1997 and the Company commenced commissioning in October the same year. During commissioning, NSM produced 207,129 tonnes of hotrolled steel. However, because of the financial crisis that hit Thailand in 1997, the Company was unable to raise further funds in the domestic market as planned, to finish the DRI and finishing facilities. With a lack of domestic financing, NSM looked to complete the mini-mill by raising funds through the US debt and equity markets. In March 1998 the Company successfully raised USD 505.63 million US Notes issue. As a condition to the issue, NSM was required to bring in management expertise through Steel Dynamics Inc (“SDI”), a leading mini-mill operator in the United States. However, due to the fall in the international price of hot-rolled steel from USD 340 to USD 200 per tonne in 1998, SDI cancelled its management contract. As such, the Company’s access to its remaining funds had been severely restricted under the terms of its long-term debt agreement, that were scheduled to be provided to the Company, and completion of the construction of the facilities was forced to be discontinued. The mill was mothballed from 1999. Cessation of production impacted the Company cash flow worse than expected. Lack of liquidity since December 1998 caused the company to be unable to settle any debts.

Annual Report 2009

G J Steel Public Company Limited

The Company entered into debt restructuring under the supervision of CDRAC in 1999. It entered into the Business Reorganization pursuant to the Bankruptcy Act in April 2000. On October 27-29, 2003, the Company

was able to raise funds, essential for the reorganizing process, by offering new shares in the Public Offering

of 1,800,000,000 shares with a par value of THB 8.25 per share. The Public Offering price was at THB 2.20 per share. Including conversion under the Reorganization Plan that led to THB 74,137,788,788.25 paid-up capital and a total of 8,986,398,641 common shares. In 2004, the Company started production for commercial market and achieved net profit from the 3rd quarter operation and also achieved net profit from cumulative operation for the year ended 2004. In May, 2005, The Stock Exchange of Thailand (SET) has transferred the securities of NSM from the REHABCO sector to Construction Materials sector, Property and Construction group and two Creditors had conversion of

the principal amount under the Master Restructuring Agreement (“MRA”). And in December, The Company’s quality for the entire production process has been assured by achievement of ISO 9001 : 2000 In June 2006, the Business Reorganization Plan of the Company was amended with the main issue of converting the restructured term loan into ordinary share

of the Company, the Business Reorganization Plan stipulates that there shall be an increase and decrease

of the registered capital of the Company in order to support the debt-to-equity conversion which resulted in the registered capital of the Company increased to THB 171,478,835,962.50. In September, there was a change

of directors of the Company and in November, the Company moved the Company’s headquarter. Moreover, in December, the Company decreased its registered capital by decreasing the par value from THB 8.25 to THB 1.12.

7


In January 2007, the Company has registered paid up capital in amount of THB 4,360,784,730.40. In April, the Company has registered paid up capital in amount of THB 1,115,350,468.96. In December, the Meeting considered and resolved to approve the petition for amendment of the business Reorganization Plan of the Company with a vote of 99.99 % of the creditors who attended the meeting and cast their vote. The Meeting resolved to extend the time period for implementation of the Business Reorganization Plan for one year from the period December 11, 2007 and the Central Bankruptcy Court considered and approved the Petition on March 3, 2008. In February 2008, the Creditor’s Meeting considered and approved the petition for amendment of the Business Reorganization Plan of the Company in order to allow the Company to issue the convertible debentures for the amount of USD 250 Million for sale to investors. In

the present, the Company has not managed for sale because of the world financial crisis. The Company registered the paid-up capital into total amount of THB 15,711,031,461.44 in order to support the debt-to-equity conversion to the creditor. In April the Company has informed the change in the major shareholding structure

of the company whereby G Steel Public Company

Limited holding 49.67%. Consequently, the change derives from conversion debt-into-equity restructuring debt into ordinary shares of the Company determined in Business Reorganization Plan, the Company registered the change

of the Company’s name from Nakornthai Strip Mill

Public Company Limited to G J Steel Public Company Limited with Department of Business Development, Ministry of Commerce on June 5, 2008. On June 12, 2008, the Company reduced registered capital by decreasing the par value of the share from THB 1.12 to THB 0.78 in order to set off against the share discount of THB 13,286,677,768.15. The Company has reduced the registered capital of

the Company by decreasing the par value from THB 0.78 to THB 0.69 in order to cover the deficit THB 3,304.86 million on November 4, 2008. The Company has reduced the registered capital of the Company for the ordinary shares which have not been issued for the amount of 864,877,421

shares on November 5, 2008. The Company has increased the registered capital in the amount of THB 502,000,114.62 in order to support the issuance of Employee Stock Option Program on November 6, 2008. On November 28, 2008, the Company filed the petition to terminate of the Business Reorganization Plan with the Central Bankruptcy Court since the Company has successfully completed its Business Reorganization Plan. The Company was authorized to issue and offer ESOP warrants by the Securities and Exchange Commission in the amount of 727,536,398 shares or equivalent to 1.83% of total paid-up capital of the Company on December 11, 2008

Major Events and Developments in 2009 March

On March 2, 2009, the Central Bankruptcy Court order on termination of Business Reorganization of the Company and on March 23, 2009, the Board of Directors Meeting No.1/2009 has passed a resolution to appoint three groups of the Board of Directors compose of Executive Committee, Audit Committee, and Nomination and Remuneration Committee and resolved to set the date of 2009 Annual General Meeting as of 23 April 2009 April The 2009 Annual General Meeting has passed a resolution to appointed the directors and to approved the Remuneration of the Directors for the year 2009 and also to appointed the Company’s auditor and to approved the audit fees for the year 2009. December The Extraordinary General Meeting No.1/2552 has passed a resolution to approved the issuance of the Second Warrant in the amount of 5,000 million units for sale to all exiting shareholders base on shareholding proportion with the offering price of THB 0.03 per unit

and approved the increase of the registered

capital of the Company in the amount THB 10,350 million by issuing the ordinary shares in the amount of 15,000 million shares in order to support the issuance of the Second Warrant.

8 G J Steel Public Company Limited

Annual Report 2009


Major Events and Developments in 2010

January On January 22, 2010, the Board of Directors Meeting has passed a resolution to fix the record date to determine the shareholder who shall be entitled to subscribe to the warrant

as of February 9, 2010 and the date to close the share registration book on February 10, 2010 and fix the period of subscription during

3-5 March 2010 and 8-9 March 2010 (Total 5 Business day of the Company). Furthermore, the Board of Directors passed a resolution not to prepare consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2009 because both NSM Steel Public Company Limited, a subsidiary of the Company, and NSM Steel (Delaware) Inc., and indirect subsidiary of the Company, have been struck off under the laws of the Cayman Islands. February On February 24, 2010, the Board of Directors Meeting has resolved to postpone the subscription period of GJS-W2 after the completion of the special audit. March The Company has moved the head office from “No.52 Thaniya Plaza Building, 24th floor, Silom Road, Suriyawongse, Bangrak, Bangkok” to “No.88 PASO Tower, 24 th floor, Silom Road, Suriyawong, Bangrak, Bangkok”

The Company is primarily engaged in the manufacture of hot rolled steel and other related products. NSM Steel Company Limited (“NSM Cayman”) is a whollyowned subsidiary of the Company, whilst NSM Steel (Delaware) Inc (“NSM Delaware”) is a wholly-owned subsidiary of NSM Cayman and both were established outside Thailand. NSM Cayman has been organized solely for the purpose of issuing Senior Mortgage Notes Due 2006, Senior Subordinated Mortgage Notes Due 2008, and Subordinated Second Mortgage Debentures Due in 2009. NSM Delaware issued Notes solely as an agent of NSM Cayman. The Notes were irrevocably and unconditionally guaranteed by the Company. These two subsidiaries have no income, because they have no operations and have not engaged in any business. The Company intends to complete the liquidation

of NSM Cayman after completion of the Business Reorganization. Presently, NSM Delaware is no longer in existence, and has been so proclaimed in accordance with provisions of general corporation laws of the Cayman Islands.

Revenue Structure

In 2009, the global economic crisis had affected significantly the Company in the third and the fourth quarter of 2008 and the selling price decreased dramatically. However in the fourth quarter, the situation of the market improved since the selling price increased as well as the demand and the selling volume increased subsequently. Business Operation Overview of Business Operation Structure as at Anyway, total sell of 2009 dropped 53% when compared

to 2008. December 31, 2009 G J Steel Public Company Limited 100% NSM Steel Company Limited (Not Existing) 100% NSM Steel (Delaware) Inc. (Not Existing) Annual Report 2009

G J Steel Public Company Limited

9


2009

Sales Hot Roll Coil (HRC) Recoil Temper Mill (RTM) Slab Cut Sheet Raw material & iron unit

Business Objectives

2007

THB Million % THB Million % THB Million % 10,985.03 77.09 21,423.78 78.59 21,800.66 91.07 982.16 6.89 2,947.67 10.96 1,374.40 5.75 0.99 0.01 220.18 0.82 107.98 0.45 36.02 0.25 57.37 0.21 - - 310 2.18 1,467.05 5.46 310.27 1.30

Interest Income Other Income Gain on reversal of impairment of fixed assets Gain on foreign exchange Reversal of devaluation of inventories Reversal of liabilities under the Business Rehabilitation Plan Other income

2008

2.98

0.02

2.86

0.01

5.28

0.00

- - 59.76 0.42 1,736.81 12.19 - - 135.30 0.95

- - - 663.25 108.78

- - - 2.47 0.04

- 152.82 39.18 50.03 97.57

- 0.64 0.17 0.21 0.41

Subsequent to the Public Offering in the late of 2003, the Company has restarted its operation and consequentially running its production 24 hours since the third quarter whereby the Company could eventually produced more than 86,000 tonnes of Hot Rolled Coil in December 2004. To this extent, the Company has continuously improved its production quality and in 2006 the Company initiated the construction of finishing facilities to expand the Company’s products from Hot Rolled Coil or HRC to Tempered Hot Rolled Coil. In 2007 the Company extended its production line to cover Pickled and Oiled Product and in the second quarter of 2008, the Company reached its full capacity whereby the average monthly production volumes reached up to 100,000 tonnes. In the future, the Company is planning its expansion to cover the project on Galvanizing Line, Cold Rolled and Vacuum Oxygen Degasser which can remove gas from the steel to improve the quality of the products and to use them as raw materials for producing Cold Rolled Coil and high cost products. Nonetheless, the Company’s business objective is to become one of the world best quality steel manufacturers

together with the best efficiency and the lowest fund. Moreover, the Company will extend its Hot Rolled Coil Line to higher cost product line such as Galvanizing Line together with other product line such as Special Quality Steel. Besides, the Company focuses in development of product quality in order to reduce its production of fundamental products whose prices are highly fluctuated and on the other hand concentrate in enhancing the product quality to allow the Company to generate more project. The Company is persisting in its principle of “Quality Steel by Quality People” whereby the main objective of the Company is the sustainable growth of products quality, services and human resources as the Company was qualified in the international standard as follows: ISO 9001 : 2000 qualified on 19 November 2005 CE Mark qualified on 31 July 2006 OHSAS 18001 : 1999 qualified on 28 November 2007 ISO/IEC 17025 : 2005 qualified on 30 November 2009 The Company can enhance its competitiveness which will result in its operation become more profitable.

10 G J Steel Public Company Limited

Annual Report 2009


Risk Factors

1. Risks associated with fluctuation of demand decreased to only 12% in year 2009. In addition, the decreasing of exportation also affected to the domestic of raw materials Scrap and Pig Iron are the major raw materials for the Company’s production whereby any increase of their prices will highly affect the profitability of the Company unless the Company can effectively adjust the price of its products accordingly. On the other hand, if the price of such raw materials decreases dramatically until they become lower than the costs of the Company. To such extent, it will also affect the profitability of the Company because the sale price may become higher than the market price which will result in the Company has to record its reserve for its inventories at the end of financial period. However, in order to reduce such risk, the Company is following up closely on any changes to the price of such raw materials, whereby this will assist the Company to suitably forecast and determine its purchasing plan and its production plan. In general, the price of Scrap and Pig Iron will changed in accordance with the price of Hot Rolled Coil, therefore, if demand of the Hot Rolled Coil changed, the price of Scrap and Pig Iron will also changed accordingly, to such extent, the differences between the price of Hot Rolled Coil and the price of its raw materials will fluctuated in according way.

2. Risks associated with world economic crisis

Due to the financial cricis which originated in United Stated of America on the third quarter of the year 2008 is affected especially to export market because steel demand of each country has dramatically reduced whereas the bank carefully released on credits whereby such situations resulted in the Company’s export volume were substantially decreased. The company had exportation 29% and 25% of total sale in year 2007 and 2008 respectively, but it

buyer because when the export decreases, money inflow to the country will be decreased too as result of the decreasing of purchasing power. However, the Company forecasts that the world economic will start to get better by the first quarter of the year 2010 which effected to the increasing price of export products.

3. Risk associated with internal politics conflict

The internal politic conflict affected significantly the deceleration of selling of the customer. This factor caused the demand directly and the sale hardly increased.

4. Risks associated with fluctuation of currency

exchange Due to the Company is heavily depending on the importation of raw materials together with the Company is also exporting its products to its foreign customers whereby the Company has to deal with many transactions in various currency at all time. As a result, the fluctuation of the currency exchange has become one of the risks factors of the Company. In 2009, the Company imported the raw materials equivalent to 74% of the total cost of production and exported its products equivalent to 12% of the total sales. Therefore, if considering such percentage, the risks associated with the fluctuation of currency exchange will be deemed as one of the most significant factors to the Company’s operation as can be clearly seen in the Statement of Incomes whereby the Company has recorded both realized and unrealized gain and loss on exchange rate. To this extent, in order to reduce such risks, the Company has used its foreign income to pay its foreign debt under the same currency.

11 Annual Report 2009

G J Steel Public Company Limited


5. Risks associated with Anti-Dumping policy

After the government by Ministry of Commerce decided to continue the preventive tax policy to oppose the Anti-Dumping of Hot Rolled Coil originated from 14 countries for next 5 years effective on May 2009 onward, it presents that the government has the policy to prevent the unfair trade completition between the local producer and the foreign trader. This policy has the positive effect with the Hot Rolled Steel Industry by reducing the price fluctuation of the dumping from those 14 countries. However, the dumping may exists from other counties that the tax measure doesn’t apply such as China, 50% capacity of Word steel producer, may release the exceed products to the un-protected measured country, or Malaysia that trends to export more to Thailand under

the ASEAN FTA. Therefore, the Company can be at risk of losing its market share and losing its pricing competitiveness. Nevertheless, the Company together with other steel producers as the local producer group is monitoring the dumping closely. If there are any dumping signals emerging, the local producer group will ask the government to apply the tax policy to oppose the Anti-Dumping of Hot Rolled Coil with those countries immediately. In addition, the local producer group is also requesting the government to apply an industrial standard to import products in the same way as domestic products because such importing products are considered as sub-standard which can be sold at substantial lower price. In order to reduce the aforementioned risks, the Company is continuously developing modern production technology and improving

other system to decrease other cost. Moreover, as a result of investment by G Steel Public Company Limited, the Company will be able to reduce its production cost and enhance its competitiveness.

6. Risk associated with Free Trade Agreement

Thailand has entered into the Agreement on the Common Effective Preferential Tariff (CEPT) Scheme for ASEAN Free Trade Area (AFTA) whereby an import tax on any steel listed under the Normal Track will be reduced to 0 percent within 2010. Presently, Thailand is levying the import tax on the importation form ASEAN’s countries at the rate of 2-5 percent depending on the type and size of the steel. Furthermore, as Thailand has also entered into Japan Thai Economic Partnership Agreement (JTEPA) which provided that, within 10 years, Thailand must reduced its import tax on steel and iron from Japan to 0 percent while, during such 10 years, Thailand must determine its import quota which is tax exemption until such period is lapsed. Therefore, in the future, the Company will be affected by the importation of Hot Rolled Coil from both ASEAN and Japan. And if the government still continues

to negotiate such Free Trade Agreement with other

nation such as ASEAN-EU FTA, and ASEAN-China FTA and Thailand-India FTA, and etc. whereby Hot Rolled Coil is involved, then the Company will be unavoidably affected. Nonetheless, due to high production capacity and efficient cost saving policy of the Company together with the investment by G Steel Public Company Limited, the Company will be able to strengthen its competitiveness.

12 G J Steel Public Company Limited

Annual Report 2009


Shareholding Structure and Management

1. Shareholders

As of 25 November 2009, the top ten of major shareholders of the Company are as follows:

Name of Shareholders/Shareholders Group 1. Group of G Steel Public Company Limited

Number of shares

Percentage (%)

1.1 Oriental Access Company Limited

10,806,434,586

27.22

1.2 G Steel Public Company Limited

8,911,266,071

22.45

2. Nomura Singapore Limited - Customer Segregated Account

4,072,224,150

10.26

3. Thai Asset Management Corporation

1,550,314,798

3.90

4. Quam Securities Company Limited A/C Client

1,535,799,666

3.87

5. Thai NVDR Company Limited

772,142,425

1.94

6. Mr. Teerasak Tangpoonpholwiwat

537,498,099

1.35

7. Mr. Sittathat Sittisaman

507,180,000

1.28

8. Mr. Suneth Burakasikorn

388,642,300

0.98

9. Mrs. Sunee Triyangkoonsri

306,420,800

0.77

10. Bangkok Commercial Asset Management Company Limited

268,395,666

0.68

Total

29,656,318,561

74.70

Other Shareholders

10,046,107,979

25.30

Grand Total

39,702,426,540

100.00

13 Annual Report 2009

G J Steel Public Company Limited


Management 2.

Management Structure Board of Directors

Audit Committee

Executive Committee

Nomination & Remuneration Committee

Risk Management Committee

President

Executive Vice President: Accounting, Financial & MIS

Executive Vice President: Commercial

Executive Vice President: HR & Admin, Procurement & Logistics

Executive Vice President: Expansion

Executive Vice President: Operation

The Company’s management structure comprises: Board of Directors, Executive Committee, Audit Committee, Nomination and Remuneration Committee and Risk Management Committee. The respective roles and responsibilities are summed up as follows : 1. Board of Directors The Board of Directors has 9 members comprises of 5 Executive Committees and 4 Independent Directors as follows : No. 1. 2. 3. 4. 5. 6. 7. 8. 9.

Name/Representatives Mr. Nibhat Bhukkanasut Dr. Somsak Leeswadtrakul Assoc. Prof. Niputh Jitprasonk Mrs. Arthidtaya Sutatam Assoc. Prof. Sukunya Tantanawat*1 Mr. Chanathip Trivuth Mr. Sittichai Leeswadtrakul Mr. Isra Akrapitak Mr. Ariel Seth Levy*2

Position Chairman & Independent Director Vice Chairman Independent Director Independent Director Independent Director Director Director Director Director

Remarks: *1. Assoc. Prof. Sukunya Tantanawat has appointed to be Director instead of Asst. Prof. Dr. Tanawat Ceevaromaya as the resolutions of Board of Directors Meeting No. 3/2010 on February 16, 2010. *2. Mr. Ari Set Levy has appointed to be Director instead of Khunying Patama Leeswadtrakul as the resolutions of Board of Directors Meeting No. 3/2010 on February 16, 2010.

14 G J Steel Public Company Limited

Annual Report 2009


Authorised director : Mr. Chanathip Trivuth or Mr. Sittichai Leeswadtrakul or Mr. Isra Akrapitak or Mr. Ariel Seth Levy two of these four directors can together sign a document with the Company’s seal affixed Secretary Company : Ms. Pannee Tanaprateepkul Scope of Duties and Authority of the Board of Directors The Board of Directors have the power and authority to manage the company’s business in compliance with the objectives, Articles of Association and resolutions of the shareholders’ meeting. The Board of Directors is not entitled to approve or consider making any decision in the following matters without the approval of at least 50 percent of the directors at a Board meeting: 1. Any enquiry investment in any other enquiry or many purchases of assets of any other entity other than those specified in (2) (b) of Article 40, 2. Entry into any joint venture, partnership or other transactions with any person with an aim to share profit and loss; 3. Any acquisition, disposition, assignment, transfer, licensing or sublicensing of any know-how, trademarks, trade names, trade secrets or similar intellectual property rights of any person other than in the ordinary course of business; 2. The Executive Committee No. 1. 2. 3. 4. 5.

Name/Representatives Mr. Chanathip Trivuth Dr. Somsak Leeswadtrakul Mr. Sittichai Leeswadtrakul Mr. Isra Akrapitak Mr. Ariel Seth Levy*

4. Approval of annual budget and expense; 5. Approval of construction of any new steel mill; 6. Borrowing money for purposes other than as working capital in amount not exceeding one hundred million dollars (USD 100,000,000) (or the THB equivalent thereof); 7. Execution of any contract other than those contracts of less than one year’s duration or arising in the normal course of business: and 8. Enforcement of right against the concerned persons under the Management Agreement and the Management Advisory and Technical Assistance Agreement. The Board of Directors also has the authority to delegate to the Executive Committee or the President the power and authority to perform various activities under the established budgets, provided that such delegation does not involve the approval of any transaction in which there is a conflict of interest between the Company and the Company subsidiaries (as per those specified under the Company’s Articles of Association and the SEC), except where such transactions are approved in accordance with the policies and criteria as specified by the Board of Directors in the ordinary course of company business, such as purchase of raw materials and connected transactions with related companies. Position Chairman of Executive Committee Member of Executive Committee Member of Executive Committee Member of Executive Committee Member of Executive Committee

Remark: *Mr. Ari Set Levy has appointed to be Director as the resolutions of Board of Directors Meeting No. 3/2010 on February 16, 2010.

