INOX: Annual Report 2005 by inox inox

THAINOX STAINLESS PUBLIC COMPANY LIMITED

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Message from the Chairman

Board of Directors

Management Explanation and Analysis

Financial Statement

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Message from the Chairman and Chief Executive Officer The impacts of the economic crisis, the oil price increase and higher bank interests during the year 2005, has generally affected the ThailandRs industrial sector. Comparing with the year 2004, the world stainless steel production has dropped to 24.36 million tons or a 1.25% fall in 2005. Despite the fall of the world stainless steel production, ThailandRs stainless steel consumption grew by 10 % last year. Thainox Stainless Public Company Limited has declared the successive high profits and sale volumes. Due to the efficient sale management, the forecast analysis and efficient financial risk control, the Company has good balance, liquidity and zero interestbearing debt. Since January 27, 2006, the Company changed its trading symbol in the Stock Exchange of Thailand from LTNXM to LINOXM. For the benefit of shareholders, the Company operates its activity under the objective of providing sustainable profit under 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 order to provide the information on CompanyRs operating results. For the benefit of customers, the Company develops and delivers integrated customized products and services that meet customerRs requirement. According to its effective cost management, the Company has become competitive in the world market. Due to the excellent technique and high quality products, the Company nowadays successfully exports its products to over 30 countries worldwide and brings back more than 6,000 Million Baht of foreign currency per annum to the Country. The success of the Company is the result of co-operation of the management, employees, customers and commercial alliances as well as the support and encouragement of shareholders and investors. On behalf of the Chairman and Chief Executive Officer of Thainox Stainless Public Company Limited, I would like to express my sincerest thank to all of you for your trust and confidence in our Company, and of course to thank all colleagues and employees for their contribution, which results in CompanyRs success and acknowledgement in the stainless steel industry these days.

(Prayudh Mahagitsiri) Chairman & Chief Executive Officer

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T H A INOX 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 M.R. Priyangsri Watanakun ACM. Nipon Sakornyen Mr. Choon Jaruchaiyakul

Chairman of the Audit Committee Member of the Audit Committee Member of the Audit Committee 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.

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

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T H A INOX STAINLESS PUBLIC COMPANY LIMITED

Management Explanation and Analysis 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.

T H A I NOX 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.

T H A INOX 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.

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

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

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

19.

, , :# / , + #, # #,

) & 31 ( 2548

'& &' &+ + &+ + + )

$0 '

% ' ?& + @ ) )

$0 % (& 3C & 3 % * + 0 %

0 (& ( %

(& + + % * & / * @ )

$+ (A ) 0 ' ) &

$+ (A )

12,238,907,440.60 3,961,955.07 12,242,869,395.67

1,182,626,332.30 43,730,807.09 1,226,357,139.39

13,421,533,772.90 47,692,762.16 13,469,226,535.06

11,248,318,049.39 593,521,605.38 (39,552,194.75) 38,679,419.55 3,100,412.07 110,871,365.30 8,760,705.00 11,963,699,361.94 279,170,033.73 2,138,211.69 277,031,822.04

1,086,907,241.01 57,351,057.09 (3,821,866.23) 3,737,531.34 299,587.93 10,713,325.25 846,533.11 1,156,033,409.50 70,323,729.89 206,612.03 70,117,117.86

12,335,225,290.40 650,872,662.47 (43,374,060.98) 42,416,950.89 3,400,000.00 121,584,690.55 9,607,238.11 13,119,732,771.44 349,493,763.62 2,344,823.72 347,148,939.90

) & 31 ( 2547

'& &' &+ + &+ + + )

$0 '

% & & " ? ( + & ' ?& + @ ) )

$0 % (& 3C & 3 % * + 0 %

0 (& ( (& % $ + ( % * & / * @ )

$+ (A ) 0 ' ) &

$+ (A )

12,099,377,712.02 91,386,687.70 9,856,702.45 12,200,621,102.17

2,441,344,565.40 18,439,493.23 12,565,237.82 2,472,349,296.45

14,540,722,277.42 109,826,180.93 22,421,940.27 14,672,970,398.62

9,882,049,426.58 593,864,644.47 (1,456,180.14) 1,234,567.80 199,690,999.59 20,249,434.80 1,730,774.11 10,697,363,667.21 1,503,257,434.96 26,863,308.18 1,476,394,126.78

1,993,944,501.68 119,826,676.78 (293,819.86) 249,104.16 40,292,529.77 4,085,817.37 349,225.89 2,158,454,035.79 313,895,260.66 5,420,327.64 308,474,933.02

11,875,993,928.26 713,691,321.25 (1,750,000.00) 1,483,671.96 239,983,529.36 24,335,252.17 2,080,000.00 12,855,817,703.00 1,817,152,695.62 32,283,635.82 1,784,869,059.80

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

; 6 FQ / # ' % *'

* 6 / - # / 9 + '% 20.

/ * : ; # / + !" * / !" $ % $ FQ & ' % !" # / + + - A * / # A

+ ' ' +' *% +# + + I+ * / / + !" % / + + - A * / /' # * 2548 % 2547 ; * 9 " ! + A% # A 9 " ! / + *' 2548 TONS + A *

# A

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 TONS + A *

# A

9 " !

59,744

5,137

18,251

83,132

81,127

164,259

/ 9 (%)

36.37

3.13

11.11

50.61

49.39

100.00

21.

