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Annual Report 2005

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Page 1: INOX: Annual Report 2005
Page 2: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Page 3: INOX: Annual Report 2005

C O N T E N T S “√∫ —≠

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Message from the Chairman 5

Board of Directors 6

Management Explanation and Analysis 29

Financial Statement 61

Page 4: INOX: Annual Report 2005

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2 THAINOX STAINLESS PUBLIC COMPANY LIMITED

Page 5: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED 3

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2548 2547 2546

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Page 6: INOX: Annual Report 2005

4 THAINOX STAINLESS PUBLIC COMPANY LIMITED

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Page 7: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED 5

Message from the Chairman and Chief Executive OfficerThe impacts of the economic crisis, the oil price increase and higher bank interestsduring the year 2005, has generally affected the ThailandRs industrial sector.

Comparing with the year 2004, the world stainless steel production has dropped to24.36 million tons or a 1.25% fall in 2005. Despite the fall of the world stainless steelproduction, ThailandRs stainless steel consumption grew by 10 % last year. ThainoxStainless Public Company Limited has declared the successive high profits and salevolumes. Due to the efficient sale management, the forecast analysis and efficientfinancial risk control, the Company has good balance, liquidity and zero interest-bearing debt.

Since January 27, 2006, the Company changed its trading symbol in the Stock Exchange of Thailand from LTNXM toLINOXM.

For the benefit of shareholders, the Company operates its activity under the objective of providing sustainable profitunder good governance which increases the confidence of investors and all concerned parties. For example in 2005,the Company had regularly arranged meetings between the CompanyRs management, investors and analysts in orderto provide the information on CompanyRs operating results.

For the benefit of customers, the Company develops and delivers integrated customized products and services thatmeet customerRs requirement. According to its effective cost management, the Company has become competitive inthe world market.

Due to the excellent technique and high quality products, the Company nowadays successfully exports its products toover 30 countries worldwide and brings back more than 6,000 Million Baht of foreign currency per annum to theCountry.

The success of the Company is the result of co-operation of the management, employees, customers and commercialalliances as well as the support and encouragement of shareholders and investors. On behalf of the Chairman andChief Executive Officer of Thainox Stainless Public Company Limited, I would like to express my sincerest thank to allof you for your trust and confidence in our Company, and of course to thank all colleagues and employees for theircontribution, which results in CompanyRs success and acknowledgement in the stainless steel industry these days.

(Prayudh Mahagitsiri)Chairman & Chief Executive Officer

Page 8: INOX: Annual Report 2005

6 THAINOX STAINLESS PUBLIC COMPANY LIMITED

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Page 9: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED 7

������� ��� ��������� �!���"������������%�����������/��������- 68 #'���������� �����-

��������� Associate in arts Stephens College, Columbia Missouri �������������������������� ���������� �� * '�&��# ���� ��$���%���&%�#' 2543 )����#�))����������������*������������ ���

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Diploma in Textile Engineering Dundee College of Technology,Dundee Scotland ��������+�K�

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Page 10: INOX: Annual Report 2005

8 THAINOX STAINLESS PUBLIC COMPANY LIMITED

������$ &������ ����������������- 62 ������������ �����-

��������� : Economics, Claremont MenNs College, Ca., USA.�������� : Economics, William College, Mass., USA

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- *:��$�����$��"#�� �Q��+��"$����������- ��R��������$�������$ *:���G�- Orthopedic Registrar Oswestry UK

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Ph.D. in Science, Metallurgy Orsay University, Paris ������H��&+������������ ���������� �� * '�&��# ���� ��$���%���&%�#' 2543 )����#�))�����������*���������/0� ����� 2547-�� ���� �� . '���8�(�$ ����������������(�� 2544-�� ���� ����(��H��&+���-'���������/0��)������3�& 2541-2546 � �. '���8�(�$ �����������/0� ����� 2534-2541 � �. '���8�(�$ ����

Page 11: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED 9

��������� ��)*&������������- 60 ������������ �����-

Faculty of Law University of Tokyo��������� ���������� �� * '�&��# ���� ��$���%���&%�#' 2543 )����#�))�����������

2548 > �� ���� - ��). +��,��/� �0%�01�Managing Director

�� ���� - Nippon Steel & Sumikin Stainless Steel Corporation

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��������� �������������$��"#����%���������� ����������%��*�&���������� ���������� �� * '�&��# ���� ��$���%���&%�#' 2543 )����#�))�����������

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- ��������� : Accounting, Auditing University of Delhi, India- Certificate of Chartered Accountant

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2548-�� ���� �� . '���8�(�$ �������Finance Director

2545 >2548 Dole Asia Limited , Asia Region2541-2545 Dole Asia Limited, Thailand2539-2541 Seagate Technology Thailand

Page 12: INOX: Annual Report 2005

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��'��� � ���$���%����� ������&���'���'� ���*���& �5������� �+�/���'�+���9�+�-��'� $����FQ����9�+����;�*

2 � �� ��� ���&���'���'� ���*���& � ������� ���� (Cold-Rolled Austenitic Stainless Steel) %�����&���'���'� ���*���&

� ���~�������� (Cold-Rolled Ferritic Stainless Steel) ����� *' ����;�����$������&���'���'� ���*��'� $�/ No. 1

# �* 2547

1) ���&���'���'� ���*���& � ������� ���� (304)

���&���'���'� �� ���� 304 �I�+�* �������-�����/�� 8 % �I+�*�/�������6 ��������� �����6�I+9I' �-�

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#�'# +� ��%��+ �� %��+� �����'�+ ��& �' $�/� '�9�+���&���'���'� �� 304 �* 2 $�/��� ��'%�� $�/� �� 2B

($�/�'� ) %��$�/� �� BA ($�/� )

2) ���&���'���'� ���~�������� (430)

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�/�������� '���+ ���� 430 �����6#�'��� ������+��/ +� ��%��+ %���~��� ������ ��& �'

'+ *' ������+���9�+����;�����6$������&���'���'� ���*���& ��'����� �� 9I' ��-���� ��9�+�'/ ���&���'� ��

�*��'� *�#�'# ���$���%���/���'�+���9�+�-��'�

������ � !"����9�+����;����������� ��9'��'/ ���&���'� ���*��'� (Hot-Rolled Stainless Steel Coils) ������+

����A (� ���+�������A���+����*$-'$����'/ ���&���'� �� �*��'� *�#�'# ���$������&���'���'� ���*���& ) �I�+�'/ ���&���'� ��

�*��'� *'��$�� ����/ ��� �+�/���'� ������'/���� ����*���9 �� %������*�$�/ �5���#�'��'���&���'���'� ���*���&

*��*����G� ���� <������;����� ���$����FQ��+����/'+# ����A%�����+����A �I�+������ ����+����/ ����� �

���<�������� ���#�'���-��'�<����+%�������� ���$�� �/% ��� ���# �����9���9�+ Arcelor Stainless International

10 THAINOX STAINLESS PUBLIC COMPANY LIMITED

Page 13: INOX: Annual Report 2005

�"�����������&���'���'� ���*���& # ����<�� �+�+��-�# ��/+9����/ �����+���~�' �/�+�A��G���9�+

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40.8 9�+�������&���'���'� ���*���& # ����A'+��� <����/ %��+�������*�������������� ��9'�������+����A

<��$-'#�'%��$-'�'����&� �I�+$-'$������&���'���'� ��*���& �-�%9�+*����,��'%�� Nippon Steel & Sumikin Stainless Steel Corporation,

Nisshin Steel, JFE Steel Corporation, Nippon Yakin Kogyo, Nippon Metal Industry,TISCO , YUSCO %�� Acerinox-

Columbus ��& �' ����+���&��� ����; �+�+��'���*��# �'� ���%9�+9 # ���� K �'� ��� �+�+��'������"'����+���

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12 THAINOX STAINLESS PUBLIC COMPANY LIMITED

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THAINOX STAINLESS PUBLIC COMPANY LIMITED 13

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6-���� ��/'<������/+5�F����*� 123 �� �����<���� ����+���&��� $������� � +� 9�+����; ���6-�����

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

3. �#����$�"�($�")� �����$�����"'�"�� ��� !�� ���,$����������� ����"��-�

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Sumitomo Metal %��+����A,*��"� *�����"���������+����A�� �����������*����/��/������� ���/��+

���� Nippon Steel %�� Sumitomo Metal # �* 2546 %��������& ����#���<��#�'����/�� ���� Nippon Steel

and Sumikin Stainless Steel Corp. �����������/�� NSSC ��+$�#�'����; *�����#��� *' �'�+6-���*����&���������

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1. ��"�� ������"! ������A��� 5,254,519,650 65.68 2. MERRILL LYNCH INTERNATIONAL-GEF ACCOUNT 319,198,100 3.99 3. GOLDMAN SACHS INTERNATIONAL 271,638,700 3.40 4. ���� �� ����� ��� ��� ���� (���� ) 204,290,900 2.55 5. UBS AG, LONDON BRANCH-ASIA EQUITY 147,427,700 1.84 6. ! ���� ��"+A�*��"!�� ���� (���� ) 100,000,000 1.25 7. MARIZON CAPITAL LIMITED 95,000,000 1.19 8. NIPPON STEEL & SUMIKIN STAINLESS STEEL

CORPORATION 89,834,402 1.12 9. .�. �"�� %����� 54,141,188 0.6810. NISSHIN STEEL CO.,LTD. 53,900,502 0.67

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

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18

Page 21: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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19

Page 22: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

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21

Page 24: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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<� ��/� 8 3,458,653

��+" ����+��*'�+�*5 9 1,098,653

��� K 9 6,823,780

�/� 61,418,265

11. �����0,��>� ��� ��

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12. ���*� ����� 5* �/����� ** 0/11

22

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

'+ *'�*���������+� �������"��/'��& ������F�����%������&����+� �������"�*�$�� �������+���

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16. ��� �����#$�" ���-�������"����������+� *� 5

23

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

�������!��������&�� �"

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���� �� ����� ��� ��� ���� (���� )

24

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

Report from Audit Committee

To the Shareholders of Thainox Stainless Public Company Limited

The Audit Committee of Thainox Stainless Public Company comprises four independent Directors with:

Mr. Charin Suankaew Chairman of the Audit Committee

M.R. Priyangsri Watanakun Member of the Audit Committee

ACM. Nipon Sakornyen Member of the Audit Committee

Mr. Choon Jaruchaiyakul Member of the Audit Committee

In year 2005, the Audit Committee held 6 regular meetings with CompanyRs management to review and consider

financial statement as well as the procedure of internal control system and the audit planning presented by internal

auditors. All our activities were to uphold our duty and responsibility as vested in us by the Board with focuses on

internal control, good corporate governance, and management transparency.

During the last year, financial reviewed and related reports and submitted it to the Board for review and approval. We

firmly believed that the financial reports were prepared in accordance with the generally accepted accounting practices

and that relevant information was sufficiently revealed. The Company had operated the business under the Good

Corporate Governance conditions. Moreover, the Company has efficiency internal control system and internal auditing.

That the Audit Committee ensured in order of the CompanyRs financial report is reliable correctness and qualitative.

The Audit Committee did review the CompanyRs financial statement for year end December 31, 2005, after that, we do

agree that the Board of Director should submit the Financial Statement to the Shareholders Meetings for the further

approval.

The Audit Committee recommends the Chairman and Chief Executive Officer to consider the nomination and remuneration

of the Auditor, and inform the shareholders for the further approval.

Mr. Charin Suankaew

Chairman of the Audit Committee

Thainox Stainless Public Company Limited.