There is no Executive Committee but the scope and duties performance to the Board of Directors meeting for will be as follows: acknowledgement. Scope of Duties and Authority of the Executive Committee 3. To approve any execution or payment which is exceed 1. To review policies, business plan, investment plan and an authority or authorized amount or the executive in annual budget plan to present to the Board of Directors accordance with the Company’s authorization for approval. regulations or annual budget previously approved by 2. To monitor, Supervise and control the execution of the Board of Directors. plans to achieve the preset goals earlier approved by 4. To consider the organizational structure, management the Board of Directors or as assigned. The committee authority, remuneration policy, and salary structure. is also responsible for reporting the Company’s Annual Report 2009

G J Steel Public Company Limited

15


5. To consider the authorization of managerial and operational levels which covers finance, accounting, procurement, investment, borrowing, mortgage, collateral, assets transfer, and entering into any contract or agreement as well as other operations as deemed appropriate. 6. To assign any person or persons to act on behalf of the Executive Committee as deemed appropriate. The authorization can be revoked, changed or mended. 7. To consider and approve to open different

bank accounts with commercial bank as deemed appropriate and assign persons to authorize withdrawal or payment from such bank accounts.

8. To undertake other tasks as assigned by the Board of Directors. The authorization of the Executive Committee mentioned above does not include authorizations that enable the Executive Committee to approve any transactional items that any executive director has conflict of interest as per the announcement of SEC or with the Company or its affiliates. The Executive Committee shall propose such matters to the Board of Directors and/or the shareholders’ meeting for consideration and approval under related regulations, announcements or laws.

3. The Audit Committee No. Name/Representatives 1. Assoc. Prof. Niputh Jitprasonk*1 2. Mrs. Arthidtaya Sutatam 3. Assoc. Prof. Sukunya Tantanawat*2 Remark:

16

Position Chairman of Audit Committee Member of Audit Committee Member of Audit Committee

*1. Assoc. Prof. Niputh Jitprasonk is skill and experience in verify financial statement. *2. Assoc. Prof. Sukunya Tantanawat has appointed to be Audit Committee instead of Asst. Prof. Dr. Tanawat Ceevaromaya as the

resolutions of Board of Directors Meeting No. 3/2010 on February 16, 2010.

Scope of Duties and Authority of the Audit Committee 1. To review and ensure the Company has accurate and sufficient financial report. 2. To review and ensure the Company has appropriate and effective internal control and internal audit system, also, consider the independence of internal control and internal audit unit, give consent on appointing, rotating, and discharge of the chief of such unit or others responsible for internal audit. 3. To review and ensure the Company’s operation complies with the laws on securities and stock exchange, regulations of the SET or laws related to the Company’s business. 4. To consider, select and propose the nomination of independent persons to perform as the Company’s external auditors and their remuneration, and to attend the meeting with the external auditors without the Management at least once a year. 5. To consider any related transaction with possible conflict of interest to be compliance to the law and

SET regulations, in order to ensure that such transactions are reasonable and for the best benefit of the Company. 6. To prepare the report of the Audit Committee to be published in the Company’s annual report. The Audit

Committee’s report shall be signed by the committee’s chairman and consist of at lest the following information: (a) Notes on the preparation procedures and information discloser in the Company’s financial report in relations to accuracy, sufficiency and reliability. (b) Notes on the sufficiency of internal control system. (c) Opinion on compliance with law related to securities and the stock exchange, the SET regulations or other laws related to the Company’s business. (d) Opinion on the suitability of external auditors. (e) Opinion on transaction with possible conflict of interest. (f) The number of audit committee meetings and the attendance of each member. (g) Overall opinion and notes that the Audit Committee receives from performing complying with the laws. (h) Any other reports that shareholders and

investors should be informed under the scope of responsibilities assigned by the Board of Directors. G J Steel Public Company Limited

Annual Report 2009


7. To Carry out any other tasks assigned by the Board of Directors and has resolution of the Audit Committee. 8. The Audit Committee has responsibilities to the Board of Directors by their duty and shall report to it the performance, including recommendations and findings at least twice a year. In any case where any Audit Committee member of parties with possible conflict of interest wit the company or its affiliates, the acquisition or sale of assets of listed

companies and connected transactions (if any), as per announcements of the Securities and Exchange Commission (SEC) and/or the Stock Exchange of Thailand, The Audi Committee shall report the matter or the Board

of Directors and/or the shareholders’ meeting for consideration and approval in compliance with related law and regulations.

4. The Nomination and Remuneration Committee No. 1. 2. 3.

Name/Representatives Assoc. Prof. Sukunya Tantanawat*1 Mrs. Arthidtaya Sutatam Mr. Chanathip Trivuth*2

Position Chairman of Nomination and Remuneration Committee Member of Nomination and Remuneration Committee Member of Nomination and Remuneration Committee

Remark : *1 Assoc. Prof. Sukunya Tantanawat has appointed for Chairman of Nomination and Remuneration Committee instead of Asst. Prof. Dr. Tanawat Ceevaromaya as the resolutions of Board of Directors Meeting No. 4/2553 on February 24, 2010. *2. Mr. Chanathip Trivuth has appointed to be Director instead of Khunying Patama Leeswadtrakul as the resolutions of Board of Directors Meeting No. 4/2010 on February 24, 2010.

Scope of Duties and Authority of the Nomination Committee 1. To formulate criteria and policy in nominating directors, members of different committees and the Chief Executive Officer. 2. To consider and nominate appropriate persons to be appointed as directors, and members of different committees as well as the Chief Executive Officer for approval by the Board of Directors and/or Shareholders’ Meeting. 3. To report to the Board of Directors the results of the Nomination Committee meetings or other matters that the Board of Directors should be informed. 4. To perform any tasks assigned by the Board of Directors. 1.5 Risk Management Committee No. Name/Representatives 1. Assoc. Prof. Sukunya Tantanawat* 2. Mr. Sittichai Leeswadtrakul 3. Mr. Chanathip Trivuth 4. Ms. Pannee Tanaprateepkul 5. Mr. Chaimongkol Boonchanaphun 6. Mr. Wasan Chitsuk 7. Mr. Tanaongsak Bhumina 8. Mr. Sathaporn Varongchaiyakul 9. Mr. Yongchai Hounvongkotvichien 10. Mr. Surapong Tanapongpitaya 11. Ms. Jurai Chailertdilokkul

Scope of Duties and Authority of the Remuneration

Committee 1. To stipulate all the rules and policies on remunerations for the Board of Directors, Committee, and Chief Executive Officer for the approval by the Board of Directors and/or, as the case may be, the shareholders’ meeting. 2. To set necessary and appropriate annual remunerations for the Board of Directors, Committee, and Chief Executive Officer. 3. To report to the Board of Directors the Remuneration Committee’s meeting results or other matters the Board of Directors should be informed. 4. To perform any tasks assigned by the Board of

Directors. Position Chairman of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee Member of Risk Management Committee

Remark: * Assoc. Prof. Sukunya Tantanawat has appointed for Chairman of Risk Management Committee instead of Asst. Prof. Dr. Tanawat Ceevaromaya as the resolutions of Board of Directors Meeting No. 4/2553 on February 24, 2010.

Annual Report 2009

G J Steel Public Company Limited

17


Scope of Duties and Authority of Risk Management 3. To review the moderation of policy and the management system include the system performance and follow the Committee defining policy. 1. To set risk management policy that can be applied to 4. To report to the Internal Audit Committee constantly the all operations. progress of risk in order to correspond with the policy 2. To follow up and control the operation to achieve the and the procedure risk management. aim of the risk plan management. 6. Management Team No Name 1. Mr. Chanathip Trivuth* 2. Mr. Chanathip Trivuth 3. Ms. Pannee Tanaprateepkul 4. Mr. Santi Kittikote

Position Acting President & Executive Vice President: Commercial Executive Vice President : Accounting, Financial & MIS Executive Vice President : HR & Admin, Procurement & Logistics Executive Vice President : Expansion & Acting Executive Vice President: Operation

Remark: * The Company appointed Mr. Chanathip Trivuth Acting President & Executive Vice President: Commercial instead of

Mr. Sirichai Sae-Ku who resigned from this position effective as November 20, 2009.

Scope of Duties and Authority of the Management Team 1. To formulate business plan, investment plan, and annual budget plan for approval by the Executive Committee and/or the Board of Directors. 2. To be responsible for the overall management and to deliberate all the Company’s policies to achieve the present objective and within the policy, business plan and budget plan approved by the Board of Director. 3. To approve an execution or payment according to the Company’s authorization regulations of annual budget approved by the Board of Directors. 4. To recruit, hire, transfer, reshuffle, suspend of terminate employment of any executives or employees and to stipulate scope of roles and responsibilities and appropriate remuneration. An execution of position equivalent to Senior Vice President of higher shall be reported to the Board of Directors, while an execution of positions equivalent to the Internal Audit Department executive shall be made with the Audit Committee’s consideration. 5. To appoint respective authorized persons to sign the Company’s document in the areas of accounting, finance, purchase, production, sale and general management, as well as other important document. 6. To set, change, revise or cancel any rules, regulations, order, announcement, punishment measures and internal control systems for use as guideline for all employees and to enable the internal management is executed as per the Company’s policies.

7. To appoint advisors in various respects significant to the operations for the best benefits of the Company. The CEO is empowered to appoint attorney(s) to file lawsuit or defend case related to the Company. 8. To assign person(s) to perform task on his/her behalf as deemed appropriate. Such authorization can be terminated, changed or modified. 9. To report the Company’s performance, progress of any projects and financial status to the Executive Committee and the Board of Directors. 10. To perform other works assigned by the Executive Committee or the Board of Directors. In case that the CEO or other persons with possible conflict of interest may have conflict of interest, the CEO shall have no right to approve such matter. 2. Selection of Director and Management (1) The selection of the Directors and Chief

Executive Office When the positions of Company’s directors of Chief Executive Officer are vacant, the Nomination Committee are responsible for selecting and nominating the persons to take these positions. The Nomination Committee shall consider person with knowledge, capability, experience and required specialization that are crucial to the Company’s operation. (2) The nomination of directors (at the end of terms as required by law)

18 G J Steel Public Company Limited

Annual Report 2009


The selection of a Board of Directors member to replace director who must retire at the end of his/her term shall be approved by the Annual General Shareholders’ Meeting. Criteria and selection method are as follows: 1. A shareholder shall have one vote per one share. 2. Each shareholder shall exercise all his/her voting right as mentioned above in selecting one or many persons as directors but cannot separate votes for any

person(s) according to Clause 70, Section 1 of the Public Limited Company Act. 3. The persons receiving the highest votes will be selected as directors. The number of persons selected shall be equal to the number of directors to be selected. In case there are persons with the highest votes more than the number of directors required, the meeting chairman shall have the right to make decision. 3. Remuneration for the Directors, Management Team and Other expenses

- Remuneration for the Directors and Management Team Remuneration 1. Remuneration for Director or the year 2009 No.

Name

Position

1. Mr. Nibhat Bhukkanasut

Chairman & Independent Director 2. Dr. Somsak Leeswadtrakul Vice Chairman 3. Assoc. Prof. Niputh Jitprasonk Independent Director & Chairman of Audit Committee 4. Mrs. Arthidtaya Sutatam Independent Director & Member of Audit Committee 5. Assist. Prof. Dr. Tanawat Independent Director & Ceewaromaya Member of Audit Committee 6. Khunying Patama Leeswadtrakul Director 7. Mr. Chanathip Trivuth Director 8. Mr. Sittichai Leeswadtrakul Director 9. Mr. Isra Akrapitak Director Total

Monthly Remuneration Remuneration Remuneration of Board of of Audit Total Directors Committee 450,000 35,000 - 485,000 - 360,000

- 35,000

- 35,000

- 430,000

-

25,000

30,000

55,000

-

30,000

25,000

55,000

- - - - 810,000

- - 35,000 20,000 180,000

- - - - - 35,500 - 20,000 90,000 1,080,000

2. Remuneration for the Management team for the year 2009 were amounting to THB 35.30 million. Others Remuneration On 11 December 2008, the Company was authorized to issue and offer ESOP warrants amount of 727,536,398 units to the Company’s directors and employees in recognition of the directors and employees’ contribution to the Company as well as motivation to work for the Company in the long run. The details are as follows: Nature Warrants to purchase ordinary share of G J Steel Public Company Limited (“Warrants” or “GJS-ESOP) Type of Warrants

Number of Warrants

Specified and Non-Transferrable Warrants to purchase ordinary share of the Company, except transfer by intermediary person, or as otherwise specified by the Board of Directors or the Allocation Committee (Intermediary Person is the person who holds the said securities for distributing to all future directors and employees) 727,536,398 units 19

Annual Report 2009

G J Steel Public Company Limited


Number of Shares Issued to Support Warrants Offering Method

727,536,398 shares

Offering to directors and employees of the Company and the intermediary person (Intermediary Person shall mean Chief Financial Officer or Vice President-Finance, Vice President-Accounting Offering Price THB 0 (Zero) per unit Terms of Warrants 5 year Issuing Date December 11, 2008 Exercise Ratio 1 warrant : 1 ordinary share (amendable subsequent to any adjustment of the right under warrants) Exercise Price Par Value at exercise date (as of October 20, 2008, Par Value is THB 0.69 per share) Exercise Date Last business day of December of each year throughout the terms if warrants whereby the first exercise date shall be December 30, 2011 and the last exercise date will fall on December 10, 2013. In case of the exercise date shall fall on the Company’s annual holiday, the exercise date shall be moved up to the earlier business day of the Company. The last exercise notice shall be lodged by the warrant holders at least 15 days prior to such exercise date. Exercise Period and Directors and employees of the Company can exercise their warrants in accordance with the Ratio (percentage of following details: total distribution) First 20% shall be exercisable on the first exercise date which fall on the last business day of December 2011 Second 30% shall be exercisable on the second exercise date which fall on the last business day of December 2012 Third 50% shall be exercisable on the last exercise date which falls on December 10, 2013. In case of the exercise date shall fall on the Company’s annual holiday, the exercise date shall be moved up to the earlier business day of the Company. The last exercise notice shall be lodged by the warrant holders at least 15 days prior to such exercise date. In case of the warrant holders does not exercise or partly exercise their right on each exercise date, such warrant holders can exercise their remaining warrant on the next exercise date throughout the terms of the warrants. Registrar G J Steel Public Company Limited

4. Corporate Governance

After the termination of the business reorganization on March 2, 2009, the company intends to operate the business under the Good Corporate Governance by implementing the Principle of Good Corporate Governance and SET’s regulation as the guideline of the company’s business operation in order to enhance the efficient management system that can be categorized as follow; Part 1: Shareholder’s Right The Company’s Board of Directors arranges for an annual general meeting of shareholders within four months

following the end of the fiscal year. In case there are any special issues affecting or involving with shareholder’s privilege or any regulations and transactions required shareholder’s approval, the company will arrange the extraordinary general meeting. For year 2009, the Annual General Meeting of the Shareholders and the Extraordinary General Meeting of the Shareholders were held on April 23, 2009 and December 18, 2009 respectively at Arnoma Grand, Arnoma Hotel, Pathumwan, Bangkok that all members of the Board of Directors attended both of meetings. In each Shareholder

20 G J Steel Public Company Limited

Annual Report 2009


Meeting, the outside Auditor and the legal counsel will be invited for observation the transparency of the meeting and the vote. The chairman of the Board of Directors was the moderator proceeds with the meeting’s agendas that the resolution and the voting result were reported for each agenda. For every Shareholders Meeting, the publication of the meeting notice is made in a daily Thai newspaper for three consecutive days prior to the meeting not less than 3 days. And the meeting invitation and the meeting documents were delivered to the shareholders prior to the meeting not less than 7 days in order to provided sufficient time for the shareholders to study the adequate information related to the matters for consideration in the meeting. The Board of Directors has preparation to give the information and clarify the shareholders’ questions without any negligence. After the Shareholders Meeting, the minutes will be sent to SET within 14 days which is in compliance with the regulations of SEC and SET. Part 2 : Equitable Treatment of Shareholders The Board of Director respected the equitable treatment of shareholders. All shareholders will be invited to attend the Shareholder Meeting. Thailand Securities Depository Co., Ltd. , the company’s registrar, has responsibility to send the meeting invitation and the meeting document to the shareholders prior to the meeting not less than 7 days. The additional issue in the agenda or change any significant information without advance notice did not be considered to the Board of Director. In case the shareholders did not available to attend the meeting, the company encouraged the shareholders to use the power of attorney by providing the Power of Attorney Form A (general), Form B and Form C (only for custodian) and Shareholders are able to assign proxy to 2 independent directors to attend the meeting and vote on behalf of the shareholders. The company also encouraged the shareholders to use their voting rights by providing and distributing voting ballots while registration before meeting. Voting ballots were provided for each issue of the agenda. In addition, the shareholders who assign proxy are able to use their voting right directly by voting in the Power of Attorney Form B and Form C. Part 3 : Role of Stakeholders The company recognized and respected to all stakeholders’ rights that might consist of major and minor shareholders, employees, customers, creditors and also including the community around factory by processing through the company’s policy such as the Shareholders Annual Report 2009

G J Steel Public Company Limited

Meeting arrangement, the adequate employee welfare determination, willing to receive the complaint from customer and community around factory, give the knowledge for environmental treatment to the community around factory, signed the agreement or contract for trading with customers or vendors and suppliers and continuously make the relationship with all stakeholders. Part 4 : Information Disclosure and Transparency The company recognizes a responsibility of information disclosure with accuracy adequacy transparency and audit ability to ensure that the information given out is meaningful to decision making of investors. The company’s information will be provided both in Thai and English version disseminated through the online system of the Stock Exchange of Thailand. The information disclosure will be strictly follows the regulations required by the Office of the Securities and Exchange Commission (“SEC”), the Stock Exchange of Thailand, and other concerned authorities. The company always updates any regulations change to ensure the correct acting with those regulations and to create the confidence among the investors. Part 5 : The Responsibilities of the Board of Directors 1. Structure of the Board of Directors The Board of Directors has 9 member and comprises 5 Directors and 4 Independent Directors as described in the Company’s management structure. 2. Independent Directors have specifications as follows 2.1 Hold not exceeding 1.0% of the total voting shares of the Company, its subsidiaries, affiliates, or juristic person with possible conflict of interest, including the shares held by their related persons. 2.2 Neither involving in management, nor controlling nor being authorized signatory person, nor being the Company’s executives/employees, salaried consultant, competent authorized person to control the Company, its subsidiaries, affiliates or other juristic person with possible conflict of interest and nor having such interests or stakes for at least 24 months. 2.3 Not having lineage, marriage, or legally registered relationship such as father, mother, spouse, sibling, and child, including spouse of the child, to executives, major shareholders, controlling person, or persons to be nominated as executive or controlling person of the Company or its subsidiary, and be independent from major shareholders, executives and controlling.

21


2.4 Neither having a business relationship with the Company, its subsidiaries, affiliates, or juristic person with possible conflict of interest which make him/her incapable in expressing independent opinions nor being appointed as a representative of major shareholders, the Company’s directors or executives of the person who has the business relation with the Company, its subsidiaries, affiliates, or juristic person with possible conflict of interest and nor having such interests or stakes for at least 24 months. 2.5 Not being the auditor of the Company, parent company, subsidiaries, associates or juristic persons which may have conflict of interest, including being major shareholder, non-executive director, executive or partner of the audit firm of the auditor of the Company, parent company, subsidiaries, associates or juristic persons which may have conflict of interest, and not having such relationship for at least 24 months before an appointment. 2.6 Not being professional advisors, including legal advisor or financial advisor which receives remuneration in excess of THB 2 million per year from the Company, parent company, subsidiary, associate or juristic person which may have conflict of interest. In the case that the professional advisor is a juristic person, the prohibition shall include the major shareholder, non-executive director, executive or partner of such advisor, and not having been in such relationship for at least 24 months before an appointment. 2.7 Not being representative of director, major shareholder or shareholder which relates to the major shareholder of the Company. No 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Remark :

22

Name Mr. Nibhat Bhukkanasut Dr. Somsak Leeswadtrakul Assoc. Prof. Niputh Jitprasonk Mr. Chanathip Trivuth Mrs. Arthidtaya Sutatam Mr. Sittichai Leeswadtrakul Mr. Seiji Inoue*1 Mr. Isra Akrapitak*2 Khunying Patama Leeswadtrakul*3 Asst. Prof. Dr. Tanawat Ceevaromaya*4

2.8 Neither running the business which is similar to or compete with the Company, its subsidiaries or shareholders nor being executives, employees, salaried consultant and nor holding over 1% of the total voting shares of any other company which run such same business with the Company and its subsidiaries. 2.9 Shall have the qualifications and not having prohibited characteristics as stipulated in the Articles of Association of the Company, the Public Limited Companies Act and the rules of the Office of the Securities and Exchange Commission. 3. Committee The Company set up the Committee comprises of Executive Committee, Audit Committee, Nomination and Remuneration Committee as described in the Company’s management structure. 4. The Roles and Responsibilities of the Boards of Directors 1. Shall perform their duty honestly and carefully to achieve the Company’s goal for the best benefits of the shareholders. 2. Shall provide sufficient time to perform their assigned duty. 3. Shall be consistently accountable to shareholders and support shareholders to exercise their rights in various areas. 4. Shall treat the stakeholders equally and fairly. 5. The Boards of Directors shall convene once every 3 months, In 2009, the Board of Directors has the total Meetings of 7 times. Details of the attendance in each meetings are as follows:

Position Chairman and Director Vice President Independent Director Director Independent Director Director Director Director Director Independent Director

Attendance/No. of meeting 7/7 7/7 7/7 7/7 5/7 7/7 2/2 4/4 7/7 6/7

*1. Mr. Seiji Inoue resigned from the Director on 13 July 2009 *2. Mr. Isra Akrapitak was appointed as Director in the replacement of Mr. Seiji Inoue approved by the Board of Directors’ Meeting on 11 August 2009 *3. Khunying Patama Leeswadtrakul resigned from the Directors on 16 February 2010 *4. Asst. Prof. Dr. Tanawat Ceevaromaya resigned from the Directors on 16 February 2010.