1 1 21.1 < / * + + + ; * < # / * + + + < # ' + + + * / ,, ' 9 + + A /+ ' (Forward Contract) % ,, # ' *' + * % # ' (Floating Interest Rate) + & ; * <

* # ' + + + + / 5 &+ 5 '

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

21.2 / * + *'

/ * + ' * ' * % +9 + * ' # I+ *$ + % % + 9 + ; < ; * 5 % *' * * / * + * ' + *'

+ H : $(USD) + H : $( ) z 3C + 22 - 90

) + 31 ( 2548 31 ( 2547 1,509.17 1,169.02 649.99 897.37 800.00 1,125.50

& 31 ( 2548 31 ( 2547 2.50 0.55 0.88 0.65 3.45 1.60 > 1.85

21.3 / * + % * / * + ' % * 9 + ; +' * ' 9 + A & + + A< F / * 31 ! / 2548 % 2547 ; * 5 * & + + A / 56.64 ' * , G % / 58.92 ' * , G * *' * & + + A / 79.08 ' * , G % / 146.43 ' * , G I + ; ' ' + / * + + /< ,, ' 9 + + A /+ ' " * 23 21.4 / * + ' # ' ; * / * + ' # ' # / * & + + ; # ' - ' < + # ' ; I+ + ' % - ' * / I + ~ # ' ; ; + ' ; 69 / ! ' * / - ' * & 9 # A - ' * & $-' '

/ ' ' & + - ' K ~ # 9 + ; 21.5 - " ! + 5 + + % *' + + / # , - # ' ; I+ / - , *9 + 5 % * ' + + + / % + - % + - " ! + * , 22.

'' : ' F / * 31 ! / 2548 % 2547 ; * , , + *' 22.1 ,, & ' ' * ' '/ ; ' ,, I + &

* '+9I' 9 + A < + / + * 9 % + & ' ' * ' '/ (/ 6" ) # '% ; / * ; # + / # ' + 9 * " /'# ,, % - , , + # ' < * ' 9 * # ,, ,, * ' * / 5 * < *$ + +' % / * 19 *

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

2547 % 69 / < < & / " K 3 * /' % - , , C # C I+ % '+ & F /+ ' 180 / % - , , * C I+ ,, ' " + 22.2 ,, % + +' /% ; ' ,, % + '+ * % % I + &

* '+9I' Â&#x2026; 9 + AC + A & /% 9 + ; # + 9 ' 9 + ; / < /' A,* " %

# * ' ; + ' # I+ " /'# ,, - FOB (free on board) ,, * ' *$ +' % / * 19 * 2547 % ' / ' " 9 + ,, - , , C # C I+ ,, '< % '+ & F /+ ' 6 # ' - , , * C I+ 22.3 ,, # ' % % " ; ' ,, - I+ & * +' 9I ' Â&#x2026; 9 + AC + A < ; + / + * # ' % % ; * / !" % K % " # % # / 9 +C < ++ % C + + 99 + ,, ; $- 5 * ' + % # ' # * /'# ,, ,, * ' $* + +' % / * 19 * 2547 % ' " +# ! / 2548 22.4 ,, # ' ! + < < * ; ' + ,, # ' ! + < < * / * 18 ! / 2547 - ( * # AC + A % * & $-6' " ' # , 9 + ;) 5 % ,, / * 19 5Â&#x201E; 2547 5 # ' ! # < < * * * -9 + ; +6 / I+ '< - # ' , , / / + +/ * 26 Â&#x2026; 2539 I+ *$ + # ' & / 10 * +' % / * 16 2540 5 *' ; ' ! * & + 5.9 ' * , G (5 ' * , G " ! * F * ) / * 28 ! / 2547 # ' - * % % ~ ( * * /9' + - ) 23.

'' )1 F / * 31 ! / 2548 ; * , , ' + + A /+ ' I+ * " , , 1 * / + 22.25 ' * , G < " / + 914.27 ' % & - " ! / + 914.06 ' % 0.64 ' * , -< < " / + 31.22 ' % & - " ! / + 31.26 '

F / * 31 ! / 2547 ; * , , ' + + A /+ ' I+ * " , , 1 * / + 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

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

24.

+ 3* $ ,/B *' * Â&#x192;# + " % '/ F / * 31 ! / 2548 % / * 31 ! / 2547 ;

+ * $- 5 ! + *' " &

- Letters of Credit ( ) - Letters of Credit ( ) - Letters of Guarantee ( )

31 ( 2548 + + 3C ' 2,600.00 242.00 81.90 226.00 1.50

31 ( 2547 + + 3C ' 1,600.00 1,580.00 197.00 166.01 26.00 5.05

F / * 31 ! / 2548 ; * $- 5 * ' + ,, ' + + A * + 6+I 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 " < + $ & * ' " ' " # < + + /

T H A INOX 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 + ; % '/

T H A I NOX 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.

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

Balance Sheets THAINOX STAINLESS PUBLIC COMPANY LIMITED As of December 31, 2005 and 2004

In Baht 2005 ASSETS CURRENT ASSETS Cash and Cash Equivalents Trade Accounts Receivable - Net Inventories - Net Other Current Assets Account Receivable-Revenue Department Others Total Current Assets NON-CURRENT ASSETS General Investments - Net Property, Plant and Equipment - Net Other Assets Total Non-Current Assets Total Assets

(Note 6) (Note 7)

(Note 8)

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

2004

2,959,398,483.46 1,253,470,383.17 2,208,974,391.07

3,185,641,924.37 1,743,909,724.44 2,118,975,347.28

77,347,930.27 34,424,211.76 6,533,615,399.73

58,808,576.81 51,915,369.80 7,159,250,942.70

810,000.00 9,200,793,776.21 10,680,109.50 9,212,283,885.71 15,745,899,285.44

4,210,000.00 9,992,512,965.11 2,337,433.50 9,999,060,398.61 17,158,311,341.31

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

Balance Sheets THAINOX STAINLESS PUBLIC COMPANY LIMITED As of December 31, 2005 and 2004

In Baht 2005 LIABILITIES AND SHAREHOLDERSV EQUITY CURRENT LIABILITIES Trade Accounts and Notes Payable Accounts Payable Related Company Other Current Liabilities Withholding Income Tax Payable Account Payable-Revenue Department Accrued Expenses Accrued Expenses Related Companies Others Total Current Liabilities NON - CURRENT LIABILITIES EmployeesR Retirement Indemnity Total Non-Current Liabilities Total Liabilities

(Note 5.2)

(Note 9) (Note 5.2)

(Note 11)

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

2004

3,371,057,977.58 -

3,646,460,665.95 117,560,874.51

993,972.20 350,495,817.10 20,155,011.49 22,281,094.93 3,764,983,873.30

36,385,322.72 54,273,391.21 275,204,370.78 20,155,011.49 41,782,254.34 4,191,821,891.00

