7. Legal disputes

7.1 The Claims of the following creditors have not been settled and are
still pending
(“Pending Claims”):

Under the Plan, most Claims by creditors have been settled and the
Company’s liabilities will be limited to the amount stated in the Plan
approved by the Bankruptcy Court. However, certain Claims as summarised
below have not been settled in respect of the amount of Claims and are
still pending (“Pending Claims”), for which NSM may be financially
liable. If the final decision of the official receiver or the Court
results in a substantial increase in the amount of the Company’s
indebtedness. The significant increase in its indebtedness would have
serious impact on its cash flow, its ability to service debts, its
financial condition and the shareholders’ equity.

The Company’s creditors were required to submit claims to the Official
Receiver for outstanding debts on May 8, 2000. Some creditors filed
claims significantly greater than those recorded in the Company’s
accounts. The amount applied by the creditors may be varied according to
the order of the official receiver or the Court (as the case may be).
The Company did not adjust its liabilities to reflect these differences
in the financial statements. As of December 31, 2004, total claims filed
by the creditors against the Company amounted to Baht 434.99 million.
The Company believes that these claims exceed the amounts rightly
payable by the Company. The Company has, therefore, brought the dispute
to the Rehabilitation Court for adjudication. The Company has, however,
recorded liabilities totaling of 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 Rehabilitation 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.

As of December 31, 2004, the matter has not been settled by the court
and it is not possible to determine what adjustments, if any, would be
required to be made by the Company when this matter is finally settled
by the Court.

Creditor No. 159/43 (Siam City Bank Public Company Limited) reduced its
claim amount to the actual claim amount as guaranteed. The Planner
accepted the reduction amount and had no objection. For Creditor No.
160/43 (Khun Sawasdi Horrungruang), the Official Receiver rejected his
claims, and no appeal has been filed against this decision.

7.2 Litigation issues

There were six cases filed against NSM in the Civil Court of Southern
Bangkok and two cases filed in the Intellectual Property and
International Trade Court. The approximate amount claimed in those cases
was Baht 53.37 million. Those court cases were subject to an automatic
stay under Section 90/12 of the Bankruptcy Act. Creditors in the court
cases applied for debt repayment in the rehabilitation process of NSM
and were classified as Class 13 Creditors.

A group of investors who purchased the Senior Notes, Senior Subordinated
Notes and Debentures have filed lawsuits against the Company’s
subsidiaries and several of the underwriters of the Company’s Notes in
courts in the US. The Company has provided guarantee for the Senior
Notes, Senior Subordinated Notes and Debentures. The Company’s
subsidiaries have decided not to defend themselves against these claims.
A default judgment was issued against the Company’s subsidiaries by a US
court in one such case. The plaintiff in this case is seeking damages of
approximately US$ 42.10 million. The US court has not assessed the value
of the claim against the Company’s subsidiaries and such value cannot be
determined at this time. Also, the outcome of the case against the
Company’s advisers is uncertain, and the amount of any potential related
indemnification claims cannot be determined. Therefore, the Company has
established no provision for these potential liabilities.

An insurance company filed a claim against the Company through the South
Bangkok Civil Court in respect of unpaid insurance expenses for the year
2001 in the amount of Baht 5.43 million. The Company’s lawyer held a
brief to such Court that the Company is in the process of restructuring
and the Company was watched over in case of any claim which had occurred
before the Court approved date without the approval of the Central
Bankruptcy Court. The said expenses had occurred before the Central
Bankruptcy Court approved the plan and the said company sued the Company
without the Central Bankruptcy Court’s permission. The claim is,
therefore, prohibited according to the Bankruptcy Act. The South Bangkok
Civil Court ordered to temporary dispose of the case and passed the case
to the President of the Supreme Court to consider whether the case was
under the jurisdiction of the South Bangkok Civil Court. On September
13, 2004, the President of the Supreme Court considered that this case
was under the jurisdiction of the South Bangkok Civil Court. Presently,
the aforesaid insurance company had withdrawn such case on March 4,
2005.

Several former employees have filed lawsuits against the Company
alleging that they were wrongfully terminated in violation of their
employment agreements and claiming damages of approximately Baht 55.45
million which is in part of Central Bankruptcy Court. The Company is
defending itself against these claims and believes it will prevail.
Therefore, no provision has been made for those claims. Several lawsuits
have been filed against the Company by vendors seeking payment of
overdue amounts totaling Baht 54.25 million which is in part of Central
Bankruptcy Court. This amount is included in the Company’s accounts
payable. Additional lawsuits have been filed by vendors seeking Baht
0.54 million for interest on late payments and reimbursement of costs
associated with the termination of a contract by the Company. Further, a
suit has been brought against the Company by an insurance company
seeking Baht 16.46 million in compensation for damage to equipment owned
by a third party insured. These cases are being tried in court and the
Company is defending itself against these claims. The Company believes
it will prevail in these cases, therefore no provision has been
established for these claims. All litigation filed against the Company
in Thai courts has been suspended pursuant to the automatic stay
provisions of Thailand’s bankruptcy law.

3.  Central Intellectual Property and International Trade Court

Maharaj Planner Company, Limited, in the capacity of the planner of the
Company, is the plaintiff who has sued a domestic financial institution
and a foreign financial institution (collectively called "Defendant"),
in the Central Intellectual Property and International Trade Court
according to the Black Case No.Kor.Kaw. 5/2548 dated January 21, 2005,
in respect of a letter of credit. The defendant has committed an act of
breach of conditions under the letter of credit, which caused damage to
the Company. The defendant had made payment to a foreign seller by a
letter of credit covering the cost of goods amounting to USD 4.92
million (equivalent to Baht 201.58 million) without delaying payment
till the fulfillment of conditions under the letter of credit as
instructed by the Company. The defendant had deducted the said sum from
the Company's account. The Company has not yet received the said goods. 
Therefore, the Company has sued the defendant for damages, including
interest cost and other estimated damages, amounting to Baht 8,593.72
million. Currently, the case is still under the consideration of the
court. As at December 31, 2004, the Company accounted for the amount
deducted from the Company’s account by the Defendant as a part of
“Advance to Supplier” and classified as “Non-Current Assets” in the
balance sheets amounting to Baht 201.58 million.