G J Steel Public Company Limited

Annual Report 2009


5. Supervision of Internal Information Control The Company adopt a policy and measures to supervise the management on the use of internal information for their own benefits and trading securities. In particular, during the one month before the Company’s financial statements will be disseminated to the public, the information will be limited only to those who have the need to know. The Company’s executives and the Plan Administrator are fully responsible for preparing and submitting to the SEC and the SET the report on their shareholding in the Company including those of their spouses and minor children and any change thereof in accordance with section 59 of the Securities and Exchange Act B E 2535 within the following specified period: - An initial shareholding report (Form 59-1) must be submitted within 30 days after the end of subscription period of any public offering of the Company or after the date of appointment to be the management of the Company. - The report of change in shareholding (Form 59-2) must be submitted within 3 business days after the purchase, sale or transfer. Those who fail to comply with the policy or measures will be penalized pursuant to the Company’s regulations.

6. Internal Control

The organizational structure of the Company and the surroundings can help with promoting operational efficiency, sufficient supervision, apparent organizational administration, organizational reformation consistent with business strategy, employee sourcing, uninterrupted employee development appropriate for business fluctuation, reduction of overlapping operation, identical standard of operation and apparent determination of business operational target by considering various factors such as economic status, market situation and competing strategy.

The Company has determined risk factor, risk opportunity, risk effect, administrative strategy and risk pursuit to minimize organizational effect or risk management to transform crisis into opportunity together with determining alert signal in order to prevent or decrease risk that may occur to the business operation. The Company has determined the suitable controlling activity in order to operate the Company business efficiency such as defining the apparent scope of authority and function of each executive, regular following up with the Company operation together with having internal controlling system with respect to transactions with major shareholder, director, executive and other related person. However in 1st quarter of 2009, the Company had terminated the rehabilitation proceeding, Board of Directors has set up The Audit Committee to consider appropriate reason of related transactions, sufficient internal control system, meeting with independent auditor for financial statement and data disclosure revision, and also to consider annual audit plan and follow up internal audit report. In order to maintain the Internal Audit Department’s independence and balance of power, the Board of Directors therefore assigned the department to report directly to The Audit Committee. Moreover the Company has set up the Risk Management Committee to review and appraise the efficient of risk management. The Company has regularly recorded minute of the Company meeting and also complying with rules and regulations in storing important documents and accounting documents together with having storage system and communicating system which efficiency, up-to-date and easy to use. The Company has regularly convened the meeting of the Company executive in order to compare the operational performance with the prescribed target which will be regularly and continuously analyzed and improved all the time.

23 Annual Report 2009

G J Steel Public Company Limited


24

Board of Directors and Management Team

Age Name-Surname/Position (Year)

Education

G J Steel Public Company Limited

1. Mr. Nibhat Bhukkanasut 67 - Master of Arts (Political Science), Chairman & Independent

University of Hawaii Director - Bachelor of Arts (Economics), University of Hawaii - Diploma of the Joint State-Private Sectors Course, The National Defence College of Thailand - The Role of Chairman Program (RCP) 13/2006 - Director Arrcreditation Program (DAP) 66/2007 - Audit Committee Program (ACP) 24/2008 Thai Institute of Directors (IOD)

% of shareholding

Relation

None

None

Work Experience for the Past 5 Years Time Position / Organization May. 2008 - Present Nov. 2005 - Present Present Present Present Present

Annual Report 2009

Chairman & Independent Director, G J Steel Plc. Chairman, T C J Asia Plc Chairman, Capital Market Development Foundation Director, The Stock Exchange of Thailand Chairman, Securities Investor Protection Fund Committee, SET Consultant, Unithai Group Co., ltd.


Annual Report 2009

Age Name-Surname/Position (Year)

Education

G J Steel Public Company Limited

2. Dr. Somsak Leeswadtrakul 58 - Wharton-Nida Executive Leadership Vice Chairman Program Certificate, University of Pennsylvania, USA - The Program of Capital Market Academy - The Program of Senior Executive in Criminal Justice Administration - Honorary of Doctorate in Administration, Kasetsart University - MBA, Ramkhamhaeng University - B. Econ., Ramkhamhaeng University - Director Arrcreditation Program (DAP) - Director Certification Program (DCP) - The Role of Chairman Program (RCP) 13/2006 - Financial Statement for Directors (FSD) Thai Institute of Directors (IOD)

% of shareholding None

Relation

Work Experience for the Past 5 Years Time Position / Organization

Uncle of Present Mr. Sittichai Leeswadtrakul Present 1988 - Present Present Present Present Present

Vice Chairman, G J Steel Plc. Vice Chairman, G Steel Plc. Director, Thailand Iron Works Plc. Council, Members, Nation Institute of Development Administration (NIDA) Distinguished Member of Ramkhamhaeng Council, Ramkhamhaeng University Council Members, Saint Louis College Board of Member, Iron Steel Institute of Thailand

25


26

3.

Assoc.Prof. Niputh

Jitprasonk Independent Director & Chairman of Audit

Committee

G J Steel Public Company Limited

4. Mrs. Arthidtaya Sutatam Independent Director & Audit Committee

Work Experience for the Past 5 Years Time Position / Organization

% of shareholding

Relation

67 - M.B.A. (International Trade & Finance), Gothenburg School of Economics and Business Administration, Sweden - Bachelor of Arts (Hon., First Class) Faculty of Commerce and Accountancy, Thammasat University - Certificate, Capital Market Academy Leadership Program, Class 2 - Director Arrcreditation Program (DAP) 85/2007 Thai Institute of Directors (IOD)

None

None

2009 - Present Present Present Nov. 2008 - Present 1995 - 31 Oct. 2008

Independent Director & Chairman of Audit Committee, G J Steel Plc. Director and Audit Committee, The Stock Exchange of Thailand Director and Audit Committee, Siam City Bank Consultant, Real Estate Business Program, Thammasat University Director, Real Estate Business Program Thammasat University

52 - MBA, Morehead State University, U.S.A. - Master of Information Technology King Mongkut’s Institute of Technology Ladkrabang - Director Arrcreditation Program (DAP) 30/2005 Thai Institute of Directors (IOD)

None

None

Nov. 2006 - Present Dec. 2006 - Present Jul. 2004 - Present Jul. 2004 - Dec. 2005 Oct. 1997 - Jun. 2004

Independent Director & Audit Committee, G J Steel Plc. Computer Technician 8, The Office of the Permanent Secretary of Information and Communication Technology Independent Director and Auditor, Thailand Iron Works Plc. Manager, Supat & Friend Office Computer Technician 8, The Excise Department of Thailand

Age Name-Surname/Position (Year)

Education

Annual Report 2009


Annual Report 2009

Age Name-Surname/Position (Year) 5.

Assoc. Prof. Sukanya Tantanawat Independent Director & Audit Committee

Education

G J Steel Public Company Limited

67 - Master of Development Economics Nation Institute of Development Administration (NIDA) - Bachelor of Arts in Economics, Chulalongkorn University

6. Mr. Chanathip Trivuth 46 - Master of Business Administration, Director, Acting, President, National Institute of Acting Executive Vice Develpoment Administration (NIDA) President : Commercial - Bachelor of Arts (Economics), and Executive Vice Thammasat University President: Accounting, - Director Arrcreditation Program (DAP) Finance & MIS Thai Institute of Directors (IOD)

Work Experience for the Past 5 Years Time Position / Organization

% of shareholding

Relation

None

None

Present Present Present Present Present Present Present Present

Independent Director & Audit Committee, G J Steel Plc. Vice President of Regional Campuses, Ramkhamhaeng University Director of Graduate Studies, Ramkhamhaeng University Assistance Professor Business Administration Chairman of Economy of Master Degree Project, Nakhonratchasima Province Chairman of Economy of Master Degree Project, (Co operation between Organization and Thai Employers Project) Internal Academic Quality Audit Quality Management Audit ISO 9001:2008

None

None

Present 2006 - Present 2004 - Present 2004 - 2006 2001 - Present 1999 - Present 1991 - Present

Director, Acting President, Acting Executive Vice President: Commercial and Executive Vice President: Accounting, Financial & MIS , G J Steel Plc. Director, Asia Metal Plc. Director, Felix River Kwae Resort (Kanchanaburi) Co., Ltd. Lay Judge Central Labor Court Managing Director, SSP Place Co., Ltd. Managing Director, Great Eastern International Co., Ltd. Managing Director, Intelligent Systems Network Co., Ltd.

27


28

Name-Surname/Position

Age (Year)

Education

% of shareholding

Relation

Work Experience for the Past 5 Years Time Position / Organization

32 - Master of Law, Department of Economics Regulation, Chulalongkorn University - Master of Science in Engineering Management, Warwick University - Business Course University of California of Berkeley - Bachelor of Business Administration, Mahidol University - Director Arrcreditation Program (DAP) 41/2005 Thai Institute of Directors (IOD)

None

Nephew of Dr. Somsak Leeswadtrakul

8. Mr. Isra Akrapitak Director

40 - Master of Management, Thames Business School, Amsterdam, Netherlands - B.B.A., Business Administration, Assumption University - Certificate: Leadership & Management Skills, University van Amsterdam & SITA, Amsterdam, Netherlands - Director Arrcreditation Program (DAP) 81/2009 Thai Institute of Directors (IOD)

None

None

2009 - Present 2009 - Present 2005 - 2008

Director, G J Steel Plc. Director, Agro Industrial Machinery Plc. Managing Director , KPN Music Co., Ltd.

9. Mr. Ariel Seth Levy Director

35 - Bachelor Degree Major Business Administration, University of Michigan

None

None

Present 2003 - Present

Director, G J Steel Plc. Principal and Managing Director, Global Principal Partners LLC, USA

G J Steel Public Company Limited

7. Mr. Sittichai Leeswadtrakul Director

2009 - Present Director, G J Steel Plc. 2009 - Present Director, G Steel Plc. 2008 - Present Chairman of Executive Committee, B R P Steel Co., Ltd. 2004 - Present Director and Managing Director, Millcon Steel Industries Plc. 2004 - Present Director, Siam Rubber Indutries Co., Ltd.

Annual Report 2009


Annual Report 2009

Age (Year)

Work Experience for the Past 5 Years Time Position / Organization

% of shareholding

Relation

10. Ms. Pannee Tanaprateepkul 48 - MBA, Ramkhamhaeng University Executive Vice President: - Bachelor of Business Administration HR & Admin, Procurement and (General Management), Sukhothai Logistics Thammathirat Open University - Bachelor of Economics, Ramkhamhaeng University

None

None

Present 2005 - 2006 2003 - 2005

Executive Vice President : HR&Admin, Procurement and Logistics, G J Steel Plc. Vice President : General Administration, G Steel Plc. Senior Manager HR & Admin, G Steel Plc.

11. Mr. Santi Kittikote Executive Vice President: Expansion and Acting Executive Vice President : Operation

None

None

Present 2005 - Jul. 2008 2002 - 2005 1996 - 2002

Executive Vice President : Expansion and Acting Executive Vice President : Operation, G J Steel Plc. Senior Manager, G J Steel Plc. Director, Milenium Steel Plc. Director and Senior Vice President, NTS Steel Group Plc.

Name-Surname/Position

Education

G J Steel Public Company Limited

66 - Bachelor of Engineering, Chulalongkorn University

29


Related Transactions

The Company has entered into transactions with related persons which may give raise to the conflict of interest issue whereby such transactions can be summarized as follows: Related Persons Description G Steel Public Company Limited 1. G Steel Public Company Limited is holding 22.45 percent of the Company’s shares (as of 25 November 2009) 2. Dr. Somsak Leeswadtrakul is the Vice Chairman of G J Steel Public Company Limited and Vice Chairman of G Steel Public Company Limited. 3. Khunying Patama Leeswadtrakul, wife of Dr. Somsak Leeswadtrakul is the Director and is holding 10.42% of the shares of G Steel Pubic Company Limited (as of 7 April 2009). 4. Mr. Sittichai Leeswadtrakul is the Director of G J Steel Public Company Limited and Director 2.55% of G Steel Public Company Limited, who holds 2.55% of the shares (as of 7 April 2009). Oriental Access Company Limited 1. Oriental Access Company Limited is holding 27.22 percent of the Company’s shares (as of 25 November 2009) 2. G Steel Public Company Limited is indirectly holding 99.92% of the shares of Oriental Access Company Limited (as of 30 April 2009) Asia Metal Public Company 1. Mr. Chanathip Trivuth, the Company’s Director and the Acting President in the Limited shares of Asia Metal Public Company Limited (as of 7 April 2009) 2. Khunying Patama Leeswadtrakul, wife of Dr. Somsak Leeswadtrakul is holding 16.67 percent in the shares of Asia Metal Public Company Limited (as of 7 April 2009) Mill Con Steel Industries Public 1. Mr. Sittichai Leeswadtrakul is the Company’s Director and the Chairman of Company Limited Executive Committee and shareholder of Mill Con Steel Industries Public Company Limited and is holding 27.80% of the shares of Mill Con Steel Industries Public Company Limited (as of 7 April 2009). 2. Khunying Patama Leeswadtrakul, wife of Dr. Somsak Leeswadtrakul is holding 1.25% of shares of Mill Con Steel Industries Public Company Limited (as of 7 April 2009). SSP Place Company Limited 1. Mr. Chanathip Trivuth, the Company’s director and Acting President , is a director, a managing director and a major shareholder of SSP Place Company Limited and is holding 99.99% (as of 30 April 2009) and Chairman of BRP Steel Company Limited 1. Mr. Sittichai Leeswadtrakul is the Company’s Director Executive Committee of BRP Steel Company Limited

30 G J Steel Public Company Limited

Annual Report 2009


Related Persons Arnoma Bangkok Company Limited

Description 1. Khunying Patama Leeswadtrakul, wife of Dr. Somsak Leeswadtrakul is the Director of Arnoma Bangkok Company Limited.

Related Transactions in 2009 and 2008 are as follows: 1. Transactions with G Steel Public Company Limited: Description

Transaction Value/Outstanding (THB Million) As of 31 As of 31 December 2009 December 2008

- Purchase of Raw Materials & 395.72 Finished Goods - Production Service Charge 49.55 - Revenue from sale 37.59 - Advances to suppliers 0.77 376.91 - Accounts payable 992.24 - Payable to related party from offsetting of machinery purchase - Account Receivable - 0.75 - Other income 2. Transactions with Oriental Access Company Limited: Description - Interest expenses - Accrued interest expenses - Liabilities under Business

Reorganization Plan - Sale and Administration

expenses - Other accounts receivable - Other accrued expenses - Advanced expenses

783.73 - 1,143.54 - 187.63 - 0.66 0.62

Necessity and Reasonableness of Transactions The management’s opinion: These transactions are in ordinary course of the Company’s business.

Transaction Value/Outstanding (THB Million) Necessity and Reasonableness of Transactions As of 31 As of 31 December 2009 December 2008 - 2.83 The management’s opinion: These - - transactions related to MRA and - - are equally treated with other creditors. 452.95 - 288.90 -

675.13 - - 111.04

The management’s opinion: These transactions are in ordinary course of the Company’s business and moreover have been approved by the Creditors’ Committee whereby such expenses are in accordance with the Operation Service Agreement.

31 Annual Report 2009

G J Steel Public Company Limited


3. Transactions with Asia Metal Public Company Limited: Description - Revenue from sale of finished goods - Advanced from customer

Transaction Value/Outstanding (THB Million) As of 31 As of 31 December 2009 December 2008 75.19 379.25 41.12 0.06

Necessity and Reasonableness of Transactions The management’s opinion: These transactions are in ordinary course of the Company’s business

4. Transactions with Mill Con Steel Industries Public Company Limited: Description

Transaction Value/Outstanding (THB Million) As of 31 As of 31 December 2009 December 2008

- Revenue from sale of finished

277.63 goods - Purchase of raw materials &

- finished goods - Accounts payable - - Accounts receivable - - Advanced from customer 142.99 5. Transactions with SSP Place Company Limited: Description - Rental of office space and other

services - Accrued Expenses

126.31 416.38 149.76 30.26 0.06

Transaction Value/Outstanding (THB Million) As of 31 As of 31 December 2009 December 2008 0.04 0.04

0.29 -

Necessity and Reasonableness of Transactions The management’s opinion: These transactions are in ordinary course of the Company’s business

Necessity and Reasonableness of Transactions The management’s opinion: The space is rented to support business operation and is charged at the same rate as other tenants.

6. Transaction with BRP Steel Company Limited Description - Revenue from sale of finished goods - Purchase of raw materials & finished goods - Accounts Payable

Transaction Value/Outstanding (THB Million) As of 31 As of 31 December 2009 December 2008 5.42 32.86 29.36

- - -

Necessity and Reasonableness of Transactions The management’s opinion: These transactions are in ordinary course of the Company’s business

32 G J Steel Public Company Limited

Annual Report 2009


7. Transaction with Arnoma Bangkok Company Limited Transaction Value/Outstanding (THB Million) As of 31 As of 31 December 2009 December 2008

Description - Rental of office space and other services - Accrued Expenses

0.13 0.01

- -

Necessity and Reasonableness of Transactions The management’s opinion: The space is rented to support business operation and is charged at the same rate as other tenants.

Measures and procedures in approving 2. Transactions in normal course of Company’s related transactions business without standard terms of trade and other related The related transactions must comply with the

laws on securities and exchange and regulations, announcements, orders or terms and conditions of the Securities and Exchange Commission (SEC) and the Stock Exchange of Thailand (SET). The person who may have any conflict of interest with the related transactions will not have the right of approve casting vote. The Board of Directors and the Audit Committee have to review and control those transactions. The management or director who has no any conflict of interest for those transactions will perform the decision making but exclude the transaction in the normal course of business. However, the procedures in approving related transactions will be performed in accordance with the Company’s guideline on dealing with related transactions and will be, further, opinioned by the Audit Committee for the reasonableness. The Company will also comply with relevant regulations of the Stock Exchange of Thailand and the Securities and Exchange Commission whereby such related transactions shall be either approved by the Board of Directors or the Shareholders’ Meeting. Furthermore, the Company also determines its policy in handling the related transaction as follows: 1. Transactions in normal course of Company’s business with standard terms of trade In the Future, the Company is expecting to continue entering into the transactions with related persons in the normal course of the Company’s Business which may create the conflict of interest issue in the future such as product selling or office rental whereby the terms and conditions of such transactions will be the standard terms of trade. The term and condition of the related transaction must be the same as the term and condition of the normal trade in the fair value. Annual Report 2009

G J Steel Public Company Limited

transactions In the Future, the Company is expecting to continue entering into the transactions with related persons in the normal course of the Company’s Business whereby the terms and conditions of such transactions will not be the standard terms of trade and also entering into other related transactions which may create the conflict of interest issue in the future such as entering into the transactions with the Strategic Advisory Alliance. The company will strictly follow the terms and conditions of the agreement.. In case there shall be any additional related transactions in the future, the Company will strictly comply with the measures and procedures in approving the related transactions that the director who may have any conflict of interests will not have the right to approve the transactions in accordance with the scope of authority. 3. Loans The Company has no policy in granting any loans to any related companies and to the Strategic Advisory Alliance, however, in case of unavoidable, the Company will strictly follow the relevant measures and procedures in approving such related transactions that the director who may have any conflict of interests will not have the right to approve the transactions in accordance with the scope of authority. Besides, the Company’s products are similar to the G Steel’s product. In order to prevent the further conflict of interest, the Company’s management determined the measures as follows: 1. To reduction of business competition between the Company and G Steel The Company’s management and G Steel will plan the guideline of each business expansion in the future. The objective is to support the skill, production and target

33


customers of each company in accordance with the demand of any group of customer, to avoid the duplicate investment and to create Economy of Scale in the production and the purchase of raw materials. 2. The independence of the Director and Management Both the company and G Steel have their own independent Director and Audit Committee in order to maintain the benefit of each other’s minor shareholders. The management has policy in operating the business independently.

3. Transaction between the Company and G Steel The Company has a policy in maintain Commercial Arm’s Length Basis in transaction between the Company and G Steel. If there is any related transaction, the transparent audit of the outside auditor of the both company is required in order to review and give opinion to such transaction and subsequently disclose in the financial statement sufficiently.

34 G J Steel Public Company Limited

Annual Report 2009


Analysis and Explanation of Management

Operational Results

The Company’s gross profit (loss) for the year 2009 and 2008 were amounted to THB (3,920) million and THB 1,049 million, respectively, and EBITDA for the year 2009 and 2008 were amounted to THB (3,490) million and THB (1,896) million, respectively, whereby in 2009, the Company’s incomes were included gain from the reversal of devaluation of inventories in the amount of THB 1,737 million and gain from foreign currency exchange in the amount of THB 60 million and the Company’s expenses were included estimate loss on the confirmed purchase orders of undelivered raw materials in the amount of THB 115 million, bad debt and doubtful debt in the amount of THB 302 million and loss on asset impairment in the amount of THB 272 million. The operational result which varied for more than 20% can be explained as follows: Revenue from sales and cost of goods sold : Revenue from sales for the year 2009 and 2008 were amounted to THB 12,314 million and THB 26,115 million, respectively, and gross profit (loss) for the year 2009 and 2008 were amounted to THB (3,920) million and THB 1,049 million, respectively. The major issue was that during the first 6 months of the year 2008, the volume of sales and prices was irregularly raised whereby during the last 6 months of the year 2008, the global financial crisis hit and the volume of sales and prices was dramatically dropped. Moreover, during August 2009, the Company’s plant incurred an accident which interrupted our production for 1 month whereby the Company took this opportunity to concurrently perform it annual check on its machineries. For other income of the year 2009 and 2008 which were amounted to THB 138 million and THB 112 million, respectively, this increase due to the sale of nonconforming products resulted from the production.

Selling expenses : Selling expenses for the year 2009 and 2008 were amounted to THB 159 million and THB 531 million, respectively. This is mainly due to decrease in sale volume. Administrative expenses : Administrative expenses for the year 2009 and 2008 were amounted to THB 1,469 million and THB 1,831 million, respectively, decreasing from 2008 in the amount of

THB 362 million. This is mainly due to the decrease in depreciation, operation consultancy fee and loss from the asset disposal. Bad debt and doubtful debt : For the year 2009, the Company recorded its provisional loss on doubtful debt in the amount of 1,223 million which included the provisional loss on account receivable in the amount of THB 1,079 million and the provisional loss on advance for the goods in the amount of THB 144 million and the reversal of doubtful debt of account receivable recorded since 2008, in the amount of THB 82 million and the counterbalance with foreign account receivable in the amount of 839 million. Loss on asset impairment : For the year 2009, the Company recorded loss on asset impairment for its DRI project in the amount of THB 250 million and recorded impairment for the construction in progress in the amount of THB 22 million using the information provided by an independent appraiser.

Financial status

Assets As of December 31, 2009 and 2008, the total assets were THB 26,624 million and THB 30,165 million respectively which reduced by THB 3,541 million or 11.74% which mainly resulted from the reduction of cash and cash equivalents, trade accounts receivable, inventories and advances to suppliers which can be explained as follows: 35

Annual Report 2009

G J Steel Public Company Limited


36

1) Cash and cash equivalents As of December 31, 2009 and 2008, the Company had its cash and cash equivalents in the amount of THB 43 million and THB 84 million respectively which decreased by THB 41 million or 48.81% due to the cash was used for the investing and financing activities for the amount of THB 238 million and THB 1,496 million respectively and was received by the operating activities for the amount of THB 1,696 million (details as per the Statement of Cash Flow). 2) Trade accounts receivable As of December 31, 2009 and 2008, the Company had its trade accounts receivable in the amount of THB 93 million and THB 1,864 million respectively which decreased by THB 1,771 million. The decreased amount resulted from the agreement with the major customer to purchase machinery and to offset the cost of this machinery against the amount of trade accounts receivable. 3) Inventories As of December 31, 2009 and 2008, the Company had its inventories in the amount of THB 1,058 million and THB 3,762 million respectively which reduced by THB 2,704 million due to the company reduced the production by operating in off-peak period only and consume the existing raw material with slow down the purchasing. 4) Advances to suppliers As of December 31, 2009 and 2008, the Company had its cash advance to suppliers in the amount of THB 133 million and THB 820 million respectively which decreased by THB 687 million because of the raw material purchase decreasing. Liabilities As of December 31, 2009 and 2008, the Company its total liabilities in the amount of THB 7,811 million and THB 6,752 million respectively which increased by THB 1,059 million or 15.68% which mainly result from the reduction of short term loans from financial institute and trade accounts payable and the increasing of payable to related party from offsetting of machinery purchase, other current liabilities and provision for loss on confirmed purchase orders for undelivered raw material which can be explained as follows : 1) Short-term loans from financial institutions As of December 31, 2009, the company didn’t Current Ratio Quick Ratio Debt to Equity Ratio

have short-term loans due to the company had repayment the short-term loans from financial institutions in the amount of THB 1,305 million during 2009. 2) Trade accounts payable As of December 31, 2009 and 2008, the Company had its trade accounts payable in the amount of THB 2,676 million and THB 2,804 million respectively which reduced by THB 128 million due to the repayment. 3) Payable to related party from offsetting of machinery purchase During 2009, the company purchased the machinery from one vendor who is the trade accounts receivable of the parent company. Therefore, the company had offset the cost of this machinery against the amount of receivable of the parent company vendor that the company had recorded the parent company as a payable to related party from offecting of machinery purchase. 4) Provision for loss on confirmed purchase orders for undelivered raw material Refer to Thai Accounting Standard, the company has to estimate the provision for loss in respect of outstanding purchase orders for raw materials that have not been delivered based on comparison with the economic benefits expected to be received in the form of estimated sales pirces and the conversion costs of finished producted at the end of year. Because of the comparison result, the company has to record this loss in the financial statement. 5) Other current liabilities As of December 31, 2009 and 2008, the Company had other current liabilities in the amount of THB 644 million and THB 37 million respectively which increased by THB 607 million due to the recording of payable of machinery purchase and increasing of the Revenue Department payable. Shareholder’s equity As of December 31, 2009 and 2008, the total shareholder’s equity is equal to THB 18,813 million and THB 23,413 million which decreased by THB 4,600 million or 19.65% due to the net loss of the year 2009 and the change of fair value of the available for sale marketable securities. Liquidity The financial statements as of December 31, 2009 and 2008, the liquidity of the Company represented by financial ratios is as follows: As December 31 2009 2008 0.22 1.07 0.02 0.31 0.42 0.29 G J Steel Public Company Limited

Annual Report 2009


Audit report of Certified Public Accountant Audit report of Certified Public Accountant To the Shareholders of G J Steel Public Company Limited I have audited the accompanying balance sheet of G J Steel Public Company Limited as at 31 December 2009, and the related statements of income, changes in equity and cash flows for the year then ended. The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to issue a report on these financial statements based on my audit. The consolidated and separate financial statements for the year ended 31 December 2008 of G J Steel Public Company Limited and its subsidiaries, and of G J Steel Public Company Limited, respectively, were audited by another auditor who expressed an unqualified opinion on those financial statements in his report dated 24 February 2009 with an emphasis paragraph on matters relating to the Company’s ability to continue as a going concern and to comply with the debt restructuring plan. Except for the matters described in the following paragraphs (1) to (5), I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my report. (1) As described in note 7 to the financial statements, as at 31 December 2009 the Company had a trade receivable from an overseas counterparty of Baht 1,871 million (USD 55.9 million) of which Baht 1,737 million (USD 51.9 million) is overdue. The Company has entered into an agreement with this counterparty to purchase machinery for Baht 1,525 million (USD 45.5 million) and to offset the cost of this machinery against the amount receivable from the counterparty. The net receivable after the offset was Baht 346 million (USD 10.4 million), for which the Company has made full allowance for doubtful accounts. In addition, as at 31 December 2009 the Company had trade receivables of Baht 450 million from two customers of which Baht 427 million is overdue and for which the Company has set up a Baht 375 million allowance for doubtful accounts.

37 Annual Report 2009

G J Steel Public Company Limited


I was unable from my audit of the above transactions to establish that the Company had exercised appropriate internal controls over these transactions, particularly with respect to credit control procedures such as approval of credit facilities; monitoring of collection and follow up of outstanding debts. In addition, up to the date of this report, I have not received letters from such counterparty confirming the amounts owed by them to the Company and I was unable to satisfy myself in this regard by other audit procedures. I was, therefore, unable to satisfy myself that these transactions had been properly entered into and recorded by the Company. Furthermore the financial crisis in the steel industry, which has resulted in steel prices dropping significantly since 2008, may adversely affect the Company’s ability to collect the amounts owed in respect of trade receivables and consequently may impact on the adequacy of the allowance made for doubtful trade accounts. (2) As described in paragraph (1) above and in note 7 to the financial statements, the Company has entered into an agreement with an overseas counterparty to purchase machinery for Baht 1,525 million (USD 45.5 million) to offset against the outstanding debt owed by the counterparty to the Company. In addition, as described in note 13 to the financial statements, the Company has entered into an agreement with another counterparty (‘Counterparty A’), which is also a debtor of the Company’s parent company in respect of scrap sales made by the parent company to the counterparty, to purchase machinery from Counterparty A for Baht 1,017 million (USD 29.8 million). The Company, the parent company and Counterparty A have agreed to settle the outstanding debt owed by Counterparty A to the parent company by offsetting its debt to the parent company against the amount receivable from the Company for the machinery purchase. As described in note 13 to the financial statements, the Company has entered into an agreement with a supplier to purchase machinery for Baht 608 million (USD 18.2 million) and has paid the first installment of Baht 221 million (USD 6.3 million). Subsequently, the Company entered into an agreement with the supplier and Counterparty A to transfer all rights, benefits and liabilities under the purchase agreement, including the first installment payment, to Counterparty A. I was unable from my audit of the above transactions to establish that the Company had exercised appropriate internal controls over the purchase and tendering process, including selection of the supplier and cost of the machinery, and over the offset and transfer arrangements generally. In addition, up to the date of this report, I have not received a letter from Counterparty A confirming the amounts owed by the Company and I was unable to satisfy myself in this regard by other audit procedures. I was therefore, unable to satisfy myself that these transactions had been properly entered into and recorded by the Company. (3) As described in note 13 to the financial statements, as at 31 December 2009 the Company’s property, plant and equipment were appraised by an independent appraiser during 2008 and the results of this appraisal did not indicate any impairment in the carrying value of these assets. In January 2010 an independent appraiser was engaged to appraise the value of the Company’s property, plant and equipment, however the appraisal report has not yet been issued. In view of the significant uncertainties over the Company’s operations arising in part from the current global economic climate and the severe impact on the steel industry there are indicators of potential impairment that require a more current appraisal of the value of the Company’s property, plant and equipment to be made. I was, accordingly, unable to satisfy myself as to whether and to what extent the carrying value of the Company’s property, plant and equipment, which as at 31 December 2009 amounted to Baht 24,530 million, had been impaired.

38

2

G J Steel Public Company Limited

Annual Report 2009


(4) Up to the date of this report, I have not received letters from a bank; a major supplier; and a former related party confirming the amounts owed by them to the Company and I was unable to satisfy myself in this regard by other audit procedures. I was therefore, unable to satisfy myself on the accuracy and existence of the balance as at 31 December 2009 of cash and cash equivalents; trade accounts payable; and long-term loans to and receivables from former related parties that had been recorded by the Company. (5) As described in note 1.2 to the financial statements, since the second half of 2008 the operations of the Company have been significantly affected by the global economic recession. As a result, the Company made an operating loss for the year ended 31 December 2009 of Baht 4,594 million and as at 31 December 2009 the Company had net current liabilities exceeding net current assets by Baht 5,014 million. The Company needs to generate sufficient operating cash flows to meet both its working capital requirements and its operating obligations, including obligations under the rehabilitation plan. These circumstances raise substantial uncertainties over the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result should the Company be unable to generate sufficient cash flows and/or raise additional finance from other sources to enable it to continue as a going concern. Because of the significance of the matters described in the preceding paragraphs (1) to (5), I have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, I do not express an opinion on the financial statements of G J Steel Public Company Limited for the year ended 31 December 2009. I draw your attention to Note 30, the consolidated and separate financial statements for the year ended 31 December 2008 have been restated for the effects of the change in accounting policy in respect of the method used for calculating the value of raw materials and spare parts and supplies from the first-in, first-out method to the moving average cost method. I have audited the adjustments that were applied to the restatement of the 2008 financial statements and in my opinion these adjustments are appropriate and have been properly applied. As described in note 37 to the financial statements, on 25 January 2010, the Security and Exchange Commission has ordered the Company and the parent company to provide special audit reports by the auditors on the following issues: sales under credit term and the acquisition of machineries; the recognition of allowance for deterioration of raw material; construction in process with no progress; and advance payment for the purchase of machineries. Up to the date of this report, these special audits have not been completed. The result of these special audits may necessitate adjustments to the Company’s financial statements for the year ended 31 December 2009.

(Wilai Buranakittisopon) Certified Public Accountant Registration No. 3920 KPMG Phoomchai Audit Ltd. Bangkok 24 February 2010

3

Annual Report 2009

G J Steel Public Company Limited

39


G J Steel Public Company Limited and its Subsidiaries

Balance Sheets

Balance sheets As at 31 December 2009 and 2008

As 31 December 2009 andLimited 2008 and its Subsidiaries G JatSteel Public Company

GBalance J Steelsheets Public Company Limited and its Subsidiaries Assets As at 31 December 2009 and 2008

Note

Current assets Cash and cash equivalents

Assets Current investment

6, 35 Note 35

Trade accounts receivable Inventories Current assets Advances to suppliers

Cash cash assets equivalents Otherand current Current investment Total current assets

4, 7 8, 16, 30 4 6,4,359 35

Trade accounts receivable

Inventories Non-current assets Advances suppliers Restrictedtodeposits at financial institutions

4, 7 8, 16, 30 410 4,11 9

Other current in assets Investments subsidiaires Total current assets Other long-term investments

Long-term loans to and receivables from Non-current assets former related parties Restricted deposits financial institutions Property, plant andatequipment Investments in subsidiaires Intangible assets Other long-term investments Other non-current assets

Consolidated financial statements

Separate financial statements

2009

2008

2008

(restated)

(restated)

(in Baht) Consolidated financial statements 84,213,993

Separate financial statements 84,213,993

1,058,475,872

(in Baht) 3,762,765,795

3,762,765,795

133,135,354 42,839,157 84,311,857

820,995,020 84,213,993 240,193,585

Separate financial statements 42,839,157

2009 3,404,626 93,148,059

3,404,626 1,415,314,925 93,148,059 1,058,475,872 133,135,354 168,700,000 84,311,857 -

2008835,740 (restated) 1,864,489,067

2008835,740 (restated) 1,864,489,067 820,995,020 84,213,993 240,193,585

835,740 6,773,493,200 1,864,489,067

835,740 6,773,493,200 1,864,489,067

3,762,765,795

3,762,765,795

820,995,020 108,700,000 240,193,585 -

820,995,020 108,700,000 240,193,585 420,004

12

1,415,314,925 -

6,773,493,200 25,957,362

6,773,493,200 25,957,362

5 10 13 11 14

69,740,943 168,700,000 24,530,090,371 61,933,031

69,740,943 108,700,000 22,073,053,046 67,996,158

69,867,629 108,700,000 22,073,053,046 420,004 67,449,468

5

25,208,723,543 69,740,943

23,391,726,827 69,740,943

23,391,726,827 69,867,629

24,530,090,371 26,624,038,468 61,933,031

22,073,053,046 30,165,220,027 67,996,158

22,073,053,046 30,165,220,027 67,449,468

1,046,279,318

1,046,279,318

12 15

Long-term loans to and receivables from Total non-current assets former related parties

Separate financial statements

Property, plant and equipment Total assets Intangible assets

14

Other non-current assets

15

13

378,259,198

378,259,198

25,957,362 1,046,279,318

25,957,362 1,046,279,318

Total non-current assets

25,208,723,543

23,391,726,827

23,391,726,827

Total assets

26,624,038,468

30,165,220,027

30,165,220,027

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

40

4

G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries

Balance Sheets

Balance sheets As at 31 December 2009 and 2008

AsJatSteel 31 December 2009 and 2008 and its Subsidiaries G Public Company Limited

G J Steelsheets Public Company Limited Balance Assets As at 31 December 2009 and 2008

and its Subsidiaries

Note

Separate financial statements

Consolidated financial statements

Separate financial statements

2009

2008

2008

(restated)

(restated)

Cash and cash equivalents

6, 35 Note 35

Separate financial statements 42,839,157 2009 3,404,626

Trade accounts receivable

4, 7

93,148,059

Current assets

Liabilities and equity Current investment

Inventories Current liabilities Advances to suppliers Short-term loans from financial institutions Other current assets Short-term loanassets from other parties Total current Trade accounts payable

8, 16, 30 4 16 4, 9 16

1,058,475,872 133,135,354 84,311,857

(in Baht) Consolidated financial statements 84,213,993 2008835,740

(restated) 1,864,489,067 (in Baht) 3,762,765,795

Separate financial statements 84,213,993 2008835,740

(restated) 1,864,489,067

3,762,765,795

820,995,020 1,304,609,430 240,193,585 80,880,305 6,773,493,200

820,995,020 1,304,609,430 240,193,585 80,880,305 6,773,493,200

1,611,456,106

1,611,456,106

4, 17

74,340,176 1,415,314,925 2,675,891,663

4

1,582,887,860

410 411

1,254,830,443 168,700,000 82,173,643 -

505,742,930 108,700,000 12,632,550 -

505,742,930 108,700,000 12,632,550 420,004

12 32.3

115,299,495

25,957,362 -

25,957,362 -

18 5

13

644,158,266 69,740,943 6,429,581,546 24,530,090,371

37,498,894 69,740,943 6,357,119,484 22,073,053,046

37,498,894 69,867,629 6,357,119,484 22,073,053,046

14

61,933,031

67,996,158

67,449,468

15 4, 16

378,259,198 992,236,875 25,208,723,543 389,255,758

1,046,279,318 23,391,726,827 394,877,813

1,046,279,318 23,391,726,827 394,877,813

Total liabilities Totalnon-current assets

1,381,492,633 26,624,038,468

394,877,813 30,165,220,027

394,877,813 30,165,220,027

Total liabilities

7,811,074,179

6,751,997,297

6,751,997,297

Advance received from customers Non-current assets Other payables and accrued expenses Restricted deposits at financial institutions Accrued interest expenses Investments in subsidiaires Provision for lossinvestments on confirmed purchase Other long-term

orders for loans undelivered materialfrom Long-term to and raw receivables Other current liabilities former related parties Total current liabilities Property, plant and equipment

Intangible assets Non-current liabilities Other non-current assets Payable to related party from offsetting of machinery purchase Total non-current assets Liabilities under rehabilitation plan

19

2,804,299,269

2,804,299,269

Equity Share capital

20

Authorised share capital

40,478,051,205

30,128,051,205

30,128,051,205

20

27,394,674,313

27,394,674,313

27,394,674,313

21

161,693,969

161,693,969

161,693,969

20, 22

480,508,859

480,508,859

480,508,859

6,729,687

6,729,687

Issued and paid-up share capital Warrants Premium on shares Premium on ordinary shares Unrealised surpluses Fair value changes on investments

12

-

Retained earnings (deficit) Appropriated Legal reserve

18,507,422

18,507,422

18,507,422

(9,242,420,274)

(4,648,891,520)

(4,648,891,520)

Total equity

18,812,964,289

23,413,222,730

23,413,222,730

Total liabilities and equity

26,624,038,468

30,165,220,027

30,165,220,027

22

Unappropriated/(deficit)

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

Annual Report 2009

G J Steel Public Company Limited

4

41


G J Steel Public Company Limited and its Subsidiaries Statements of income Balance sheets As at 31 December 2009 and 2008

ForJ the ended 31 December 2008 G Steelyears Public Company Limited2009 and and its Subsidiaries

G J Steel Public Company Limited and its Subsidiaries Statements of income Assets For the years ended 31 December 2009 and 2008

Note

Current investment Inventories Revenues Advances to suppliers Revenue from sale of goods Other current assets Net foreign exchange gain Total current assets Reversal of devaluation of inventories

Long-term loans to and receivables from Expenses former related parties Cost of sale of goods Property, plant and equipment Selling expenses Intangible assets Administrative expenses Other non-current assets Management benefit expenses Total non-current assets Net foreign exchange loss

2008

2008

(restated)

(restated)

133,135,354 12,314,215,853 84,311,857 59,757,897 1,415,314,925 1,736,809,891

820,995,020 26,115,051,115 240,193,585 6,773,493,200 -

820,995,020 26,115,051,115 240,193,585 6,773,493,200 -

168,700,000 138,278,713 14,249,062,354 -

663,248,378 108,700,000 111,634,543 26,889,934,036 25,957,362

663,248,378 108,700,000 111,634,543 420,004 26,889,934,036 25,957,362

69,740,943 16,234,699,002 24,530,090,371 158,747,782 61,933,031 1,468,743,631 378,259,198 35,298,804 25,208,723,543 -

69,740,943 25,066,143,423 22,073,053,046 530,815,721 67,996,158 1,830,733,262 1,046,279,318 35,675,011 23,391,726,827 141,269,889

69,867,629 25,066,143,423 22,073,053,046 530,815,721 67,449,468 1,830,733,262 1,046,279,318 35,675,011 23,391,726,827 141,269,889

8

26,624,038,468

1,813,556,060 30,165,220,027

1,813,556,060 30,165,220,027

4 4, 23 4, 9 8 27 10 4 11

12 5 4, 30 13 4, 24 14 4, 25 15 26

Loss on devaluation of inventories Total assets Loss on confirmed purchase orders

2009

1,058,475,872

4, 7 8, 16, 30

Reversal of liabilities under Non-current assets the Business Rehabilitation Plan Restricted deposits at financial institutions Other income Investments in subsidiaires Total revenues Other long-term investments

Separate financial statements

Separate financial statements 84,213,993 2008 835,740 (restated) 1,864,489,067

6, 35 Note 35

Trade accounts receivable

Consolidated financial statements

(in Baht) Consolidated financial statements 84,213,993 2008 835,740 (restated) 1,864,489,067 (in Baht) 3,762,765,795

Current assets Cash and cash equivalents

Separate financial statements

Separate financial statements 42,839,157 2009 3,404,626

93,148,059

for undelivered raw material

32.3

115,299,495

Bad and doubtful debts expense

7, 9, 15

302,461,092

Loss on impairment of assets

13, 15

271,852,357

-

3,762,765,795

-

800,701,148 -

800,701,148 -

Total expenses

18,587,102,163

30,218,894,514

30,218,894,514

Loss before finance costs

(4,338,039,809)

(3,328,960,478)

(3,328,960,478)

255,488,945

269,023,518

269,023,518

(4,593,528,754)

(3,597,983,996)

(3,597,983,996)

(0.12)

(0.10)

(0.10)

Finance costs Loss for the year Loss per share

29

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

42

4

G J Steel Public Company Limited

Annual Report 2009


Trade accounts receivable

4, 7

Inventories

8, 16, 30

Advances to suppliers

4

Other current assets

4, 9

Total current assets

Statements of changes in equity

Annual Report 2009

Non-current assets G J Steel Public

Company Limited and its Subsidiaries

Restricted deposits at financial institutions

Statements of changes in equity

10

Other investments Glong-term J Steel Public Company

12

93,148,059

1,864,489,067

1,864,489,067

1,058,475,872

3,762,765,795

3,762,765,795

133,135,354

820,995,020

820,995,020

84,311,857

240,193,585

240,193,585

1,415,314,925

6,773,493,200

6,773,493,200

168,700,000

For the years ended 31 December 2009 and 2008 11

Investments in subsidiaires

For the years ended 31 December 2009 and 2008

Limited and its Subsidiaries

108,700,000

-

-

-

G J Steel Public Company Limited

Property, plant and equipment

69,740,943

69,740,943

13

24,530,090,371

22,073,053,046

22,073,053,046 surpluses

61,933,031

67,996,158

67,449,468 Fair value

15 paid-up Note

share capital

378,259,198 25,208,723,543 Warrants

69,867,629 Unrealised

1,046,279,318 Share premium 1,046,279,318 changes

23,391,726,827 (discount)

23,391,726,827 on investment

(in thousand Baht) 30,165,220,027 28,755,686,263 26,624,038,468 161,693,969 30,165,220,027 (3,467,283,090) 15,766,695

Total assets Balance at 1 January 2008 Effects of changes in accounting policies

5 14 and Issued

Other non-current assets

25,957,362

Consolidated and Separate financial statements (restated)

former related parties

Total non-current assets

420,004

25,957,362

Long-term loans to and receivables from

Intangible assets

108,700,000

-

30

Restated balance

28,755,686,263

161,693,969

(3,467,283,090)

15,766,695

Retained earnings / (deficit) Legal reserve 18,507,422 18,507,422

Deficit (4,315,902,896) (39,861,412) (4,355,764,308)

Total equity 21,168,468,363 (39,861,412) 21,128,606,951

Available for sale investments Net change in fair value recognised in equity

-

-

-

(9,037,008)

-

(9,037,008)

-

Net expense recognised directly in equity

-

-

-

Loss for the year

-

-

-

-

-

-

-

-

Total recognised expense Conversion of debt to equity

19, 20

Increase in discount on share capital

20

Reduction of par value

20

15,711,031,462 (17,072,043,412)

-

(9,819,394,679)

-

13,767,186,628

(9,037,008)

-

-

(3,597,983,996)

-

(3,597,983,996)

(9,037,008) (9,037,008) (3,597,983,996) (3,607,021,004)

-

-

-

15,711,031,462

-

-

-

(9,819,394,679)

-

-

3,304,856,784

-

Balance at 31 December 2008

27,394,674,313

161,693,969

480,508,859

6,729,687

18,507,422

(4,648,891,520)

23,413,222,730

Balance at 1 January 2009

27,394,674,313

161,693,969

480,508,859

6,729,687

18,507,422

(4,650,571,220)

23,411,543,030

Effects of changes in accounting policies Restated balance

-

30

27,394,674,313

161,693,969

480,508,859

6,729,687

18,507,422

1,679,700 (4,648,891,520)

1,679,700 23,413,222,730

Available for sale investments Net change in fair value transferred to profit

-

Loss for the year Balance at 31 December 2009

27,394,674,313

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

43

4 The accompanying notes are an integral part of these financial statements.

161,693,969

480,508,859

(6,729,687) -

18,507,422

-

(6,729,687)

(4,593,528,754)

(4,593,528,754)

(9,242,420,274)

18,812,964,289


G J Steel Public Company Limited and its Subsidiaries

Statements of cash flows Balance sheets As at 31 December 2009 and 2008

ForJ the ended 31 December 2008 G Steelyears Public Company Limited2009 and and its Subsidiaries

G J Steel Public Company Statements of cash flows Limited and its Subsidiaries Assets For the years ended 31 December 2009 and 2008

Note

Current assets Cash and cash equivalents

6, 35 Note 35

Separate financial statements

Consolidated financial statements

Separate financial statements

2009

2008

2008

(restated)

(restated)

Separate financial statements 42,839,157

Separate financial statements 84,213,993

1,058,475,872

2008835,740 (restated) 1,864,489,067 (in Baht) 3,762,765,795

133,135,354 (4,593,528,754) 84,311,857

820,995,020 (3,597,983,996) 240,193,585

820,995,020 (3,597,983,996) 240,193,585

Depreciation and amortisation

1,415,314,925 976,134,602

6,773,493,200 1,834,055,128

6,773,493,200 1,834,055,128

Dividend income Non-current assets Interest income Restricted deposits at financial institutions Finance costs in subsidiaires Investments

(1,461,303)

(1,461,303)

(2,980,959) 168,700,000 255,488,945 -

(2,855,779) 108,700,000 269,023,518 -

(2,855,779) 108,700,000 269,023,518 420,004

69,740,943 (1,736,809,891) 24,530,090,371

69,740,943 1,813,556,060 22,073,053,046

69,867,629 1,813,556,060 22,073,053,046

61,933,031 115,299,495 378,259,198

67,996,158 1,046,279,318

67,449,468 1,046,279,318

25,208,723,543 -

23,391,726,827 (663,248,378)

23,391,726,827 (663,248,378)

(2,680,540) 26,624,038,468 271,852,357

30,165,220,027 -

30,165,220,027 -

194,283,264

194,283,264

Current investment Trade accounts receivable Inventories Cash flows to from operating activities Advances suppliers

4, 7 8, 16, 30 4

Loss forcurrent the year Other assets Adjustments for Total current assets

4, 9

2009 3,404,626

(in Baht) Consolidated financial statements 84,213,993

93,148,059

10 11

Unrealised (gain) investments loss on exchange rate Other long-term Bad and doubtful Long-term loans debts to andexpense receivables from

12

(Reversal of) lossparties on devaluation of former related inventories Property, plant and equipment

5 13

Provision loss on confirmed purchase Intangibleforassets orders for undelivered Other non-current assetsraw material

14 15

Reversal of liabilitiesassets under the Total non-current Rehabilitation Plan Gain onassets sale of other long-term investment Total Loss on impairment of assets Loss on write-off of assets

(70,255,040) 302,461,092

5,147,369

Gain on disposal of equipment

-

64,323,228 25,957,362 800,701,148

2008835,740 (restated) 1,864,489,067 3,762,765,795

64,323,228 25,957,362 800,701,148

(30,000)

(30,000)

(4,479,871,324)

710,362,890

710,362,890

91,926,474

(1,080,485,855)

(1,080,485,855)

Changes in operating assets and liabilities Trade accounts receivable Inventories

4,441,099,814

(2,089,359,196)

(2,089,359,196)

Advances to suppliers

672,265,625

(549,026,267)

(549,026,267)

Other current assets

155,373,232

211,250,148

211,250,148

Other non-current assets

(26,086,808)

(333,802,940)

(333,802,940)

Trade accounts payable

(78,803,522)

1,793,969,332

1,793,969,332

Advances received from customers

(28,568,246)

1,415,854,482

1,415,854,482

Other payables and accrued expenses

761,875,461

161,166,367

161,166,367

Other current liabilities

186,668,957

(10,557,735)

(10,557,735)

(41,089)

(76,468)

(76,468)

1,695,838,574

229,294,758

229,294,758

Income tax paid Net cash provided by operating activities

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

44

4

G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries

Statements of cash flows Balance sheets As at 31 December 2009 and 2008

For the years ended 31 December 2009 and 2008

G J Steel Public Company Limited and its Subsidiaries

G J Steel Public Company Limited and its Subsidiaries

Statements of cash flows Assets For the years ended 31 December 2009 and 2008

Note

Current assets Cash and cash equivalents

6, 35 Note 35

Current investment Trade accounts receivable

4, 7

Inventories Cash flowstofrom investing activities Advances suppliers

8, 16, 30 4

Dividend received Other current assets Interest received Total current assets

4, 9

(Increase) decrease in current investment Proceeds fromassets sale of available-for-sale Non-current marketable securities Restricted deposits at financial institutions Increase in restricted deposits Investments in subsidiaires at financial institutions Other long-term investments

Separate financial statements

2009

2008

2008

(restated)

(restated)

Separate financial statements 42,839,157

(in Baht) Consolidated financial statements 84,213,993

Separate financial statements 84,213,993

2009 3,404,626

2008835,740 (restated) 1,864,489,067

1,058,475,872

2008835,740 (restated) 1,864,489,067 (in Baht) 3,762,765,795

133,135,354 84,311,857

820,995,020 1,461,303 240,193,585

820,995,020 1,461,303 240,193,585

3,731,727 1,415,314,925 (2,568,886)

2,850,507 6,773,493,200 155,812,363

2,850,507 6,773,493,200 155,812,363

93,148,059

3,762,765,795

21,908,215 168,700,000

108,700,000

108,700,000

11

(60,000,000) -

(62,000,000) 25,957,362

(75,341,247)

(100,505,992)

420,004 (62,000,000) 25,957,362 (100,505,992)

(1,382,866) 69,740,943 24,530,090,371

(748,800) 69,740,943 30,000 22,073,053,046

(748,800) 69,867,629 30,000 22,073,053,046

61,933,031 (124,482,652) 378,259,198

67,996,158 (247,567,289) 1,046,279,318

67,449,468 (247,567,289) 1,046,279,318

12 5

Proceeds equipment Property,from plantsale andof equipment Advance forassets purchase of property, plant Intangible

14

13 15

Cash flows from financing activities Total assets Interest paid

Consolidated financial statements

10

Purchase of loans property, plant and equipment Long-term to and receivables from Purchase of intangible assets former related parties

and equipment Other non-current assets Net cash used in investing Total non-current assets activities

Separate financial statements

(238,135,709) 25,208,723,543

(250,667,908) 23,391,726,827

(250,667,908) 23,391,726,827

26,624,038,468 (185,947,852)

30,165,220,027 (761,756,333)

30,165,220,027 (761,756,333)

877,646,132

2,259,539,102

2,259,539,102 (1,823,943,718)

Proceeds from short-term loans from financial institutions Repayment of short-term loans (2,182,255,562)

(1,823,943,718)

Proceeds from short-term loans from others

from financial institutions

635,446,456

515,230,306

515,230,306

Repayment of short-term loans from others

(641,050,490)

(434,350,000)

(434,350,000)

Proceeds from short-term loan from director

20,000,000

-

-

Repayment of short-term loan from director

(20,000,000)

-

-

Repayment of liabilities under rehabilitation plan

-

Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at beginning of year

(10,498,500)

(10,498,500)

(1,496,161,316)

(255,779,143)

(255,779,143)

(38,458,451)

(277,152,293)

(277,152,293)

84,213,993

360,943,052

360,943,052

Effect of exchange rate changes on balances held in foreign currencies

(2,916,385)

Cash and cash equivalents at end of year

42,839,157

423,234

84,213,993

423,234

84,213,993

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

Annual Report 2009

G J Steel Public Company Limited

4

45


G J Steel Public Company Limited and its Subsidiaries

Statements of cash flows Balance sheets As at 31 December 2009 and 2008

For the years ended 31 December 2009 and 2008

G JJ Steel Limited and itsand Subsidiaries G SteelPublic PublicCompany Company Limited its Subsidiaries

Assets Statements of cash flows For the years ended 31 December 2009 and 2008

Note

Current assets Cash and cash equivalents Current investment

6, 35 Note 35

Trade accounts receivable Inventories Non-cash Advancestransactions to suppliers (in thousand Baht)

4, 7 8, 16, 30 4

Conversion of debt to equity under the Business Other current assets Rehabilitation Plan Total current assets

4, 9 19

Plan with trade accounts receivable Non-current assets Purchase of machineries by offsetting with trade accounts Restricted deposits at financial institutions receivable in subsidiaires Investments

19

Offset of accounts payable under the Business Rehabilitation

Purchase of machinery not yet paid (including payable to Other long-term investments related party from offsetting of machinery Long-term loans to and receivables from purchase)

Separate financial statements

Consolidated financial statements

Separate financial statements

2009

2008

2008

(restated)

(restated)

Separate financial statements 42,839,157

(in Baht) Consolidated financial statements 84,213,993

Separate financial statements 84,213,993

2009 3,404,626

2008835,740 (restated) 1,864,489,067

1,058,475,872

2008835,740 (restated) 1,864,489,067 (in Baht) 3,762,765,795

133,135,354

820,995,020

820,995,020

84,311,857 1,415,314,925

240,193,585 5,891,637 6,773,493,200

240,193,585 5,891,637 6,773,493,200

93,148,059

-

127,870

3,762,765,795

127,870

10 4, 7,11 13

168,700,000 1,524,977 -

108,700,000 --

108,700,000 - 420,004

12 13

1,448,572

25,957,362 19,052

25,957,362 19,052

5

69,740,943

69,740,943

69,867,629

Property, plant and equipment

former related parties

13

24,530,090,371

22,073,053,046

22,073,053,046

Intangible assets

14

61,933,031

67,996,158

67,449,468

Other non-current assets

15

1,046,279,318

1,046,279,318

Total non-current assets

25,208,723,543

378,259,198

23,391,726,827

23,391,726,827

Total assets

26,624,038,468

30,165,220,027

30,165,220,027

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

46

4

G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements G J Steel Public Company Limited and its Subsidiaries

For the years ended 31 financial Decemberstatements 2009 and 2008 Notes to the

G J Steel Public Company Subsidiaries2009 and 2008 For the yearsLimited endedand 31 its December Note

Contents

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37

General information and going concern Basis of preparation of the financial statements Significant accounting policies Related party transactions and balances Balances with former related parties Cash and cash equivalents Trade accounts receivable Inventories Other current assets Restricted deposits at financial institutions Investments in subsidiaries Other long-term investments Property, plant and equipment Intangible assets Other non-current assets Interest-bearing liabilities Trade accounts payable Other current liabilities Liabilities under rehabilitation plan Share capital Warrants Share premium and reserve Segment information Selling expenses Administrative expenses Employee benefit expenses Reversal of liabilities under the Business Rehabilitation Plan Promotional privileges Loss per share Changes in accounting policy Financial instruments Commitments with non-related parties Litigation Event after the reporting period Thai Accounting Standard (TAS) not yet adopted Reclassification of accounts Others

47 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 These notes form an integral part of the financial statements. The financial statements were authorised for issue by the Board of Directors on 24 February 2010.

1

General information and going concern

1.1

General information G J Steel Public Company Limited G J Steel Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office as follows: Head office

:

52 Thaniya Plaza Building, 24th Floor, Silom Road, Suriyawongse, Bangrak, Bangkok.

Factory

:

358 Moo 6, Chonburi Industrial Estate (Bowin) Highway 331, Tambol Bowin, Amphur Sriracha, Chonburi.

The Company was listed on the Stock Exchange of Thailand on 2 July 1996. The Company’s major shareholders during the financial year were Oriental Access Company Limited (27.22% shareholding) and G Steel Public Company Limited (22.45% shareholding). Both companies were incorporated in Thailand. The principal business of the Company is the manufacturing of various flat-rolled steel products. In February 2000, the Company entered into the debt restructuring process as instructed by the Corporate Debt Restructuring Advisory Committee (CDRAC). In April 2000, the Company entered into the business rehabilitation process administered by the Central Bankruptcy Court. In 2002, the Central Bankruptcy Court approved the Business Rehabilitation Plan and appointed Maharaj Planner Co., Ltd. as the Plan Administrator. On 28 November 2008, the Company filed the petition to terminate the business rehabilitation with the Central Bankruptcy Court and on 2 March 2009, the Central Bankruptcy Court issued an order to terminate the rehabilitation proceeding of the Company since the Company had successfully completed its business rehabilitation plan. Details of the Company’s subsidiaries as at 31 December 2008 were as follows:

Direct subsidiary NSM Steel Company Limited I ndirect subsidiary NSM Steel (Delaware) Inc.

Type of business

Country of incorporation

Ownership interest (%)

Dormant

Cayman Islands, Cayman

100

Dormant

State of Delaware, The United States of America

100

12

48 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 At a board of directors’ meeting of the Company held on 22 January 2010, the board of directors passed a resolution not to prepare consolidated financial statements of the Company and its subsidiaries for the year ended 31 December 2009 because both NSM Steel Company Limited, a subsidiary of the Company, and NSM Steel (Delaware) Inc., an indirect subsidiary of the Company, have been struck off under the laws of the Cayman Islands. 1.2

Going concern Since the second half of 2008, the operations of the Company have been significantly affected by the global economic recession. As a result, the Company made an operating loss for the years ended 31 December 2009 of Baht 4,594 million (2008: Baht 3,598 million) and as at 31 December 2009, the Company had net current liabilities exceeding net current assets by Baht 5,014 million. The Company needs to generate sufficient operating cash flows to meet both its working capital requirements and its operating obligations, including obligations under the rehabilitation plan. These circumstances raise substantial uncertainties over the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result should the Company be unable to generate sufficient cash flows and/or raise additional finance from other sources to enable it to continue as a going concern. The Company is, accordingly, seeking additional credit facilities to fund its working capital requirements. The financial statements of the Company have been prepared on the going concern basis, which assumes that the Company will be successful in raising additional credit facilities and, therefore, to realize its assets and repay its liabilities in the ordinary course of business. Should the outcome of the uncertainties mentioned above not be favorable to the Company continuing as a going concern, it would likely be necessary to present the financial statements on a net realizable value basis, rather than on a going concern basis. The financial statements as presented do not include any adjustments which would be required if the Company is unable to continue as a going concern.

2

Basis of preparation of the financial statements The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language. The financial statements are prepared in accordance with Thai Accounting Standards (“TAS”) and Thai Financial Reporting Standards (“TFRS”) including related interpretations and guidelines promulgated by the Federation of Accounting Professions (“FAP”) and with generally accepted accounting principles in Thailand. On 15 May 2009, the FAP announced (Announcement No. 12/2009) the re-numbering of TAS to the same numbers as the International Accounting Standards ("IAS") on which the TAS/TFRS are based. The Company has adopted the following revised TAS/TFRS and accounting guidance which were issued by the FAP during 2008 and 2009 and effective for annual accounting periods beginning on or after 1 January 2009: TAS 36 (revised 2007)

Impairment of Assets 13

49 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 TFRS 5 (revised 2007)

Non-current Assets Held for Sale and Discontinued Operations (formerly TAS 54)

Framework for the Preparation and Presentation of Financial Statements (revised 2007) (effective on 26 June 2009) The adoption of these revised TAS/TFRS and accounting guidance does not have any material impact on the Company’s financial statements. The FAP has issued during 2009 a number of new and revised TAS which are not currently effective and have not been adopted in the preparation of these financial statements. These new and revised TAS are disclosed in note 35. The financial statements are presented in Thai Baht, rounded in the notes to financial statements to the nearest thousand (unless otherwise stated). They are prepared on the historical cost basis except as stated in the accounting policies. The preparation of financial statements in conformity with TAS and TFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which estimates are revised and in any future periods affected. Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements is included in the following notes: Note 7 Note 8 Note 13 Note 15 Note 31 Note 32.3

Allowance for doubtful accounts Allowance for devaluation of inventories Appraisal valuations of property, plant and equipment Appraisal valuations of suspense construction in progress Valuation of financial instruments Provision for loss on confirmed purchase orders for undelivered raw material

3

Significant accounting policies

(a)

Basis of consolidation The consolidated financial statements for the year ended 31 December 2008 related to the Company and its subsidiaries (together referred to as the “Group�). Significant intra-group transactions between the Company and its subsidiaries are eliminated on consolidation. Subsidiaries Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting 14

50 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Company. (b)

Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Thai Baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising on transaction are recognised in the statement of income. Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign exchange rates ruling at the dates of the transactions.

(c)

Cash and cash equivalents Cash and cash equivalents in the statements of cash flows comprise cash balances, call deposits and high liquidity short-term investments. Bank overdrafts that are repayable on demand are a component of financing activities for the purpose of the statement of cash flows.

(d)

Trade and other accounts receivable Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts. The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off when incurred.

(e)

I nventories Raw materials and finished goods Inventories are stated at the lower of cost and net realisable value. Cost of finished goods is calculated using the specific cost method, while cost of raw materials is calculated using moving average cost principle. Cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to make the sale. An allowance is made for all deteriorated, damaged, obsolete and slow-moving inventories.

15

51 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 (f)

I nvestments Investments in subsidiaries Investments in subsidiaries in the separate financial statements of the Company are accounted for using the cost method. Investments in other equity securities Marketable equity securities are classified as being available-for-sale investments. Available-for-sale investments are, subsequent to initial recognition, stated at fair value, and changes therein, other than impairment losses and foreign currency differences on available-for-sale monetary items, are recognised directly in equity. Impairment losses and foreign exchange differences are recognised in the statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the statement of income. The fair value of financial instruments classified as available-for-sale is determined as the quoted bid price at the reporting date. Other investments Other long-term investments represent time deposits with banks which have been pledged as collateral for credit facilities obtained from the banks and stated at cost. Disposal of investments On disposal of an investment, the difference between net disposal proceeds and the carrying amount together with the associated cumulative gain or loss that was reported in equity is recognised in the statement of income.

(g)

Property, plant and equipment Owned assets Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment except depreciation of machineries are depreciated on a production unit basis. The estimated useful lives are as follows: Land improvements Buildings Machinery and equipment

20 years 20 years Production unit basis and straight line basis over 10 and 25 years 5 years 5 years 5 years

Furniture and fixtures Office equipment Vehicles

No depreciation is provided on freehold land or assets under construction. 16

52 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 (h)

I ntangible assets Intangible assets represent cost of computer software and cost of a production licence (licence). Intangible assets that are acquired by the Company, which have finite useful lives, are stated at cost less accumulated amortisation and impairment losses. Other intangible assets are amortised in the statement of income on a straight-line basis over their estimated useful lives from the date that they are available for use. The estimated useful lives are as follows: Cost of computer software licence Cost of licence for production

(i)

10 years 25 years

Deferred costs of rolls Deferred costs of rolls are stated at cost less accumulated amortization. Amortisation is based on consumption.

(j)

I mpairment The carrying amounts of the Company’s assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the statement of income unless it reverses a previous revaluation credited to equity, in which case it is charged to equity. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the statement of income even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the statement of income is the difference between the acquisition cost and current fair value, less any impairment loss on the financial asset previously recognised in the statement of income. Calculation of recoverable amount The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value. The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognised. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.

17

53 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 Impairment losses recognised in priors periods in respect of other non-financial assets is assessed at each reporting date for any indications that the loss has decreased or no longer exits. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (k)

I nterest-bearing liabilities Interest-bearing liabilities are recognised initially at fair value less attributable transaction charges. Subsequent to initial recognition, interest-bearing liabilities are stated at amortised cost with any difference between cost and redemption value being recognised in the statement of income over the period of the borrowings on an effective interest basis.

(l)

Trade and other accounts payable Trade and other accounts payable are stated at cost.

(m)

Employee benefits Provident fund Obligations for contributions to the provident fund are recognised as an expense in the statement of income as incurred.

(n)

Provisions A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pretax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Onerous contracts A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting the Company’s obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract.

(o)

Revenue Revenue excludes value added taxes and is arrived at after deduction of trade discounts. Sale of goods and services rendered Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertainties regarding recovery of the 18

54 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 consideration due, associated costs or the probable return of goods. Service income is recognised as services are provided. Interest and dividend income Interest income is recognised in the statement of income as it accrues. Dividend income is recognised in the statement of income on the date the Company’s right to receive payment is established. (p)

Expenses Operating leases Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made. Contingent rentals are charged to the statement of income for the accounting period in which they are incurred. Finance costs Interest expense and similar costs are charged to the statement of income in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale.

(q)

I ncome tax Income tax on the profit or loss for the year comprises current tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

4

Related party transactions and balances Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market prices exist, at contractually agreed prices. Relationships with related parties that control or jointly control the Company or are being controlled or jointly controlled by the Company or have transactions with the Company were as follows.

Name of entities

Country of incorporation/ nationality

G Steel Public Co., Ltd.

Thailand

Oriental Access Co., Ltd.

Thailand

SSP Place Co., Ltd. Mill Con Steel Industries Public Co., Ltd. Asia Metal Public Co., Ltd.

Thailand Thailand Thailand

Type of business Manufacture and sale of steel Business consulting service Office rental Manufacture and sale of steel Manufacture and sale of steel

Nature of relationships Parent company (administrative control since 2 June 2008) Subsidiary of G Steel Public Co., Ltd. and shareholding Common director Common director Common director

19

55 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008

Name of entities

Country of incorporation/ nationality

BRP Steel Co., Ltd.

Thailand

Arnoma Hotel Bangkok Co., Ltd.

Thailand

Type of business Manufacture and sale of steel bar Hotel, food and beverage

Nature of relationships Common director Common director

The pricing policies for particular types of transactions are explained further below: Transactions Sale of raw materials Sale of finished goods Purchase of raw materials Purchase of finished goods Production service charge Operating service expense Interest expense

Pricing policies Cost plus margin Agreed prices with reference to market prices Cost plus margin Agreed prices with reference to market prices 5,100 Baht per ton based on finished goods produced Fixed rate as stipulated in agreement Contractual prices

Significant transactions for the years ended 31 December 2009 and 2008 with related parties were as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Parent (G Steel Public Co., Ltd.) Sale of raw materials and finished goods Purchase of raw materials and finished goods Other income Production service charge Other related parties Sale of raw materials and finished goods Purchase of raw materials and finished goods Operating service expense Other expense Interest expense

37,593 395,721 751 49,545

1,143,536 783,731 620 -

358,247 32,859 452,953 167 16

505,565 416,376 675,135 289 2,832

The Company has expenses in relation to directors’ meeting allowance for the year ended 31 December 2009 amounting to Baht 0.89 million. For the year ended 31 December 2008, the Company was managed by the Plan Administrator appointed under the Rehabilitation Plan and the Company had expenses in relation to directors’ meeting allowance amounting to Baht 0.34 million.

20

56 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 Balances as at 31 December 2009 and 2008 with related parties were as follows:

Trade accounts receivable from related parties Parent G Steel Public Co., Ltd. Other related parties Mill Con Steel Industries Public Co., Ltd.

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) -

664

-

30,259 30,923

Advances to suppliers Parent G Steel Public Co., Ltd.

766

Prepaid expense (Part of other current assets) Other related parties Oriental Access Co., Ltd.

-

Advances from customers Other related parties Mill Con Steel Industries Public Co., Ltd. Asia Metal Public Co., Ltd. Trade accounts payable to related parties Parent G Steel Public Co., Ltd. Other related parties Mill Con Steel Industries Public Co., Ltd. BRP Steel Co., Ltd.

Short-term loan from related parties Other related parties Director Other payables and accrued expenses Other related parties Oriental Access Co., Ltd. SSP Place Co., Ltd. Arnoma Hotel Bangkok Co., Ltd.

-

111,039

142,990 41,124 184,114

64 63 127

376,914

187,626

29,358 406,272

149,761 337,387

-

-

288,901 38 9 288,948

-

21

57 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008

Payable to related party from offsetting of machinery purchase (see note 13) Parent G Steel Public Co., Ltd.

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

992,237

-

Movements during the years ended 31 December 2009 and 2008 of loans from related parties were as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Short-term loan from related parties Other related parties At 1 January Increase Decrease At 31 December

20,000 (20,000) -

-

Significant agreement with related parties a) According to an agreement on 11 September 2006, Maharaj Planner Co., Ltd. (“the Plan Administrator”) entered an operation service agreement with Oriental Access Co., Ltd. and On City Holding Limited (“the Operator”) to arrange working capital credit lines for the operation of the Company and to act as its strategic advisor to provide services in relation to the operation of the Plan during the term, including the procurement of raw materials, production of products, sales, marketing, promotion and distribution of products both domestic and export markets. Fees are as follows: • • • •

Operating fee of USD 400,000 per month Maintenance management fee of USD 375,000 per quarter Technical assistance fee of USD 500,000 per quarter Minimum revenue sharing of USD 400,000 per month

The agreement period is 5 years with options to renew and commenced on 12 September 2006. On 21 December 2006, Maharaj Planner Co., Ltd. (“the Plan Administrator”) and Oriental Access Co., Ltd. agree that the maximum fee payable under the operation service agreement shall not exceed USD 13,100,000 per annum and the fees in relation to arrangement fee and revenue sharing in excess of the said minimum revenue sharing will be irrevocably waived. Nonetheless, if the Company wishes to terminate the operation service agreement prior to the expiration of the term of the operation service agreement, the Company would be required to pay 22

58 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 the termination fees as specified in the agreement to Oriental Access Co., Ltd. when the Company terminates the operation service agreement. b) At a board of directors’ meeting of the Company held on 6 November 2009, the board of directors passed a resolution concerning the terms of payment of the amount payable to the parent company (G Steel Public Company Limited) under the offset arrangement described in note 13. The repayment period is 3 years from 1 November 2009 to 31 October 2012. Interest is payable on the outstanding amount at MLR+1%, with a grace period of 90 days. Payments made by the Company shall be deducted first from outstanding interest payable with any remaining balance deducted from outstanding principal. Payable to the parent company was classified under non-current liabilities as at 31 December 2009. Significant matter with related parties The Company has been informed by the parent company that Oriental Access Company Limited (‘OAC’), a subsidiary of the parent company which is also a major shareholder of the Company, has been informed by a loan creditor that, following default of the loan covenants by OAC, the loan creditor has reserved its rights to sell OAC’s 27.22% shareholding in the Company which has been pledged to the loan creditor as collateral for the loan. OAC has filed a petition with the court to seek a temporary injunction to prevent such enforcement. On 29 October 2009, the court granted a temporary injunction preventing the creditor from enforcing its rights over the pledged shares until the injunction is lifted.

5

Balances with former related parties Balances as at 31 December 2009 and 2008 with former related parties were as follows: Separate financial statements 2009 Long-term loans to and accrued interest receivables (interest rate per annum) Metal Star Co., Ltd. (16.0%) Nakornthai Integrated Steels Co., Ltd. (16.0%) Tak-Ka-Pon Co., Ltd. (16.0%) Nakornthai Steel Work Co., Ltd. (16.0%) Sathorn North Pattana Co., Ltd. (16.0%) Total Less allowance for doubtful accounts Net

Consolidated financial statements 2008 (in thousand Baht)

Separate financial statements 2008

437,565

437,565

437,565

87,825 75,278 3,710 576 604,954 (604,954) -

87,825 75,278 3,710 576 604,954 (604,954) -

87,825 75,278 3,710 576 604,954 (604,954) -

23

59 Annual Report 2009

G J Steel Public Company Limited


For the years ended 31 December 2009 and 2008

Separate financial statements 2009 Receivables from former related parties N.T.S. Steel Group Public Co., Ltd. (See note 33.3) Steel Top Co., Ltd. NSM Steel Co., Ltd. Total Less allowance for doubtful accounts Net Long-term loans to and receivables from, net

Consolidated financial statements 2008 (in thousand Baht)

Separate financial statements 2008

72,117 272 126 72,515 (2,774) 69,741

72,117 272 72,389 (2,648) 69,741

72,117 272 126 72,515 (2,648) 69,867

69,741

69,741

69,867

These companies ceased to be related parties of the Company since 30 September 2006. Long-term loans to and accrued interest receivable Long-term loans to and accrued interest receivable represent long-term loans to former related parties for working capital in the form of promissory notes which bear interest at 16% per annum and are unsecured. The Company has made full allowance for doubtful accounts for these long-term loans and accrued interest receivable. Since 1999, the Company has ceased the recognition of interest income on these long-term loans. Receivables from former related parties Receivables from former related parties – N.T.S. Steel Group Public Co., Ltd. (“NTS”) represent advance payments of Baht 12.2 million and refundable deposits for water usage of Baht 60.0 million. Refundable deposits for water usage of Baht 60.0 million were made to a former related party under a 19 year agreement executed on 1 February 1997. On 15 November 2001 the Central Bankruptcy Court granted an order in favour of the Company to receive an amount of Baht 58.0 million against the said amount. This is payable by the related party within 10 years, commencing on the 5th year, pursuant to the effective date of the rehabilitation plan of the related company, dated 29 November 2002. The related party has also terminated the water usage agreement effective from 13 September 2002 in accordance with the rehabilitation plan. As at 31 December 2009, the Company had receivables from former related parties - NTS in total amount of Baht 72.2 million for which the Company has made an allowance of Baht 2.7 million for doubtful accounts. However, NTS is also the Company’s creditor which has a payable under the rehabilitation plan and other payable according to the prosecution in total amount of Baht 58.6 million (see note 33.4).

24

60 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 6

Cash and cash equivalents Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 41,135 82,848 1,704 1,366 42,839 84,214

Cash and deposits at financial institutions Fixed deposits due within three months Total

The currency denomination of cash and cash equivalents as at 31 December was as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 31,592 72,814 11,247 11,400 42,839 84,214

Thai Baht (THB) United States Dollars (USD) Total

7

Trade accounts receivable

Note Related parties Other parties

4

Less allowance for doubtful accounts Total

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 30,923 813,701 2,396,403 813,701 2,427,326 (720,553) (562,837) 93,148 1,864,489 157,716

Bad and doubtful debts expense for the year

562,587

25

61 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 Aging analyses for trade accounts receivable were as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Related parties Within credit terms Overdue less than 3 months Other parties Within credit terms Overdue : Less than 3 months 3-6 months 6-12 months Over 12 months Total Less allowance for doubtful accounts Net Total

Balance before offset transactions of machinery purchase Offset transactions of machinery purchase Net after offset transactions of machinery purchase

-

30,923 30,923

157,126

629,155

63,598 137,068 160,926 294,983 813,701 (720,553) 93,148 93,148

1,265,693 409,103 92,202 250 2,396,403 (562,837) 1,833,566 1,864,489

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 2,338,678 2,427,326 (1,524,977) 813,701 2,427,326

The normal credit terms granted by the Company for domestic sales ranges from cash sale to 120 days and for export sales covered by letters of credit at sight but since 2007, the Company has given a credit term of 90-120 days without letters of credit to a customer. As at 31 December 2009, the Company had a trade receivable from an overseas counterparty of Baht 1,871 million (USD 55.9 million) of which Baht 1,737 million (USD 51.9 million) is overdue. The Company has entered into an agreement with this counterparty to purchase machinery for Baht 1,525 million (USD 45.5 million) and to offset the cost of this machinery against the amount receivable from the counterparty. The net receivable after the offset was Baht 346 million (USD 10.4 million), for which the Company has made full allowance for doubtful accounts. In addition, as at 31 December 2009, the Company had trade receivables of Baht 450 million from two domestic customers of which Baht 427 million is overdue and for which the Company has set up a Baht 375 million allowance for doubtful accounts.

26

62 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 The currency denomination of trade accounts receivable, gross amount as at 31 December was as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 452,960 538,579 360,741 1,888,747 813,701 2,427,326

Thai Baht (THB) United States Dollars (USD) Total

8

Inventories Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 343,821 1,662,800 399,882 3,140,429 383,150 559,643 32,086 237,167 1,158,939 5,600,039 (100,463) (1,837,273) 1,058,476 3,762,766

Finished goods Raw materials Spare parts and supplies Goods in transit Total Less allowance for decline in value Net

The cost of inventories which is recognised as an expense and included in ‘cost of sale of goods’ for the years ended 31 December included: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 1,318,979 (566,128) 12,606,087 20,496,261

Changes in inventories of finished goods Raw materials and consumables used

As at 31 December 2009, finished goods of the Company amounting to Baht 271 million were pledged as security for trading and loan facilities (2008: Baht 1,169 million). As at 31 December 2008, raw materials were pledged as collateral for short-term loans from financial institutions amounting to USD 52 million, equivalent to Baht 1,817 million (see note 16). The Company recognised reversal of allowance for devaluation of inventories amounting to Baht 1,737 million for the year ended 31 December 2009. The reversal of devaluation of inventories was recognised due to the decrease in the inventory balance and the increase in the selling price of finished goods. 27

63 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 The Company recognised provision for the devaluation of certain inventories to net realisable value amounting to Baht 1,814 million for the year ended 31 December 2008. The provision was recognised due to decrease in market prices of inventories.

9

Other current assets

Note Suspense input tax Prepaid expense to third parties Refundable value added tax Prepaid expense to related party

4

Others Less allowance for doubtful account Net Total

69,288 (53,479) 15,809

69,259 (53,479) 15,780

84,312

240,194

-

Bad and doubtful debts expense for the year

10

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 54,675 46,076 13,688 57,532 140 9,767 111,039 68,503 224,414

36,256

Restricted deposits at financial institutions As at 31 December 2009 and 2008, the Company had pledged its deposits at financial institutions as collateral for supplies and services receivable from the government and other entities as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 168,700 108,700 168,700 108,700

Guarantee for utility supplies and services Total

28

64 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 11

Investments in subsidiaries Investments in subsidiaries as at 31 December 2008 were as follows:

Offshore subsidiaries NSM Steel Co., Ltd. Less allowance for impairment loss At cost – net

Business Dormant (see note 1.1)

Separate financial statements Ownership interest Cost Method (%) (in thousand Baht) 100

420 420

NSM Steel Co., Ltd is no longer in existence, and has been struck off under the laws of the Cayman Islands. The Company has recorded the loss on impairment of investment in subsidiaries amounting to Baht 0.42 million in 2009.

12

Other long-term investments Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 143,144 143,144 (143,144) (143,144) -

Promissory notes Less allowance for doubtful accounts Net Available-for-sale marketable securities - Tata Steel (Thailand) Public Company Limited Revaluation of fair value Total

-

19,228 6,729 25,957

Net

-

25,957

As at 31 December 2009 and 2008, long-term investments included promissory notes issued by closed finance companies amounting to Baht 143 million, including interest receivable, that are used as collateral for loans of certain related parties from those closed finance companies. The Company has fully provided allowance for these promissory notes due to concerns about the financial position of the related parties. The Company received dividends from available-for-sale securities for the year ended 31 December 2008 amounting to Baht 1 million.

29

65 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries 66

Notes to the financial statements For the years ended 31 December 2009 and 2008 13

Property, plant and equipment Land and land improvements

Plant, equipment Building

Consolidated and Separate financial statements Furniture Office

and machinery

and fixtures

equipment

Construction Vehicles

in progress

Total

7,741,131

29,039,573

(in thousand Baht) Cost At 1 January 2008

15,210,557

43,824

177,243

Additions

-

-

-

-

10,113

Disposals

-

-

-

-

(103)

Transfers

37,587

195,051

1,165,089

-

489

854,864 -

5,240,978 -

16,375,646 -

At 31 December 2008 and

1 January 2009 Additions

817,277

5,045,927

187,742 1,399

(365) 3,249 -

109,444

119,557

(194,232)

(194,700)

(1,572,828)

(174,612)

6,083,515 3,267,251

-

Transfers

2,080

1,004,043

6,245,021

17,872,095

43,824

211,606

3,249

Accumulated depreciation At 1 January 2008

1,807

2,401,646

2,171,888

33,194

133,435

3,306

-

4,745,276

Depreciation charge for the year

1,992

338,577

769,790

2,864

16,587

165

-

1,129,975

-

-

(365)

-

3,106 123

-

G J Steel Public Company Limited

Disposals

At 31 December 2008 and

1 January 2009 Depreciation charge for the year Disposals

At 31 December 2009 Allowance for loss on impairment

At 31 December 2008 Impairment losses

Annual Report 2009

At 31 December 2009

Net book value

At 31 December 2008

At 31 December 2009

856,944

3,799 3,645 -

2,740,223 417,641 -

-

-

(1,343)

-

(4,819)

1,496,449

-

23,808

-

(2,526,693)

28,789,818 3,268,650

Disposals At 31 December 2009

-

43,824 -

3,614

2,941,678 342,443

3,157,864

3,284,121

194,351 -

42,926 -

81,564 -

656,714

2,457,829

13,352,404

655,149

42,926

3,044,231

36,058 2,452

-

7,444

194,351

-

-

38,510

-

81,564

-

7,766

14,506,410

5,314

30

(52) 149,970 18,732 (1,015)

167,687

-

37,772

43,919

6,819,254

-

-

-

523,090 21,117

3,229

-

-

544,207

143

20

5,560,425

6,275,047

(6,162) (313)

32,051,993

(417) 5,874,834 785,036 (1,015)

6,658,855

841,931 21,117 863,048

22,073,053 24,530,090


Notes to the financial statements For the years ended 31 December 2009 and 2008 Details of Construction in progress as at 31 December were as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 5,083,216 3,863,412 1,184,744 1,524,977 211,061 1,035,359 6,819,254 6,083,515

Galvanizing line Push Pull Pickling Line Reversing Mill line Others Total

The gross amount of the Company’s fully depreciated property, plant and equipment that was still in use amounted to Baht 151 million as at 31 December 2009 (2008: Baht 137 million). The Company’s property, plant and equipment were appraised by an independent appraiser during the quarter ended 31 March 2008 and the results of this appraisal did not indicate any impairment in the carrying value of these assets. As at 31 December 2009, the Company’s property, plant and equipment and construction in progress, with a net book value of Baht 15,703 million, were pledged as collateral for liabilities under the rehabilitation plan. (2008: Baht 16,466 million) In 2009, the Company entered into three agreements to purchase certain machineries for Baht 3,150 million (USD 93.5 million) as follows: The Company has entered into an agreement with a counterparty (‘Counterparty A’), which is also a debtor of the Company’s parent company in respect of sale of scrap made by the parent company to the counterparty, to purchase machinery from Counterparty A for Baht 1,017 million (USD 29.8 million). The Company, the parent company and Counterparty A have agreed to settle the outstanding debt owed by Counterparty A to the parent company by offsetting its debt to the parent company against the amount receivable from the Company for the machinery purchase. Subsequently, the parties agreed to fix the USD/Baht exchange rate for the machinery purchase. As a result, the USD 29.8 million purchase price was converted to Baht 992 million. The Company has entered into an agreement with a supplier to purchase machinery for Baht 608 million (USD 18.2 million) and has paid the first installment of Baht 221 million (USD 6.3 million). Subsequently, the Company entered into an agreement with the supplier and Counterparty A to transfer all rights, benefits and liabilities under the purchase agreement, including the first installment payment, to Counterparty A. The Company has entered into an agreement with an overseas counterparty to purchase machinery for Baht 1,525 million (USD 45.5 million) and to offset the cost of this machinery against the outstanding amount receivable from the counterparty (see note 7). The machinery purchased under the above agreements was delivered to the Company’s factory during August and November 2009.