39,446,971.00 39,446,971.00 3,804,430,844.30

37,243,180.00 37,243,180.00 4,229,065,071.00

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

Balance Sheets THAINOX STAINLESS PUBLIC COMPANY LIMITED As of December 31, 2005 and 2004

In Baht 2005 SHAREHOLDERSV EQUITY Share Capital (Note 12) Authorized Share Capital 8,000,000,000 Ordinary Share @ Baht 1.00 Issued and Paid-up Share Capital 8,000,000,000 Ordinary Share @ Baht 1.00 Premiun on Share Capital - Net Revaluation Increment in Property, Plant and Equipment - Net Treasury Stock (Note 13) Treasury Stock Reserve (Note 13) Retained Earnings (Deficit) Appropriated Legal Reserve (Note 15) Unappropriated Total ShareholdersV Equity Total Liabilities and ShareholdersV Equity

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

2004

8,000,000,000.00 ○

○

8,000,000,000.00 ○

○

8,000,000,000.00 332,131,263.64 2,932,857,236.03 (249,557,679.37) 249,557,679.37

8,000,000,000.00 332,131,263.64 3,218,226,325.73 -

418,000,000.00 258,479,941.47 11,941,468,441.14 15,745,899,285.44

400,000,000.00 978,888,680.94 12,929,246,270.31 17,158,311,341.31

○

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

Statements of Income THAINOX STAINLESS PUBLIC COMPANY LIMITED For the Years Ending on December 31, 2005 and 2004

In Baht 2005 REVENUES Sales Reversed Sales Discount According to Accrued Quantity Other Income Total Revenues EXPENSES Cost of Sales Selling and Administrative Expenses Technology Licence Fee Reversal of Allowance for Doubtful Accounts Loss on Declining in Value of Inventories Loss on Impairment of Investments Loss on Exchange Rate DirectorRs Remuneration Total Expenses Profit Before Interest Expense Interest Expense Net Profit BASIC EARNINGS PER SHARE (Unit : Baht) ORDINARY SHARES (Unit : Share)

(Note16) (Note16)

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

13,421,533,772.90 47,692,762.16 13,469,226,535.06

2004 Restated 14,540,722,277.42 109,826,180.93 22,421,940.27 14,672,970,398.62

0.23 7,671,180,246

(Note 15)

(Note 14) (Note 13) (Note 13)

(Note 2)

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

Balance as at January 1, 2005 before Adjustments Over Stated from Capital Surplus Arisen from Assets Revaluation Balance as at January 1, 2005 after Adjustments Dividend Treasury Stock Treasury Stock Reserve Net Profit Depreciation Legal Reserve Balance as at December 31, 2005 Balance as at January 1, 2004 Increase in Share Capital Premiums on Share Capital Net Profit Over Stated from Capital Surplus Arisen from Assets Revaluation Depreciation Legal Reserve Balance as at December 31, 2004 -

1,594,960,419.00 (240,715,333.00) 332,131,263.64 3,280,780,109.46

8,000,000,000.00

Baht

Reserve of Treasury Stock

(62,553,783.73) 332,131,263.64 3,218,226,325.73 (249,557,679.37) 249,557,679.37 (285,369,089.70) 332,131,263.64 2,932,857,236.03 (249,557,679.37) 249,557,679.37 1,926,535,023.46 332,131,263.64 -

332,131,263.64 3,280,780,109.46

Premiums on Capital Surplus Treasury Stock Share Capital - net Arisen From Assets Revaluation - net Baht Baht Baht

8,000,000,000.00 8,000,000,000.00 7,670,411,666.00 329,588,334.00 -

8,000,000,000.00

Issued and Paid-Up Share Capital Baht

THAINOX STAINLESS PUBLIC COMPANY LIMITED For the Years Ending on December 31, 2005 and 2004

400,000,000.00 400,000,000.00

(62,553,783.73) 12,929,246,270.31 (800,000,000.00) (249,557,679.37) 347,148,939.90 (285,369,089.70) 11,941,468,441.14 9,190,966,310.60 329,588,334.00 332,131,263.64 1,784,869,059.80 1,594,960,419.00 (240,715,333.00) (400,000,000.00) 978,888,680.94 12,991,800,054.04

400,000,000.00 978,888,680.94 (800,000,000.00) (249,557,679.37) 347,148,939.90 18,000,000.00 (18,000,000.00) 418,000,000.00 258,479,941.47 (405,980,378.86) 1,784,869,059.80

Retained Earnings (Deficit) Appropriated Unappropriated Total for Legal Reserve Baht Baht Baht Restated 400,000,000.00 978,888,680.94 12,991,800,054.04

Statements of Changes in Shareholdersâ&#x20AC;&#x2122; Equity

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

Cash Flow Statements THAINOX STAINLESS PUBLIC COMPANY LIMITED For the Years Ending on December 31, 2005 and 2004 In Baht

CASH FLOW FROM OPERATING ACTIVITIES Net profit Adjustment to Net Profit (Loss) for Cash Received (Paid) from Operations Depreciation Allowance from Declining in Value of Inventories Unrealized (Gain) Loss on Exchange Rate Unrealized (Gain) Loss on Impairment of Investments Reversal of Allowance for Doubtful Accounts Provision for Employee Retirement Indemnity Loss from Disposal of Fixed Assets Profit(Loss) from Operating Activities before Changes in Operating Assets and Liabilities (Increase) Decrease in Trade Accounts Receivable (Increase) Decrease in Inventories (Increase) Decrease in Other Current Assets Increase (Decrease) in Trade Accounts and Notes Payable Increase (Decrease) in Accounts Payable Related Company Increase (Decrease) in Other Current Liabilities Cash Provided (Used) from Operating Activities-Net CASH FLOW FROM INVESTING ACTIVITIES Cash Paid for Purchase of Fixed Assets Cash Received from Sales of Fixed Assets (Increase) Decrease in Other Non-Current Assets Cash Provided (Used) from Investing Activities-Net

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

2005

2004 Restated

347,148,939.90

1,784,869,059.80

532,352,707.41 42,416,950.89 4,129,703.81 3,400,000.00 (43,374,060.98) 2,203,791.00 888,278,032.03

526,261,328.02 1,483,671.96 (90,839,008.41) (1,750,000.00) 6,049,000.00 48,061.54 2,226,122,112.91

534,710,444.33 (132,415,994.68) (1,048,195.42) (280,429,434.26) (117,560,874.51) (34,506,077.18) 857,027,900.31

418,053,349.90 (1,957,059,701.55) (42,693,613.48) 2,638,522,436.99 (117,128,343.97) (79,100,745.56) 3,086,715,495.24

(26,002,608.21) (8,342,676.00) (34,345,284.21)

(33,884,594.05) 104,504.64 9,148,119.95 (24,631,969.46)

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

Cash Flow Statements THAINOX STAINLESS PUBLIC COMPANY LIMITED For the Years Ending on December 31, 2005 and 2004 In Baht 2005 CASH FLOWS FROM FINANCING ACTIVITIES: Cash Payment for Loans from the Parent Company Cash Received from Long-term Loan Cash Paid for Long-term Loan Cash Received from Increase Capital Stock Cash Paid for Treasury Stock Cash Paid for Dividend Cash Provided (Used) from Financing Activities - Net Cash on Hand and Cash Equivalents Increase (Decrease)-Net Cash on Hand and Cash Equivalents at Beginning of the Period Cash on Hand and Cash Equivalents at Ending of the Period Additional Disclosure of Cash Flow: 1. Cash paid during the period for Interest Expenses Corporate Income Tax 2. Cash and Cash Equivalents Consist of: 2.1 Cash on Hand 2.2 Bank Deposit - Saving Acoount 2.3 Bank Deposit - Current Acoount 2.4 Promissory Notes - within 22 - 90 Days

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

2004 Restated

(249,557,679.37) (799,368,377.64) (1,048,926,057.01) (226,243,440.91) 3,185,641,924.37 2,959,398,483.46

(1,378,022,226.72) 1,459,280,000.00 (1,459,280,000.00) 661,719,597.64 (716,302,629.08) 2,345,780,896.70 839,861,027.67 3,185,641,924.37

2,344,823.72 -

148,484,866.00 63,465.00

186,161.76 2,159,160,530.99 51,790.71 800,000,000.00 2,959,398,483.46

3,506,557.97 2,066,390,957.74 (9,755,591.34) 1,125,500,000.00 3,185,641,924.37

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

Notes to Financial Statements THAINOX STAINLESS PUBLIC COMPANY LIMITED December 31, 2005 and 2004 1.

Basis of Financial Statements 1.1

The financial statements have been prepared in accordance with generally accepted accounting principles under the Accounting Act, B.E. 2543 (2000) being those Thai Accounting Standards under the Accounting Profession Act B.E. 2547 (2004), and presents its financial statements in compliance with the notification of the Department of Commercial Registration LDefine the abbreviation component required in the financial statements, B.E. 2544 (2001)M , and the financial reporting requirements of the Securities and Exchange 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 there was no effect to the balance of net profit or shareholdersR equity represented in the report. The items were as follows: Account Inventories - Net Property, Plant and Equipment - Net Other Non-Current Assets Accounts and Notes Payable Accounts Payable Related Company Sales Other Income Cost of Sales Selling and Administrative Expenses

1.3

Baht Decrease Increase Decrease Decrease Increase Decrease Increase Decrease Increase

2,173,728,385.65 39,730,566.83 60,165,053.28 2,311,723,746.61 117,560,874.51 99,626,273.44 110,233,530.58 62,886,540.07 73,493,797.21

The Changes of the CompanyRs Status and Name At the annual general meeting of shareholders held on April 1, 2004 and the extraordinary shareholdersR meeting held on April 19, 2004, the shareholders approved the resolution to change the CompanyRs status to be a public company, and change the CompanyRs name from LThainox Steel LimitedM to be LThainox Steel Public Company LimitedM. The Company registered the changes of the CompanyRs status and name with the Ministry of Commerce on April 26, 2004. At the extraordinary shareholdersR meeting held on June 17, 2004, the shareholders approved the resolution to change the CompanyRs name to LThainox Stainless Public Company LimitedM. The Company registered the change of the CompanyRs name with the Ministry of Commerce on June 25, 2004.

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

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

General Information Thainox Stainless Public Company Limited (Lthe CompanyM) is a company registered in Thailand and listed on the Stock Exchange of Thailand. The principal activities of the Company are manufacturing and sales of stainless steel for use in the manufacture of sinks, kitchen appliances, washing machines and a variety of other 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, Rayong 21180, Thailand As at December 31, 2005 and 2004 the Company has employees and Employee Expenses as follows:

Average Employees (number) Employee Expenses (million Baht) 4.

2005

2004

482 303

497 331

Summary of Significant Accounting Policy 4.1

Cash and cash equivalent items include cash at banks in saving accounts, current accounts and fixed accounts 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 materials Supplies - at the lower of cost (first-in, first-out method) and net realizable value

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

Net realizable value is the estimated selling price in the ordinary course of business less the estimated 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 which were revalued at the appraised value as of that date. The property, plant and equipment acquired subsequent to the appraisal date are recorded at cost. Revalued Assets -

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

Any increase in value, on revaluation, is credited to the revaluation reserve unless it offsets a previous decrease in value recognized in the statement of income. A decrease in value is recognized in the statement of income to the extent it exceeds an increase previously recognized in the revaluation reserve. The revaluation surplus is utilized by reference to the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the assetRs original cost and credited to the statement of income. Upon disposal, any remaining related revaluation surplus is transferred from the revaluation reserve to the statement of income and is taken 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 carrying amount of the asset when it is probable that the future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Company. All other subsequent expenditure 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 are calculated on a straight-line method over their approximate useful-life as follows: Land improvements Buildings and improvements Machinery and equipment Furniture, fixtures and office equipment Transportation equipment

20 20 20, 25 5, 10 5

Years Years Years Years Years

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

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

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

4.6

Impairment -

The carrying amounts of the CompanyRs assets, other than inventories are reviewed at each balance sheet 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-generating unit 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 assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversals of impairment -

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

An impairment loss is reversed only to the extent that the assetRs carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. All reversals of impairment losses are recognized in the statement of income.

4.7

A provision of liabilities is recognized in the balance sheet when the Company has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, 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 from operational activities. Derivative financial instruments are not used for trading purposes. Derivatives that 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 fair value. 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.

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

4.10 Revenue -

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

Revenue from the sale of goods is recognized in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognized if there are significant uncertainties regarding recovery of the consideration due, associated costs, the probable return 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 which they 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 or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. 4.13 Foreign Currency Transactions -

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

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Thai baht at the foreign exchange rates ruling at that date. Foreign exchange differences arising 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 currency are translated using the foreign exchange rates ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Thai 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 standards in 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, liabilities and contingent liabilities. Actual outcomes may, therefore, differ from the estimates used.

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

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

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. The Company, therefore, does not present transactions with the former shareholder which occurred subsequent to this date as related party transactions. The significant related party-transactions among the Company, parent company and related companies were as follows: 5.1

Related Party-Revenues and Expenses For the Year Ended On December 31, 2005 2004 Baht Baht

Sales Arcelor Stainless International Arcelor Stainless China Uginnox VIETNAM Purchase Ugine & Alz SA Arcelor Stainless International Nippon Steel & Sumikin Stainless Corporation Commission Expense Arcelor Stainless International Management Service Fee Ugine Usinor Interest Expense Usinor Advertising Lakewood Country Club Co.,Ltd.

114,232,965.99

79,976,515.52 50,433,758.87 548,495.26 1,226,003,067.88 226,719,438.12 -

32,185,474.23

15,762,270.80 9,109,984.27

7,065,660.11

164,485.99

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

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

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

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

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

5.2

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 departments and technical services in accordance with terms and conditions of the agreement.

Related Party -Assets and Liabilities As of December 31, 2005 Baht Accounts Payable Nippon Steel & Sumikin Stainless Corporation Accrued Expenses Nippon Steel & Sumikin Stainless Corporation Nisshin Steel Co., Ltd. Nippon Metal Industry Co., Ltd. J F E Steel Corporation Nippon Yakin Kogyo Co., Ltd.

7,167,122.12 3,583,561.06 3,583,561.06 3,583,561.06 2,237,206.19 20,155,011.49

December 31, 2004 Baht 117,560,874.51 7,167,122.12 3,583,561.06 3,583,561.06 3,583,561.06 2,237,206.19 20,155,011.49

For the year ended on December 31, 2004 there was movement in loan transactions from parent company and accrued interest payable as follows: As of December 31,2003 Baht

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

Loan 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)

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

5.3

Type of Relationship with the Company

Name of Company

Country

Relationship

Usinor Arcelor Stainless International Ugine & Alz SA Lakewood Country Club Co.,Ltd.

France France France Thai

Formerly the Parent Company Formerly the Related Company Formerly the Related Company Related Company

Nippon Steel & Sumikin Stainless Corporation Nisshin Steel Co., Ltd. Nippon Metal Industry Co., Ltd. J F E Steel Corporation Nippon Yakin Kogyo Co., Ltd.

Japan Japan Japan Japan Japan

Related Company Related Company Related Company Related Company Related Company

Nature of Relationship Direct Majority Shareholders Common Group Shareholder Common Group Shareholder Direct Minority Shareholders and Mutual Management Direct Minority Shareholders Direct Minority Shareholders Direct Minority Shareholders Direct Minority Shareholders Direct Minority Shareholders

Accounts Receivable - Net Consist of: As of

Within credit term Over credit term less than 3 months Over credit term 3 - 6 months Over credit term 6 - 12 months Over credit term 12 months Total Less allowance for doubtful debt Net

December 31, 2005 Baht 1,133,244,629.41 120,210,539.85 85,284,514.01 1,338,739,683.27 (85,269,300.10) 1,253,470,383.17

December 31, 2004 Baht 1,764,910,901.10 32,615,080.44 75,027,103.98 1,872,553,085.52 (128,643,361.08) 1,743,909,724.44

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

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

Inventories-Net Consist of: As of

Finished Goods Work in Process Raw Materials Supplies Total Less Allowance from Declining in Value Net 8.

December 31, 2005 Baht 942,725,559.38 1,135,842,409.07 132,210,398.76 44,373,694.97 2,255,152,062.18 (46,177,671.11) 2,208,974,391.07

December 31, 2004 Baht 1,237,810,174.98 751,231,960.15 62,271,550.58 71,422,381.79 2,122,736,067.50 (3,760,720.22) 2,118,975,347.28

Property, Plant and Equipment-Net Consist of: Balance As of December 31, 2004 Baht

Increase / Transfer in

Sale / Transfer out

Baht

Balance As of December 31, 2005 Baht

Cost Land 277,214,500.00 Land improvements 142,864,032.48 Buildings and improvements 1,991,794,290.61 Machinery and equipment (incl. spare parts) 8,473,262,581.77 Furniture, fixtures and office equipment 222,464,902.79 Machinery under installation 54,388,423.06 Construction in progress and 1,455,653.35 Total Cost 11,163,444,384.06 Accumulated Depreciation Land improvements (37,890,069.76) Buildings and improvements (930,621,449.45) Machinery and equipment (incl. spare parts) (3,230,623,369.11) Furniture, fixtures and office equipment (159,653,509.89) Machinery under installation (30,369,346.47) Total Accum. Depre-Cost (4,389,157,744.68) Net 6,774,286,639.38 Add Capital surplus arisen from assets revaluation 5,637,057,351.13 Less Allowance from impairment of assets (2,418,831,025.40) Net Book Value 9,992,512,965.11 Depreciation in Income Statement For the Years ended on December 31, 2005 2004

277,214,500.00 142,864,032.48 1,994,883,936.96 8,480,517,963.50 229,778,481.64 61,701,423.06 (1,095,263.35) 2,486,654.63 (1,095,263.35) 11,189,446,992.27 (1,095,263.35) (1,095,263.35)

(45,051,586.50) (1,031,245,186.83) (3,634,303,324.05) (172,890,505.94) (38,019,848.77) (4,921,510,452.09) 6,267,936,540.18 5,637,057,351.13 (2,704,200,115.10) 9,200,793,776.21

532,352,707.41 526,261,328.02

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

In January 1998, the Company engaged a consulting company (Chesterton Thai Property Consultants Limited), as independent appraiser, to appraise buildings and improvements, machinery and equipment, used for 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 Company recorded 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.), as independent appraiser, to reappraise buildings and improvements, machinery and equipment outstanding as at June 30, 2004. According to the appraisal report dated July 1, 2004, those assets, which had a net book value as at June 30, 2004 of Baht 7,802.8 million, had a value, based on the cost approach method net of accumulated depreciation, totaling Baht 9,397.8 million. The Company recorded the revaluation increment amounting to Baht 1,595 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 of accumulated depreciation and the portion relating to assets disposed of) amounting to approximately Baht 2,932.86 million and Baht 3,218.24 million respectively as a component of LShareholdersR EquityM in the balance sheet. 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 is accrued expenses related to royalties payable to a foreign company which was formerly a direct majority shareholder.

10.

Long-Term Loan - Net On March 19, 2004, the Company entered into a long-term loan agreement with a local bank for a facility amount of Baht 2,113 million, and withdrew the loan of Baht 1,459 million. The loan bears interest at Minimum Loan Rate (MLR) per annum and is repayable in semi-annual installments starting from June 2004 up to December 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 total facility amount of Baht 4,500 million, giving total credit facilities to the Company of Baht 6,613 million. The Company mortgaged land, together with the existing and future buildings thereon, and pledged machinery as specified in the agreement (the Company is required to register the mortgage of machinery to the bank within 6 months commencing from the withdrawal date of the loan, which the Company has not registered the mortgage) as collateral for the CompanyRs long-term loan and short-term credit facilities with a value of Baht 6,613 million, and as collateral for loans from two shareholders of the Company with a value of Baht 3,136

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

million. According to conditions of the long-term loan agreement, the bank will allow the amendment of the mortgage agreement and decrease the mortgage amount of land, buildings and machinery to the mortgage amount of Baht 6,613 million for the collateral of the CompanyRs liabilities with the local bank, when the Company completes its Initial Public Offering of shares. In addition, the loans of the Company are also guaranteed by a shareholder of the Company, whereby the bank agrees to release such guarantee as soon as the 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 stipulated in the agreements. On June 23, 2004, the Company repaid in full this loan amount. In addition, the Company has not paid prepayment fee as stipulated in the agreement, because the Company received an exemption of prepayment fee from the bank. The mortgage of land together with the existing and future buildings thereon, the pledge of machinery and 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 Financial Reporting Standard (IFRS) No. 19 LEmployee BenefitsM. The retirement indemnity will be paid to employees upon retirement from the Company. The retirement indemnity is calculated annually by a qualified actuary using the projected unit credit method in order to determine the present value of the obligation and the current service cost. Based on the actuarial valuation report issued by the independent actuaries dated January 14, 2005, the retirement indemnity for the CompanyRs employees for the year ended December 31, 2005 and 2004 computed according to the IFRS No. 19 amounted to Baht 5.0 million and Baht 6.0 million respectively. EmployeesR retirement indemnity is analyzed as follows:

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

Balance sheet provisions as at January 1 Present value of the obligation Fair value of financial assets Total Unrecognised actuarial gain (loss) Unrecognised past service cost Unrecognised net transition assets (liabilities) Liabilities recognised in balance sheet Benefit expense for the year Current service cost Interest cost Net actuarial (gain) loss recognised in the year Past service cost Transitional (asset) liabilities Expense (Income) recognized in the income statement Movements in the net liabilities recognised in the balance sheet Opening net liabilities as at January 1 Expenses Benefit paid Closing net liabilities as at December 31 Main actuarial assumptions (%) Discount rate Average rate of salary increase Inflation rate 12.

For the Year Ended On December 31, 2005 Baht

For the Year Ended On December 31, 2004 Baht

27,404,569.00 27,404,569.00 9,838,611.00 37,243,180.00

36,703,000.00 36,703,000.00 36,703,000.00

3,947,491.00 1,500,679.00 (430,191.00) -

4,473,000.00 1,576,000.00 -

5,017,979.00

6,049,000.00

37,243,180.00 5,017,979.00 (2,814,188.00)

36,703,000.00 6,049,000.00 (5,508,820.00)

39,446,971.00

37,243,180.00

6.00 3.00 6.00

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

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

At the extraordinary shareholdersR meeting held on May 6, 2004, the meeting unanimously resolved to approve the increase of the CompanyRs authorized share capital from Baht 7,670,411,666 (7,670,411,666 shares at Baht 1 par value) to Baht 8,000,000,000 (8,000,000,000 shares at the same par value) by issuing 329,588,334 new common shares at Baht 1 par value. In addition, the meeting unanimously resolved to approve the allocation and offer for sale of not more than 329,588,334 newly-issued shares of the Company to the public, and authorized the Company to prepare all necessary documentation to be submitted to the Office of Securities Exchange Commission of Thailand. The Company registered the increase in share capital with the Ministry of Commerce on May 14, 2004, and submitted the registration statement for its initial public offering to the Office of Securities Exchange Commission of Thailand on August 9, 2004. Subsequently, the Stock Exchange of Thailand issued an order accepting the common shares of the Company as registered securities on December 9, 2004. As a result of the initial public offering of the CompanyRs common shares, the Company received proceeds of Baht 692.1 Million which was separately recorded as its share capital of Baht 329.6 million (at Baht 1 par value) and premium on share capital for the remaining amount (net of the related expenses incurred from the 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, the meeting unanimously approved the amendment to the existing Article No. 10 of the Articles of Association of the 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 shareholders meeting consider, and the shareholders approved per EGM No. 1/2548 to allow the Company to rectify the CompanyRs article No. 10 of the articles of association in respect of the buy back of its Shares as the Company may purchase its shares back and dispose of such shares within the time limit prescribed in the Ministerial Regulations 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 the Company within the prescribed time, the Company shall reduce its paid-up capital by canceling any such shares which remain undisposed. The shares held by the Company shall not be counted for constituting a quorum of the shareholdersR meeting nor entitle the Company to voting rights and dividend payments. The Company 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 the shares of the Company if the number of shares to be purchased back does not exceed 10 per cent of the total paid-up capital of the Company.

