nformation Memorandum : SABINA

o Interactive Communication System: In the fitting process, the Company accommodates the video teleconference system to interactively communicate with OEM clients. This help the Company realizes the problems of the prototype clearer and also help reduce the production lead time. o Product Design: Cute design allows the Company's product to gain popularity among teenagers. o High-skilled Labor: The Company has high-skilled labors who are capable of producing underwear which require sophisticate sewing skill. The Company has opened the "School in the Factory" which provide general as well as vocational education to its shift, thereby, attracting skilled labors to work with the Company. o Factory Management and Labor Coaching: In the factory management, the Industrial Engineering Unit has been set up to improve the manufacturing process and reduce some tasks. Also, the coaching team provides training to and prepares the labors for skilled sewing tasks. In addition, the Company also sets up the Non-Formal Education Center for junior-high and high school level in Yasothorn factory namely "Learning Center at Sabina Public Company Limited". Moreover, the vocation training center called "Skilled Labor Training Center according to Skilled Labor Development Act B.E. 2545" has been set up to provide sewing course for people. The Human Resources Training and Development Centers will also be established in all factories. Environmental Impacts None Summary of Material Contracts Property Rental Contract - On 1 June 2007, the Company signed a 3-year property rental agreement with Sabina Fareast Company Limited to renting office building and warehouse. According to the rental agreement, the Company can extend the rental period for 3 years per each round of extension by officially informing the lesser at least 180 days in advance. The current rental rate is 142,500 baht per month while the lesser will be responsible for property and land tax. The lesser agreed not to sell the rented property or transfer the ownership of the rented property to other parties within 12-year period. Service Contract - On 31 December 2007, the Company commitment was the financial advisory service agreement and underwriting agreement, with the domestic financial advisory and brokerage firms for an Initial Public Offering and listing on the Stock Exchange of Thailand, while related fees are charged according to the agreement. If the Company decides not to list its shares on the Stock Exchange of Thailand after application and filing submission to the Securities of Exchange Commission in absence of the financial advisory firm's faults, the Company would be liable to pay the cancellation fee. Feasibility Study None Technical and Management None Assistance Future Projects - Production Efficiency Development Project: In 2008, the Company will order 4 new molding machines, as well as other molding machine accessories for 2.34 million baht in total. - Human Resource Training and Development Center Project: The Company will complete the establishment of training and development centers in all factories within 2008. - New Products and Market Expansion Project: The Company and subsidiary plan to concentrate more on promoting own-branded products in export market through both promotional campaigns and products exhibition in order to enhance the sale revenue of the foreign importers. