Review Report of Certified Public Accountant

Review Report of Certified Public Accountant To the Board of Directors of G Steel Public Company Limited I have reviewed the accompanying consolidated and separate balance sheets as at 30 June 2009, and the related statements of income for the three-month and six-month periods then ended, and the related statement of changes in equity and cash flows for the six-month period then ended of G Steel Public Company Limited and its subsidiaries, and of G Steel Public Company Limited, respectively. The Company’s management is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to issue a report on these financial statements based on my reviews. The consolidated and separate statements of income for the three-month and six-month period ended 30 June 2008, and the related statements of changes in equity and cash flows for the six-month period ended 30 June 2008 of G Steel Public Company Limited and its subsidiaries, and of G Steel Public Company Limited, respectively, were reviewed by another auditor whose report dated 13 August 2008 stated that except for the effect on the financial statements of the Company being in process of determination an appropriate fair value of the net assets of the subsidiary from the financial advisor in order to make adjustments for the recognition of the excess of the net fair value of its investment in the equity at the subsidiary over the purchase cost as income in the statement of income for the six-month period ended 30 June 2008, as described in note 3 to the financial statements, nothing had come to her attention that caused her to believe that those financial statements were not presented fairly, in all material respects, in accordance with generally accepted accounting principles. Except for the matters described in the third to fifth paragraphs, I conducted my reviews in accordance with the auditing standard on review engagements. This Standard requires that I plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit in accordance with generally accepted auditing standards. I have not performed an audit and, accordingly, I do not express an audit opinion on the reviewed financial statements. As discussed in Note 1.2 to the financial statements, since the second half of 2008, the operations of the Company and its subsidiaries have been significantly affected by the global economic recession. As a result, the Company and its subsidiaries made an operating loss for the six-month period ended 30 June 2009 of Baht 5,811 million and Baht 1,501 million in the consolidated and the Company’s financial statements, respectively, and are experiencing liquidity problems. The Company and its subsidiaries need to generate sufficient operating cash flows to meet both their working capital requirements and their operating obligations. The Company and its subsidiaries postponed and extended payments to trade accounts payables and other payables. A subsidiary was unable to make a loan instalment payment of USD 15 million or Baht 535 million that was due for payment in April 2009. As at 30 June 2009, a subsidiary had the outstanding loan settlement obligations that came due, totaling approximately USD 64 million, or Baht 2,174 million. The Company also has obligations amounting to Baht 5,761 million to redeem bonds that mature in the fourth quarter of 2010. These circumstances raise substantial uncertainties over the Company and its subsidiaries ability to continue as a going concern and to realize the carrying amounts of their assets. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. However, the Company and its subsidiaries are in process of resolving their financial positions and the problem of the shortage of liquidity for running the business.

2

As described in note 8 to the financial statements, as at 30 June 2009, the Company had outstanding other receivables from scrap sales amounting to Baht 3,423 million, relating to the sale of low quality raw materials that could not be used (scrap) to three customers in the fourth quarter of 2008. The financial crisis in the steel industry, with steel prices dropping significantly since 2008, may affect the Company’s ability to collect debt from these customers. Consequently the Company has plans to enter into various arrangements with the counterparties to facilitate the settlement of these receivables by offsetting them against various machinery purchases. As at 30 June 2009 The Company has set aside an allowance for doubtful accounts of Baht 358 million, however it is uncertain whether full recovery of the outstanding amounts will be made. Moreover, as described in note 6 to the financial statements, as at 30 June 2009, a subsidiary has an overseas trade receivable amount of Baht 1,855 million (equivalent to USD 54.9 million) of which the amount of Baht 1,792 million is overdue over 4 months. The subsidiary has already set up an allowance for doubtful accounts of Baht 1,185 million. The subsidiary has entered into an agreement with the counterparty to purchase machinery to offset against the outstanding debt. However, due to the unusual economic conditions which remain uncertain, the fair value of the machinery should be evaluated and the adequacy of allowance for doubtful accounts that may be required in the future. The Company’s machinery and equipment were appraised by an independent appraiser during the quarter ended 30 June 2009. The results of this recent appraisal did not indicate any impairment based on the value in use method set down in Thai Accounting Standard 36. The value in use method requires an entity to base cash flow projections on reasonable and supportable assumptions including estimates of sales, margins, timing of cash-flows and the time value of money and risks specific to the assets. However in view of the significant uncertainties due to the current global economic climate and the severe impact on the steel industry it is not possible to accurately determine the appropriateness of the various assumptions management has used and if actual outcomes differ from the management’s expectation, the financial statements might be materially affected by any impairment provision that may be required. Because of the pervasive effect of the matters of uncertainties as described in preceding paragraphs three to five on the consolidated and separate financial statements, I am unable to conclude the review report on the accompanying interim financial statements. The consolidated and separate financial statements for the year ended 31 December 2008 of G Steel Public Company Limited and its subsidiaries, and of G Steel Public Company Limited, respectively, were audited by another auditor who disclaimed an opinion on those financial statements in her report dated 2 March 2009 because of the pervasive effect on the consolidated and the separate financial statements arising from; the uncertainties over the recoverable amount of accounts receivable, other receivables and other assets; inability to perform audit procedures to determine the loss provision of outstanding purchase orders for undelivered raw materials; the valuation of the Company’s land, buildings, machinery and equipment is in process and non-receipt of confirmation letters from bank and lawyers; the uncertainty as to whether the Company and its subsidiaries will be able to continue as a going concern, as mentioned in the said report. The audit report also included emphasis of matter paragraphs in relation to the net fair value of interest in the equity of G J Steel Public Company Limited (a subsidiary) which has higher than the acquisition cost and was recorded as income and the change of accounting policy for recording negative goodwill for investment in subsidiary. The consolidated and separate balance sheets as at 31 December 2008, which are included in the accompanying financial statements for comparative purposes, are components of those financial statements. (Wilai Buranakittisopon) Certified Public Accountant Registration No. 3920 KPMG Phoomchai Audit Ltd. Bangkok 14 August 2009

G Steel Public Company Limited and its Subsidiaries

Balance sheets

As at 30 June 2009 and 31 December 2008

Assets Note 30 June 31 December 30 June 31 December

2009 2008 2009 2008

(Unaudited) (Unaudited)

Current assets

Cash and cash equivalents 75,919 157,112 15,409 71,220

Current investments 839 836 - -

Trade accounts receivable 5, 6 2,042,526 2,985,581 1,270,160 1,121,756

Amount due from related parties 4 - - 1,377,714 1,017,726

Inventories 7 1,951,326 6,234,179 867,120 2,417,486

Other receivables from scrap sales 5, 8 3,064,762 3,223,961 3,064,762 3,223,961

Other current assets 9 1,030,376 1,747,968 514,773 761,718

Total current assets 8,165,748 14,349,637 7,109,938 8,613,867

Non-current assets

Restricted deposits at financial institutions 10 170,487 547,483 31,772 438,116

Investments in subsidiaries 11 - - 3,843,799 3,843,799

Other long-term investments - 25,957 - -

Long-term loans and interest receivable to

related parties 4 - - 2,192,018 1,519,981

Long-term loans and interest receivable to others 11,598 11,598 - -

Advance payment for purchases of property, plant

and equipment 3,387,743 3,302,624 2,933,391 2,926,033

Property, plant and equipment 12 46,211,377 46,584,648 ######### 24,457,717

Intangible assets 98,157 104,229 33,844 36,233

Deferred tax assets 947,773 947,773 - -

Other non-current assets 4, 13 718,160 726,468 337,653 356,705

Total non-current assets 51,545,295 52,250,780 33,847,955 33,578,584

Total assets 59,711,043 66,600,417 40,957,893 42,192,451

Consolidated Separate

(in thousand Baht)

financial statements financial statements

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

3


Balance sheets


Liabilities and equity Note 30 June 31 December 30 June 31 December

2009 2008 2009 2008


Current liabilities

Short-term loans from financial institutions 233,337 1,630,180 233,337 325,571

Trade accounts payable 4, 5, 14 6,399,143 7,382,722 4,647,391 4,789,995

Current portion of liabilities which were included

under the former rehabilitation plan 15,124 14,712 15,124 14,712

Long-term loan from financial institution 16 2,174,026 1,052,472 - -

Short-term loan from other parties 15 564,762 80,880 373,915 -

Advances received from customers 4, 22.4 4,016,596 3,567,177 1,873,976 1,955,721

Accrued expenses 4, 5 919,017 674,268 259,358 137,012

Accrued interest expenses 491,019 372,057 393,395 323,129

Provision for loss on confirmed purchase orders

of raw material 3, 22.3 353,810 - 68,134 -

Other current liabilities 5 1,021,388 752,805 792,435 693,948

Total current liabilities 16,188,222 15,527,273 8,657,065 8,240,088

Non-current liabilities

Liabilities which were included under

the former rehabilitation plan - net of current portion 1,081,998 1,098,546 690,604 703,668

Long-term loan from financial institutions

- net of current portion 16 - 1,578,708 - -

Bonds 17 5,760,812 5,897,885 5,760,812 5,897,885

Total non-current liabilities 6,842,810 8,575,139 6,451,416 6,601,553

Total liabilities 23,031,032 24,102,412 15,108,481 14,841,641



(in thousand Baht)


4


Balance sheets


Liabilities and equity 30 June 31 December 30 June 31 December

2009 2008 2009 2008


Equity

Share capital

Authorised share capital 13,860,000 13,860,000 13,860,000 13,860,000

Issued and paid-up share capital 13,760,435 13,760,435 13,760,435 13,760,435

Surplus on ordinary shares

Share premium 1,976,478 1,976,478 1,976,478 1,976,478

Premium on capital reduction 206,307 206,307 206,307 206,307

Unrealised gain

Fair value changes and revaluation surplus - 3,342 - -

Retained earnings

Appropriated-legal reserve 763,977 763,977 763,977 763,977

Unappropriated 9,990,200 13,637,082 9,142,215 10,643,613

Total equity attributable to equity holders 26,697,397 30,347,621 25,849,412 27,350,810

Minority interest 9,982,614 12,150,384 - -

Total equity 36,680,011 42,498,005 25,849,412 27,350,810

Total liabilities and equity 59,711,043 66,600,417 40,957,893 42,192,451

(0) (0) (0) (0)



(in thousand Baht)


5


Statements of income

For the three-month periods ended 30 June 2009 and 2008 (Unaudited)

Note 2009 2008 2009 2008

Revenues 4

Revenue from sale of goods 5,759,451 9,601,921 2,125,727 7,526,806

Revenue from rendering of services - 72,939 101,499 95,654

Reversal of provision for loss on

comfirmed purchase orders of

underlivered raw material 3, 22.3 1,987,005 - 592,897 -

Reversal of devaluation of inventories 3, 7 1,108,539 4,664 233,707 -

Net foreign exchange gain 554,775 - 423,590 -

Other income 4, 5 75,733 66,834 36,745 78,380

Total revenues 9,485,503 9,746,358 3,514,165 7,700,840

Expenses 4

Cost of sale of goods 7,690,507 8,018,766 2,763,988 6,369,326

Selling expenses 85,675 105,395 34,236 103,084

Administrative expenses 244,767 545,207 200,785 75,617

Net foreign exchange loss - 665,417 - 403,503

Bad and doubtful debts expense (reversal) 6, 9 (302,651) 44,522 (220,707) -

Loss from diminution in value of inventories 3, 7 - - - 574

Total expenses 7,718,298 9,379,307 2,778,302 6,952,104

Share of profit from investment in associate - 294,052 - -

Profit before finance cost 1,767,205 661,103 735,863 748,736

Finance costs (388,004) (169,370) (111,751) (91,388)

Profit for the period 1,379,201 491,733 624,112 657,348

Attributable to :

Equity holders of the Company 1,106,992 518,579 624,112 657,348

Minority interests 272,209 (26,846) - -

Profit for the period 1,379,201 491,733 624,112 657,348

Earnings per share (Baht) 20

Basic 0.08 0.04 0.05 0.05

Diluted 0.08 0.04 0.05 0.05



(in thousand Baht)


6


Statements of income

For the six-month periods ended 30 June 2009 and 2008 (Unaudited)

Note 2009 2008 2009 2008

Revenues 4

Revenue from sale of goods 11,300,217 17,129,581 4,294,605 15,054,465

Revenue from rendering of services - 175,751 205,737 190,058

Reversal of devaluation of inventories 3, 7 1,742,049 4,416 8,426 -

Net foreign exchange gain 281,392 91,811 264,085 102,771

Other income 4, 5 91,669 101,721 67,519 132,243

Excess of interest in the net fair value of subsidiary

that over purchase cost 3 - 3,431,376 - -

Total revenues 13,415,327 20,934,656 4,840,372 15,479,537

Expenses 4

Cost of sale of goods 16,055,464 14,767,938 5,444,096 13,118,498

Selling expenses 172,305 224,193 68,915 221,882

Administrative expenses 874,824 586,979 409,462 117,322

Bad and doubtful debts expense 6, 9 1,103,034 44,522 139,457 -

Loss on confirmed purchase orders of

undelivered raw material 3, 22.3 353,810 - 68,134 -

Loss from diminution in value of inventories 3, 7 - - - 822

Total expenses 18,559,437 15,623,632 6,130,064 13,458,524

Share of profit from investment in associate - 441,990 - -

Profit (loss) before finance cost (5,144,110) 5,753,014 (1,289,692) 2,021,013

Finance costs (667,154) (354,537) (211,706) (197,451)

Profit (loss) for the period (5,811,264) 5,398,477 (1,501,398) 1,823,562

Attributable to :

Equity holders of the Company (3,646,872) 5,425,323 (1,501,398) 1,823,562

Minority interests (2,164,392) (26,846) - -


Earnings (loss) per share (Baht) 20

Basic (0.27) 0.44 (0.11) 0.15

Diluted (0.27) 0.44 (0.11) 0.15

(in thousand Baht)




7

Statements of changes in equity

Total equity

Issued and Fair value attributable to

paid-up Premium on changes equity holders Minority

share capital Share premium capital reduction on investment Legal reserve Unappropriated of the Company interests Total equity

Balance at 1 January 2008 11,100,000 2,561,678 206,307 - 763,977 15,160,909 29,792,871 199 29,793,070

Profit for the period - - - - - 5,425,323 5,425,323 (26,846) 5,398,477

Dividend - - - - - (275,179) (275,179) - (275,179)

Minority interest from investment in subsidiary - - - - - - - 14,141,858 14,141,858

Issue of ordinary shares 2,660,000 (585,200) - - - - 2,074,800 - 2,074,800

Balance at 30 June 2008 13,760,000 1,976,478 206,307 - 763,977 20,311,053 37,017,815 14,115,211 51,133,026

Balance at 1 January 2009 13,760,435 1,976,478 206,307 3,342 763,977 13,637,082 30,347,621 12,150,384 42,498,005

Available for sale investments

Net change in fair value transferred to profit - - - (3,342) - - (3,342) (3,388) (6,730)

Loss for the period - - - - - (3,646,872) (3,646,872) (2,164,392) (5,811,264)

Balance at 30 June 2009 13,760,435 1,976,478 206,307 - 763,977 9,990,210 26,697,407 9,982,604 36,680,011

(in thousand Baht)

Retained earnings



Consolidated financial statements

Surplus on ordinary shares

The accompanying notes are an integral part of these financial statements.8

Statements of changes in equity

Total equity

Issued and attributable to

paid-up Premium on equity holders

share capital Share premium capital reduction Legal reserve Unappropriated of the Company

Balance at 1 January 2008 11,100,000 2,561,678 206,307 763,977 13,371,101 28,003,063

Profit for the period - - - - 1,823,562 1,823,562

Dividend - - - - (275,179) (275,179)

Issue of ordinary shares 2,660,000 (585,200) - - - 2,074,800

Balance at 30 June 2008 13,760,000 1,976,478 206,307 763,977 14,919,484 31,626,246

Balance at 1 January 2009 13,760,435 1,976,478 206,307 763,977 10,643,613 27,350,810

Loss for the period - - - - (1,501,398) (1,501,398)

Balance at 30 June 2009 13,760,435 1,976,478 206,307 763,977 9,142,215 25,849,412

Surplus on ordinary shares Retained earnings

(in thousand Baht)



Seperate financial statements

The accompanying notes are an integral part of these financial statements. 9

G Steel Public Company Limited and its SubsidiariesStatements of cash flowsFor the six-month periods ended 30 June 2009 and 2008 (Unaudited)

2009 2008 2009 2008

Cash flows from operating activities


Adjustments for

Depreciation and amortisation 888,206 567,038 322,078 430,257

Interest Income (61,932) (7,901) (67,519) (46,496)

Finance costs 667,154 325,667 211,706 177,526

Allowance for doubtful accounts 1,103,034 - 139,457 -

(Reversal) loss on devaluation of inventories (1,742,049) 6,061 (8,426) 822

Provision on loss on confirmed orders

undelivered raw material 353,810 - 68,134 -

Unrealised (gain) loss on exchange (459,893) 28,573 (269,707) 9,704

Excess of interest in the net assets value of subsidiary

that over purchase cost - (3,431,376) - -

Discount from liabilities which were included under the

former rehabilitation plan - (9,166) - (9,166)

Gain on revalue of investments (3) (769) - -

Share of profit from investment in associate - (441,990) - -

Gain on sale of other long-term investment (2,680) - - -

(5,065,617) 2,434,614 (1,105,675) 2,386,209

Changes in operating assets and liabilities

Trade accounts receivable (43,222) 691,468 (119,384) (501,399)

Trade accounts receivable - related party - 168,220 (359,988) (104,167)

Inventories 6,024,902 (504,465) 1,558,792 877,504

Other current assets 706,815 (233,194) 206,092 69,117

Other non-current assets (109,505) 135,090 (13,791) 550,639

Trade accounts payable (790,177) 1,031,934 (23,541) (36,167)

Advance received from customers 460,793 781,349 (81,745) 727,186

Accrued expenses 301,114 14,416 123,106 (72,855)

Other current liabilities 276,799 (37,967) 106,204 (41,751)

Income tax received 1,158 - 1,158 -

Income tax paid (18) (11,070) (18) (3,144)