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

The transaction related to Treasury stock is analyzed as follows: Treasury Stock (Shares) Purchased Percent of Authorized and Paid Up Share Capital Total Cost of Treasury Stock (Baht) Average Price per Share(Baht) Reserve for Treasury Stock 14.

As of December 31, 2005 204,290,900 2.55% 249,557,679.37 1.2216 249,557,679.37

Dividend At the annual general shareholdersR meeting No. 1/2005 held on April 25, 2005, the meeting resolved to approve for the legal reserve appropriation amounting to Baht 400 million and paid dividends from the operational results of year 2004 to shareholders at Baht 0.10 per share for number of shares 8,000 million amounting to Baht 800 million. The dividend had been derived from the net profit of Industrial Investment PromotionRs operations 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 appropriate at least 5% of its annual net profit after deduction of the deficit brought forward (if any) as legal reserve until the reserve reaches not less than 10% of the authorized share capital. In 2005 and 2004, the Company appropriated for 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 dividing the net profit by the weighted average number of shares as follows:

Net Profit (Baht) Weighted Average Number of Shares (Shares) Earnings Per Share (Baht) Par Value (Baht) 17.

For the Year Ended On December 31, 2005 2004 347,148,939.90 1,784,869,059.80 7,993,662,338 7,671,180,246 0.04 0.23 1.00 1.00

Promotional Privileges By virtue of the provisions of the Industrial Investment Promotion Act B.E. 2520, the Company was granted certain promotional privileges in the business relating to the manufacturing of cold rolled stainless steel which 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 expiring on November 30, 1999, and November 11, 2005, respectively.

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

3. Exemption of income tax for a period of 5 years at the rate of 50% after the promotion periods expiring on November 30, 2004, and November 11, 2010, respectively. As a promoted industry, the Company must comply with the conditions provided for in the promotional certificate. 18.

EmployeesV Provident Fund The Company established a contributory registered provident fund in accordance with the Provident Fund Act, B.E. 2530. The registered provident fund plan was approved by the Ministry of Finance in accordance with the Ministerial Regulation No. 183 (B.E. 2533) on October 11, 1993. Under the plan, the employees are required to contribute to the fund an amount equivalent to certain percentages of their basic salaries. The Company also makes monthly contributions to the fund at the percentage of the employeesR basic salaries. The Company appointed a fund manager to manage the fund in accordance with the terms and conditions prescribed in 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 to Baht 10.04 million and Baht 10.10 million respectively.

19.

Details of Income Statements Categorized by Activities with Investment Promotional Benefits and Activities without Investment Promotional Benefits For the Year ended on December 31, 2005 Activities with Activities without Total Investment Investment Promotional Benefits Promotional Benefits Baht Baht Baht REVENUES FROM OPERATION Sales 12,238,907,440.60 Other Incomes 3,961,955.07 TOTAL REVENUES 12,242,869,395.67 EXPENSES FROM OPERATION Cost of Sales 11,248,318,049.39 Selling and Administrative Expenses 593,521,605.38 Reversal of Allowance for Doubtful Accounts (39,552,194.75) Loss on Declining in Value of Inventories 38,679,419.55 Loss on Impairment of Investments 3,100,412.07 Loss on Exchange Rate 110,871,365.30 DirectorsR Remuneration 8,760,705.00 TOTAL EXPENSES 11,963,699,361.94 Profit Before Interest Expense 279,170,033.73 Interest Expenses 2,138,211.69 Net Profit 277,031,822.04

1,182,626,332.30 13,421,533,772.90 43,730,807.09 47,692,762.16 1,226,357,139.39 13,469,226,535.06 1,086,907,241.01 12,335,225,290.40 57,351,057.09 650,872,662.47 (3,821,866.23) (43,374,060.98) 3,737,531.34 42,416,950.89 299,587.93 3,400,000.00 10,713,325.25 121,584,690.55 846,533.11 9,607,238.11 1,156,033,409.50 13,119,732,771.44 70,323,729.89 349,493,763.62 206,612.03 2,344,823.72 70,117,117.86 347,148,939.90

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

For the Year ended on December 31, 2004 Activities with Activities without Total Investment Investment Promotional BenefitsPromotional Benefits Baht Baht Baht REVENUES FROM OPERATION Sales 12,099,377,712.02 Reversed Sales Discount According to Accrued 91,386,687.70 Other Incomes 9,856,702.45 TOTAL REVENUES 12,200,621,102.17 EXPENSES FROM OPERATION Cost of Sales 9,882,049,426.58 Selling and Administrative Expenses 593,864,644.47 Reversal of Allowance for Doubtful Accounts (1,456,180.14) Loss on Declining in Value of Inventories 1,234,567.80 Technology Licence Fee 199,690,999.59 Loss on Exchange Rate 20,249,434.80 DirectorsR Remuneration 1,730,774.11 TOTAL EXPENSES 10,697,363,667.21 Profit Before Interest Expense 1,503,257,434.96 Interest Expenses 26,863,308.18 Net Profit 1,476,394,126.78

2,441,344,565.40 14,540,722,277.42 18,439,493.23 109,826,180.93 12,565,237.82 22,421,940.27 2,472,349,296.45 14,672,970,398.62 1,993,944,501.68 11,875,993,928.26 119,826,676.78 713,691,321.25 (293,819.86) (1,750,000.00) 249,104.16 1,483,671.96 40,292,529.77 239,983,529.36 4,085,817.37 24,335,252.17 349,225.89 2,080,000.00 2,158,454,035.79 12,855,817,703.00 313,895,260.66 1,817,152,695.62 5,420,327.64 32,283,635.82 308,474,933.02 1,784,869,059.80

The company regarded that allocation of expense and interest repayment which is not able to be classified that which type of business it is addressed in accordance with the proportion of revenue of respective entity. 20.

Segment Financial Information The Company operates in one segment business which is business of production and distribution of stainless steel and operates in one geographical sector , i.e. Thailand. As a result, the total revenue which is reflected in the financial statements will be related to business sector and geographical sector in accordance with those mentioned.