31

67 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 The Company hired an independent appraiser to appraise the machineries purchased as mentioned above. The appraisal was made on the Depreciated Replacement Cost method for the value of its machineries. The appraised values of the machineries were greater than the purchase prices. During August 2009, the Company had an accident at a factory, which was consequently closed for repairs for about one month. The loss on damage of machinery and an equipment will be claimed from the insurance company. Consequently, the Company entered into a service agreement with the parent company, G Steel Public Company Limited, to produce finished goods during September 2009. However, regular production recommenced in October 2009.

14

Intangible assets

Cost At 1 January 2008 Additions Transfers At 31 December 2008

Consolidated financial statements Software Licence Other Total (in thousand Baht)

Accumulated amortisation At 1 January 2008 Amortisation charge for the year At 31 December 2008 Net book value At 31 December 2008

72,060 749 174,612 247,421

40,684 40,684

547 547

113,291 749 174,612 288,652

62,679 140,076 202,755

16,273 1,628 17,901

-

78,952 141,704 220,656

44,666

22,783

547

67,996

Separate financial statements Software Licence Total (in thousand Baht)

Cost At 1 January 2008 Additions Transfers At 31 December 2008 and 1 January 2009 Additions Transfers At 31 December 2009 Accumulated amortisation At 1 January 2008 Amortisation charge for the year At 31 December 2008 and 1 January 2009 Amortisation charge for the year At 31 December 2009 Net book value As at 31 December 2008 As at 31 December 2009

72,060 749 174,612 247,421 1,070 313 248,804

40,684 40,684 40,684

112,744 749 174,612 288,105 1,070 313 289,488

62,679 140,076 202,755 5,272 208,027

16,273 1,628 17,901 1,627 19,528

78,952 141,704 220,656 6,899 227,555

44,666 40,777

22,783 21,156

67,449 61,933

32

68 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 15

Other non-current assets Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 2,086,474 2,086,474 (2,041,990) (1,791,674) 44,484 294,800 201,578 201,578 (201,578) (201,578) -

Suspended construction in progress Less allowance for impairment Advances to suppliers Less allowance for doubtful accounts Advances for purchase of property, plant and equipment Less allowance for doubtful accounts Deferred cost of roll Refundable deposits Others Net

246,023 (129,024) 116,999 185,964 17,778 13,034 378,259

376,591 376,591 256,242 51,734 66,912 1,046,279

Loss on impairment of assets for the year

250,316

-

Bad and doubtful debts expense for the year

129,024

201,858

Suspended construction in progress represented the “Direct Reduced Iron” plant (DRI). The management of the Company decided to suspend this project since 1999. In 2006, a feasibility study from an independent expert recommended that the Company should not proceed with the completion of the Direct Reduced Iron (“DRI”). In response to this recommendation the Company instructed an independent valuer to conduct a valuation of the DRI plant on both a continuing basis and forced sale value basis. The DRI plant has been impaired to its forced sale value of Baht 295 million as at 31 December 2008. In 2009, The Company has made an allowance for loss on impairment of suspended construction in progress of Baht 250 million by reference to a valuation by an independent appraiser in 2008, which was prepared on the forced sale value basis.

33

69 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 16

Interest-bearing liabilities

Note Current Short-term loans from financial institutions - Liabilities under trust receipts secured

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

-

Short-term loans from other parties secured unsecured Non-current Payable to related party from offsetting of machinery purchase unsecured

1,304,609

74,340 74,340

80,880 1,385,489

992,237 992,237

-

4

Total

1,066,577

1,385,489

The periods to maturity of interest-bearing liabilities as at 31 December were as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 74,340 1,385,489 992,237 1,066,577 1,385,489

Within one year After one year but within five years Total

The currency denomination of interest-bearing liabilities as at 31 December was as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 1,046,537 187,492 20,040 1,197,997 1,066,577 1,385,489

Thai Baht (THB) United States Dollars (USD) Total

34

70 G J Steel Public Company Limited

Annual Report 2009


Notes to the financial statements For the years ended 31 December 2009 and 2008 Short-term loans from financial institutions Liabilities under trust receipts bear interest at 18% per annum (default rate) in 2009 (2008: 4.10% to 9.23% per annum). As at 31 December 2008, total short-term trade financing facilities from the financial institution amounted to USD 44 million (equivalent to Baht 1,544 million). The facilities bear interest at the rates specified in the agreements. Loans under the facility and to finance the purchase of raw materials are secured by specific raw materials as described in Note 8. The benefits of the insurance of such raw materials have been assigned to the lenders. Short-term loans from other parties Short-term loan from other party bear interest at 2% to 13% per annum in 2009 (2008: 11% to 13% per annum). In 2008, the Company entered into a loan agreement with a third party, “the lender�, for loan facilities not exceeding Baht 240 million. The loan is repayable 60 days from draw-down of the loan and, in addition, the lender charges a holding finished goods service fee, not exceeding Baht 1,300,000. The Company has pledged finished goods to the lender as security for its obligation (see note 8). As at 31 December 2008, the Company had unused short-term credit facilities equivalent to Baht 159 million.

17

Trade accounts payable

Note Related parties Other parties Total

4

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 406,272 337,387 2,269,620 2,466,912 2,675,892 2,804,299

The currency denomination of trade accounts payable as at 31 December was as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 727,794 780,225 1,946,444 1,982,754 1,654 41,198 122 2,675,892 2,804,299

Thai Baht (THB) United States Dollars (USD) Euro Dollars (EUR) Singapore Dollars (SGD) Total

35

71 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008 The Company had agreements to purchase raw materials with various overseas suppliers. The Company has released raw materials but still not paid for the material under consignment agreements in the amount of Baht 1,555 million as at 31 December 2009. The Company has to pay interest at 2% to 6% and MLR per annum on the released raw materials and on the payables balance from the boarding date on ship until full payment is made (2008: Baht 1,405 million, interest rate at 4.10% to 9.23% and MLR per annum).

18

Other current liabilities Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 400,176 213,041 12,904 30,941 24,595 644,158 37,499

Machinery purchase payable (see note 13) The Revenue Department payable Construction payables Total

The currency denomination of other current liabilities as at 31 December was as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 225,945 18,297 411,681 11,978 6,532 7,224 644,158 37,499

Thai Baht (THB) United States Dollars (USD) Euro Dollars (EUR) Total

36

72 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 Annual Report 2009

19

Liabilities under rehabilitation plan At 31 December 2007

G J Steel Public Company Limited

Loans: Syndicated loans from Thai financial institutions Holder from related party - Oriental Access Co., Ltd. Holders (mortgage notes) Other liabilities: Past accrued interest and deferred interest from - Related party - Oriental Access Co., Ltd - Other parties Others Total

Conversion of debt to equity (see note 20)

Separate financial statements Adjust At 31 exchange rate Reversal of December and others liabilities 2008 (see note 27) (in thousand Baht)

Adjust exchange rate and others

At 31 December 2009

2,461,286

(2,461,286)

-

-

-

-

-

2,074,216 274,459 4,809,961

(2,074,216) (274,459) (4,809,961)

-

-

-

-

-

1,081,674 363,250 877,487 2,322,411 7,132,372

(1,081,674) (1,081,674) (5,891,635)

(182,611) (182,611) (182,611)

37

(363,250) (299,998) (663,248) (663,248)

394,878 394,878 394,878

(5,622) (5,622) (5,622)

389,256 389,256 389,256

73


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

The classification of creditors and payment as at 31 December were as follows:

Creditors Class 5 Class 11 Class 13

Due date Equipment Claims Repayable in October 2011 Operating Fund Repayable in October 2003 Creditors Provided in the Form of Overdraft Other Creditors Repayable in October 2011

Total

Consolidated and Separate Separate financial financial statements statements 2009 2008 (in thousand Baht) 37,448

38,285

15,795 336,013 389,256

15,795 340,798 394,878

The currency denomination of liabilities under rehabilitation plan as at 31 December was as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 259,568 259,568 105,147 110,058 20,821 21,480 3,360 3,427 360 345 389,256 394,878

Thai Baht (THB) United States Dollars (USD) Euro Dollars (EUR) Singapore Dollars Pound Sterling Total

The repayment schedule of each creditor under Class 5 and Class 13 is not on the same date, as it depends on the date of the final conclusion of the debt. However, the first due date of creditors under Class 5 and Class 13 is 31 October 2011. Although repayment of creditors under Class 11 was due in October 2003, the repayment schedule of these creditors was conditional upon those creditors continuing to provide overdraft facilities to the Company equal to the total debt under Class 11. However, the Company has not received any such overdraft facility from the creditors under Class 11 and, therefore, the repayment condition has not been satisfied. In February 2000, the Company entered into the debt restructuring process as instructed by the Corporate Debt Restructuring Advisory Committee (CDRAC). In April 2000, the Company entered into the business rehabilitation process administered by the Central Bankruptcy Court. In 2002, the Central Bankruptcy Court approved the Business Rehabilitation Plan and appointed Maharaj Planner Co., Ltd. as the Plan Administrator. On 28 November 2008, the Company filed the petition to terminate the business rehabilitation with the Central Bankruptcy Court and on 2 March 2009, the Central Bankruptcy Court issued an order to terminate the rehabilitation proceeding of the Company since the Company had successfully completed its business rehabilitation plan.

38

74 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 20

Share Capital The movements of share capital for the years ended 31 December 2009 and 2008 were as follows:

Authorised At 1 January ordinary shares ordinary shares Reduction in par value from Baht 1.12 to Baht 0.78 Reduction in par value from Baht 0.78 to Baht 0.69 Reduction of shares Increase of new shares At 31 December ordinary shares I ssued and paid up At 1 January ordinary shares ordinary shares Converted debt to Equity on 18 March 2008 on 25 March 2008 Reduction of par value from Baht 1.12 to Baht 0.78 Reduction of par value from Baht 0.78 to Baht 0.69 At 31 December ordinary shares

Par value per share (in Baht)

Number

2009

2008 Amount Number Amount (thousand shares / in thousand Baht)

0.69 1.12

43,663,842 -

30,128,051 -

43,801,183

49,057,325

0.78

-

-

-

(14,892,402)

0.69 0.69 0.69

15,000,000

10,350,000

0.69

58,663,842

40,478,051

43,663,842

30,128,051

0.69 1.12

39,702,427 -

27,394,675 -

25,674,720

28,755,686

1.12 1.12

-

-

7,517,453 6,510,254

8,419,548 7,291,484

0.78

-

-

-

(13,498,825)

0.69

-

-

-

(3,573,218)

0.69

39,702,427

27,394,675

39,702,427

27,394,675

(864,877) 727,536

(3,942,106) (596,765) 501,999

39

75 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 Reserve Share premium (discount) Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Share premium (discount) At 1 January Conversion of debt to equity Reduction in par value from Baht 1.12 to Baht 0.78 Reduction in par value from Baht 0.78 to Baht 0.69 At 31 December

480,509 480,509

(3,467,283) (9,819,395) 13,498,825 268,362 480,509

Movement in conversion of debt to equity Debt At 18 March 2008 (Converted price of Baht 0.42 per share) • Principal amount under the Master Restructuring Agreement • Past accrued interest and deferred interest requests by creditors

Share capital Share discount Debit/(Credit)/(in thousand Baht)

2,075,655

(5,535,081)

3,459,426

1,081,675 3,157,330

(2,884,467) (8,419,548)

1,802,792 5,262,218

At 25 March 2008 (Converted price of Baht 0.42 per share) • Principal amount under the Master Restructuring Agreement

2,734,307

(7,291,484)

4,557,177

Total

5,891,637

(15,711,032)

9,819,395

On 18 March and 25 March 2008, the Plan Administrator registered the increase in the Company’s paid up capital with the Business Development Department, Ministry of Commerce by Baht 15,711,031,462, comprising 14,027,706,662 shares with par value of Baht 1.12 per share, resulting from the final conversion of the remainder of restructured debt, deferred interest and past accrued interest of the two creditors requesting for debt to equity conversion. After the paid up capital increase, the Company had registered capital of Baht 49,057,325,350, comprising 43,801,183,349 ordinary shares with par value of Baht 1.12 per share and issued and paid up share capital of Baht 44,466,717,725, comprising 39,702,426,540 ordinary shares with par value of Baht 1.12 per share. All shares that were converted from debt to equity by the creditors are subject to a 6 months lock-up period after listing on the SET. On 22 April 2008, the Central Bankruptcy Court approved the petition for amendment of the Business Reorganisation Plan of the Company. Under the amended Plan, the Company shall reduce its authorised share capital by decreasing the par value of its shares by set off against all existing share discount of the Company. The Plan Administrator reduced the authorised share capital of the Company by decreasing the par value of the Company’s shares from Baht 1.12 per share to Baht 0.78 40

76 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

per share in order to set off against the share discount of Baht 13,286,677,768. As a result, the Company has authorised share capital of Baht 34,164,923,012, comprising 43,801,183,349 ordinary shares with par value of Baht 0.78 per share and issued and paid up share capital of Baht 30,967,892,701, comprising 39,702,425,540 ordinary shares with par value of Baht 0.78 per share. The Company registered the capital reduction with the Business Development Department, Ministry of Commerce on 12 June 2008. As a result, the Company recorded a share premium from reduction in par value of the shares of approximately Baht 212 million. On 20 October 2008, the Central Bankruptcy Court approved the Business Reorganisation Plan as follows: - The reduction of the authorised share capital by decreasing the par value of the Company’s shares from Baht 0.78 per share to Baht 0.69 per share in order to off set against the Company’s deficit of Baht 3,304,856,784 (balance as at 30 June 2008). As a result, the Company had authorised share capital of Baht 30,222,816,510, comprising 43,801,183,349 ordinary shares with par value of Baht 0.69 per share and issued and paid-up share capital of Baht 27,394,674,313, comprising 39,702,426,540 ordinary shares with par value of Baht 0.69 per share. The Company registered the capital reduction with the Business Development Department, Ministry of Commerce on 4 November 2008. Furthermore, the Company recorded share premium from the reduction in par value of the shares of approximately Baht 268 million. - The reduction of the authorised share capital by decreasing the number of ordinary shares which have not been issued by 864,877,421 shares. As a result, the Company had authorised share capital of Baht 29,626,051,090, comprising 42,936,305,928 ordinary shares with par value of Baht 0.69 per share, and issued and paid-up share capital of Baht 27,394,674,313, comprising 39,702,426,540 ordinary shares with par value of Baht 0.69 per share. The Company registered the capital reduction with the Business Development Department, Ministry of Commerce on 5 November 2008. - The increase of the authorised share capital in order to provide for the issuance of Employee Stock Option Program of 727,536,398 units, which was approved by the Securities and Exchange Commission on 11 December 2008 for the amount of Baht 502,000,115. As a result, the Company had authorised share capital of Baht 30,128,051,205, comprising 43,663,842,326 ordinary shares with par value of Baht 0.69 per share, and issued and paid-up share capital of Baht 27,394,674,313, comprising 39,702,426,540 ordinary shares with par value of Baht 0.69 per share. The Company registered the capital increase with the Business Development Department, Ministry of Commerce on 6 November 2008. At the extraordinary shareholders’ meeting held on 18 December 2009, the board of directors passed resolutions as follows: - To issue warrants (the second warrant) in the amount of 5,000,000,000 units for sale to all existing shareholders based on shareholding proportion with the offering price of Baht 0.03 per unit. - To increase the authorised share capital from Baht 30,128,051,204.94 (43,663,842,326 ordinary shares at Baht 0.69 par value) to Baht 40,478,051,204.94 (58,663,842,326 ordinary shares at Baht 0.69 par value). - To approve the allocation of ordinary shares in support of the conversion of the second warrant which will be offered for sale to all existing shareholders based on shareholding proportion. On 30 December 2009, the Company registered the increase in the Company’s authorised capital with the Business Development Department, Ministry of Commerce by Baht 10,350,000,000 comprising 15,000,000,000 shares with par value of Baht 0.69 per share, in order to provide for the issuance of 41

77 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

second warrants to the existing shareholders of 5,000,000,000 units. As a result, the Company had authorised share capital of Baht 40,478,051,205 comprising 58,663,842,326 ordinary shares with par value of Baht 0.69 per share, and issued and paid-up share capital of Baht 27,394,674,313, comprising 39,702,426,540 ordinary shares with par value of Baht 0.69 per share.

21

Warrants Warrants The followings are terms and conditions of the warrants: First Warrants -

The Company has allotted 3,233,879,388 units of warrants to the existing shareholders whose names appeared in the Company’s share register as owners of existing shares on the closure of the share register on 11 April 2000 at the ratio of 1 existing share for 4.5 units of warrants.

-

Offering price of a warrant is Baht 0.05 per unit.

-

One warrant is exercisable for one new ordinary share at the initial price of Baht 3.162 per share subject to further adjustments on the occurrence of adjustable events.

-

The warrants have an eight years maturity from the issuing date, whereby the Company shall issue the warrants within 14 days from the end of the subscription period. The last Exercise Date will be at the expiration of the term of the warrants.

-

The Exercise Date is the last business day of March, June, September, and December, during the term of the warrants, except the last Exercise Date. The first Exercise Date shall be after the expiration of three years after issuing the warrants. Accordingly, the first Exercise Date falls on 29 December 2006, and the last Exercise Date is on the expiry date of the term of the warrants (on 31 October 2011).

Second Warrants -

The Company has allotted 5,000,000,000 units of warrants to the existing shareholders whose names appeared in the Company’s share register as owners of existing shares on the closure of the share register on 9 February 2010 at the ratio of 7.9405 existing share for 1 units of warrants.

-

Offering price of a warrant is Baht 0.03 per unit.

-

One warrant will be exercisable for three new ordinary shares at the initial price of Baht 0.25 per share subject to further adjustments on the occurrence of adjustable events.

-

The warrants shall have a seven years maturity from the issuing date.

-

The Exercise Date is the last business day of June and December of each year, during the term of the warrants, except the last Exercise Date. The first Exercise Date shall be 30 December 2010 and the last exercise date will fall on 14 March 2017. The last exercise notice shall be lodged by the warrant holder at least 15 days prior to such exercise date.

42

78 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

Employee Stock Option Program Warrants (ESOP Warrants) -

On 11 December 2008, the Company was authorised by the Securities and Exchange Commission to issue and offer ESOP warrants, amounting to 727,536,398 units of warrants or equivalent to 1.83% of total paid-up share capital of the Company (as of 20 October 2008). The warrants are issued to the specified holders and are non-transferable, except transfer by intermediary person, or as otherwise specified by the Board of Directors or the Allocation Committee (Intermediary Person is the person who holds the said securities for distributing to all future directors and employees). Details are as follows:

-

Offering price of a warrant is Baht 0 per unit.

-

One warrant will be exercisable for one new ordinary share (amendable subsequent to any adjustment of the right under warrants) at the par value at exercise date (as of 20 October 2008, par value is Baht 0.69 per share).

-

The warrants shall have a five years maturity from the date of issuing and offering (Warrants shall expire on 10 December 2013).

-

The Exercise Date is the last business day of December of each year throughout the terms whereby the first exercise date shall be December 30, 2011 and the last exercise date will fall on 10 December 2013. In case the exercise date shall fall on the Company’s annual holiday, the exercise date shall be moved up to the earlier business day of the Company. The last exercise notice shall be lodged by the warrants holders at least 15 days prior to such exercise date.

-

Exercise Period and Ratio (percentage of total distribution) are Directors and employees of the Company can exercise their warrants in accordance with the following details : First

20% shall be exercisable on the first exercise dates which fall on the last business day of December 2011.

Second

30% shall be exercisable on the second exercise date which fall on the last business day of December 2012.

Third

50% shall be exercisable on the last exercise date which falls on December 10, 2013. In case shall fall on the Company's annual holiday, the exercise date shall be moved up to the earlier business day of the Company. The last exercise notice shall be lodged by the warrant holders at least 15 days prior to such exercise date.

If warrant holders do not exercise or partly exercise their rights on each exercise date, such warrant holders can exercise their remaining warrants on the next exercise date throughout the terms of the warrants.

22

Share premium and reserve Share premium Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution.

43

79 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 Legal reserve Section 116 of the Public Companies Act B.E. 2535 requires that a company shall allocated not less than 5% of its annual net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount net less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

23

Segment information Segment information is presented in respect of the Company’s geographical segments based on the Company’s management and internal reporting structure. In presenting information on the basis of geographical segments, segment revenue is based on the geographic location of customers. Revenue and gross profit/loss, based on geographical segment, in the financial statements for the years ended 31 December 2009 and 2008 were as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Segment revenue Domestic Export Total Segment gross profit/(loss) Domestic Export Total

10,804,566 1,509,650 12,314,216

19,601,063 6,513,988 26,115,051

(3,281,860) (638,623) (3,920,483)

679,292 369,616 1,048,908

Business segments Management considers that the Company operates in a single line of business, namely manufacturing of flat-rolled steel products, and has, therefore, only one major business segment.