Net cash provided by operating activities 1,763,042 4,470,395 291,210 3,851,172


(in thousand Baht)



10


2009 2008 2009 2008

Cash flows from investing activities

(Increase) decrease in short-term investment - (187,728) - 4,562

Decrease in other long-term investment - 769 - -

Cash received from investing in subsidiary - 184,872 - -

Cash received from disposal of assets 366 - 366 -

Interest received 616 - 616 -

Decrease in restricted deposits at financial institutions 376,996 248,404 406,344 248,560

Purchase of property, plant and equipment (120,006) (3,057,308) (33,561) (3,022,021)

Loans to and interest receivable from related parties - - (605,329) (425,124)

Proceeds from loans and interest receivable to subsidiary - - - 21,000

Advance for purchase machine (85,119) - (7,357) -

Proceed from sale of other long-term

investment 21,908 - - -

Net cash provided by (used in) investing activities 194,761 (2,810,991) (238,921) (3,173,023)

Cash flows from financing activities

Finance costs paid (807,172) (521,496) (400,421) (300,872)

Payment of liabilities which were included under

the former rehabilitation plan (12,652) (12,747) (12,652) (12,747)

Proceeds from short-term loans from financial institutions 1,105,879 - 158,117 -

Repayment of short-term loans from financial institutions (2,421,709) - (239,453) -

Proceeds from short-term loans from other parties 839,435 - 529,529 -

Repayment of short-term loans from other parties (343,420) - (143,220) -

Repayment of long-term loans from financial institutions (399,058) - - -

Dividends paid - (275,179) - (275,179)

Net cash used in financing activities (2,038,697) (809,422) (108,100) (588,798)

Net increase (decrease) in cash and cash equivalents (80,894) 849,982 (55,811) 89,351

Cash and cash equivalents at beginning of period 157,112 223,229 71,220 223,063

Effect of exchange rate changes on balances

held in foreign currencies (299) - - -

Cash and cash equivalents at end of period 75,919 1,073,211 15,409 312,414



(in thousand Baht)


11


2009 2008 2009 2008

Non-cash transactions

Convert investment in rights over secured convertible - 3,272,384 - -

debts to ordinary shares of associate

Issue ordinary shares in exchange of investment in associate - 2,074,800 - 2,074,800

Payable on purchase of property, plant and equipment 287,631 152,437 287,631 152,437

(in thousand Baht)




12

G Steel Public Company Limited and its Subsidiaries Notes to the interim financial statements For the three-month and six-month periods ended 30 June 2009 (Unaudited)

13

Note Contents 1 General information and going concern 2 Basis of preparation of the financial statements 3 Significant issues 4 Related party transactions and balances 5 Transaction with business alliances 6 Trade accounts receivable 7 Inventories 8 Other receivables from scrap sales 9 Other current assets 10 Restricted deposits at financial institutions 11 Investments in subsidiaries 12 Property, plant and equipment 13 Other non-current assets 14 Trade accounts payable 15 Short term loan from other parties 16 Long-term loan from financial institution 17 Bonds 18 Warrants 19 Segment information 20 Earnings (loss) per share 21 Changes in accounting policy 22 Commitments with non-related parties 23 Litigation 24 Reclassification of accounts


14

These notes form an integral part of the financial statements. The interim financial statements were authorised for issue by the Board of Directors on 14 August 2009.

1 General information and going concern 1.1 General information

G Steel Public Company Limited, the “Company”, is incorporated in Thailand and has its registered office as follows: Head office : 88, SSP Tower 3, 18th Floor, Silom Road, Suriyawong,

Bangrak, Bangkok Factory : 55 Moo 5, SSP Industrial Estate, Tambol Nonglalog, Amphur

Bankhai, Rayong 21120 The Company was listed on the Stock Exchange of Thailand on 25 January 2006 . The Company’s major shareholders during the financial period were Whiterock Global Fund, SPC. (19.33% shareholding) and Superior Overseas (Thailand) Co., Ltd. (18.33% shareholding). The two companies were incorporated in Cayman Islands and Thailand, respectively. The principal activities of the Company are the manufacturing and distribution of hot rolled coil steel products. Details of the Company’s subsidiaries as at 30 June 2009 and 31 December 2008 were as follows:

Name of the entity

Type of business

Country of incorporation

Ownership interest (%)

30 June 2009

31 December

2008

Direct subsidiaries

Siam Professional Holdings Company Limited

Holdings Company

Thailand 99.99 99.99

G J Steel Public Company Limited (held by Oriental Access Co., Ltd. 27.22 %)

Manufacture and distribution of hot rolled coil steel products



15

Name of the entity Type of business

Country of incorporation

Ownership interest

(%)

30 June 2009

31 December

2008

Indirect subsidiaries

Oriental Access Co.,Ltd.(held by Siam Professional Holdings Company Limited 99.98%)

Consulting service and investing


NSM Steel Company Limited.(held by G J Steel Public Company Limited 100%)

None Cayman Islands, Cayman

49.66 49.66

NSM Steel (Delaware) Inc. (held by NSM Steel Company Limited 100% )

None The United State of America

49.66 49.66

The financial statements of G J Steel Public Company Limited (GJS) are included in the consolidated financial statements since 2 June 2008. The Company’s management control GJS’s financial policy and operation on that date. As at 30 June 2008, G J Steel Public Company Limited (GJS) was the Company’s subsidiary.

1.2 Going concern

Since 2008, the operations of the Company and its subsidiaries have been significantly affected by the global economic recession. As a result, the Company and its subsidiaries made an operating loss for the six-month period ended 30 June 2009 of Baht 5,811 million and Baht 1,501 million in the consolidated and the Company’s financial statements, respectively, and are experiencing liquidity problems. The Company and its subsidiaries need to generate sufficient operating cash flows to meet both their working capital requirements and their operating obligations. The Company and its subsidiaries postponed payments to trade accounts payables and other payables. A subsidiary was unable to make a loan instalment payment of USD 15 million or Baht 535 million that was due for payment in April 2009. As at 30 June 2009, a subsidiary had the outstanding loan settlement obligations that came due, totaling USD 64 million, or Baht 2,174 million. The Company also has obligations amounting to Baht 5,761 million to redeem bonds that mature in 2010. These circumstances raise substantial uncertainties over the Company and its subsidiaries are ability to continue as a going concern and to realize the carrying amounts of their assets. The Company and its subsidiaries are in process of resolving their financial positions and the problem of the shortage of liquidity for running the business. However, the financial statements do not include any adjustments that might result from the outcome of these uncertainties.


16

The Company plans to solve the liquidity problem by seeking new investment from abroad, finding additional credit facilities from financial institutions both domestically and abroad, refinancing the existing debt from financial institutions, negotiating terms of payment with trade creditors, and improving collecting from the receivables debt and increasing cash sales The financial statements of the Company and its subsidiaries have been prepared on the going concern basis, which assumes that the Company and its subsidiaries will realize their assets and repay their liabilities in the ordinary course of business. Should the outcome of the uncertainties mentioned above not be favorable to the Company and its subsidiaries continuing as going concerns, it would likely be necessary to present the financial statements on a net realizable value basis, rather than on a going concern basis. As a result, the continuation of the Company and its subsidiaries as going concerns and the realization of the carrying amount of their assets are therefore dependent upon the outcome of these uncertainties. The financial statements as presented do not include any adjustments, which would be required if

the Company and certain subsidiaries are unable to continue as going concerns. 2 Basis of preparation of the financial statements

The interim financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the financial statements has been prepared for the convenience of readers not conversant with the Thai language. The interim financial statements are prepared on a condensed basis in accordance with Thai Accounting Standard No. 34 Interim Financial Reporting (formerly TAS 41) including related interpretations and guidelines promulgated by the Federation of Accounting Professions, applicable rules and regulations of the Securities and Exchange Commission and with generally accepted accounting principles in Thailand. The interim financial statements are prepared to provide an update on the financial statements for the year ended 31 December 2008. They focus on new activities, events and circumstances to avoid repetition of information previously reported. Accordingly, these interim financial statements should be read in conjunction with the financial statements for the year ended 31 December 2008. The interim financial statements are presented in Thai Baht, rounded to the nearest thousand unless otherwise stated. On 15 May 2009, the FAP has made the announcement No. 12/2009 to renumber Thai Accounting Standards (TAS) to be the same as International Accounting Standards (IAS). The Company has adopted the following revised Thai Accounting Standards (TAS) and Thai Financial Reporting Standards (TFRS) which were issued by the FAP during 2008 and effective for annual accounting periods beginning on or after 1 January 2009: TAS 36 (revised 2007) Impairment of Assets (formerly TAS 36) TFRS 5 (revised 2007) Non-current Assets Held for Sale and Discontinued Operations (formerly

TAS 54) The adoption of these revised TAS and TFRS does not have any material impact on the Company’s financial statements.


17

Accounting policies and methods of computation applied in the interim financial statements for the three-month and six-month period ended 30 June 2009 are consistent with those applied in the financial statements for the year ended 31 December 2008 except for the change in accounting policy discussed in Note 21.

3. Significant issues

For the three-month and six-month periods ended 30 June 2009

a) The Company and its subsidiary recognized a gain from the reversal of allowance for diminution in value of inventories amounting to Baht 1,108 million and Baht 1,742 million for the three-month and six-month periods ended 30 June 2009 in the consolidated financial statements (Note 7) as follows: The Company recognised gain from the reversal of allowance for diminution of inventories amounting to Baht 234 million and Baht 8 million for the three-month and six-month period ended 30 June 2009. G J Steel Public Company Limited, the subsidiary, recognised reversal of allowance for devaluation of inventories amounting to Baht 874 million and Baht 1,734 million for the three-month and six-month period ended 30 June 2009 due to decreasing of inventories.

b) The Company and its subsidiary has set provision on loss on confirmed purchase orders of undelivered raw material amounting Baht 354 million in the consolidated financial statements. (Note 22.3) as follows:

The Company has estimated that provision for loss in respect of outstanding purchase orders of raw

materials that have not been delivered at approximately Baht 68 million and recorded provision on this loss in the financial statements for the six-month period ended 30 June 2009.

G J Steel Public Company Limited, the subsidiary, has estimated that provision for loss in respect

of outstanding purchase orders of raw materials that have not been delivered at approximately Baht 286 million and recorded provision on this loss in the financial statements for the six-month period ended 30 June 2009.

For the three-month and six-month periods ended 30 June 2008 c) The Company and subsidiary acquired additional shares of GJS during the first quarter of 2008, the

Company hired a financial advisor to ascertain the fair value of the identifiable assets, liabilities and contingent liabilities of GJS as at 31 March 2008. The Company has yet to receive a formal report on the fair value assessment. Therefore the Company has preliminarily recognized the investment based on the difference between the net assets value of GJS and the total purchase cost incurred by the Company and subsidiary in the income statement, as “Excess of interest in the net assets value of subsidiary that over purchase cost” from the investment made during the year 2008.

4 Related party transactions and balances Related parties are those parties linked to the Company by common shareholders or directors. Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually agreed prices.


18

Relationships with related parties that control or are being controlled by the Company or have transactions with the Company were as follows: Name of entities

Country of incorporation/ nationality

Nature of relationships

Siam Professional Holdings Company Limited

Thailand Subsidiary, 99.99% shareholding, more than 50% of directors are representatives of the Company

G J Steel Public Company Limited

Thailand Subsidiary, 49.66% shareholding by the Company and its subsidiary, more than 50% of directors are representatives of the Company

Oriental Access Co.,Ltd.

Thailand Indirect subsidiary more than 50% of directors are representatives of the Company

NSM Steel Company Limited

Cayman Islands, Cayman

Indirect subsidiary more than 50% of directors are representatives of the Company

NSM Steel (Delaware) Inc.

The United States of America

Indirect subsidiary more than 50% of directors are representatives of the Company

Sukhumvit Inter Development Company Limited

Thailand Related company which has the same director

Mill Con Steel Industries Public Company Limited


Burapa Steel Industries Company Limited


The pricing policies for particular types of transactions are explained further below:

Transactions Pricing policies Operating service income Fixed rate as stipulated in agreement Interest income 7 - 9 % per annum Sale of goods Agreed upon basis based on market price Purchase of raw material Agreed upon basis based on market price Sales of raw material Cost plus margin Interest on investments in right over secured convertible debts (reversal) MLR per annum Purchase of raw water Contractual prices Rental and service expenses Contractual prices Significant transactions for the three-month and six-month periods ended 30 June 2009 and 2008 with related parties were as follows:


19


Separate financial statements

Three-month period ended 30 June 2009 2008 2009 2008 ( in thousand Baht) Subsidiaries Operating service income - - 101,499 95,654 Interest income - - 36,653 20,727 Purchase of raw material - - 1,227 453,196 Other purchase - - 390 - Sales of raw material (net of cost are presented in other income) - - 6,367 129,225 Other income - - - 1,660 Purchase of goods - - - 7,124 Transactions with G J Steel as Associate Operating service income - 72,940 - - Sale of goods - 61,891 - 61,891 Purchase of raw material - 230,531 - 230,531 Other related parties Purchase of raw water 1,174 4,994 1,174 4,994 Sale of finished goods 165,505 - 75,546 -



Six-month period ended 30 June 2009 2008 2009 2008 ( in thousand Baht) Subsidiaries Operating Service Income - - 205,736 190,058 Interest income - - 66,708 37,494 Purchase of raw material - - 15,641 453,196 Other purchase - - 658 - Sales of raw material

(net of cost are presented in other income) - - 389,071 129,225 Other income - - - 1,660 Purchase of goods - - - 7,124 Transactions with G J Steel as Associate Operating service income - 175,751 - - Sale of goods - 450,303 - 450,303 Purchase of raw material - 440,293 - 440,293 Interest on investments in right over secured convertible debts (reversal) - (2,207) - - Other related parties Purchase of raw water 3,785 9,922 3,785 9,922 Sale of finished goods 257,168 - 117,374 -


20

Balances as at 30 June 2009 and 31 December 2008 with related parties were as follows

Significant agreement with related parties According to agreement on 11 September 2006, Maharaj Planner Co., Ltd. (“the Plan Administrator”) entered the operation service agreement with Oriental Access Co., Ltd. and On City Holding Limited (“the Operator”) to arrange the working capital credit lines for the operation of the Company and act as its strategic advisor to provide services in relation to the operation of the Plan during the term, including the procurement of raw materials, production of products, sales, marketing, promotion and distribution of products both domestic and export markets. Fees are as follows: • Operating fee of USD 400,000 per month • Maintenance management fee of USD 375,000 per quarter • Technical assistance fee of USD 500,000 per quarter • Minimum revenue sharing of USD 400,000 per month The agreement period is 5 years with options to renew and commenced since 12 September 2006. On 21 December 2006, Maharaj Planner Co., Ltd. (“the Plan Administrator”) and Oriental Access Co., Ltd. agree that the maximum fee payable under the operation service agreement shall not exceed USD 13,100,000 per annum and the fees in relation to arrangement fee and revenue sharing in excess of the said minimum revenue sharing will be irrevocably waived.

Trade accounts receivable from related parties



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Subsidiaries G J Steel Public Company Limited - - 369,176 187,626 Oriental Access Company Limited - - 1,008,538 830,100 Total - - 1,377,714 1,017,726

The Company recorded receivable from sales of raw materials to a subsidiary as amount due from related parties rather than trade accounts receivable - related party because raw materials sold to that subsidiary was purchased from outside for sales.

Deposit - related party



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Other related party Sukhumvit Inter Development Company Limited 1,776 1,776 1,776 1,776 Total deposit - related party 1,776 1,776 1,776 1,776


21

Nonetheless, in case of the subsidiary would like to terminate the operation service agreement prior to the expiration of the term of the operation service agreement, the subsidiary will be required to pay the termination fees in each during the year that was specified in the agreement to Oriental Access Co., Ltd. when the subsidiary terminate the operation service agreement.

Movement of loans to related party for the six-month periods ended 30 June 2009 and 2008 were as follows:

Loans to and interest receivable from related parties



30 June 2009

31 December

2008

30 June 2009

31 December

2008 Subsidiaries ( in thousand Baht) Loans to related parties Oriental Access Company Limited - - 2,015,879 1,410,550Siam Professional Holdings Company Limited - - 5,450 5,450Total - - 2,021,329 1,416,000

Interest receivable from related parties Oriental Access Company Limited - - 169,643 103,124Siam Professional Holdings Company Limited - - 1,046 857Total - - 170,689 103,981 Total loans to and interest receivable from related parties - - 2,192,018 1,519,981

Loans to related party Consolidated financial statements


2009 2008 2009 2008 (in thousand Baht)

As at 1 January - - 1,416,000 909,145 Increased - - 605,329 387,630 Decreased - - - (21,000)As at 30 June - - 2,021,329 1,275,775 Trade accounts payable to related party Subsidiary G J Steel Public Company Limited - - 8,868 663 Other related party Sukhumvit Inter Development Company Limited - 1,210 - 1,210Total - 1,210 8,868 1,873


22

Guarantee obligations with related parties The Company has guaranteed bank credit facilities of its subsidiary amounting to USD 100 million.

5 Transaction with business alliances During the years, the Company had significant business transactions with its business alliances, which the Company formerly had shareholders or directors in common or had the directors who have relationships with the Company’s directors. The business transactions have been concluded on commercial terms and bases agreed upon in the ordinary course of business between the Company and those companies. Below is a summary of those transactions.