25

Page 28: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

$������� � +� <���/��*�/��%�����+���+/���*�/� 9�+�*��� �I�+�*�����"���, K �+ *'

���:#/�,���

� ����;�*�����'������9�����&���'� ���*���& �� / 13,422 �'� �� (140,464 � F ����9��6/�|�*�� 95,555

������ ) �I�+����/�����9��# +/���*�/� 9�+�* 2547 *��*�� / 14,541 �'� �� (164,259 � F ����9��6/�|�*��

88,525 ������ ) ���� �����'�/�������9�����+ 8% (1,119 �'� ��) �*��������9��# +/���*�/� 9�+�*

2547

������+9�+�����'�*�����"����������F9��*����+ 14% ���� 23,795 � # 9F�*�����9��6/�|�*���5���9I' 8%

���� 7,030 ������ �����F���9��9�+����# �* 2548 ���+ 14% �*����� �* 2547 �*�����"�����������F

�/���'�+��� ���&�<���/�*�6�6���+'+����-��'�# %�����+����A���������"�� ��/ ��� �I�+����������+$���

��/ ��� # ����A�*

� �����'��� K �/� 47 �'� �� �5���9I' 114% ��������� 25 �'� �� �*������* 2547 � ���+��������*'�*���'�����

��/ ��� 9�+�+� ��*�C���6�� ����+�

� �' " 9��# �* 2548 ��& �� / �+� 12,335 �'� �� (140,464 � F �����' " 6/�|�*�� 87,816 ������ ) �5���9I'

4% ���� 459 �'� �����*���*������/+��*�/� 9�+�**�$�� ��*��*�' " 9����-�*� 11,876 �'� �� (164,259 � F

�����' " 6/�|�*�� 72,300 ������ ) %�'/�������F���9��# �* 2548 �*�������/���*���������F���9��# �*

2547 �' " 6/�|�*������ ����5���9I' 21% ���� 15,516 ������ # �* 2548 (<���|5������+���+�������&���'� ��

�*��'� *��5���9I' ) �*�����* 2547 %�� *���������"*��#�'�' " 9��<���/��5���9I'

� ���#�'����# ���9��%���������/���& �� / �+� 651 �'� �� ���+ 9% ���� 63 �'� ��������*�����+/���*�/�

# �* 2547 �*$����������/��"����#�'����*��*�����!�$�%��������+9�+���#�'����*���*��/� ���+������������%��

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� ���+�������; �*������*�� %��+ <����# ����'+����$���� *'�+�����-, ������/�����������/���������� *'

%�����������F���*��/���������� *'# � ��� ��& ���5����F��-�� *'%�������*����/���������'������

� 9��" ���������-������ �'� �� / �+� 42 �'� �� �5���9I' 4100% ��������� 41 �'� �� �*������* 2547

� ���+�������9��9�+���&���'� ���*���& ���+

� 9��" �������%�����*�� �����& �"!������ 122 �'� �� �5���9I' 408% ���� 98 �'� �� ������*������* 2547

���� ���+����+� ����'��� ����+# �* 2548 �I�+�*$�����<����+�����'�� *'����'����+����A

�����"���������������,���-����+���

26

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

� �����*'������/���& �� / �+� 2 �'� �� ���+ 94% ���������& �� / �+� 30 �'� �� �*������* 2547

� ���+���������+9�+�+� �-'���%�������*'��'�+����*��*��������-�� ���

� �����"!��� / 347 �'� �� ���+ 81% ���������& �-���� 1,438 �'� �� �*������* 2547 �*$������

- ������+9�+�����F9��*��*�����"�����������F�/���'�+������&�<���/�*�6�6���+'+����-��'�# %��

���+����A���������"�� ��/ ��� �I�+����������+$�����/ ��� # ����A�*

- �' " 9��*��5���9I' <���|5������+���+����9�+���&��*��'�

- 9��" ���������-������ �'�

- %��9��" �������%�����*��

��,��

������*�5

F / *� 31 ! /��� 2548 ����; �*�� �5���/� 15,746 �'� �� ���+ 8% ���� 1,412 �'� ���*�����

�* 2547 ������+9�+�� �5���/���/ #�,��*$������

� �+� ��%���+� C��! �����*�� / �+� 2,959 �'� �� ���+ 7% ���������& �-���� 227 �'� �� �*������* 2547

������+ *'�����

1. ����; �����+� � $����$������� � +� �* 2547 #�'%��$-'6���"' # �����"' �� 0.10 �� �� / 8,000 �'� �"'

�/���& �� / �+� 800 �'� �� %���+� � $�*��������+� 6I+ 31 ! /��� 2548����; ��'������& �� / �+�

799.4 �'� ��

2. ����; �����"' ���,��'��� �� / 204.3 �'� �"' ��& �� / �+� 249.6 �'� ��

� �-�� *'����'� J �"!� �/���& �� / �+� 1,253 �'� �� ���+ 28% ���� 491 �'� �� ������*������* 2547 � ���+���

������*�� %��+ <���������*����&��+� 9�+����; �I�+�+����;��'9�#�'�-��'�������& �+� �� ��������������~

������ ����������+����� �'�

27

Page 30: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

� *��� �����%���"���F� - �"!� �/���& �� / �+� 9,201 �'� �� ���+ 8% ���� 792 �'� �� ������*������* 2547

��/ #�,�� ���+����������������������� %�����#�'����������

�������

F / *� 31 ! /��� 2548 ����; �*�� / � *'�� '+�����& �+� 3,804 �'� �� ���+ 10% ���� 425 �'� ��

�*������* 2547 �� / � *'�� �/�*����+��/ #�,��*$������ ������+ 9�+� *'�� ��" �/*� �+�*�������*���+����� *' -:

� ��'�� *'����'�%����/�+� ���� �*�� / �+� 3,371 �'� �� ���+ 8% ���� 275 �'� ���*������* 2547 � ���+������

���+9�+��'�� *'����'�*���'�/�6"��� (���&���'� ���*��'� ) ��������F�/���'�+������&�<���/�*�6�6���+'+����-��'�

# %�����+����A���������"�� ��/ ��� �I�+����������+$�����/ ��� # ����A�* �#�'����;��/�6"����+��+

�+�5���#�'�����'�+��%$ ���$���

� ��'�� *'����'�����*���*��/9'�+� �*�� / �+� 0 �� ���+ 100% ���� 118 �'� ���*������* 2547 '+ *'�*$������

# ��/+���� �* ��� 2547 $-'6���"' ���#�,�9�+����; ����/��� �����-�� ��� ��'9���"' *����6����-�'+���# ����;

���+$-'6���"' �*����� I�+9�+����; �#�'����;�����'%��+������*��*��$-'6���"' ������+��� ' ��& ������������

*���*��/9'�+�

�$#�'�"���&(��,��

��/ 9�+$-'6���"' �*�� / �+� 11,941 �'� �� ���+ 8% ���� 988 �'� �� ������*�����* 2547 <���*�������*��

�+����� *' :-

� ����5���9I' 9�+�����"!�������* 2548 �*�� / �/� 347 �'� ��

� ������+ �����������+� � $�9�+$����������������* 2547 �'/��� / �+� 800 �'� ��

� ������+9�+��/ ��� " �������*�����5���� �� / �+� 285 �'� ��

� ������+��������'��"' ���,��'��� �� / 204.3 �'� �"' ��& �� / �+� 250 �'� ��

28

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

The operational performances were significantly different from the same period of last year due to the following items:

Statement of Income

� The Company realized 13,422 million Baht revenue from sale of Cold Rolled Stainless Steel (140,464 tons at an

average selling price 95,555 Baht per ton), lower than the revenue during the same period in 2004 amounting to

14,541 million Baht (164,259 tons at an average selling price 88,525 Baht per ton) or total sale revenue decreased

8% (1,119 million Baht) compared to the same period in 2004.

The decrease in revenue was due to lower sales volume of 14% or 23,795 tons while the average selling price

increased by 8% or 7,030 Baht per ton. CompanyRs sales volume in 2005 dropped 14% compared with 2004

mainly due to global recession of demand in steel by customers both in domestic and export markets as well as

over-supply caused by excess capacity in China.

� Other Income totaling to 47 million Baht increased 114% or 25 million Baht from 2004 due to interest received

from excess cash deposit.

� Cost of Sales in year 2005 totaling to 12,335 million Baht (140,464 tons at average cost per ton 87,816 Baht)

increased 4% or 459 million Baht from the same period of last year amounting to 11,876 million Baht (164,259

tons at an average cost per ton 72,300 Baht). Although sale volume in year 2005 was lower than year 2004,

average cost per ton had increased by 21% or 15,516 Baht per ton in 2005 (especially in Hot Rolled Coil price)

compared with 2004 and this caused the total cost of sale to go up.

� Selling and Administrative Expenses totaling to 651 million Baht decreased 9% or 63 million Baht from same

period in 2004 due to effectiveness from cost control and reduction of expenses related to Management and Head

Quarter Fee to be paid to Usinor who was CompanyRs former majority shareholder.

� Reversal of Allowance for Doubtful Accounts totaling to 43 million Baht increased 2050% or 41 million Baht from

same period in 2004 due to CompanyRs changing accounting policy of making allowance for doubtful debt from

historical write-off patterns to individual customers write-off.

� Loss on Declining in Value of Inventories totaling to 42 million Baht increased 4100% or 41 million Baht from 2004

due to the decrease of cold rolled stainless steel market price.

� Loss on Exchange Rate totaling to 122 million Baht, increased 408% or 98 million Baht from 2004 due to Baht

depreciation in 2005, which was effected to company overseas payables.

Management Explanation and Analysis

29

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

� Interest Expense totaling to 2 million Baht, decreased 94% or 30 million Baht from 2004 due to the reduction of

loans and accrued interest expense from Usinor.

� Net Profit totaling to 347 million Baht decreased 81% or 1,438 million Baht from 2004 due to

- dropping in sales volume caused by global recession of demand in steel and over-supply caused by

excess capacity in China,

- the cost of sales increasing specially in Hot Rolled Coil price,

- loss from declining in value of inventories,

- and loss on exchange rate.

Balance Sheet

Assets

As of December 31, 2005, the CompanyRs total asset amounting to 15,746 million Baht decreased 8% or 1,412 million

Baht from 2004.The decrease in total assets was mainly due to -:

� Cash and Cash Equivalents amounting 2,959 million Baht decreased 7% or 227 million Baht from 2004. This

decrease came from

1. Company paid dividend from the operating profits for the year 2004 to be paid 0.10 Baht per share of the

total 8,000,000,000 shares, which is equal to 800 million Baht and the actual payment up to date till

December 31, 2005 was equal to Baht 799.4 million.

2. Company paid for treasury stocks to be equal to 204.3 million shares in amounting to 249.6 million Baht.

� Trade Accounts Receivable J Net amounting to 1,253 million Baht decreased 28% or 491 million Baht from 2004

due to CompanyRs changing policy on receivables collection, which requires customers to make payment by cash

or letter of credit to secure delivery of products.

30

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

� Property, Plant and Equipment J Net amounting to 9,201 million Baht decreased 8% or 792 million Baht compared

to 2004 mainly due to deduction of depreciation and amortization expenses.

Liabilities

As of December 31, 2005, the Company had total liabilities of 3,804 million Baht decreased 10% or 425 million Baht

from 2004. The decrease in total liability was mainly from the decrease in the current liabilities and details will be

stated as follows -:

� Trade Accounts and Notes Payable amounting to 3,371 million Baht decreased 8% or 275 million Baht from 2004

due to decreasing of trade accounts payable of Raw Material Purchase (Hot Rolled Coils) based on the global

recession of demand in steel by customers both domestic and export market as well as over-supply caused by

excess capacity in China, caused Company to make lower raw material inventories to match production plan.

� Accounts Payable Related Companies amounting to 0 Baht decreased 100% or 118 million Baht from 2004 since

in March 2004 the CompanyRs majority shareholder (Group Usinor) sold all of its shares in the Company to a

shareholder of the Company. The Company therefore, does not present transactions with the former shareholder

as a related party transactions, which caused the change in the transactions with related party.

Shareholders� equity

ShareholderRs equity amounting to 11,941 million Baht decreased 8% or 988 million Baht from 2004. This came from

the following details -:

� Increase in Net Profit for the year 2005 totaling to 347 million Baht.

� Decrease in dividend paid from the operating profits for the year 2004 totaling to 800 million Baht.

� Decrease in Revaluation increment in property, plant and equipment J Net amounting to 285 million Baht.

� Allocation of reserve for treasury stock to be equal to 204.3 million shares amounting to 250 million Baht.