24

Selling expenses Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) Packing expenses Domestic shipping expenses Export shipping expenses Total

3,715 96,155 58,878 158,748

17,084 189,724 324,007 530,815

G J Steel Public Company Limited

Annual Report 2009

44

80


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 25

Administrative expenses

Note Operating service expense Idle cost Penalty charge Depreciation and amortisation expenses and loss on write-off assets Personnel expenses Demurrage charges Professional and consulting fees Donation Debts restructuring fees Others Total

26

4

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 452,953 675,135 280,184 138,779 207,914 17,327 181,775 133,111 103,690 34,491 1,609 864 72,153 1,468,744

460,338 181,364 100,267 77,944 38,757 31,220 109,602 1,830,733

Employee benefit expenses Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Management Wages and salaries Welfare Contribution to defined benefit plan Other employees Wages and salaries Welfare Contribution to defined benefit plan Total

32,354 2,474 471 35,299

33,434 1,820 421 35,675

244,162 72,961 13,041 330,164

293,698 117,403 16,295 427,396

365,463

463,071

The defined contribution plan comprises a provident fund established by the Company for its employees. Membership to the fund is on a voluntary basis. Contributions are made monthly by the employees at rates ranging from 2% to 10% of their basic salaries and by the Company at rates ranging from 3% to 10% of the employees’ basic salaries. The provident fund is registered with the Ministry of Finance as a juristic entity and is managed by a licensed Fund Manager.

45

81 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 27

Reversal of liabilities under the Business Rehabilitation Plan The Company reversed the remaining balance of past accrued interest and deferred interest of certain creditors which had not opted for conversion of their debt to equity, amounting to Baht 363 million, to income during the year ended 31 December 2008. During 2008, the Company received two notices of agreement made by and between the creditors (“the creditors”) under the Business Reorganisation Plan and Nuelife South Asia Private Limited (“Nuelife”) to inform that the creditors assigned all their rights and interests in relation to the claims under the Plan to Nuelife. The outstanding balance of the creditors at the notice dates amounted to Baht 230 million, however, under the Plan the creditors received debt amounting to Baht 128 million. As a result, the Company transferred the amount of Baht 128 million to Nuelife as a creditor and reversed a net amount of Baht 102 million of liabilities to income during the year ended 31 December 2008. Furthermore, the Company also received a letter dated 25 September 2008 from Nuelife to inform the setoff of the amount of Baht 128 million (equivalent to US$ 3.7 million) as a creditor against the payable by Nuelife to the Company. As a result, the Company offset the balance of this creditor and the account receivable amounting to Baht 128 million as at 31 December 2008. During 2008, the Company received a letter from a creditor under the plan to inform that the creditor forgave debt of Baht 24.5 million to the Company. The Company reversed the liability for this forgiveness to income during the year ended 31 December 2008. Furthermore, the Company recalculated its liabilities under the plan in respect of certain creditors which had ordered by the courts to discount the amount to be paid by the Company. As a result, the Company reversed its liabilities under the plan from the Court orders totaling Baht 173.2 million to income during the year ended 31 December 2008.

28

Promotional privileges The Board of Investment has approved the granting of promotional privileges to the Company by issuing certificates for the manufacturing of Hot Rolled Coils (BOI privilege for "CSP" project), Direct Reduced Iron (BOI privilege for "DRI" project) and Cold Rolled/Coated products Pickle and Oiled Products and Re-Coil Temper Mill Products (BOI privilege for "PGL" Project). The privileges granted include: (a)

exemption from payment of import duty on machinery approved by the Board;

(b)

exemption from payment of income tax for certain operations for a period of eight years from the date on which the income is first derived from such operations;

(c)

a 100% reduction in the normal income tax rate on the net profit derived from certain operations for a period of five years, commencing from the expiry date in (b) above; and

(d)

a deduction for a period of ten years of an amount equal to 5% of the increase in income of certain promoted operations over the income from those operations for the previous year.

As a promoted company, the Company must comply with certain terms and conditions specified in the promotional certificate.

46

82 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

Summary of revenue from promoted and non-promoted businesses: Separate financial statements

Export Sale Domestic Sale Total Revenue

29

Promoted businesses

2009 NonPromoted businesses

1,509,649 10,549,589 12,059,238

254,978 254,978

Consolidated and Separate financial statements

Promoted Total businesses (in thousand Baht) 1,509,649 6,158,494 10,804,567 17,679,070 12,314,216 23,837,564

2008 NonPromoted businesses

355,494 1,921,993 2,277,487

Total 6,513,988 19,601,063 26,115,051

Loss per share Basic loss per share The calculations of basic loss per share for the years ended 31 December 2009 and 2008 were based on the loss for the years attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the years as follows: Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht/in thousand shares)

Loss attributable to equity holders of the Company Number of ordinary shares outstanding at 1 January Effect of conversion of debt to equity Weighted average number of ordinary shares outstanding Loss per share (in Baht)

4,593,529

3,597,984

39,702,407 -

25,674,720 10,925,747

39,702,427

36,600,467

0.12

0.10

The Company did not present diluted loss per share for the years ended 31 December 2009 and 2008 because the exercise price of the Company’s warrants was higher than the fair value of the Company’s ordinary shares.

30

Changes in accounting policy During the second quarter of 2009, the Company changed its accounting policy in respect of the method used for calculating the value of raw materials and spare parts and supplies from the first-in, first-out method to the weighted average method as management considers it is more appropriate to the nature of the Company’s business and in compliance with the parent company’s accounting policy. On 14 May 2009, the Company received approval for this change from The Revenue Department. With effect from 1 January 2009, the Company has, accordingly, changed its accounting policy to present financial statements in which the value of raw materials and spare parts and supplies is calculated using the weighted average method. The change in accounting policy has been applied 47

83 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

retrospectively for 2008, and the Company’s 2008 financial statements which are included in the Company’s 2009 financial statements for comparative purposes, have been restated accordingly. The effects of the change in accounting policy on the financial statements as at 31 December 2009 and 2008 were as follows:

I nventories Balance at 1 January before change in accounting policy Increase (decrease) in retained earnings Balance at 1 January after change in accounting policy Deficit Balance at 1 January before change in accounting policy Effects of changes in calculating the value of raw materials and spare parts and supplies Balance at 1 January after change in accounting policy

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 3,761,086 1,680 3,762,766

3,749,914 (39,861) 3,710,053

(4,650,571)

(4,315,903)

1,680 (4,648,891)

(39,861) (4,355,764)

The effects of the change on the statements of income for the years ended 31 December 2009 and 2008 were as follows:

Net loss Loss for the year before change in accounting policy Increase (decrease) in cost of sales Increase (decrease) in reversal of loss for devaluation of inventories Increase in loss on confirmed purchase orders for undelivered raw material Net decrease Loss for the year after change in accounting policy Decrease in loss per share (Baht)

Consolidated and Separate Separate financial financial statements statements 2009 2008 (in thousand Baht) 4,597,190 (79,219)

3,639,525 35,445

(75,407)

76,986

151 3,661

41,541

4,593,529 0.0001

3,597,984 0.001

48

84 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 31

Financial instruments As at 31 December 2009, the Company had not entered into any derivative contracts to hedge its exposure to foreign currency exchange risk. Significant risks of financial instruments are summarised as follows: Financial risk management policies The Company is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-performance of contractual obligations by counterparties. The Company does not hold or issue derivative financial instruments for speculative or trading purposes. Risk management is integral to the whole business of the Company. The Company has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Company’s risk management process to ensure that an appropriate balance between risk and control is achieved. I nterest rate risk Interest rate risk is the uncertainty in value of financial assets and liabilities or net interest income as a result of the fluctuation of the market interest rate. Most of the interest rates of financial assets and liabilities of the Company are floating rates, which are based on market rates. The effective interest rates of financial assets and financial liabilities as at 31 December and the periods to maturity or re-pricing were as follows:

Financial assets : Cash and cash equivalents Current investment Other long term investments Financial liabilities : Short-term loan from other companies Trade accounts payable Payable to related party from offsetting of machinery purchase

Effective interest rate (% per annum)

Separate financial statements 2009 After 1 year Within 1 but within 5 After 5 year years years (in thousand Baht)

0.25% 1.00% 1.18%

42,839 3,405 46,244

8.89% 4.65% MLR+1%

Total

168,700 168,700

-

42,839 3,405 168,700 214,944

74,340 1,555,227

-

-

74,340 1,555,227

1,629,567

992,237 992,237

-

992,237 2,621,804

49

85 Annual Report 2009

G J Steel Public Company Limited


Notes to the financial statements For the years ended 31 December 2009 and 2008

Financial assets : Cash and cash equivalents Current investment Other long term investments Financial liabilities : Short-term loan from financial institution Short-term loan from other company Trade accounts payable

Effective interest rate (% per annum)

Consolidated and Separate financial statements 2008 After 1 year Within 1 but within 5 After 5 year years years Total (in thousand Baht)

0.50% 1.50% 2.37%

84,213 836 85,049

108,700 108,700

-

84,213 836 108,700 193,749

7.25%

1,304,609

-

-

1,304,609

13.00% 4.04%

80,880 1,404,801 2,790,290

-

-

80,880 1,404,801 2,790,290

Liquidity risk Liquidity risk arises from the difficulty in mobilizing funds for timely and adequately meeting commitments under financial instruments. Liquidity risk may arise from failure to sell financial assets at a price close to the fair value. The Company has liquidity risk that the Company needs to generate sufficient operating cash flows to meet both its working capital requirements and its operating obligations, including obligations under the rehabilitation plan. The Company monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Company’s operations and to mitigate the effects of fluctuations in cash flows (see note 1.2). Foreign currency risk The Company is exposed to foreign currency risk relating to purchases and sales which are denominated in foreign currencies.

50

86 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

At 31 December, the Company was exposed to foreign currency risk in respect of financial assets and liabilities denominated in the following currencies:

Note

United States Dollars Cash and cash equivalents Trade accounts receivable Interest-bearing liabilities Trade accounts payable Other payables and accrued expenses Accrued interest expenses Other current liabilities Liabilities under rehabilitation plan Gross balance sheet exposure

6 7 16 17 18 19

Estimated forecast sales Estimated forecast purchases Gross exposure

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) 11,247 11,400 360,741 1,888,747 (20,040) (1,197,997) (1,946,444) (1,982,754) (323,711) (26,421) (77,806) (411,681) (11,978) (105,147) (110,058) (2,512,841) (1,429,061) 262,093 (2,702,966) (4,953,714)

Note

Euro Trade accounts payable Other payables and accrued expenses Other current liabilities Liabilities under rehabilitation plan Gross balance sheet exposure

17 18 19

Estimated forecast purchases Gross exposure

Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht) (1,654) (41,198) (14,169) (12,194) (6,532) (7,224) (20,821) (21,480) (43,176) (82,096) (36,604) (79,780)

Note

Others Trade accounts payable Other payables and accrued expenses Liabilities under rehabilitation plan Gross balance sheet exposure

17 19

Estimated forecast purchases Gross exposure

1,679,105 (9,300,917) (9,050,873)

(298,505) (380,601)

Consolidated and Separate Separate financial financial statements statements 2009 2008 (in thousand Baht) (122) (210) (201) (3,720) (3,772) (3,930) (4,095) (219) (4,149)

(122) (4,217)

51

87 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 Determination of fair values A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. The fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. The fair value of trade and other short-term receivables is taken to approximate the carrying value. Maturities of financial assets and liabilities Details of the maturities of financial assets and liabilities have been provided in the relevant notes to the financial statements. Estimated fair value of financial instruments The fair values of financial instruments have been estimated by the Company using available market information and appropriate valuation methodologies. The fair value of financial assets and liabilities is close to the carrying value in the balance sheets as at 31 December 2009 and 2008. Capital management The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board is presently seeking additional capital investment in order to secure the ongoing viability of the Company.

52

88 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 32

Commitments with non-related parties 32.1 Commitments Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Capital Commitments Contracted but not provided for Land Buildings and other constructions Machinery and equipment Furniture, fixtures and office equipment Total Lease and service agreement commitments Within one year After one year but within five years Total Other commitments Bank guarantees

105,000 5,440 82,116 243 192,799

166,500 5,440 1,488,990 243 1,661,173

2,263 180 2,443

3,640 920 4,560

168,700

108,700

32.2 Long-term agreements - On 1 December 2003, the Company entered into a ten-year agreement to purchase natural gas with monthly charges based on consumption. - On 1 May 2008, the Company entered into a three-year agreement to receive consultation for the most suitable refractory design and for delivery of any refractory consumables. The pricing of the agreement is based on the cost per ton of refractory consumed in each month. - On 1 November 2004, the Company entered into a twenty-year take-or-pay agreement to purchase oxygen, argon and nitrogen. Minimum payments under the agreement amount to approximately Baht 6 million per month. Consolidated Separate and Separate financial financial statements statements 2009 2008 (in thousand Baht)

Long-term agreement commitments Within one year After one year but within five years After five years Total

70,648 282,593 694,707 1,047,948

76,248 282,593 765,356 1,124,197

53

89 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 32.3 Raw material purchase orders As at 31 December 2009, the Company had outstanding purchase orders for raw materials that have not been delivered to the Company totaling Baht 2,455 million (2008: Baht 9,021 million). Some of these orders were placed since the third quarter of 2008 when prices were significantly higher than current market prices. Since the first quarter of 2009, new purchase orders have been placed in order to reduce the average cost when the Company releases the raw material to production. The Company has estimated the provision for loss in respect of outstanding purchase orders for raw materials that have not been delivered at approximately Baht 115 million based on comparison with the economic benefits expected to be received in the form of estimated sales prices and the conversion costs of finished products and has recorded the provision for this loss in the financial statements for the year ended 31 December 2009. The Company had agreements to purchase raw materials with various overseas suppliers for purchase of raw materials under a consignment agreement, under which the ownership of unreleased raw material belongs to the sellers. The Company has to pay interest at 2% to 6% and MLR per annum on the unreleased raw materials from the boarding date on ship until the material have been fully paid for. (2008: 4.10% to 9.23% and MLR per annum)

33

Litigation As at 31 December 2009, the Company had the following pending litigation: 33.1 Central Bankruptcy Court The Company’s creditors were required to submit claims to the Official Receiver for outstanding debts on 8 May 2000. As of 31 December 2003, total claims filed by the creditors against the Company amounted to Baht 435 million. The Company believes that these claims exceed the amounts rightly payable by the Company. The Company has, therefore, brought the dispute to the Court for adjudication. The Company has, however, recorded liabilities totaling Baht 363 million for such claims equal to the amounts claimed by the creditors adjusted for the proportional rate approved in the rehabilitation plan. As a result, the recorded liability is Baht 72 million less than the amount claimed by the creditors to the Court. However, such difference of liabilities will be subjected to the limitation provided under treatment of each creditor class in accordance with the approved rehabilitation plan. Therefore, liabilities under rehabilitation plan in the balance sheet are the amount of liabilities which have been adjusted to reflect such conclusion. 33.2 Central I ntellectual Property and I nternational Trade Court According to the Black Case No. Kor. Kaw. 5/2548 dated 21 January 2005, Maharaj Planner Company Limited, in the capacity of the Plan Administrator of the Company, is the plaintiff who has sued a domestic financial institution and a foreign financial institution (collectively called "Defendant"), in the Central Intellectual Property and International Trade Court, in respect of a letter of credit. The Defendant has committed an act of breach of conditions under the letter of credit, which caused damage to the Company. The Defendant had made payment to a foreign seller by a letter of credit covering the cost of goods amounting to USD 5 million (equivalent to Baht 202 million) without delaying payment, until the fulfillment of conditions under the letter of credit, as instructed by the Company. The Defendant had deducted the said amount from the Company’s account. The Company did not receive the said goods. Therefore, the Company has sued the Defendant for damages, including interest cost and other estimated damages, amounting to Baht 8,594 million. 54

90 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

The Central Intellectual Property and International Trade Court have dismissed the claim of the Company but the Company could not agree with such decision. Therefore, on 24 April 2009, the Company filed an appeal against the Central Intellectual Property and International Trade Court’s decision to the Supreme Court. The Company accounted for the amount deducted from the Company’s account of Baht 202 million by the Defendant as a part of “Advance to Suppliers” and recorded a provision for loss of the whole amount in 2008. 33.3 According to the Black Case No.7181/2550 of the South Bangkok Civil Court, between N.T.S. Steel Group PCL, the plaintiff, and G J Steel Public Company Limited (formerly Nakornthai Strip Mill PCL), the defendant. The plaintiff had submitted the prosecution to the court on 1 August 2007, for the case worth Baht 31 million. The prosecution was described as follows: 1) The defendant had made an evidence for renting the accommodation in Building 1 and Building 6 with the plaintiff and made use of the movable property there-in; but the defendant had failed to pay the plaintiff for using the said property. 2) The defendant had contacted the plaintiff for the use of the long-distance telephone calls both locally and internationally, but had failed to pay for such services. 3) The defendant had an outstanding debt arising from buying the water from the plaintiff; therefore, the plaintiff requested that the defendant admitted the fault by paying the total amount of Baht 31 million, together with the interest payable at 7.5% per annum, in the principal of Baht 23 million, as from the date of prosecution until completion of payment. As at 31 December 2008, the case was under consideration by the Court and the defendant had counter-sued the plaintiff by demanding the plaintiff to refund the deposit of the lease of Building 1 and Building 6, including the refund of the cost of water stated in the water purchase agreement, totaling Baht 73 million, with 7.5% interest per annum and classified as non-current assets in the balance sheets. On 28 January 2009, N.T.S. Steel Group PCL filed a petition to withdraw the claim against the Company and the Company also filed a petition to withdraw the claim against N.T.S. Steel Group PCL. The Civil Court has allowed such withdrawal and dismissed all the claims. 33.4 According to the Black Case No.280/2552, on 27 February 2009 in the South Bangkok Civil Court, N.T.S. Steel Group PCL filed a complaint against the Company for breach of a water purchase agreement and demanded damages in the amount of Baht 8 million together with interest at the rate of 7.5 % per annum on the principal amount of Baht 6 million from the date of filing the complaint until the date of full repayment. On 30 November 2009, the South Bangkok Civil Court rendered its judgment on this complaint in favour of N.T.S. Steel Group PCL under which the Company has been ordered to pay the sum of Baht 8 million together with interest at the rate of 7.5% per annum from the date of filing the complaint on the principal sum of Baht 6 million until the Company shall fully pay to N.T.S. Steel Group PCL. On 29 January 2010, the Company filed an appeal against the judgment of the South Bangkok Civil Court. Presently, this case is pending at the court. 33.5 Five suppliers filed a complaint against the Company for the breach of sale and purchase agreement, hire of work agreement and demanded damages in the amount of Baht 15 million together with interest at the rate of 7.5% and 15 % per annum on the principal amount of Baht 14 million from the date of filing the complaint until the date of full repayment. Presently, these cases have been settled between the Company and five suppliers and the Company has no further complaint pending at the court. 55

91 Annual Report 2009

G J Steel Public Company Limited


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008 34

Event after the reporting period The Board of Directors’ meeting of the Company held on 24 February 2010, has resolved to postpone the subscription period of second warrants from 3-5 March 2010 and 8-9 March 2010 to “after the completion of the special audit”. This is to ensure that all existing shareholders and investors have enough information before subscribing for the second warrants. The Company will inform the new subscription period further.

35

Thai Accounting Standard (TAS) not yet adopted The Company has not adopted the following revised TAS that has been issued as of the reporting date but is not yet effective. The revised TAS is anticipated to become effective for annual financial periods beginning on or after 1 January 2011. TAS TAS 24 (revised 2009)

Topic Related Party Disclosures (formerly TAS 47)

Management is presently considering the potential impact of adopting and initial application of this revised TAS on the financial statements.

36

Reclassification of accounts Certain accounts in the 2008 financial statements have been reclassified to conform to the presentation in the 2009 financial statements as follows: Before reclass (restate) Balance Sheet Consolidated financial statements Long-term loans to and receivables from former related parties Other non-current assets Separate financial statements Cash and cash equivalents Current investment Long-term loans to and receivables from former related parties Other non-current assets Trade accounts payable Other payables and accrued expenses

2008

After reclass

Reclass (in thousand Baht)

11,598 1,104,422

58,143 (58,143) -

69,741 1,046,279

83,260 1,790

954 (954)

84,214 836

11,724 1,104,422 2,781,016 529,026

58,143 (58,143) 23,283 (23,283) -

69,867 1,046,279 2,804,299 505,743

56

92 G J Steel Public Company Limited

Annual Report 2009


G J Steel Public Company Limited and its Subsidiaries Notes to the financial statements For the years ended 31 December 2009 and 2008

Before reclass (restate) Statement of income Consolidated and Separate financial statements Selling and administrative expenses Selling expenses Administrative expenses Management benefit expenses Bad and doubtful debts expense Finance costs

3,349,199 117,750

2008 Reclass

After reclass

(in thousand Baht) (3,349,199) 530,816 1,830,733 35,675 800,701 151,274 -

530,816 1,830,733 35,675 800,701 269,024

The reclassifications have been made to comply with the classification set out in the Pronouncement of the Department of Business Development Re: Determination of items in the financial statements B.E. 2552 dated 30 January 2009 and are considered to be more appropriate to the Company’s business.

37

Others On 25 January 2010, the Securities and Exchange Commission has ordered the Company and the parent company to provide special audit reports by the auditors on the following issues: sales under credit term and the acquisition of machineries; the recognition of allowance for deterioration of raw materials; construction in process with no progress; and advance payment for the purchase of machineries. Both companies are required to submit the special audit reports to the Securities and Exchange Commission by 1 March 2010 and to disseminate these reports through the SET’s electronic system. The Company and the parent company have requested the SEC for an extension of the special audit deadline to 7 April 2010.

57

93 Annual Report 2009

G J Steel Public Company Limited


94 G J Steel Public Company Limited

Annual Report 2009


Gjs 09