Transactions Pricing policies Sale of goods Normal selling price Purchase of raw material Agreed upon basis based on market price Transportation expenses and other services Agreed upon basis and contractual price Sale of raw material Cost plus margin Other income Cost plus margin



2009 2008 2009 2008 (in thousand Baht)

Accrued expense to related party Other related party Sukhumvit Inter Development Company Limited 739 - 739 - Advance received from related party Other related party Millcon Steel Industries Pcl. 325,786 - 185,586 -


23

Significant transactions for the three-month and six-month periods ended 30 June 2009 and 2008 with business alliances were as follows:

Consolidated financial statements and separate

financial statements Three-month period ended 30 June 2009 2008 ( in thousand Baht) Sale of goods 426,970 1,749,698 Purchase of raw material 103,322 1,621,300 Transportation expenses and other services 32,417 126,897 Other income 3,176 23,418


financial statements Six-month period ended 30 June 2009 2008 ( in thousand Baht) Sale of goods 1,133,865 3,975,681 Purchase of raw material 274,374 2,904,298 Transportation expenses and other services 128,652 404,625 Other income 3,176 28,001


24

Balances as at 30 June 2009 and 31 December 2008 with business alliances were as follows


financial statements

Note30 June

2009 31 December

2008 (in thousand Baht) Trade accounts receivable 6 Nara International Co., Ltd. 135,140 144,695

Advance Metal Fabrication Co., Ltd. - 59,802

Federal Steel Industry Co., Ltd. 340,235 77,897

Millenium Metal Work Co., Ltd. 4,181 93,925 479,556 376,319

Other receivables from scrap sales 8

Advance Metal Fabrication Co., Ltd 1,035,520 1,196,200

Less allowance for doubtful account (119,620) (119,620)

Net 915,900 1,076,580

Other current assets - other receivables

Trinity Freight and Shipping Co., Ltd. 532 532

Advance Metal Fabrication Co., Ltd. - - 532 532

Trade accounts payable 14 Nara International Co., Ltd. - 48,850

Advance Metal Fabrication Co., Ltd. 71,032 24,587 71,032 73,437

Other current liabilities - Other payables Trinity Freight and Shipping Co., Ltd. 24,816 18,411

Trinity International Co., Ltd. 37,676 15,027 62,492 33,438

Accrued expenses Trinity International Co., Ltd. 7,870 79,211

Trinity Freight and Shipping Co., Ltd. 34,890 35,471 42,760 114,682


25

6 Trade accounts receivable

Aging analyses for trade accounts receivable were as follows:

The normal credit terms granted by the Company for domestic sales is range from cash sale to 30-45 days and for export sales covered by letters of credit at sight.



Note

30 June 2009

31 December

2008

30 June 2009

31 December

2008 (in thousand Baht) Business alliances 5 479,556 376,319 479,556 376,319 Other parties 3,466,309 3,580,920 1,167,656 1,154,258 3,945,865 3,957,239 1,647,212 1,530,577 Less allowance for doubtful accounts (1,903,339) (971,658) (377,052) (408,821) Total 2,042,526 2,985,581 1,270,160 1,121,756 2009 2008 2009 2008 (in thousand Baht) Bad and doubtful debts expense (reversal) for the: - three-month period ended 30 June (302,651) - (220,707) - - six-month period ended 30 June 931,681 - (31,770) -



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Business alliance Within credit terms 146,862 231,246 146,862 231,246Overdue:

Less than 3 months 320,366 58,046 320,366 58,0463-6 months 12,328 87,027 12,328 87,027

479,556 376,319 479,556 376,319 Other parties Within credit terms 166,957 748,212 17,535 119,057Overdue:

Less than 3 months 537,400 1,551,255 537,178 255,3033-6 months 1,026,574 1,140,983 165,166 731,8806-12 months 1,598,044 140,220 310,693 48,018Over 12 months 137,334 250 137,084 -

3,466,309 3,580,920 1,167,656 1,154,258Less allowance for doubtful accounts (1,903,339) (971,658) (377,052) (408,821)Net 1,562,970 2,609,262 790,604 745,437 Total 2,042,526

2,985,581

1,270,160 1,121,756


26

As at 30 June 2009, trade account receivable-other parties of the Company amounting to Baht 340 million (31 December 2008: four customers were 409 Million Baht) were outstanding balances of two customers for which the Company has set aside full allowance for doubtful accounts.

From the above two accounts receivable, in the first quarter of 2009, the Company received a letter dated 25 February 2009 from D Lon Co., Ltd. requesting approval to pay outstanding debt amounting to Baht 135 million in monthly instalments over a period of 3 years, from March 2009 to December 2011. In addition, the Company received a letter dated 26 February 2009 from Empire Steel Center Co., Ltd. requesting to pay outstanding debt amounting to Baht 206 million in instalments over a period of 4 years, from February 2009 to December 2012.

In addition, as at 30 June 2009, the subsidiary has an overseas trade receivable amount of Baht 1,855 million (equivalent to USD 54.9 million) of which an amount of Baht 1,792 million is overdue over four months. The Company has already set up allowance for doubtful accounts of Baht 1,185 million. The subsidiary has entered into an agreement to purchase machinery in the amount of USD 45.5 million in which both parties agreed to offset the cost of machinery with the outstanding debt and the remaining balances of debt will be repaid to the subsidiary. It is expected that the machinery will be delivered within the fourth quarter of 2009.

7 Inventories

As at 30 June 2009, finished goods of the Company amounting to Baht 167 million were pledged as security for trading facilities. The Company recognised reversal of allowance for devaluation of inventories amounting to Baht 234 million and Baht 8 million for the three-month and six-month period ended 30 June 2009, respectively. As at 30 June 2009, G J Steel Public Company Limited, the subsidiary, recognised reversal of allowance for devaluation of inventories amounting to Baht 874 million and Baht 1,734 million for the three-month and six-month periods ended 30 June 2009, respectively. The reversal of devaluation of inventories was recognised due to increase in the selling price of inventory. As at 31 December 2008, finished goods of G J Steel Public Company Limited, the subsidiary, were pledged as security for trading and loans facilities amounting to Baht 1,619 million and raw materials were pledged as collateral for short-term loans from financial institutions amounting to USD 52 million, equivalent to Baht 1,817 million.



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Finished goods 534,112 2,573,030 256,153 895,051 Raw materials 2,085,233 5,498,556 1,574,696 2,285,756 Spare parts 374,419 1,260,791 374,419 395,470 Consumable 469,426 107,342 47,252 107,342 Others 132,686 187,490 78,871 206,565 3,595,876 9,627,209 2,331,391 3,890,184 Less : Allowance for devaluation of inventories (1,644,550) (3,393,030) (1,464,271) (1,472,698)Net 1,951,326 6,234,179 867,120 2,417,486


27

8. Other receivables from scrap sales

As at 30 June 2009 the Company’s receivables in respect to scrap sales were Baht 3,423 million representing amounts due from three counterparties.

Due to the current worldwide liquidity problems facing the steel industry the Company has plans to enter into various arrangements to facilitate the settlement of these receivables by offsetting them against various machinery purchases.

Consequently, the Company and its subsidiary have plans to enter into an agreement with one of the counterparties for the subsidiary to receive machinery to the value of USD 29.8 million as part-settlement of the outstanding balance due to the Company and which will be accounted for via the inter-company balance with the subsidiary. In addition the Company has plan to enter into an arrangement with another counterparty to partly settle the outstanding amount by purchasing machinery amounting to USD 17.9 million.



Note

30 June 2009

31 December

2008

30 June 2009

31 December

2008 (in thousand Baht) Accounts receivable from scrap sales Business alliances 5 1,035,520 1,196,200 1,035,520 1,196,200 Other parties 2,387,625 2,386,144 2,387,625 2,386,144 3,423,145 3,582,344 3,423,145 3,582,344 Less allowance for doubtful accounts (358,383) (358,383) (358,383) (358,383)Total 3,064,762 3,223,961 3,064,762 3,223,961


28

9. Other current assets

Part of the outstanding balance of other receivables as of 30 June 2009 represents USD 4.9 million, or equivalent to Baht 171 million (31 December 2008: Baht 171 million) of credit notes issued by two suppliers of the Company in order to reduce the price after payment had been made. As of 30 June 2009, the Company has set aside full allowance for doubtful accounts.

10 Restricted deposits at financial institutions

As at 30 June 2009 and 31 December 2008, the Company and its subsidiaries have pledged their deposits at financial institutions to secure for those financial institutions as follows:



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Other receivables 223,379 226,856 223,373 226,851 Refundable value added tax 116,071 141,623 106,238 106,671 Suspense value added tax 89,940 87,977 59,747 67,085 Advance for purchases of goods and service 660,364 1,145,276 240,672 266,749 Interest receivable 241 46 241 46 Others 165,187 199,670 55,829 94,316 1,255,182 1,801,448 686,100 761,718 Less : Allowance for doubtful accounts

(224,806)

(53,480)

(171,327)

-

Net 1,030,376 1,747,968 514,773 761,718 2009 2008 2009 2008 ( in thousand Baht) Bad and doubtful debts expense for the: - three-month period ended 30 June - - - - - six-month period ended 30 June 171,327 - 171,327 -



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Guarantee for purchasing of goods 6,372 102,080 6,372 102,080 Guarantee for the repayment of bond interest (See note 17) - 310,636 - 310,636 Guarantee for utility supplies and services 164,100 134,100 25,400 25,400 Guarantee for other loans 15 667 - - Total 170,487 547,483 31,772 438,116


29

11 Investments in subsidiaries Investments in subsidiaries as at 30 June 2009 and 31 December 2008 are as follows:

As at 30 June 2009, the market price of ordinary shares of G J Steel Public Company Limited was Baht of 0.18 per share (31 December 2008: Baht 0.14 per share) or equivalent to the valuation of investment of Baht 1,604 million (31 December 2008: Baht 1,247 million).