31

Page 34: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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32

Page 35: INOX: Annual Report 2005

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�� �'��+����� - �"!� (�������" 7) 2,208,974,391.07 2,118,975,347.28

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��� K 34,424,211.76 51,915,369.80

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�� �5����� 10,680,109.50 2,337,433.50

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33

Page 36: INOX: Annual Report 2005

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� *'�� ��" �/*� ���

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��'�� *'������5��� - 54,273,391.21

���#�'�����'�+���� (�������" 9) 350,495,817.10 275,204,370.78

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��� K 22,281,094.93 41,782,254.34

������������� ��� 3,764,983,873.30 4,191,821,891.00

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�������� 3,804,430,844.30 4,229,065,071.00

�������"������+�����+� ��& ��/ � I�+9�++�����+� *'

34

Page 37: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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35

Page 38: INOX: Annual Report 2005

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38

Page 41: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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Page 42: INOX: Annual Report 2005

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- ��� ��� '� ��& ��� ��� '�������9�����+����A$�� ����#�,� ��& �������FQ�*����+��/�� ����,,�

45

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

- ���!���� *�����/����/�������+��������� ��& ���!���� *��; ������#�'��������% � ���*��/�����

������!"����������� �����"�����# ����������� ����������C���<�++� %������+� %���/����/������

�+�� �� ��& �������FQ�*����+��/�� ����,,�

5.2 �� �5��%��� *'��

F / *�

31 ! /��� 2548 31 ! /��� 2547

�� ��

��'�� *'����'�

���� ��*� %� �� �-���� ��� ��� ������������ - 117,560,874.51

���#�'�����'�+����

���� ��*� %� �� �-���� ��� ��� ������������ 7,167,122.12 7,167,122.12

���� ��*� ���� * ������&� 3,583,561.06 3,583,561.06

���� ��� �� ����*�� ���� * ������&� 3,583,561.06 3,583,561.06

����~�* ��*� ������������ 3,583,561.06 3,583,561.06

���� ����' <�<� ���� * ������&� 2,237,206.19 2,237,206.19

20,155,011.49 20,155,011.49

# ���/��+�* ��' �"�/ *� 31 ! /��� 2547 �+� �-'���%�������*'��'�+�����������#�,��*��������� ��/ �+����� *'

F / *� # ���/��+�* F / *�

31 ! /��� 2546 �5���9I' ���+ 31 ! /��� 2547

�� �� �� ��

�+� �-'�������#�,�

�-�� ��� 1,378,022,226.72 - (1,378,022,226.72) -

�����*'��'�+��������#�,�

�-�� ��� 117,128,343.97 7,065,660.11 (124,194,004.08) -

�/� 1,495,150,570.69 7,065,660.11 (1,502,216,230.80) -

46

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

5.3 ���F��/����5 !�9�+����

�������� ��� � ���������� ���������������

�������� ���� �� � !"����#$%� &�'(��$)'�#$%���"��

���!���� � "� �� ��� "��� ����+�� ���� �� � !"����!� �!���,'���� &�'(��$)'���)�� !����

���!� +�� � +���� -����� ���� �� � !"����!� �!���,'���� &�'(��$)'���)�� !����

���� ���� ���!���� ./� 0� ����!� �!���,'���� &�'(��$)'������'����"��

+���!&�'���$��������

������ �"!� +�� � ������� � "� �� �������� ���� %!��)�� ����!� �!���,'���� &�'(��$)'������'����"��

������ �"!� �����! ���� "1 %!��)�� ����!� �!���,'���� &�'(��$)'������'����"��

������ �� ��� �"�!�� �����! ���� "1 %!��)�� ����!� �!���,'���� &�'(��$)'������'����"��

. �-�! �"!� �������� ���� %!��)�� ����!� �!���,'���� &�'(��$)'������'����"��

������ ����'� 2�2� �����! ���� "1 %!��)�� ����!� �!���,'���� &�'(��$)'����� '���+��+

6. �*���������� - �����

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F / *�

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��-�# ��� ����� 1,133,244,629.41 1,764,910,901.10

��� ��� ����������� 3 ���� 120,210,539.85 32,615,080.44

��� ��� ����� 3 J 6 ���� - -

��� ��� ����� 6 J 12 ���� - -

��� ��� ����� 12 ���� 9I' �� 85,284,514.01 75,027,103.98

�/� 1,338,739,683.27 1,872,553,085.52

�� ����$���� *'�+�����-, (85,269,300.10) (128,643,361.08)

�"!� 1,253,470,383.17 1,743,909,724.44

F / *� 31 ! /��� 2548 ����$���� *'�+�����-, ���+ �� / 42.57 �'� �� ������*��+����; �*���

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����� *'# � ��� ��& ���5����F��-�� *'%�������*����/���������'������

47

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

7. �����������1� - �����

�������'/�

F / *�

31 ! /��� 2548 31 ! /��� 2547

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�� �'�����&��-� 942,725,559.38 1,237,810,174.98

�� �'����/��+$��� 1,135,842,409.07 751,231,960.15

/�6"��� 132,210,398.76 62,271,550.58

/��"��' �����+ 44,373,694.97 71,422,381.79

�/� 2,255,152,062.18 2,122,736,067.50

�� ����$����-������ �'����+ (46,177,671.11) (3,760,720.22)

�"!� 2,208,974,391.07 2,118,975,347.28

8. ���,�� ���� �������"� - �����

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���(+��?� �:�&�%j��/ )�&��/ ���(+��?�

" �����& ������ ������ " �����&

31 ����(� 2547 31 ����(� 2548

��� ��� ��� ���

�����

��&��� 277,214,500.00 - - 277,214,500.00

�&���������+��&��� 142,864,032.48 - - 142,864,032.48

��(��*���&���������+ 1,991,794,290.61 3,089,646.35 - 1,994,883,936.96

�(�?&�+ ���*�������"$ (�����'�&) 8,473,262,581.77 7,255,381.73 - 8,480,517,963.50

�(�?&�+��*�&+ ������+*�������"$�)���+�� 222,464,902.79 7,313,578.85 - 229,778,481.64

���:��� 54,388,423.06 7,313,000.00 - 61,701,423.06

+�����&�+�) 1,455,653.35 2,126,264.63 (1,095,263.35) 2,486,654.63

�� ����� 11,163,444,384.06 27,097,871.56 (1,095,263.35) 11,189,446,992.27

���0����� ���� ��

�&���������+��&��� (37,890,069.76) (7,161,516.74) - (45,051,586.50)

��(��*���&���������+ (930,621,449.45) (100,623,737.38) - (1,031,245,186.83)

�(�?&�+ ���*�������"$ (�����'�&) (3,230,623,369.11) (403,679,954.94) - (3,634,303,324.05)

�(�?&�+��*�&+ ������+*�������"$�)���+�� (159,653,509.89) (13,236,996.05) - (172,890,505.94)

���:��� (30,369,346.47) (7,650,502.30) - (38,019,848.77)

�����0����� ���� �� (4,389,157,744.68) (532,352,707.41) - (4,921,510,452.09)

��� 6,774,286,639.38 (505,254,835.85) (1,095,263.35) 6,267,936,540.18

��� �&��������� ���������(����:�$��� 5,637,057,351.13 - - 5,637,057,351.13

�� (&��/?&��������(&�%�+������:�$ (2,418,831,025.40) (285,369,089.70) - (2,704,200,115.10)

�"1���%����?@'��� 9,992,512,965.11 (790,623,925.55) (1,095,263.35) 9,200,793,776.21

���0����� ����$� ��#'���������'� 31 �������

2548 532,352,707.41

2547 526,261,328.02

48

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+� 9�+���� F / *� 31 ! /��� 2540 �I�+�*��������,�*�/� 3,800.6 �'� �� ���������� ������+� ���

������ �����+/ *� 26 ������ 2541 �*�� / �+� 6,836.8 �'� �� ����; ��'� I���/ ��� " �������*����

�5���� 9�+���� (�"!���������������������%����/ 9�+�5���� *���� ���) �� / �+� 3,036.2 �'� �� �/'#

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# ���� ������� 2547 ����; ��'/���'�+$-'������ ��������� (���� ����%/�-���� %� �� �� ��% ��

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2547 �� / 7,802.8 �'� �� �*���������� ���/�!*�' " �% �"!����������������������� / 9,397.8

�'� �� ����; � I���/ ��� " �������*�����5���� �� / 1,595 �'� �� �/'# �,�*��/ ��� " �������*

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3,136 �'� �� ����+��� �99�+�,,��+� �-'���������/ ����������� �9���"' #�'%�������� �/��%�'/���&�

! ������ ���#�'�*���%�'�9�,,��� �+%�����' �+� �� �+*��� %�����+��-���'�+%��������+����+������� /

6,613 �'� �� �5�����& ������� � *'9�+����*��*���! �����+����/ *' ����� *' �+� �-'���9�+�����+��'��

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9'���� ����+ K ���*����"�/'# �,,�

49

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9�+�����+����/9'�+�' ��'������6�6� �����/ *� 8 ! /��� 2547

11. �����:���%�$������

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|��*� 19 �����+$����<�� �5 �+� �+� ���� &� *'������#�'��5 �+� �����������+� �+� ���� &� *'�� /F������

�F��A��������� ����& ����*<��#�'/�!* Projected Unit Credit �5���5����F��-�������"� 9�+����� *'�� %���' "

���������# ���"�

������+� ����� /F�+�6��� �I�+���<�� ��F��A��������� ��������+/ *� 14 ������ 2548

�+� ���� &�5 �+� 9�+����������*��' �"�/ *� 31 ! /��� 2548 %�� 2547 �I�+�� /F�������G� ������+�

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��� 27,404,569.00 36,703,000.00

�/0� (,� )�) �����"���"�������:�!���0������' 9,838,611.00 -

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$�!'���!���C�#��� )� 37,243,180.00 36,703,000.00

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50

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

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" ���� �"' �� / 329.6 �'� �� �-�����"' �� 1 �� %����& ��/ ��� �-�����"' ��������*�������"!�������#�'����

# ����� �9���"' ���,�+����/ �� / 332.1 �'� �� ���#�' L��/ 9�+$-'6���"' M # +��"�

������+� �������"�/����,$-'6���"' ��'+*� 1/2548 �����/ *� 13 �"���� 2548 $-'6���"' �*���� "�����& ���| �

#�'����; ����%�'�99'��+������; 9'�*� 10 ������+� �������"��F����������'+*� 8/2548 �����/ *� 13

� ��� 2548

51

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13. ��������')1���1�

������+� �������"��F����������'+*� 8/2548 �����/ *� 13 � ��� 2548 �F���������*���#�'*�����"�

$-'6���"' 5����F� %��*�����"���'� "���������+� �������"�/����,$-'6���"' ��'+*� 1/2548 #�'����; ����%�'�9

9'��+������; 9'�*� 10 ��*��/�������'��"' 9�+����; �� <��#�'����; �����6��'��"' 9�+����; �� %����� ���

�"' �+����/��������# �/��*���� �# ������/+ �����,,��%��+������/���'/��������� ���� %��

������/���'/�����5��%����������5�� # ��F**�����; ������ ���������������6��� ����"' '+���*�

����; ��'��'��� ���# �/��*���� � ����; ����" �����*� *�����%�'/ <��/�!*������"' �����*� # ��/ *�

��� ��������' �I�+�"' *�����; 6����-� ' ����� ���& �+������"�$-'6���"' �/�'+����*��!�# ��������*�+�+��%

%����!�# ������+� � $��'/� # �����'��"' 9�+����; �� ' �'�+��'��� "������$-'6���"' 9�+����; ����+���&���

�F�������������*�� ��*���� "��������'��"' �� %��'+ *'������ �'���� 10 9�+�"' �����*� *�����%�'/'+���

<���*�������*���"' ���,��'��� �+ *'

F / *� 31 ! /��� 2548

�"' ���,��'��� (�"' ) 204,290,900

�'�������" �����*� 2.55

�-�����' " �"' ��'��� '+���(��) 249,557,679.37

����6/�|�*������"' (��) 1.2216

����+������"' ���,��'��� 249,557,679.37

14. �����������3�

������+� �������"����,$-'6���"' ������* ��'+*� 1/2548 �����/ *� 25 ����� 2548 $-'6���"' ��'�*���� "���#�'

���������+����������� / 400 �'� �� %�������+� � $����$������� � +� �* 2547 #�'%��$-'6���"' # ����

�"' �� 0.10 �� �� / 8,000 �'� �"' �/���& �� / �+� 800 �'� �� %��#�'�������������/ *���'�������+�����

����+" 9�+�* 5.A. 2547 ���"� ����; ��'�����+� � $��+����/%�'/

15. �:�����D����

�����,,��%��+5������,,���������� ���� 5.A. 2535 �����'�+����������"!�������*��/ � I�+

�/'��& ����+������������ '���/���'���� 5 9�+�����"!�������*���'/�����+� 9��" �������� (6'��*)

� �/������+�+����/���*�� / ��� '���/���'���� 10 9�+" �����*� # �* 2548 %�� 2547 ����; ��'���������+

�����������& �� / �+� 18 �'� �� %�� 400 �'� �� �������

52

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

16. �:#������/���$1��E��

��������"' 9' 5�' G� �����������%��������* ��' �"�/ *� 31 ! /��� 2548 %�� 2547 ����; �� /F<��

�����������"!��'/��� / �"' ���,6/�|�*��6�/+ '�� � �+ *'

������*

��' �"�/ *� 31 ! /���

2548 2547

�����"!� (��) 347,148,939.90 1,784,869,059.80

�� / �"' ���,6/�|�*��6�/+ '�� � (�"' ) 7,993,662,338 7,671,180,246

��������"' (��) 0.04 0.23

�-��������"' *�����/' (��) 1.00 1.00

17. �����$���F�������������������

����; ��'����!�5��A���������+���������+" ���5������,,����+���������+" 5.A. 2520 # ������

*���*��/� ���+�����$������&�%$� ��'� ���*���& <���+�9��+ *'���

1. ��'�����/' ����9��9'������������+���%���"���F�*� ��9'�������+����A

2. ��'�����/' ���*�+� ��' ����"�����& �/�����*%��%���* �%��/ *�������*�����'���������*���'�������+�����

�I�+����' �"�# / *� 30 5�A����� 2542 %�� / *� 11 5�A����� 2548 �������

3. ��'�����/' ���*�+� ��' ����"���# �����'���� 50 ��+�����' �"������/�������+������*� 5 �* �I�+����' �"�

# / *� 30 5�A����� 2547 %��/ *� 11 5�A����� 2553 �������

# G� �*���& ������*���'�������+���������+" ����; �'�+����������+��� �9%��9'���� ����+ K ��*��/��

�����+���������+" ����+����+���

18. �����������:����������$$������

����; ��'���'+�+� ��+" ����+��*'�+�*55 �+� ����/��# 5������,,����+" ����+��*'�+�*5 5.A. 2530

%���9'���& ��+" �����*� <����'��� "����������/+�����+���������/+|��*� 183 (5.A. 2533) �����/ *�

11 �"���� 2536 �������*����+" 5 �+� �'�+���������9'��+� ��+" �'/������'����9�+�+� ���� 5 �+�

%������; �����������& ������� �9'��+� ��+" *'# �����'����9�+�+� ���� 5 �+� ��� � '+ *'����;

��'%��+�'+$-'�������+" �5�����������+" #�'��& �����9'���� �9�+������/+ |��*� 2 (5.A. 2532) ������

�/��# 5������,,����+" ����+��*'�+�*5 5.A. 2530

������* ��' �"�/ *� 31 ! /��� 2548 %�� 2547 ����; �������%��� I���& ���#�'���� �� / �+�

10.04 �'� �� %�� 10.10 �'� �� �������

53

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

19. ��������,��,����:#/�,�����������+���������#,�������������������������#��#,�����

��������������

�)����� ������������& 31 ����(� 2548

�� �����&'�������� �� �����&'�&'�������� ���

�&+���������+��� �&+���������+���

��� ��� ���

��+��)���� �$0�����

���'�� �����%�� 12,238,907,440.60 1,182,626,332.30 13,421,533,772.90

���'���?&� 3,961,955.07 43,730,807.09 47,692,762.16

�� ��+�� 12,242,869,395.67 1,226,357,139.39 13,469,226,535.06

����@�)���)���� �$0�����

������%�� 11,248,318,049.39 1,086,907,241.01 12,335,225,290.40

(&�3C� &��3����%��*������� 593,521,605.38 57,351,057.09 650,872,662.47

�����������+��� ��0� (39,552,194.75) (3,821,866.23) (43,374,060.98)

%����� ��������0�(&����(�� 38,679,419.55 3,737,531.34 42,416,950.89

%����� ���������(&��+���+��� 3,100,412.07 299,587.93 3,400,000.00

%����� �������*������&�� 110,871,365.30 10,713,325.25 121,584,690.55

/����*��������� 8,760,705.00 846,533.11 9,607,238.11

������@�)��� 11,963,699,361.94 1,156,033,409.50 13,119,732,771.44

�$+ (A����)�������0�'��)��� 279,170,033.73 70,323,729.89 349,493,763.62

�������� &�� 2,138,211.69 206,612.03 2,344,823.72

�$+ (A����)��� 277,031,822.04 70,117,117.86 347,148,939.90

�)����� ������������& 31 ����(� 2547

�� �����&'�������� �� �����&'�&'�������� ���

�&+���������+��� �&+���������+���

��� ��� ���

��+��)���� �$0�����

���'�� �����%�� 12,099,377,712.02 2,441,344,565.40 14,540,722,277.42

��������&���� &����������"�?��(��+ &�� 91,386,687.70 18,439,493.23 109,826,180.93

���'���?&� 9,856,702.45 12,565,237.82 22,421,940.27

�� ��+�� 12,200,621,102.17 2,472,349,296.45 14,672,970,398.62

����@�)���)���� �$0�����

������%�� 9,882,049,426.58 1,993,944,501.68 11,875,993,928.26

(&�3C� &��3����%��*������� 593,864,644.47 119,826,676.78 713,691,321.25

�����������+��� ��0� (1,456,180.14) (293,819.86) (1,750,000.00)

%����� ��������0�(&����(�� 1,234,567.80 249,104.16 1,483,671.96

(&���%����$��+��(������ 199,690,999.59 40,292,529.77 239,983,529.36

%����� �������*������&�� 20,249,434.80 4,085,817.37 24,335,252.17

/����*��������� 1,730,774.11 349,225.89 2,080,000.00

������@�)��� 10,697,363,667.21 2,158,454,035.79 12,855,817,703.00

�$+ (A����)�������0�'��)��� 1,503,257,434.96 313,895,260.66 1,817,152,695.62

�������� &�� 26,863,308.18 5,420,327.64 32,283,635.82

�$+ (A����)��� 1,476,394,126.78 308,474,933.02 1,784,869,059.80

54

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THAINOX STAINLESS PUBLIC COMPANY LIMITED

����; 6����FQ����� ��/ ���#�'���� %�������*'�����*���������6�������/����-������������#����

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20. /���*�����������:������� ����

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# ��/ +� �+�-��A�������*�/���# ����A�� �+ ' �����' '+���*�%��+# +�����+� �I+��*��/����/ +� !"����

%����/ +� �+�-��A��������*�����/�/'

# �* 2548 %�� 2547 ����; �*���9���"!����+����A%��# ����A������9���"!��/� �+ *'

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TONS

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9���"!� 42,863 1,708 24,819 69,390 71,074 140,464

����/ ���9�� (%) 30.51 1.22 17.67 49.40 50.60 100.00

2547

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9���"!� 59,744 5,137 18,251 83,132 81,127 164,259

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21. ��1����1����������

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21.2 �/����*��+������������*'�

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�+��H��������:�$(���) 649.99 897.37 0.88 0.65

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56

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47.80 �'� ���*�,���G������� <������" �� / �+� 1,919.62 �'� �� %����& �-�����"��!��� �� / �+� 1,864.98

�'� �� %�� 1.00 �'� ���*�,�-<� <������" �� / �+� 51.87 �'� �� %����& �-�����"��!��� �� / �+� 54.30

�'� ��

���� �����������*���'�����'�+� �/����*��+�/'%�'/ F / *� 31 ! /��� 2548 %�� 31 ! /��� 2547

����; �*�� �5��*��*�������,*������'�'�+� �/����*��+��& �� / 56.64 �'� ���*�,������� %�� 58.92 �'� ���*�,

���G������� ������� � *'�� *��*�������,*������'�'�+� �/����*��+��& �� / 56.19 �'� ���*�,���G�������

%�� 101.70 �'� ���*�,���G������� �������

57

Page 60: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

24. +��3*�$�����������������������,/B��

������ *'�� *������# +��"�%�'/ F / *� 31 ! /��� 2548 %�� / *� 31 ! /��� 2547 ����;

�+�*����$-�5 ��! �����+ *'

" �����&

31 ����(� 2548 31 ����(� 2547

�+�+�� 3C�'� �+�+�� 3C�'�

- Letters of Credit (�������) 2,600.00 - 1,600.00 1,580.00

- Letters of Credit (��������������������) 242.00 81.90 197.00 166.01

- Letters of Guarantee (�������) 226.00 1.50 26.00 5.05

F / *� 31 ! /��� 2548 ����; �*����$-�5 *����'�+����������������,,���'�������+������

���+����A*��+���6I+��� ������5���#�'# ���9������+���$�����& �� / �+� 0.82 �'� ���*�,�-<�

25. �����"�+������ �����0���������

�����/ *� 24 ������ 2549 �*���#�'����; �����+� � $����/��+���9�+$�����������'+%�� / *� 1 ������

2548 6I+/ *� 30 � ��� 2548 #�'%��$-'6���"' �� / 7,795,709,100 �"' �I�+�"' �� / �+����/ *'��'���"' ��'���

*�������'��� �� / 204,290,900 �"' %�'/ # �����"' ��0.025 �� �/���& �+� � $�����$-'6���"' 194,892,727.50

��%��#�'�������������/ *���'�������+���������+" '+�� / ��� �/ �����"����*� 5����<� �"' �5���

��� ���!��# ������+� � $�# / *� 8 �"���5 !� 2549 �/�� 12.00 . %����� ������+� � $�# / *�

23 �"���5 !� 2549 �*�'+#�'�F�����������+� #�'*�����"�$-'6���"' ��������+��������+� � $� *'# �������"�

$-'6���"' ���/�����

26. �1�� G

������+� �������"��F����������'+*� 1/2548 �����/ *� 17 �"���5 !� 2548 �F���������*����+����� *'

26.1 � "���#�'����; AI���# �������*��9�+<��+���$������&��*��'� (Hot Melting Shop) �5���$��� Hot Rolled

Coil �I�+��& /�6"������*�#�'# 9�/ ���$���9�+����; ���# /+�+� �+" 14,000 �'� �� ���"� ��'��"�

��� � ���# <��+����+����/

26.2 � "���# ������#�'*���I����+����+� 9�+����; AI���# �������*������*�/������& �����������*

�/������& �'�+�5���" 9�+����; �����<��+���$������&��*��'� <������5���" ������ 2,000 �'� �"'

%�����#����,%��+��!�� (WARRANTS) ������ 2,000 �'� � �/�

������+� �������"��F����������'+*� 2/2548 �����/ *� 1 �* ��� 2548 �F���������*��� �������+

# ������# ���#�'*���I����+����+� 9�+����; AI���# �������*���/������& # ����5���" �����

<��+���$������&��*��'� ���"� ��'��"���� � ���# <��+����+����/

58

Page 61: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

26.3 � "���#�'����; �9'���,,�����'���9��*��� ������ %���*� %���5 ���� (�I�+��& ������*���*��/9'�+� )

����������'�*��� # ���� 349.20 �'� �� �����/ *� 21 �"���5 !� 2548 ����� ����; ��'#�'��!�# ���������

�,,������'�*��� �����/ *� 22 �"���5 !� 2548 %������; ��'���� �+� ����*���'��������,,�%�'/

������+� �������"��F����������'+*� 2/2548 �����/ *� 1 �* ��� 2548 �F���������*����������+���

������,,�����'���9��*��� � ���+�������; ��'�������,,�����'���9��*��� %����'���+� ������ ���

$-'��9��%�'/

27. ����������������

+�����+� *'��'������ "�������������9�+����; %�'/

59

Page 62: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Audit Report of Certified Public Accountant

To the Shareholders and Directors of THAINOX STAINLESS PUBLIC COMPANY LIMITED

I have audited the balance sheet of THAINOX STAINLESS PUBLIC COMPANY LIMITED as of December 31, 2005,

the statements of income, the statements of changes in shareholdersR equity, and the cash flow statements for the

years then ended of THAINOX STAINLESS PUBLIC COMPANY LIMITED. These financial statements are the

responsibility of the companyRs management as to their correctness and completeness of the presentation. My

responsibility is to express an opinion on these financial statements based on my audit. The financial statement of

THAINOX STAINLESS PUBLIC COMPANY LIMITED for the year ended on December 31, 2004 was audited by other

auditor who expressed unqualified opinion, in the report dated February 25,2005.

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 opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position

of THAINOX STAINLESS PUBLIC COMPANY LIMITED as of December 31, 2005, the results of its operations and

cash flow for the year then ended, respectively in accordance with generally accepted accounting principles.

S.K. ACCOUNTANT SERVICES COMPANY LIMITED

(Somchai Kurujitkosol)

Authorized Auditor No. 3277

Bangkok,

January 27, 2006.

60

Page 63: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Balance SheetsTHAINOX STAINLESS PUBLIC COMPANY LIMITED

As of December 31, 2005 and 2004

In Baht

2005 2004

ASSETS

CURRENT ASSETS

Cash and Cash Equivalents 2,959,398,483.46 3,185,641,924.37

Trade Accounts Receivable - Net (Note 6) 1,253,470,383.17 1,743,909,724.44

Inventories - Net (Note 7) 2,208,974,391.07 2,118,975,347.28

Other Current Assets

Account Receivable-Revenue Department 77,347,930.27 58,808,576.81

Others 34,424,211.76 51,915,369.80

Total Current Assets 6,533,615,399.73 7,159,250,942.70

NON-CURRENT ASSETS

General Investments - Net 810,000.00 4,210,000.00

Property, Plant and Equipment - Net (Note 8) 9,200,793,776.21 9,992,512,965.11

Other Assets 10,680,109.50 2,337,433.50

Total Non-Current Assets 9,212,283,885.71 9,999,060,398.61

Total Assets 15,745,899,285.44 17,158,311,341.31

Notes to financial statements are an integral part of these statements.

61

Page 64: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Balance SheetsTHAINOX STAINLESS PUBLIC COMPANY LIMITED

As of December 31, 2005 and 2004

In Baht

2005 2004

LIABILITIES AND SHAREHOLDERSV EQUITY

CURRENT LIABILITIES

Trade Accounts and Notes Payable 3,371,057,977.58 3,646,460,665.95

Accounts Payable Related Company (Note 5.2) - 117,560,874.51

Other Current Liabilities

Withholding Income Tax Payable 993,972.20 36,385,322.72

Account Payable-Revenue Department - 54,273,391.21

Accrued Expenses (Note 9) 350,495,817.10 275,204,370.78

Accrued Expenses Related Companies (Note 5.2) 20,155,011.49 20,155,011.49

Others 22,281,094.93 41,782,254.34

Total Current Liabilities 3,764,983,873.30 4,191,821,891.00

NON - CURRENT LIABILITIES

EmployeesR Retirement Indemnity (Note 11) 39,446,971.00 37,243,180.00

Total Non-Current Liabilities 39,446,971.00 37,243,180.00

Total Liabilities 3,804,430,844.30 4,229,065,071.00

Notes to financial statements are an integral part of these statements.