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

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

Net sales Sales proportion (%)

Asia 42,863 30.51

Export America Other region 1,708 24,819 1.22 17.67

Total 69,390 49.40

Domestic 71,074 50.60

Total 140,464 100.00

2004 TONS

Net sales Sales proportion (%) 21.

Asia 59,744 36.37

Export America Other region 5,137 18,251 3.13 11.11

Total 83,132 50.61

Domestic 81,127 49.39

Total 164,259 100.00

Financial Instruments 21.1 Policy on Financial Risk Management The company has the policy to decrease financial risk by using financial instruments such as to make forward contract of foreign currency, to make fixed interest rate contracts in replacement of floating interest rate. However the company has no policy to use financial instruments for speculating or for trading. 21.2 Risks on Interest Rates Risk on interest rates is derived from fluctuation of market interest rate in the future which affect upon operating result and cash flow. The company had assets and liabilities which it may have risk on interest rate as follows: Amount 31 December 31 December 2005 2004 Million Baht Million Baht Bank Deposit - Saving Acoount (USD) Bank Deposit - Saving Acoount (Baht) Promissory Notes (Age 20 J 90 days)

1,509.17 649.99 800.00

1,169.02 897.37 1,125.50

Annual Interest Rate 31 December 31 December 2005 2004 % % 2.50 0.88 3.45

0.55 0.65 1.60 J 1.85

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

21.3 Risks on Exchange Rate Risk on exchange rates is involved with export sales in term of US dollar currency, as of 31 December 2005 and 2004, the company had assets in foreign currency in the amount of USD 56.64 million and USD 58.92 million respectively, had liabilities in foreign currency in the amount of USD 79.08 million and USD 146.43 million respectively. The company hedged the risks by making foreign exchange forward 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 of the customers transfer money before goods is sent and the rest is sold by opening Letter of Credit issued to the company which can be cashed at the bank as soon as goods are sent. For domestic customers, retailers paid cash only, and other customers open Letter of Credit in the name of company as beneficiary. 21.5 Fair Value Due to the fact that financial assets and liabilities are mainly short term type. The company believes 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 laws of Luxembourg, whereby the latter agreed to supply and deliver the quantity of hot-rolled stainless steel coils (raw materials) required by the Company and accepted by the party in accordance with terms and conditions of the agreement at the purchase price as stipulated in the agreement. This agreement is for a period of five (5) years commencing on March 19, 2004 and automatically extended for one or more additional three (3) years, unless either party gives a one hundred and eighty (180) days written advance notice to the other party. 22.2 Reinstated Exclusive Agency Agreement The Company entered into an agreement with Arcelor Stainless International, a company incorporated under the laws of France, whereby the latter will provide exclusive representation to promote the sales of the CompanyRs products all over the world, excluding Japan and Thailand. In consideration thereof, the Company commits to pay commission at the rates specified in the agreement based on the free on board (FOB) value of the products. The agreement is effective on March 19, 2004 for an indefinite period of time. Either party may terminate the agreement at any time by giving a six (6) months written advance notice to the other party. 22.3 Reinstated Usinor Recruitment and Advisory Service Agreement

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

The Company entered into an agreement with Usinor, a company incorporated under the laws of France, whereby the latter agreed to provide advisory services to the Company on business organization, marketing, etc. and recruitment service of personnel at the level of director and management of the plant and finance departments. Under the agreement, the Company committed to pay service fee at the rates specified in the agreement. This agreement is effective on March 19, 2004 and will terminate in December 2005. 22.4 Technology License Fee The Company entered into a technology license agreement dated December 18, 2004 with Usinor, (a societe anonyme registered in France and formerly the CompanyRs major shareholder) to supersede the technology license agreement dated May 19, 2004 for the permanent right to use the existing technology of the Company, previously transferred to the Company by Usinor under a Technical Assistance Agreement entered into on July 26, 1996 and effective for a period of 10 years as from September 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 related company of Usinor. 23.

Forward Contract As at December 31, 2005, the Company has outstanding forward contracts, due within one year of US Dollars 22.25 million is the Cost Value Baht 914.27 million and Fair Value Baht 914.06 million, EURO 0.64 million 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 US Dollars 47.80 million is the Cost Value Baht 1,919.62 million and Fair Value Baht 1,864.98 million, EURO 1.00 million 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 currency assets of US Dollars 56.64 million and US Dollars 58.92 million respectively and unhedged foreign currency liabilities 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 still has other obligations with commercial banks as follows: As of December 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

T H A INOX STAINLESS PUBLIC COMPANY LIMITED

As of December 31, 2005, the Company had obligation according to the contract to purchase the machine from overseas in the purpose of capacity expansion which is not due for payment amounting to Euro 0.82 million. 25.

Subsequent Event As of January 24, 2006, it is resolved that the Company will pay interim dividend based on the performance result from January 1 ,2005 to September 30, 2005 to shareholders by number of 7,795,709,100 shares such of which number of shares have been deducted by repurchased shares which the company repurchased by number of 204,290,900.- shares, carried the rate of Baht0.025 per share, aggregating to dividend repayable to shareholders of Baht194,892,727.50. Moreover, dividend is repayable from profit on behalf of the whole investment promotion granted. It is determined that the date of registered book closing to suspend the share transfer so as to determine the right of dividend receiving is February 8, 2006, at 12.00 noon. Moreover, it is determined that dividend is payable on February 23, 2006. In addition, board of directors acknowledges to inform 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 passed the resolutions as follows: 26.1 Commission a detailed study for their consideration into the proposed hot melting shop project which would involve the investment of Baht 14,000 million in a project to produce hot rolled coil, which is the CompanyRs 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 be appropriate to increase the CompanyRs authorized share capital not more than 2,000 million shares and issue warrants 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 disapprove the companyRs financial adviser to study details of the determination of increasing fund for the hot melting shop project. 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 purchase land for Baht 349.2 million on February 21, 2005, and then the Company used its right to rescind this agreement on 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 disapprove to enter into an agreement to purchase land. Due to the company used its right to rescind this agreement and received 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.

T H A I NOX STAINLESS PUBLIC COMPANY LIMITED

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T H A INOX STAINLESS PUBLIC COMPANY LIMITED