12 Property, plant and equipment

Acquisitions, disposals and transfers of property, plant and equipment during the six-month periods ended 30 June 2009 and 2008 were as follows:

Consolidated financial statements 2009

Acquisitions and transfers in

- at cost

Disposals and transfers out - net book

value (in thousand Baht)

Buildings and improvement 1,644,058 - Machinery and equipment 1,417,069 - Office equipment, furniture and fixtures 8,854 - Vehicle 97 - Assets under construction and installation 345,062 (3,047,009)Tools and equipment 28,065 - Total 3,443,205 (3,047,009)


Ownership interest

Paid-up capital

Cost method 30 June

2009 31December

2008 30 June

200931December

2008 30 June

2009 31 December

2008 (%) (in million Baht) (in thousand Baht) Subsidiaries Siam Professional Holding Co.,Ltd 99.99 99.99 341 341 340,999 340,999G J Steel Public Company Limited 22.44 22.44 27,395 27,395 3,502,800 3,502,800Total 3,843,799 3,843,799


30

Consolidated financial statements 2008

Increase from investment in

subsidiary

Acquisitions and transfers in

- at cost

Disposals and transfers out - net book

value (in thousand Baht) Land 558,116 - - Buildings and improvement 2,527,127 2,319 - Machinery and equipment 12,822,486 85,567 - Office equipment, furniture and fixtures 51,963 5,931 (2)Vehicle 239 - - Assets under construction and installation 7,557,701 3,213,180 - Tools and equipment - 23,505 - Total 23,547,652 3,330,502 (2)

Separate financial statements 2009 2008 Acquisitions

and transfers in - at cost

Disposals and transfers out

- net book value

Acquisitions and transfers in - at cost

(in thousand Baht) Buildings and improvement 640,028 - 2,319 Machinery and equipment 23,272 - 85,567 Office equipment, furniture and fixtures 330 - 5,500 Vehicle 97 - - Assets under construction and installation 283,402 (640,218) 3,211,446 Tools and equipment 2,583 - 23,505 Total 949,712 (640,218) 3,328,337 The Company’s land, machinery and equipment were appraised by an independent appraiser during the quarter ended 30 June 2009. The result of this recent appraisal did not indicate any impairment base on the value in use method set down in Thai Accounting Standard 36. During the six-month period ended 30 June 2009, the Company capitalised interest amounting to Baht 278.61 million as cost of assets under constructions. The weighted average rate used to determine the amount of borrowing costs eligible for capitalisation was 10.50%

13 Other non-current assets



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Deposit for purchasing of raw material 160,161 164,398 160,161 164,398 Other deposits 133,332 85,622 28,833 29,622 Suspended construction in progress 44,485 44,484 - - Roll amortization 365,087 416,200 146,600 159,958 Others 15,095 15,764 2,059 2,727 Total 718,160 726,468 337,653 356,705


31

14 Trade Accounts payable

15 Short term loan from other parties

As of 30 June 2009, balance of short term loan from other party to the Company is Baht 373.92 million (USD 10.94 million). The Company entered into short term loan agreement with overseas company amounting to USD 15 million dated 14 January 2009 with a fixed interest rate plus introductory fee and arrangement fee at a fixed rate of the total loan amount as stipulated in the agreement. The maturity date is 12 months after disbursement date. On the same day, the Company made a loan for the same amount to Oriental Access Co., Ltd. which is its subsidiary to repay loan from financial institutions as described in Note 16. During this period, the Company has repaid the loan for an amount of USD 4.06 million.

16 Long-term loan from financial institutions As at 31 December 2008, loan of the subsidiary has balance at amounting to USD 75 million. Interest is charged at SIBOR + margin per annum. Loan principal is to be repaid in April and October of each year and interest is payable quarterly, with a stipulation that payment of the subsidiary’s loan must not conflict with the covenants to which the Company is tied under the condition of its bond issue. In the first quarter of 2009, the subsidiary paid loan principal of USD 11.37 million or Baht 401.55 million and the remaining amount of USD 63.63 million or Baht 2,174 million is to be repaid within one year. The subsidiary was unable to make a loan installment payment of USD 15 million or Baht 535 million that was due on 30 April 2009 due to liquidity problems, this caused the default and obligation for the subsidiary to repay loan amounting USD 63.63 million or Baht 2,174 million. As at 30 June 2009, loan from financial institution is secured by 10,806,434,586 shares of G J Steel Public Company Limited. (31 December 2008: 10,806,434,586 shares)



Note

30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Related parties 4 - 1,210 8,868 1,873 Business alliances 5 71,032 73,437 71,032 73,437 Other parties 6,328,111 7,308,075 4,567,491 4,714,685 Total 6,399,143 7,382,722 4,647,391 4,789,995


32

17 Bonds

As at 30 June 2009 and 31 December 2008, details of bonds of the Company are as follows:

Consolidate and Separate financial statements

30 June 2009 USD 100

millionUSD 70 million

bonds bonds Total (in thousand Baht) Face value of bonds 4,093,574 2,746,562 6,840,136Effect of exchange rate (676,644) (354,711) (1,031,355)Premium (discount) on face value (23,422) 17,265 (6,157)Amortisation of deferred bonds management fee (29,868) (11,944) (41,812)Book value of bonds 3,363,640 2,397,172 5,760,812

Consolidate financial statements and Separate financial statements

31 December 2008

USD 100 million

USD 70 million

bonds bonds Total (in thousand Baht) Face value of bonds 4,093,574 2,746,562 6,840,136Effect of exchange rate (585,334) (290,794) (876,128)Premium (discount) on face value (31,901) 23,551 (8,350)Amortisation of deferred bonds management fee (40,653) (17,120) (57,773)Book value of bonds 3,435,686 2,462,199 5,897,885 As of 30 June 2009, the Company did not maintain the required balance in the escrow account to meet the amount of the next coupon payment of bond as specified in the bond covenant. The interest will be paid semi-annual on 4 April and 4 October of each year. The maturity date of bonds is 4 October 2010.

18 Warrants

On 12 January 2006, the Company issued 99,972,200 warrants entitling the holders to subscribe for the Company’s ordinary shares to directors and employees of the Company (ESOP), without charge. The warrants are exercisable for a period of 5 years from the issue date, in a ratio of 1 warrant to 1 ordinary share. The exercise price is Baht 1 per share. The directors and employees can exercise each of the one-third of all allocated warrants after the Company’s shares have been traded on the Stock Exchange of Thailand for 1 year, 2 years and 3 years, respectively. The first date of exercise is on 30 March 2007 and the last date is on 11 January 2011. The Company subsequently cancelled 22,319,262 warrants since the employees who held them resigned, thus breaching the conditions under which such warrants were received. As at 30 June 2009, there were outstanding 77,652,938 warrants.


33

19 Segment Information The Company and its subsidiaries’ business operations involve 2 principal segments: manufacture and sale of hot rolled coils, consulting services and holding company. These operations are mainly carried on in Thailand. Below is the consolidated financial information for the three-month and six-month periods ended 30 June 2009 and 2008 of the Company and its subsidiaries by segment.

Consolidated financial statements Three-months period ended

30 June

Manufacture and Consulting services distribution of hot and investment in rolled coils other company Total 2009 2008 2009 2008 2009 2008 (in thousand Baht) Segment Revenue Domestic 5,416,137 8,740,072 - 72,939 5,416,137 8,813,011 Export 343,314 861,849 - - 343,314 861,849 Total 5,759,451 9,601,921 - 72,939 5,759,451 9,674,860

Consolidated financial statements Six-months period ended

30 June

Manufacture and Consulting services distribution of hot and investment in rolled coils other company Total 2009 2008 2009 2008 2009 2008 (in thousand Baht) Segment Revenue Domestic 9,915,993 15,389,961 - 175,751 9,915,993 15,565,712 Export 1,384,224 1,739,620 - - 1,384,224 1,739,620 Total 11,300,217 17,129,581 - 175,751 11,300,217 17,305,332


Three-months period ended 30 June

Six-months period ended 30 June

2009 2008 2009 2008 (in thousand Baht)

Segment gross profit (Loss) Domestic (1,869,018) 1,430,096 (4,046,839) 2,234,710 Export (62,038) 153,060 (708,408) 126,933 Total (1,931,056) 1,583,156 (4,755,247) 2,361,643


34

20 Earnings (loss) per share Basic earnings (loss) per share The calculation of basic earnings (loss) per share for the three-month and six-month periods ended 30 June 2009 and 2008 was based on the profit (loss) for the period attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the period as follows: Three-month period ended 30 June Consolidated

financial statements 2009 2008 (in thousand Baht /

thousand shares Profit attributable to equity holders of the Company 1,106,992 518,579 Weighted average number of ordinary shares outstanding (basic) 13,760,435 13,760,000 Effect of exercise warrants 85,026,036 warrants which allocated to directors and Employees exercisable at a ratio of 1 warrant to 1 Ordinary shares, at a price of Baht 1 per share - 22,507 Weighted average number of ordinary shares outstanding (diluted) 13,760,435 13,782,507 Earnings per share (basic) (in Baht) 0.08 0.04Earnings per share (diluted) (in Baht) 0.08 0.04 Three-month period ended 30 June Separate


thousand shares Profit attributable to equity holders of the Company 624,112 657,348 Weighted average number of ordinary shares outstanding (basic) 13,760,435 13,760,000 Effect of exercise warrants 85,026,036 warrants which allocated to directors and Employees exercisable at a ratio of 1 warrant to 1 Ordinary shares, at a price of Baht 1 per share - 22,507 Weighted average number of ordinary shares outstanding (diluted) 13,760,435 13,782,507 Earnings per share (basic) (in Baht) 0.05 0.05Earnings per share (diluted) (in Baht) 0.05 0.05