62

Page 65: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Balance SheetsTHAINOX STAINLESS PUBLIC COMPANY LIMITED

As of December 31, 2005 and 2004

In Baht

2005 2004

SHAREHOLDERSV EQUITY

Share Capital (Note 12)

Authorized Share Capital

8,000,000,000 Ordinary Share @ Baht 1.00 8,000,000,000.00 8,000,000,000.00

Issued and Paid-up Share Capital

8,000,000,000 Ordinary Share @ Baht 1.00 8,000,000,000.00 8,000,000,000.00

Premiun on Share Capital - Net 332,131,263.64 332,131,263.64

Revaluation Increment in Property, Plant and Equipment - Net 2,932,857,236.03 3,218,226,325.73

Treasury Stock (Note 13) (249,557,679.37) -

Treasury Stock Reserve (Note 13) 249,557,679.37 -

Retained Earnings (Deficit)

Appropriated

Legal Reserve (Note 15) 418,000,000.00 400,000,000.00

Unappropriated 258,479,941.47 978,888,680.94

Total ShareholdersV Equity 11,941,468,441.14 12,929,246,270.31

Total Liabilities and ShareholdersV Equity 15,745,899,285.44 17,158,311,341.31

Notes to financial statements are an integral part of these statements.

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

63

Page 66: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Statements of IncomeTHAINOX STAINLESS PUBLIC COMPANY LIMITED

For the Years Ending on December 31, 2005 and 2004

In Baht

2005 2004

Restated

REVENUES

Sales 13,421,533,772.90 14,540,722,277.42

Reversed Sales Discount According to Accrued Quantity - 109,826,180.93

Other Income 47,692,762.16 22,421,940.27

Total Revenues 13,469,226,535.06 14,672,970,398.62

EXPENSES

Cost of Sales 12,335,225,290.40 11,875,993,928.26

Selling and Administrative Expenses 650,872,662.47 713,691,321.25

Technology Licence Fee - 239,983,529.36

Reversal of Allowance for Doubtful Accounts (43,374,060.98) (1,750,000.00)

Loss on Declining in Value of Inventories 42,416,950.89 1,483,671.96

Loss on Impairment of Investments 3,400,000.00 -

Loss on Exchange Rate 121,584,690.55 24,335,252.17

DirectorRs Remuneration 9,607,238.11 2,080,000.00

Total Expenses 13,119,732,771.44 12,855,817,703.00

Profit Before Interest Expense 349,493,763.62 1,817,152,695.62

Interest Expense 2,344,823.72 32,283,635.82

Net Profit 347,148,939.90 1,784,869,059.80

BASIC EARNINGS PER SHARE (Unit : Baht) (Note16) 0.04 0.23

ORDINARY SHARES (Unit : Share) (Note16) 7,993,662,338 7,671,180,246

Notes to financial statements are an integral part of these statements.

64

Page 67: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Issue

d an

dPr

emium

s on

Capit

al Su

rplus

Tre

asur

y Stoc

k R

eser

ve o

f

Retai

ned

Earn

ings (

Defic

it)

Paid-

UpSh

are

Capit

al - n

etAr

isen

From

Tre

asur

y Stoc

kAp

prop

riated

Unap

prop

riated

Total

Shar

e Ca

pital

Asse

ts Re

valua

tion

- net

for L

egal

Rese

rve

Baht

Baht

Baht

Baht

Baht

Baht

Baht

Baht

Resta

ted

Balan

ce a

s at J

anua

ry 1,

2005

befo

re A

djustm

ents

8,000

,000,0

00.00

332,1

31,26

3.64

3,280

,780,1

09.46

--

400,0

00,00

0.00

978,8

88,68

0.94

12,99

1,800

,054.0

4

Over

Stat

ed fr

om C

apita

l Sur

plus A

risen

from

Ass

ets R

evalu

ation

(Note

2)

--

(62

,553,7

83.73

)-

--

-(6

2,553

,783.7

3)

Balan

ce a

s at J

anua

ry 1,

2005

afte

r Adju

stmen

ts 8

,000,0

00,00

0.00

332,1

31,26

3.64

3,218

,226,3

25.73

--

400,0

00,00

0.00

978,8

88,68

0.94

12,92

9,246

,270.3

1

Divid

end

(Note

14)

--

--

--

(800

,000,0

00.00

)(8

00,00

0,000

.00)

Trea

sury

Stoc

k(N

ote 1

3)-

--

(249

,557,6

79.37

)-

--

(249

,557,6

79.37

)

Trea

sury

Stoc

k Res

erve

(Note

13)

--

--

249

,557,6

79.37

-(2

49,55

7,679

.37)

-

Net P

rofit

--

--

--

347,1

48,93

9.90

347,1

48,93

9.90

Depr

eciat

ion-

-(2

85,36

9,089

.70)

--

--

(285

,369,0

89.70

)

Lega

l Res

erve

(Note

15)

--

--

-18

,000,0

00.00

(18,0

00,00

0.00)

-

Balan

ce a

s at D

ecem

ber 3

1, 20

058,0

00,00

0,000

.0033

2,131

,263.6

42,9

32,85

7,236

.03(2

49,55

7,679

.37)

249,5

57,67

9.37

418,0

00,00

0.00

258,4

79,94

1.47

11,94

1,468

,441.1

4

Balan

ce a

s at J

anua

ry 1,

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7,67

0,411

,666.0

0-

1,926

,535,0

23.46

--

-(4

05,98

0,378

.86)

9,190

,966,3

10.60

Incre

ase

in Sh

are

Capit

al32

9,588

,334.0

0-

--

--

- 3

29,58

8,334

.00

Prem

iums

on S

hare

Cap

ital

- 3

32,13

1,263

.64-

--

--

332,1

31,26

3.64

Net P

rofit

--

--

--

1,784

,869,0

59.80

1,784

,869,0

59.80

Over

Stat

ed fr

om C

apita

l Sur

plus A

risen

from

A

ssets

Rev

aluati

on-

-1,5

94,96

0,419

.00-

--

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94,96

0,419

.00

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eciat

ion-

-(2

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--

--

(240

,715,3

33.00

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erve

--

--

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0,000

,000.0

0 (4

00,00

0,000

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-

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ce a

s at D

ecem

ber 3

1, 20

04 8

,000,0

00,00

0.00

332,1

31,26

3.64

3,280

,780,1

09.46

--

400,0

00,00

0.00

978,8

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0.94

12,99

1,800

,054.0

4

Notes

to fin

ancia

l stat

emen

ts ar

e an

integ

ral p

art o

f the

se st

ateme

nts.

Sta

tem

ents

of

Cha

nges

in S

hare

hold

ers’

Equ

ity

THAI

NO

X ST

AIN

LESS

PU

BLIC

CO

MPA

NY

LIM

ITED

For t

he Y

ears

End

ing

on D

ecem

ber 3

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005

and

2004

65

Page 68: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

Cash Flow StatementsTHAINOX STAINLESS PUBLIC COMPANY LIMITED

For the Years Ending on December 31, 2005 and 2004

In Baht

2005 2004

Restated

CASH FLOW FROM OPERATING ACTIVITIES

Net profit 347,148,939.90 1,784,869,059.80

Adjustment to Net Profit (Loss) for Cash Received (Paid) from Operations

Depreciation 532,352,707.41 526,261,328.02

Allowance from Declining in Value of Inventories 42,416,950.89 1,483,671.96

Unrealized (Gain) Loss on Exchange Rate 4,129,703.81 (90,839,008.41)

Unrealized (Gain) Loss on Impairment of Investments 3,400,000.00 -

Reversal of Allowance for Doubtful Accounts (43,374,060.98) (1,750,000.00)

Provision for Employee Retirement Indemnity 2,203,791.00 6,049,000.00

Loss from Disposal of Fixed Assets - 48,061.54

Profit(Loss) from Operating Activities before Changes in Operating 888,278,032.03 2,226,122,112.91

Assets and Liabilities

(Increase) Decrease in Trade Accounts Receivable 534,710,444.33 418,053,349.90

(Increase) Decrease in Inventories (132,415,994.68) (1,957,059,701.55)

(Increase) Decrease in Other Current Assets (1,048,195.42) (42,693,613.48)

Increase (Decrease) in Trade Accounts and Notes Payable (280,429,434.26) 2,638,522,436.99

Increase (Decrease) in Accounts Payable Related Company (117,560,874.51) (117,128,343.97)

Increase (Decrease) in Other Current Liabilities (34,506,077.18) (79,100,745.56)

Cash Provided (Used) from Operating Activities-Net 857,027,900.31 3,086,715,495.24

CASH FLOW FROM INVESTING ACTIVITIES

Cash Paid for Purchase of Fixed Assets (26,002,608.21) (33,884,594.05)

Cash Received from Sales of Fixed Assets - 104,504.64

(Increase) Decrease in Other Non-Current Assets (8,342,676.00) 9,148,119.95

Cash Provided (Used) from Investing Activities-Net (34,345,284.21) (24,631,969.46)

Notes to financial statements are an integral part of these statements.

66

Page 69: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

THAINOX STAINLESS PUBLIC COMPANY LIMITED

For the Years Ending on December 31, 2005 and 2004

In Baht

2005 2004

Restated

Cash Flow Statements

CASH FLOWS FROM FINANCING ACTIVITIES:

Cash Payment for Loans from the Parent Company - (1,378,022,226.72)

Cash Received from Long-term Loan - 1,459,280,000.00

Cash Paid for Long-term Loan - (1,459,280,000.00)

Cash Received from Increase Capital Stock - 661,719,597.64

Cash Paid for Treasury Stock (249,557,679.37) -

Cash Paid for Dividend (799,368,377.64) -

Cash Provided (Used) from Financing Activities - Net (1,048,926,057.01) (716,302,629.08)

Cash on Hand and Cash Equivalents Increase (Decrease)-Net (226,243,440.91) 2,345,780,896.70

Cash on Hand and Cash Equivalents at Beginning of the Period 3,185,641,924.37 839,861,027.67

Cash on Hand and Cash Equivalents at Ending of the Period 2,959,398,483.46 3,185,641,924.37

Additional Disclosure of Cash Flow:

1. Cash paid during the period for

Interest Expenses 2,344,823.72 148,484,866.00

Corporate Income Tax - 63,465.00

2. Cash and Cash Equivalents Consist of:

2.1 Cash on Hand 186,161.76 3,506,557.97

2.2 Bank Deposit - Saving Acoount 2,159,160,530.99 2,066,390,957.74

2.3 Bank Deposit - Current Acoount 51,790.71 (9,755,591.34)

2.4 Promissory Notes - within 22 - 90 Days 800,000,000.00 1,125,500,000.00

2,959,398,483.46 3,185,641,924.37

Notes to financial statements are an integral part of these statements.

67

Page 70: INOX: Annual Report 2005

THAINOX STAINLESS PUBLIC COMPANY LIMITED

1. Basis of Financial Statements

1.1 The financial statements have been prepared in accordance with generally accepted accounting principlesunder the Accounting Act, B.E. 2543 (2000) being those Thai Accounting Standards under the AccountingProfession Act B.E. 2547 (2004), and presents its financial statements in compliance with the notificationof the Department of Commercial Registration LDefine the abbreviation component required in thefinancial statements, B.E. 2544 (2001)M , and the financial reporting requirements of the Securities andExchange Commission.

1.2 The Accounts Reclassification.

For the purpose of comparability and according to the account reclassification in current period,the company has reclassified accounts in the financial statement as of December 31, 2004 and therewas no effect to the balance of net profit or shareholdersR equity represented in the report. The itemswere as follows:

Account Baht

Inventories - Net Decrease 2,173,728,385.65Property, Plant and Equipment - Net Increase 39,730,566.83Other Non-Current Assets Decrease 60,165,053.28Accounts and Notes Payable Decrease 2,311,723,746.61Accounts Payable Related Company Increase 117,560,874.51Sales Decrease 99,626,273.44Other Income Increase 110,233,530.58Cost of Sales Decrease 62,886,540.07Selling and Administrative Expenses Increase 73,493,797.21

1.3 The Changes of the CompanyRs Status and Name

At the annual general meeting of shareholders held on April 1, 2004 and the extraordinaryshareholdersR meeting held on April 19, 2004, the shareholders approved the resolution to change theCompanyRs status to be a public company, and change the CompanyRs name from LThainox SteelLimitedM to be LThainox Steel Public Company LimitedM. The Company registered the changes of theCompanyRs status and name with the Ministry of Commerce on April 26, 2004.

At the extraordinary shareholdersR meeting held on June 17, 2004, the shareholders approvedthe resolution to change the CompanyRs name to LThainox Stainless Public Company LimitedM. TheCompany registered the change of the CompanyRs name with the Ministry of Commerce on June 25,2004.

Notes to Financial StatementsTHAINOX STAINLESS PUBLIC COMPANY LIMITED

December 31, 2005 and 2004

68

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2. Transactions of Error Corrections

For the second quarter ended on June 30, 2004, the Company engaged a consulting company asindependent appraiser to reappraise building and improvements, machinery and equipment, which had a netbook value as of June 30, 2004 of Baht 7,802.84 million. The amount was excluded from direct costs related tothe procurement of building and machinery in order that the building and machinery are ready for appropriateoperation at the book value as of June 30, 2004 of Baht 59.22 million and Baht 36.27 million respectively, whichcaused the company recorded high amount of revaluation increment under property, plant and equipmentamounting to the revaluation increment. So, the company recorded retro adjustments by decreasing the revaluationincrement under property, plant and equipment amounting to Baht 65.49 million and accumulated depreciationamounting to Baht 2.94 million and also decrease the revaluation increment in property, plant and equipmentamounting to Baht 62.55 million as a component under LShareholdersR EquityM.

3. General Information

Thainox Stainless Public Company Limited (Lthe CompanyM) is a company registered in Thailand andlisted on the Stock Exchange of Thailand. The principal activities of the Company are manufacturing and salesof stainless steel for use in the manufacture of sinks, kitchen appliances, washing machines and a variety ofother consumer and industrial products.

Presently, the Company has offices located at the following addresses:

a) Head Office : 31st floor Unit 3101-3, CRC Tower, All Seasons Place, 87/2 Wireless Road, Lumpini,Pathumwan, Bangkok 10330, Thailand

b) Factory : 324 Moo 8, Mabkha - Pluakdaeng Road, Tambol Mabkha, Nikom Pattana, Rayong21180, Thailand

As at December 31, 2005 and 2004 the Company has employees and Employee Expenses as follows:

2005 2004

Average Employees (number) 482 497Employee Expenses (million Baht) 303 331

4. Summary of Significant Accounting Policy

4.1 Cash and cash equivalent items include cash at banks in saving accounts, current accounts and fixedaccounts not over than 3 months and free from any guarantees.

4.2 Allowance for doubtful accounts is estimated from accounts receivable which are likely to be uncollectible.

4.3 The Company values its inventories as follows:

Finished goods, work- - at the lower of cost (specific identification method) and net realizable value in-process and raw materialsSupplies - at the lower of cost (first-in, first-out method) and net realizable value

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Net realizable value is the estimated selling price in the ordinary course of business less theestimated costs necessary to make the sale.

4.4 Investment in shares which are not marketable are stated at cost less impairment losses.

4.5 Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses,except for buildings and improvements, machinery and equipment existing as at June 30, 2004 whichwere revalued at the appraised value as of that date. The property, plant and equipment acquiredsubsequent to the appraisal date are recorded at cost.

Revalued Assets

- Revaluations are performed by independent professional appraiser with sufficient regularity to ensurethat the carrying amount of these assets does not differ materially from that which would bedetermined using fair values at the balance sheet date.

- Any increase in value, on revaluation, is credited to the revaluation reserve unless it offsets aprevious decrease in value recognized in the statement of income. A decrease in value is recognizedin the statement of income to the extent it exceeds an increase previously recognized in therevaluation reserve. The revaluation surplus is utilized by reference to the difference betweendepreciation based on the revalued carrying amount of the asset and depreciation based on theassetRs original cost and credited to the statement of income. Upon disposal, any remaining relatedrevaluation surplus is transferred from the revaluation reserve to the statement of income and istaken into account in calculating the gain or loss on disposal.

Subsequent expenditure

- Subsequent expenditure relating to an item of property, plant and equipment is added to the carryingamount of the asset when it is probable that the future economic benefits in excess of the originallyassessed standard of performance of the existing asset will flow to the Company. All other subsequentexpenditure is recognized as an expense in the period in which it is incurred.

Fixed assets are recorded at historical cost after deduction of depreciation expenses which arecalculated on a straight-line method over their approximate useful-life as follows:

Land improvements 20 YearsBuildings and improvements 20 YearsMachinery and equipment 20, 25 YearsFurniture, fixtures and office equipment 5, 10 YearsTransportation equipment 5 Years

- The Company records expenses of spare parts for machinery when installed. Spare parts held forstandby use are depreciated over their useful lives.

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

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4.6 Impairment

- The carrying amounts of the CompanyRs assets, other than inventories are reviewed at each balancesheet date to determine whether there is any indication of impairment. If any such indication exists,the assetRs recoverable amount is estimated.

- An impairment loss is recognized whenever the carrying amount of an asset or its cash-generatingunit exceeds its recoverable amount. Impairment losses are recognized in the statement of income.

Calculation of recoverable amount

- The recoverable amount is the greater of the assetRs net selling price and value in use. In assessingvalue in use, the estimated future cash flows are discounted to their present value using a pre-taxdiscount rate that reflects current market assessments of the time value of money and the risksspecific to the asset. For an asset that does not generate cash inflows largely independent of thosefrom other assets, the recoverable amount is determined for the cash-generating unit to which theasset belongs.

Reversals of impairment

- An impairment loss is reversed if there has been a change in the estimates used to determine therecoverable amount.

- An impairment loss is reversed only to the extent that the assetRs carrying amount does not exceedthe carrying amount that would have been determined, net of depreciation or amortization, if noimpairment loss had been recognized. All reversals of impairment losses are recognized in thestatement of income.

4.7 A provision of liabilities is recognized in the balance sheet when the Company has a present legal orconstructive obligation as a result of a past event, and it is probable that an outflow of economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount of theobligation. If the effect is material, provisions are determined by discounting the expected future cashflows at a pre-tax rate that reflects current market assessments of the time value of money and, whereappropriate, the risks specific to the liability.

4.8 EmployeesR retirement indemnity is accrued as described in Note 11.

4.9 Derivative financial instruments

- Derivative financial instruments are used to manage exposure to foreign exchange risks arising fromoperational activities. Derivative financial instruments are not used for trading purposes. Derivativesthat do not qualify for hedge accounting are accounted for as trading instruments.

- Derivative financial instruments are recognized initially at cost. Subsequently, they are stated at fairvalue. The gain or loss on remeasurement to fair value is recognized in the statement of income.

- The fair value of forward exchange contracts is their quoted market price at the balance sheet date,being the present value of the quoted forward price.

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4.10 Revenue

- Revenue excludes value added taxes or other sales taxes and is arrived at after deduction of tradediscounts.

- Revenue from the sale of goods is recognized in the statement of income when the significant risksand rewards of ownership have been transferred to the buyer. No revenue is recognized if there aresignificant uncertainties regarding recovery of the consideration due, associated costs, the probablereturn of goods or the continuing management involvement with the goods.

4.11 Expenses

- Other income and expenses

- Interest expenses and similar costs are charged to the statement of income in the period in whichthey are incurred.

- Interest income is recognized in the statement of income as it accrues.

4.12 Income tax is the expected tax payable on the taxable income for the year, using tax rates enacted orsubstantially enacted at the balance sheet date, and any adjustment to tax payable in respect ofprevious years.

4.13 Foreign Currency Transactions

- Transactions in foreign currencies are translated at the foreign exchange rates ruling at the date ofthe transaction.

- Monetary assets and liabilities denominated in foreign currencies at the balance sheet date aretranslated to Thai baht at the foreign exchange rates ruling at that date. Foreign exchange differencesarising on translation are recognized in the statement of income.

- Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currencyare translated using the foreign exchange rates ruling at the date of the transaction. Non-monetaryassets and liabilities denominated in foreign currencies that are stated at fair value are translated toThai baht at the foreign exchange rates ruling at the date that fair value was determined.

4.14 Use of estimates

- In order to prepare financial statements in conformity with generally accepted accounting standardsin Thailand, management needs to make estimates and set assumptions that affect income,expenditure, assets and liabilities in order to disclose information on the valuation of assets, liabilitiesand contingent liabilities. Actual outcomes may, therefore, differ from the estimates used.

- The estimates and underlying assumptions used in the preparation of these financial statements arereviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period inwhich the estimate is revised if the revision affects only that period, or in the period of the revisionand future periods if the revision affects both current and future periods.

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5. Related Party - Transactions

In March 2004, the CompanyRs majority shareholder (Group Usinor) sold all of its shares in the Company(96.11% of the CompanyRs authorized share capital at that time) to a shareholder of the Company. TheCompany, therefore, does not present transactions with the former shareholder which occurred subsequent tothis date as related party transactions.

The significant related party-transactions among the Company, parent company and related companieswere as follows:

5.1 Related Party-Revenues and Expenses

For the YearEnded On December 31,

2005 2004Baht Baht

Sales Arcelor Stainless International - 79,976,515.52 Arcelor Stainless China - 50,433,758.87 Uginnox VIETNAM - 548,495.26Purchase Ugine & Alz SA - 1,226,003,067.88 Arcelor Stainless International - 226,719,438.12 Nippon Steel & Sumikin Stainless Corporation 114,232,965.99 -Commission Expense Arcelor Stainless International - 32,185,474.23Management Service Fee Ugine - 15,762,270.80 Usinor - 9,109,984.27Interest Expense Usinor - 7,065,660.11Advertising Lakewood Country Club Co.,Ltd. 164,485.99 -

The significant policies of inter-transactions between the Company, parent company and related companieswere as follows:

- Sales of white rolled coil to related companies were based on the market price, which was nearlycomparable to the selling prices to others.

- Purchase of black rolled coil from parent company and related companies were based on the marketprice, which was nearly comparable to the purchasing prices from others.

- Commission expense was paid to the parent company incurred from export sales of companyRs productbased on the rate specified in the agreement.

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- Management service fee was incurred from providing advisory services on business organization, marketing,recruitment service of personnel at the level of director and management of plant and finance departmentsand technical services in accordance with terms and conditions of the agreement.

5.2 Related Party -Assets and Liabilities

As of

December 31, 2005 December 31, 2004Baht Baht

Accounts Payable Nippon Steel & Sumikin Stainless Corporation - 117,560,874.51Accrued Expenses Nippon Steel & Sumikin Stainless Corporation 7,167,122.12 7,167,122.12 Nisshin Steel Co., Ltd. 3,583,561.06 3,583,561.06 Nippon Metal Industry Co., Ltd. 3,583,561.06 3,583,561.06 J F E Steel Corporation 3,583,561.06 3,583,561.06 Nippon Yakin Kogyo Co., Ltd. 2,237,206.19 2,237,206.19

20,155,011.49 20,155,011.49

For the year ended on December 31, 2004 there was movement in loan transactions from parentcompany and accrued interest payable as follows:

As of Movements during the Year As ofDecember 31,2003 Increase Decrease December 31,2004

Baht Baht Baht BahtLoan from Parent Company - Usinor 1,378,022,226.72 - (1,378,022,226.72) -Accrued Interest Payable from

Parent Company - Usinor 117,128,343.97 7,065,660.11 (124,194,004.08) -Total 1,495,150,570.69 7,065,660.11 (1,502,216,230.80) -

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5.3 Type of Relationship with the Company

Name of Company Country Relationship Nature of Relationship

Usinor France Formerly the Parent Company Direct Majority ShareholdersArcelor Stainless International France Formerly the Related Company Common Group ShareholderUgine & Alz SA France Formerly the Related Company Common Group ShareholderLakewood Country Club Co.,Ltd. Thai Related Company Direct Minority Shareholders and

Mutual ManagementNippon Steel & Sumikin Stainless Corporation Japan Related Company Direct Minority ShareholdersNisshin Steel Co., Ltd. Japan Related Company Direct Minority ShareholdersNippon Metal Industry Co., Ltd. Japan Related Company Direct Minority ShareholdersJ F E Steel Corporation Japan Related Company Direct Minority Shareholders

Nippon Yakin Kogyo Co., Ltd. Japan Related Company Direct Minority Shareholders

6. Accounts Receivable - Net

Consist of:

As ofDecember 31, 2005 December 31, 2004

Baht Baht Within credit term 1,133,244,629.41 1,764,910,901.10 Over credit term less than 3 months 120,210,539.85 32,615,080.44 Over credit term 3 - 6 months - - Over credit term 6 - 12 months - - Over credit term 12 months 85,284,514.01 75,027,103.98

Total 1,338,739,683.27 1,872,553,085.52 Less allowance for doubtful debt (85,269,300.10) (128,643,361.08)

Net 1,253,470,383.17 1,743,909,724.44

As at December 31, 2005, allowance for doubtful debt decreased amounting to Baht 42.57 million. Thiswas result of the CompanyRs changed accounting policy of making allowance for doubtful debt from historicalwrite-off patterns to individual customers write-off.