35

Six-month period ended 30 June Consolidated


thousand shares Profit (loss) attributable to equity holders of the Company (3,646,872) 5,425,323 Weighted average number of ordinary shares outstanding (basic) 13,760,435 12,430,000 Effect of exercise warrants 85,026,036 warrants which allocated to directors and Employees exercisable at a ratio of 1 warrant to 1 Ordinary shares, at a price of Baht 1 per share - 20,121 Weighted average number of ordinary shares outstanding (diluted) 13,760,435 12,450,121 Earnings (loss) per share (basic) (in Baht) (0.27) 0.44Earnings (loss) per share (diluted) (in Baht) (0.27) 0.44 Six-month period ended 30 June Separate


thousand shares Profit (loss) attributable to equity holders of the Company (1,501,398) 1,823,562 Weighted average number of ordinary shares outstanding (basic) 13,760,435 12,430,000 Effect of exercise warrants 85,026,036 warrants which allocated to directors and Employees exercisable at a ratio of 1 warrant to 1 Ordinary shares, at a price of Baht 1 per share - 20,121 Weighted average number of ordinary shares outstanding (diluted) 13,760,435 12,450,121 Earnings (loss) per share (basic) (in Baht) (0.11) 0.15Earnings (loss) per share (diluted) (in Baht) (0.11) 0.15 The Company did not calculate the effect of exercise warrants for the three-month and six-month periods ended 30 June 2009 because the exercise price of the Company’s warrants was higher than the market value of ordinary shares.


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21. Changes in accounting policy

During the second quarter of 2009, G J Steel Public Company Limited, the subsidiary, changed its accounting policy in respect of the method used for calculating the value of its raw materials and spare parts and supplies from the first-in, first-out method rather than the weighted average method as management considers it is more appropriate to the nature of the subsidiary’s business and to comply with the group company’s accounting policy. Later, on 14 May 2009, the subsidiary received approval for this change from The Revenue Department. The changes in accounting policy of the subsidiary as the aforesaid did not have material effect to the consolidated financial statements. Therefore, the Company didn’t restate the comparative consolidated financial statements. The effect of the change to the financial statements for the three-month and six-month periods ended 30 June 2009 of the subsidiary are as follows:

Consolidated financial statements 2009 (in thousand Baht) Inventories Balance at 1 January before change in accounting policy 3,761,086 Increase in retained earnings 1,680 Balance at 1 January after change in accounting policy 3,762,766


2009 (in thousand Baht)Deficit Balance at 1 January before change in accounting policy (4,650,571) Effects of changes in calculating the value of its raw materials and spare parts 1,680 Balance at 1 January after change in accounting policy (4,648,891)


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22. Commitments with non-related parties 22.1 Commitments

Consolidatedfinancial statements

2009 (in thousand Baht)Net (loss) profit Three-month period ended 30 June Profit for the period before change in accounting policy 534,639 Decrease in cost of sales (34,170) Decrease in reversal of loss for devaluation inventories 24,198 Increase in loss on confirmed purchase orders of undelivered raw material 19,765 Net decrease 9,793 Profit for the period after change in accounting policy 524,846 Decrease in earnings per share (Baht) 0.0002 Six-month period ended 30 June Loss for the period before change in accounting policy (4,307,610) Decrease in cost of sales (89,648) Decrease in reversal of loss for devaluation inventories 82,642 Increase in loss on confirmed purchase orders of undelivered raw material 851 Net decrease 6,155 Loss for the period after change in accounting policy (4,301,455) Decrease in loss per share (Baht) (0.0002)



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Capital commitment Contracted but not provided for Land 115,000 166,500 - - Buildings and other constructions 106,180 82,346 100,740 76,906 Machinery and equipment 9,207,485 5,571,695 5,106,693 4,082,705 Furniture, fixtures and office equipment 350 573 107 330 Total 9,429,015 5,821,114 5,207,540 4,159,941


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Oriental Access Company Limited (Subsidiary)

The Oriental Access Company Limited, the subsidiary, had commitments to pay amendment fees to the oversea financial institution for the amendment of the Original Facility Agreement at the rate of 1.5% per month based on the outstanding of principal amount in USD until April 2010. As at 30 June 2009, the amendment fee under the agreement amounted to approximately Baht 326.10 million (USD 9.54 million)

22.2 Lease agreements

The Company a) The Company has entered into agreements of providing raw materials, raw water and water

supply management. The Company is to pay service fees related to raw materials management, raw water and water supply management based on the quantity used.

b) The Company has entered into the purchase of gas with 2 companies and is to pay service

fees under these agreements at the variable rate based on the quantity of gas used and the fixed rate within one year of Baht 3.13 million.

G J Steel Public Company Limited (Subsidiary) a) On 1 December 2003, the subsidiary entered into a ten-year agreement to purchase natural

gas with monthly charges based on consumption. b) On 1 May 2008, the subsidiary entered into a three-year agreement to receive consultation

for the most suitable refractory design and for delivery of any refractory consumables. The pricing of the agreement is based on the cost per ton of refractory consumed in each month.

c) On 1 November 2004, the subsidiary entered into a twenty-year take-or-pay agreement to

purchase oxygen, argon and nitrogen. Minimum payments under the agreement amount to approximately Baht 6 million per month.



30 June 2009

31 December

2008

30 June 2009

31 December

2008 ( in thousand Baht) Lease and service agreement commitments

Within one year 8,872 9,773 7,141 6,133 After one year but within five years 20,006 23,517 19,463 22,597 Total 28,938 33,290 26,604 28,730 Other commitments Bank guarantees 405,901 375,901 267,201 270,201


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Consolidated financial

statements 30 June 31 December 2009 2008 (in thousand Baht) Long-term agreement commitments Within one year 72,888 76,248 After one year but within five years 282,593 282,593 After five years 730,031 765,356 Total 1,085,512 1,124,197

22.3 Raw material purchase orders The Company The Company has outstanding purchase orders of raw materials that have not been delivered to the

Company as at 30 June 2009 totalling Baht 1,905 million (31 December 2008: Baht 4,130 million). These orders were placed since the third quarter of 2008 when prices were significantly in excess of current market commodity prices. Therefore, management is in discussions with its suppliers to negotiate discounts on the original order prices. The Company has increased order during the year 2009 in order to decrease average cost of raw materials. The Company has estimated that provision for loss in respect of outstanding purchase orders of raw materials that have not been delivered at approximately Baht 68 million and recorded provision on this loss in the financial statements for the period ended 30 June 2009.

Subsidiary G J Steel Public Company Limited, the subsidiary, has outstanding purchase orders of raw

materials that have not been delivered to the Company as at 30 June 2009 totalling Baht 2,912.4 million (31 December 2008: Baht 3,483.2 million). These orders were placed since the third quarter of 2008 when prices were significantly in excess of current market commodity prices. Therefore, management has been in discussions with its suppliers to negotiate discounts on the original order prices. During the year 2009, new purchase orders have been placed in order to reduce the average cost when the Company released the raw material to production. The Company has estimated that provision for loss in respect of outstanding purchase orders of raw materials that have not been delivered at approximately Baht 285.7 million based on comparison with the economic benefits expected to be received in the form of estimated sales prices and the conversion costs of finished products and in the financial statements has recorded provision for this loss for the period ended 30 June 2009.

22.4 Advance received from customer The Company As of 30 June 2009, the Company has advance received from a customer for an amount of Baht

1,584 million of which has obligation to deliver the goods to the customers in the future. Discount obligation may occur when the Company deliver goods as scheduled or repayment of advance received in the future. The Company is in the process of negotiating the terms and conditions with the customer.