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7. Inventories-Net

Consist of: As of

December 31, 2005 December 31, 2004Baht Baht

Finished Goods 942,725,559.38 1,237,810,174.98Work in Process 1,135,842,409.07 751,231,960.15Raw Materials 132,210,398.76 62,271,550.58Supplies 44,373,694.97 71,422,381.79

Total 2,255,152,062.18 2,122,736,067.50Less Allowance from Declining in Value (46,177,671.11) (3,760,720.22)

Net 2,208,974,391.07 2,118,975,347.28

8. Property, Plant and Equipment-Net

Consist of:Balance Increase / Sale / Balance

As of Transfer in Transfer out As ofDecember 31, 2004 December 31, 2005

Baht Baht Baht BahtCost

Land 277,214,500.00 - - 277,214,500.00Land improvements 142,864,032.48 - - 142,864,032.48Buildings and improvements 1,991,794,290.61 3,089,646.35 - 1,994,883,936.96Machinery and equipment (incl. spare parts) 8,473,262,581.77 7,255,381.73 - 8,480,517,963.50Furniture, fixtures and office equipment 222,464,902.79 7,313,578.85 - 229,778,481.64Machinery under installation 54,388,423.06 7,313,000.00 - 61,701,423.06Construction in progress and 1,455,653.35 2,126,264.63 (1,095,263.35) 2,486,654.63

Total Cost 11,163,444,384.06 27,097,871.56 (1,095,263.35) 11,189,446,992.27Accumulated Depreciation

Land improvements (37,890,069.76) (7,161,516.74) - (45,051,586.50)Buildings and improvements (930,621,449.45) (100,623,737.38) - (1,031,245,186.83)Machinery and equipment (incl. spare parts) (3,230,623,369.11) (403,679,954.94) - (3,634,303,324.05)Furniture, fixtures and office equipment (159,653,509.89) (13,236,996.05) - (172,890,505.94)Machinery under installation (30,369,346.47) (7,650,502.30) - (38,019,848.77)

Total Accum. Depre-Cost (4,389,157,744.68) (532,352,707.41) - (4,921,510,452.09)Net 6,774,286,639.38 (505,254,835.85) (1,095,263.35) 6,267,936,540.18

Add Capital surplus arisen from assets revaluation 5,637,057,351.13 - - 5,637,057,351.13Less Allowance from impairment of assets (2,418,831,025.40) (285,369,089.70) - (2,704,200,115.10)

Net Book Value 9,992,512,965.11 (790,623,925.55) (1,095,263.35) 9,200,793,776.21Depreciation in Income Statement For the Years ended on December 31,

2005 532,352,707.41

2004 526,261,328.02

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In January 1998, the Company engaged a consulting company (Chesterton Thai Property ConsultantsLimited), as independent appraiser, to appraise buildings and improvements, machinery and equipment, usedfor its operation as at December 31, 1997 with a net book value of Baht 3,800.6 million. The appraisal value,as shown in the appraisal reports dated January 26, 1998, amounted to Baht 6,836.8 million. The Companyrecorded the revaluation increment (net of accumulated depreciation and the portion of assets disposed of)amounting to Baht 3,036.2 million as a component of LShareholdersR EquityM in the balance sheet.

In July 2004, the Company engaged a consulting company (The Valuation & Consultants Co., Ltd.), asindependent appraiser, to reappraise buildings and improvements, machinery and equipment outstanding as atJune 30, 2004. According to the appraisal report dated July 1, 2004, those assets, which had a net book valueas at June 30, 2004 of Baht 7,802.8 million, had a value, based on the cost approach method net of accumulateddepreciation, totaling Baht 9,397.8 million. The Company recorded the revaluation increment amounting to Baht1,595 million as a component of LShareholdersR EquityM in the balance sheet.

As at December 31, 2005 and 2004, the Company recorded the related revaluation increment (net ofaccumulated depreciation and the portion relating to assets disposed of) amounting to approximately Baht2,932.86 million and Baht 3,218.24 million respectively as a component of LShareholdersR EquityM in the balancesheet. The revaluation increment of property, plant and equipment is not available for dividend distribution.

9. Accrued Expenses

As at December 31, 2005 and 2004, a part of accrued expenses amounting to Baht 111.02 million isaccrued expenses related to royalties payable to a foreign company which was formerly a direct majorityshareholder.

10. Long-Term Loan - Net

On March 19, 2004, the Company entered into a long-term loan agreement with a local bank for a facilityamount of Baht 2,113 million, and withdrew the loan of Baht 1,459 million. The loan bears interest at MinimumLoan Rate (MLR) per annum and is repayable in semi-annual installments starting from June 2004 up toDecember 2010. In addition, on March 19, 2004, the Company also entered into a short-term credit facilities(notes payables, letters of credit, trust receipts and letter of guarantee) agreement with such bank for a totalfacility amount of Baht 4,500 million, giving total credit facilities to the Company of Baht 6,613 million. TheCompany mortgaged land, together with the existing and future buildings thereon, and pledged machinery asspecified in the agreement (the Company is required to register the mortgage of machinery to the bank within6 months commencing from the withdrawal date of the loan, which the Company has not registered themortgage) as collateral for the CompanyRs long-term loan and short-term credit facilities with a value of Baht6,613 million, and as collateral for loans from two shareholders of the Company with a value of Baht 3,136

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million. According to conditions of the long-term loan agreement, the bank will allow the amendment of themortgage agreement and decrease the mortgage amount of land, buildings and machinery to the mortgageamount of Baht 6,613 million for the collateral of the CompanyRs liabilities with the local bank, when theCompany completes its Initial Public Offering of shares. In addition, the loans of the Company are alsoguaranteed by a shareholder of the Company, whereby the bank agrees to release such guarantee as soon asthe Company completes the assignment of collaterals as stipulated in the loan agreement.

Under the terms of the loan agreements, the Company has to comply with certain conditions as stipulatedin the agreements.

On June 23, 2004, the Company repaid in full this loan amount. In addition, the Company has not paidprepayment fee as stipulated in the agreement, because the Company received an exemption of prepaymentfee from the bank.

The mortgage of land together with the existing and future buildings thereon, the pledge of machineryand the guarantee by a shareholder as mentioned above were released by the bank on December 8, 2004.

11. EmployeesV Retirement Indemnity

The Company adopted the accounting for retirement indemnity following the International FinancialReporting Standard (IFRS) No. 19 LEmployee BenefitsM. The retirement indemnity will be paid to employeesupon retirement from the Company. The retirement indemnity is calculated annually by a qualified actuaryusing the projected unit credit method in order to determine the present value of the obligation and the currentservice cost.

Based on the actuarial valuation report issued by the independent actuaries dated January 14, 2005, theretirement indemnity for the CompanyRs employees for the year ended December 31, 2005 and 2004 computedaccording to the IFRS No. 19 amounted to Baht 5.0 million and Baht 6.0 million respectively.

EmployeesR retirement indemnity is analyzed as follows:

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For the Year For the YearEnded On Ended On

December 31, 2005 December 31, 2004Baht Baht

Balance sheet provisions as at January 1Present value of the obligation 27,404,569.00 36,703,000.00Fair value of financial assets - - Total 27,404,569.00 36,703,000.00Unrecognised actuarial gain (loss) 9,838,611.00 -Unrecognised past service cost - -Unrecognised net transition assets (liabilities) - -Liabilities recognised in balance sheet 37,243,180.00 36,703,000.00Benefit expense for the yearCurrent service cost 3,947,491.00 4,473,000.00Interest cost 1,500,679.00 1,576,000.00Net actuarial (gain) loss recognised in the year (430,191.00) -Past service cost - -Transitional (asset) liabilities - -Expense (Income) recognized in the incomestatement 5,017,979.00 6,049,000.00Movements in the net liabilities recognised in thebalance sheet 37,243,180.00 36,703,000.00Opening net liabilities as at January 1 5,017,979.00 6,049,000.00Expenses (2,814,188.00) (5,508,820.00)Benefit paidClosing net liabilities as at December 31 39,446,971.00 37,243,180.00Main actuarial assumptions (%)Discount rate 6.00 6.00Average rate of salary increase 3.00 3.00Inflation rate 6.00 6.00

12. Share Capital

At the extraordinary shareholdersR meeting held on April 19, 2004, the shareholders approved theresolution to change the CompanyRs par value from Baht 29 per share to Baht 1 per share, resulting in theincrease in number of shares from 264,496,954 shares to 7,670,411,666 shares. The Company registered thechange of par value and number of shares with the Ministry of Commerce on April 26, 2004.

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At the extraordinary shareholdersR meeting held on May 6, 2004, the meeting unanimously resolved toapprove the increase of the CompanyRs authorized share capital from Baht 7,670,411,666 (7,670,411,666shares at Baht 1 par value) to Baht 8,000,000,000 (8,000,000,000 shares at the same par value) by issuing329,588,334 new common shares at Baht 1 par value. In addition, the meeting unanimously resolved toapprove the allocation and offer for sale of not more than 329,588,334 newly-issued shares of the Company tothe public, and authorized the Company to prepare all necessary documentation to be submitted to the Officeof Securities Exchange Commission of Thailand. The Company registered the increase in share capital with theMinistry of Commerce on May 14, 2004, and submitted the registration statement for its initial public offering tothe Office of Securities Exchange Commission of Thailand on August 9, 2004. Subsequently, the StockExchange of Thailand issued an order accepting the common shares of the Company as registered securitieson December 9, 2004.

As a result of the initial public offering of the CompanyRs common shares, the Company receivedproceeds of Baht 692.1 Million which was separately recorded as its share capital of Baht 329.6 million (at Baht1 par value) and premium on share capital for the remaining amount (net of the related expenses incurred fromthe offering of such common shares), of Baht 332.1 million under LShareholdersR equityM in the balance sheet.

According to the Extraordinary General ShareholdersR Meeting No. 1/2548 held on October 13, 2005, themeeting unanimously approved the amendment to the existing Article No. 10 of the Articles of Association ofthe Company conforming to the board of directorsR meeting No. 8/2548 held on September 13, 2005.

13. Treasury Stock

The board of directorsR meeting No. 8/2548 held on September 13, 2005, resolved to let shareholdersmeeting consider, and the shareholders approved per EGM No. 1/2548 to allow the Company to rectify theCompanyRs article No. 10 of the articles of association in respect of the buy back of its Shares as the Companymay purchase its shares back and dispose of such shares within the time limit prescribed in the MinisterialRegulations pursuant to the provisions of the public companies laws and securities and stock exchange laws.In case the Company does not or could not dispose all of the shares which have been purchased-back by theCompany within the prescribed time, the Company shall reduce its paid-up capital by canceling any suchshares which remain undisposed. The shares held by the Company shall not be counted for constituting aquorum of the shareholdersR meeting nor entitle the Company to voting rights and dividend payments. TheCompany may purchase its shares back, subject to an approval from the shareholders of the Company.However, the Board of Directors of the Company shall have the authority to approve the purchase-back of theshares of the Company if the number of shares to be purchased back does not exceed 10 per cent of the totalpaid-up capital of the Company.

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The transaction related to Treasury stock is analyzed as follows:

As of December 31, 2005Treasury Stock (Shares) Purchased 204,290,900Percent of Authorized and Paid Up Share Capital 2.55%Total Cost of Treasury Stock (Baht) 249,557,679.37Average Price per Share(Baht) 1.2216Reserve for Treasury Stock 249,557,679.37

14. Dividend

At the annual general shareholdersR meeting No. 1/2005 held on April 25, 2005, the meeting resolved toapprove for the legal reserve appropriation amounting to Baht 400 million and paid dividends from the operationalresults of year 2004 to shareholders at Baht 0.10 per share for number of shares 8,000 million amounting toBaht 800 million. The dividend had been derived from the net profit of Industrial Investment PromotionRsoperations in the period of year 2004. At present, the Company had paid this mentioned dividend.

15. Legal Reserve

Under the provisions of the Limited Public Company act B.E. 2535, the Company is required to appropriateat least 5% of its annual net profit after deduction of the deficit brought forward (if any) as legal reserve until thereserve reaches not less than 10% of the authorized share capital. In 2005 and 2004, the Company appropriatedfor the legal reserve amounting to Baht 18 million and Baht 400 million respectively.

16. Basic Earnings Per Share

Basic earnings per share for the year ended on December 31, 2005 and 2004 are calculated by dividingthe net profit by the weighted average number of shares as follows:

For the YearEnded On December 31,

2005 2004Net Profit (Baht) 347,148,939.90 1,784,869,059.80Weighted Average Number of Shares (Shares) 7,993,662,338 7,671,180,246Earnings Per Share (Baht) 0.04 0.23Par Value (Baht) 1.00 1.00

17. Promotional Privileges

By virtue of the provisions of the Industrial Investment Promotion Act B.E. 2520, the Company wasgranted certain promotional privileges in the business relating to the manufacturing of cold rolled stainless steelwhich included, among other, the following:

1. Exemption from payment of import duty on imported machinery and equipment.

2. Exemption from income tax for a period of six years and eight years from the first derived income expiringon November 30, 1999, and November 11, 2005, respectively.