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23 Litigation As at 30 June 2009, the Company and its subsidiaries had the following pending litigation:

23.1 G J Steel Public Company Limited (the subsidiary)

a) Central Bankruptcy Court

The subsidiary’s creditors were required to submit claims to the Official Receiver for outstanding debts on 8 May 2000. As of 31 December 2003, total claims filed by the creditors against the subsidiary amounted to Baht 434.99 million. The subsidiary has, therefore, brought the dispute to the Court for adjudication. The subsidiary has, however, recorded liabilities totalling Baht 362.75 million for such claims equal to the amounts claimed by the creditors adjusted for the proportional rate approved in the rehabilitation plan. As a result, the recorded liability is Baht 72.24 million less than the amount claimed by the creditors to the Court. However, such difference of liabilities will be subjected to the limitation provided under treatment of each creditor class in accordance with the approved rehabilitation plan. Therefore, liabilities under rehabilitation plan in the balance sheet are the amount of liabilities which have been adjusted to reflect such conclusion.

b) Central Intellectual Property and International Trade Court According to the Black Case No. Kor. Kaw. 5/2548 dated 21 January 2005, Maharaj Planner Company Limited, in the capacity of the Plan Administrator of the subsidiary, is the plaintiff who has sued a domestic financial institution and a foreign financial institution (collectively called “Defendant”), in the Central Intellectual Property and International Trade Court, in respect of a letter of credit. The Defendant has committed an act of breach of conditions under the letter of credit, which caused damage to the subsidiary. The Defendant had made payment to a foreign seller by a letter of credit covering the cost of goods amounting to USD 4.92 million (equivalent to Baht 201.58 million) without delaying payment, until the fulfilment of conditions under the letter of credit, as instructed by the subsidiary. The Defendant had deducted the said amount from the subsidiary’s account. The subsidiary did not receive the said goods. Therefore, the subsidiary has sued the Defendant for damages, including interest cost and other estimated damages, amounting to Baht 8,593.72 million. Presently, the Central Intellectual Property and International Trade Court has dismissed the claim of the subsidiary whereby the subsidiary could not agree with such decision, therefore, on 24 April 2009, the subsidiary has filed an appeal against the Central Intellectual Property and International Trade Court’s decision to the Supreme Court. The subsidiary accounted for the amount deducted from the subsidiary’s account of Baht 201.58 million by the Defendant as a part of “Advance to Suppliers” and recorded the provision on loss for the whole amount in 2008.

c) According to the Black Case No. 7181/2550 of the South Bangkok Civil Court, between N.T.S. Steel Group PCL, the plaintiff, and G J Steel PCL, the defendant. The plaintiff had submitted the prosecution to the court on 1 August 2007, for the case worth Baht 31.09 million. The prosecution was described as follows: 1) The defendant had made an evidence for renting the accommodation in Building 1 and Building 6 with the plaintiff and made use of the movable property there-in; but the defendant had failed to pay the plaintiff for using the said property. 2) The defendant had contacted the plaintiff for the use of the long-distance telephone calls both locally and internationally, but had failed to pay for such services. 3) The defendant had an outstanding debt arising from buying the water from the plaintiff; therefore, the plaintiff requested that the defendant admitted the fault by paying the total amount of Baht 31.09 million, together with the interest payable at 7.5 percent per annum, in the principal of Baht 22.52 million, as from the date of prosecution until completion of payment.


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As at 31 December 2008, the defendant had counter-sued the plaintiff by demanding the plaintiff to refund the deposit of the lease of Building 1 and Building 6, including the refund of the cost of water stated in the water purchase agreement, totalling Baht 72.95 million, with 7.5 percent interest per annum and classified as non-current assets in the balance sheets.

On 28 January 2009, N.T.S. Steel Group PCL filed the petition to withdraw the claim against

the Company and the Company also filed the petition to withdraw the claim against N.T.S. Steel Group PCL. The Civil Court has allowed such withdrawal and dismissed all the claims.

d) According to the Black Case No.280/2552, on 27 February 2009 in the South Bangkok Civil

Court, N.T.S. Steel Group PCL filed its complaint against the subsidiary for the breach of water purchase agreement and demanded damages in the amount of Baht 8.18 million together with interest at the rate of 7.5% per annum on the principal amount of Baht 6.22 million calculated from the date of filing the complaint until the date of full repayment. As of 30 June 2009, this case is pending at the Civil Court.

e) The three suppliers filed their complaints against the subsidiary for the breach of sale and

purchase agreement, hire of work agreement and demanded the damages in the amount of Baht 5.19 million together with the interest in the rate of 7.5% and 15 % per annum from the principle amount of Baht 4.93 million from the date of filing the complaint until the date of full repayment. Presently, these cases are pending at the South Bangkok Civil Court.

23.2 Legal counsel

Antidumping

The Company and subsidiary appointed two solicitors to proceed on behalf of them in participating in anti-dumping cases in foreign countries as follows.

a) The Company and subsidiary appointed a law firm to proceed on behalf of them in

participating in the U.S. Department of Commerce’s administrative antidumping duty review for the period of review on hot-rolled steel flat products sold to the USA during 1 November 2007 to 31 October 2008. The Company submitted a request to the U.S. Commerce for the review on 1 December 2008. During the period of review, the Company, as importer of record, deposited antidumping duty at 6.4% of FOB merchandise value sold to the USA. The duty deposit may be refunded after the antidumping duty review process completes and final results are released. If the final results determine that the Company did not sell at any dumping price at all, it will receive refund of full amount of the antidumping duty deposited. Or if the final results determine that the Company dumped the price at a level somewhere between zero and the 6.4% duty deposit rate, the Company will receive partial refund of the 6.4% for the difference between the dumping duty rate as per the final results and the current 6.4% duty deposit rate. But if the final results determine that the Company dumped the price at 6.4% or higher, it will not receive any refund of antidumping duty deposit and may be imposed for the differential between the newly imposed duty rate and the deposit rate.

During January to March 2009, the Company and subsidiary, responded to the U.S. Department of Commerce (“DOC”)’s producer & exporter questionnaire and submitted the related information and documents for the antidumping duty review. Later, as a result from the serious economic recession, the Company and subsidiary had necessity to withdraw their request for antidumping duty review by notifying so to the U.S. DOC on 12 March 2009.


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Later on 19 June 2009, the U.S. DOC announced in Federal Register mentioning that it acceded to the Company and subsidiary’s request for withdrawal and return of proprietary information and documents in the U.S. DOC’s letter to the Company and subsidiary dated 9 April 2009. As the U.S. DOC received comments from the petitioners to collapse antidumping duty rates for both the Company and subsidiary to be one same single rate, the U.S. DOC would like some time to explore the facts if it is appropriate to collapse the rates or not, and how, and will include its findings in the preliminary results. On 30 June 2009, the Company is waiting for the U.S. DOC’s preliminary results expected to be issued soon. The final results is then expected to be issued within 30 November 2009 according to the U.S. DOC’s regular time frame for such a proceeding.

b) The Company appointed a law firm to proceed in the India’s antidumping investigation as a

consequence from the initiation notification of antidumping investigation on hot-rolled steel flat products exported from Thailand and other 14 countries to India during 1 April 2007 to 30 September 2008 by the Designated Authority in Department of Commerce of India, dated 28 November 2008. Later, on 8 December 2008, the Designated Authority sent letters and an exporter questionnaire to G Steel asking for cooperation in responding to the questionnaire with all related information. On 30 December 2008, the Company submitted a notice informing of its participation in the India’s antidumping investigation in order to defend and prove with all required information and facts to the concerned Indian government agency.

In January 2009, the Company submitted its response together with related information and documents for the questionnaire, as official participation, within the given due date. On 30 June 2009, the Company was looking forward to a further notification or additional instructions from the Indian Designated Authority. The Company expectes that after the final stage of proceedings is completed, the final results will be made known in November 2009, or there may be extension as India’s Department of Commerce sees necessary, but no later than May 2010, as communicated to the Company’s lawyer. The final results for this case cannot be assessed at the moment. If the final results determine that the Company’s merchandise exported to India during the said period of investigation was somehow dumped into the Indian market, the concerned importers of G Steel’s merchandise to India will be required to pay for the antidumping duty at the rate specified in the final results with effect from the date of investigation initiation. In this case, the Company’s competitiveness on price in the Indian market in the future will be affected. But if the final results determine that the Company did not dump its merchandise into the Indian market, the Company will not be affected at all.

Bonds and long-term loans

An overseas bank, who is loan agency and lender of long-term loans to a subsidiary, consulted an overseas legal counsel about such bonds and long-term loans for which the Company and a subsidiary have to pay such related fees.


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24 Reclassification of accounts

Certain accounts in the balance sheet as at 31 December 2008 and the statement of income for the three-month and six-month periods ended 30 June 2008 have been reclassified to conform to the presentation in the 2009 interim financial statements as follows:. 2008 Consolidated

financial statements Separate

financial statements

Before reclass.

Reclass.

After reclass.

Before reclass.

Reclass.

After reclass.

(in thousand Baht) Balance sheet Cash and cash equivalents 156,158 954 157,112 - - - Current investments 1,790 (954) 836 - - - Inventories 6,650,379 (416,200) 6,234,179 2,577,444 (159,958) 2,417,486 Advance payment - 3,302,624 3,302,624 - 2,926,033 2,926,033 Property, plant and equipment 49,333,804 (2,749,155) 46,584,649 27,260,750 (2,803,033) 24,457,717 Other non-current assets 863,736 (137,269) 726,468 319,747 36,958 356,705 - - Statement of income Three-month period ended 30 June

Selling and administrative expenses 709,462 (709,462) - 189,333 (189,333) - Selling expenses 105,395 105,395 103,084 103,084 Administrative expenses 545,207 545,207 75,617 75,617 Bad and doubtful debts expense 44,522 44,522 - - Reversal of loss on devaluation of inventories (4,664) (4,664) 574 574 Finance costs 150,368 19,002 169,370 81,330 10,058 91,388 - - Six-month period ended 30 June

Selling and administrative expenses 880,148 (880,148) - 359,951 (359,951) - Selling expenses 224,193 224,193 221,882 221,882 Administrative expenses 586,979 586,979 117,322 117,322 Bad and doubtful debts expense 44,522 44,522 - - Reversal of loss on devaluation of inventories (4,416) (4,416) 822 822 Finance costs 325,667 28,870 354,537 177,526 19,925 197,451 - -


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

Review Report of Certified Public Accountant

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