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3. Exemption of income tax for a period of 5 years at the rate of 50% after the promotion periods expiring onNovember 30, 2004, and November 11, 2010, respectively.

As a promoted industry, the Company must comply with the conditions provided for in thepromotional certificate.

18. EmployeesV Provident Fund

The Company established a contributory registered provident fund in accordance with the ProvidentFund Act, B.E. 2530. The registered provident fund plan was approved by the Ministry of Finance in accordancewith the Ministerial Regulation No. 183 (B.E. 2533) on October 11, 1993. Under the plan, the employees arerequired to contribute to the fund an amount equivalent to certain percentages of their basic salaries. TheCompany also makes monthly contributions to the fund at the percentage of the employeesR basic salaries. TheCompany appointed a fund manager to manage the fund in accordance with the terms and conditions prescribedin the Ministerial Regulation No. 2 (B.E. 2532) issued under the Provident Fund Act, B.E. 2530.

For the year ended December 31, 2005 and 2004, the Company contributed to the fund amounting toBaht 10.04 million and Baht 10.10 million respectively.

19. Details of Income Statements Categorized by Activities with Investment Promotional Benefits andActivities without Investment Promotional Benefits

For the Year ended on December 31, 2005Activities with Activities without TotalInvestment Investment

Promotional Benefits Promotional BenefitsBaht Baht Baht

REVENUES FROM OPERATIONSales 12,238,907,440.60 1,182,626,332.30 13,421,533,772.90Other Incomes 3,961,955.07 43,730,807.09 47,692,762.16 TOTAL REVENUES 12,242,869,395.67 1,226,357,139.39 13,469,226,535.06

EXPENSES FROM OPERATIONCost of Sales 11,248,318,049.39 1,086,907,241.01 12,335,225,290.40Selling and Administrative Expenses 593,521,605.38 57,351,057.09 650,872,662.47Reversal of Allowance for Doubtful Accounts (39,552,194.75) (3,821,866.23) (43,374,060.98)Loss on Declining in Value of Inventories 38,679,419.55 3,737,531.34 42,416,950.89Loss on Impairment of Investments 3,100,412.07 299,587.93 3,400,000.00Loss on Exchange Rate 110,871,365.30 10,713,325.25 121,584,690.55DirectorsR Remuneration 8,760,705.00 846,533.11 9,607,238.11

TOTAL EXPENSES 11,963,699,361.94 1,156,033,409.50 13,119,732,771.44Profit Before Interest Expense 279,170,033.73 70,323,729.89 349,493,763.62Interest Expenses 2,138,211.69 206,612.03 2,344,823.72Net Profit 277,031,822.04 70,117,117.86 347,148,939.90

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For the Year ended on December 31, 2004Activities with Activities without TotalInvestment Investment

Promotional BenefitsPromotional BenefitsBaht Baht Baht

REVENUES FROM OPERATIONSales 12,099,377,712.02 2,441,344,565.40 14,540,722,277.42Reversed Sales Discount According to Accrued 91,386,687.70 18,439,493.23 109,826,180.93Other Incomes 9,856,702.45 12,565,237.82 22,421,940.27

TOTAL REVENUES 12,200,621,102.17 2,472,349,296.45 14,672,970,398.62EXPENSES FROM OPERATION

Cost of Sales 9,882,049,426.58 1,993,944,501.68 11,875,993,928.26Selling and Administrative Expenses 593,864,644.47 119,826,676.78 713,691,321.25Reversal of Allowance for Doubtful Accounts (1,456,180.14) (293,819.86) (1,750,000.00)Loss on Declining in Value of Inventories 1,234,567.80 249,104.16 1,483,671.96Technology Licence Fee 199,690,999.59 40,292,529.77 239,983,529.36Loss on Exchange Rate 20,249,434.80 4,085,817.37 24,335,252.17DirectorsR Remuneration 1,730,774.11 349,225.89 2,080,000.00

TOTAL EXPENSES 10,697,363,667.21 2,158,454,035.79 12,855,817,703.00Profit Before Interest Expense 1,503,257,434.96 313,895,260.66 1,817,152,695.62Interest Expenses 26,863,308.18 5,420,327.64 32,283,635.82Net Profit 1,476,394,126.78 308,474,933.02 1,784,869,059.80

The company regarded that allocation of expense and interest repayment which is not able to beclassified that which type of business it is addressed in accordance with the proportion of revenue ofrespective entity.

20. Segment Financial Information

The Company operates in one segment business which is business of production and distribution ofstainless steel and operates in one geographical sector , i.e. Thailand. As a result, the total revenue which isreflected in the financial statements will be related to business sector and geographical sector in accordancewith those mentioned.

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In years 2005 and 2004, the Company has net export sales and domestic sales per total sales are asfollows:

2005 TONS

ExportAsia America Other region Total Domestic Total

Net sales 42,863 1,708 24,819 69,390 71,074 140,464Sales proportion (%) 30.51 1.22 17.67 49.40 50.60 100.00

2004 TONS

ExportAsia America Other region Total Domestic Total

Net sales 59,744 5,137 18,251 83,132 81,127 164,259Sales proportion (%) 36.37 3.13 11.11 50.61 49.39 100.00

21. Financial Instruments

21.1 Policy on Financial Risk Management

The company has the policy to decrease financial risk by using financial instruments such as tomake forward contract of foreign currency, to make fixed interest rate contracts in replacement of floatinginterest rate. However the company has no policy to use financial instruments for speculating or fortrading.

21.2 Risks on Interest Rates

Risk on interest rates is derived from fluctuation of market interest rate in the future which affectupon operating result and cash flow. The company had assets and liabilities which it may have risk oninterest rate as follows:

Amount Annual Interest Rate31 December 31 December 31 December 31 December

2005 2004 2005 2004 Million Baht Million Baht % %

Bank Deposit - Saving Acoount (USD) 1,509.17 1,169.02 2.50 0.55Bank Deposit - Saving Acoount (Baht) 649.99 897.37 0.88 0.65Promissory Notes (Age 20 J 90 days) 800.00 1,125.50 3.45 1.60 J 1.85

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21.3 Risks on Exchange Rate

Risk on exchange rates is involved with export sales in term of US dollar currency, as of 31December 2005 and 2004, the company had assets in foreign currency in the amount of USD 56.64million and USD 58.92 million respectively, had liabilities in foreign currency in the amount of USD 79.08million and USD 146.43 million respectively. The company hedged the risks by making foreign exchangeforward contract on Note 23.

21.4 Risks on Credit Term

The company has a low risk for credit term on goods for exporting customers because most ofthe customers transfer money before goods is sent and the rest is sold by opening Letter of Creditissued to the company which can be cashed at the bank as soon as goods are sent. For domesticcustomers, retailers paid cash only, and other customers open Letter of Credit in the name of companyas beneficiary.

21.5 Fair Value

Due to the fact that financial assets and liabilities are mainly short term type. The companybelieves that book values do not significantly differ from their fair values.

22. The Important Contract

As at December 31, 2005 and 2004, the Company has agreements as follows:

22.1 Supply Agreement of Hot-Rolled Stainless Steel Coils

The Company entered into an agreement with Arcelor, a company incorporated under the lawsof Luxembourg, whereby the latter agreed to supply and deliver the quantity of hot-rolled stainless steelcoils (raw materials) required by the Company and accepted by the party in accordance with terms andconditions of the agreement at the purchase price as stipulated in the agreement. This agreement is fora period of five (5) years commencing on March 19, 2004 and automatically extended for one or moreadditional three (3) years, unless either party gives a one hundred and eighty (180) days written advancenotice to the other party.

22.2 Reinstated Exclusive Agency Agreement

The Company entered into an agreement with Arcelor Stainless International, a companyincorporated under the laws of France, whereby the latter will provide exclusive representation to promotethe sales of the CompanyRs products all over the world, excluding Japan and Thailand. In considerationthereof, the Company commits to pay commission at the rates specified in the agreement based on thefree on board (FOB) value of the products. The agreement is effective on March 19, 2004 for anindefinite period of time. Either party may terminate the agreement at any time by giving a six (6) monthswritten advance notice to the other party.

22.3 Reinstated Usinor Recruitment and Advisory Service Agreement

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The Company entered into an agreement with Usinor, a company incorporated under the lawsof France, whereby the latter agreed to provide advisory services to the Company on businessorganization, marketing, etc. and recruitment service of personnel at the level of director and managementof the plant and finance departments. Under the agreement, the Company committed to pay service feeat the rates specified in the agreement. This agreement is effective on March 19, 2004 and will terminatein December 2005.

22.4 Technology License Fee

The Company entered into a technology license agreement dated December 18, 2004 withUsinor, (a societe anonyme registered in France and formerly the CompanyRs major shareholder) tosupersede the technology license agreement dated May 19, 2004 for the permanent right to use theexisting technology of the Company, previously transferred to the Company by Usinor under a TechnicalAssistance Agreement entered into on July 26, 1996 and effective for a period of 10 years as fromSeptember 16, 1997. In this connection, the Company paid a lump sum fee of U.S. Dollars 5.9 million(US Dollars 5 million net of withholding tax) on December 28, 2004 to Ugine & ALZ France, a relatedcompany of Usinor.

23. Forward Contract

As at December 31, 2005, the Company has outstanding forward contracts, due within one year of USDollars 22.25 million is the Cost Value Baht 914.27 million and Fair Value Baht 914.06 million, EURO 0.64million is the Cost Value Baht 31.22 million and Fair Value Baht 31.26 million.

As at December 31, 2004, the Company has outstanding forward contracts, due within one year of USDollars 47.80 million is the Cost Value Baht 1,919.62 million and Fair Value Baht 1,864.98 million, EURO 1.00million is the Cost Value Baht 51.87 million and Fair Value Baht 54.30 million.

In addition, as of December 31, 2005 and 2004, the Company has significant unhedged foreign currencyassets of US Dollars 56.64 million and US Dollars 58.92 million respectively and unhedged foreign currencyliabilities of US Dollars 56.19 million and US Dollars 101.70 million respectively.

24. Obligation

Apart from liabilities shown on the balance sheets as of December 31, 2005 and 2004 the company stillhas other obligations with commercial banks as follows:

As ofDecember 31, 2005 December 31,2004

Credit Line Credit Used Credit Line Credit Used- Letters of Credit (Million Baht) 2,600.00 - 1,600.00 1,580.00- Letters of Credit (Million US Dollar) 242.00 81.90 197.00 166.01- Letters of Guarantee (Million Baht) 226.00 1.50 26.00 5.05

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As of December 31, 2005, the Company had obligation according to the contract to purchase themachine from overseas in the purpose of capacity expansion which is not due for payment amounting to Euro0.82 million.

25. Subsequent Event

As of January 24, 2006, it is resolved that the Company will pay interim dividend based on the performanceresult from January 1 ,2005 to September 30, 2005 to shareholders by number of 7,795,709,100 shares suchof which number of shares have been deducted by repurchased shares which the company repurchased bynumber of 204,290,900.- shares, carried the rate of Baht0.025 per share, aggregating to dividend repayable toshareholders of Baht194,892,727.50. Moreover, dividend is repayable from profit on behalf of the wholeinvestment promotion granted. It is determined that the date of registered book closing to suspend the sharetransfer so as to determine the right of dividend receiving is February 8, 2006, at 12.00 noon. Moreover, it isdetermined that dividend is payable on February 23, 2006. In addition, board of directors acknowledges toinform the shareholders meeting about this dividend payment by next shareholders meeting.

26. Others

At the board of directorsR meeting No.1/2005 held on February 17, 2005, the board of directors passedthe resolutions as follows:

26.1 Commission a detailed study for their consideration into the proposed hot melting shop projectwhich would involve the investment of Baht 14,000 million in a project to produce hot rolled coil, which is theCompanyRs main production material. At present, the Company stops to proceed the project.

26.2 Commission a study by the CompanyRs financial adviser to determine whether or not it would beappropriate to increase the CompanyRs authorized share capital not more than 2,000 million shares and issuewarrants not more than 2,000 million warrants to fund the hot melting shop project.

At the board of directorsR meeting No. 2/2005 held on March 1, 2005, the meeting resolved to disapprovethe companyRs financial adviser to study details of the determination of increasing fund for the hot melting shopproject. At present, the Company stops to proceed the project.

26.3 Approve to enter into an agreement with Acme Camp Company Ltd. (a related party) to purchaseland for Baht 349.2 million on February 21, 2005, and then the Company used its right to rescind this agreementon February 22, 2005 and received back the deposit, which the Company had already paid under the agreement.

At the board of directorsR meeting No. 2/2005 held on March 1, 2005, the meeting resolved to disapproveto enter into an agreement to purchase land. Due to the company used its right to rescind this agreement andreceived back the deposit, which the Company had already paid under the agreement.

27. Approval of the Financial Statements

These financial statements have been approved by the CompanyRs Board of directors.

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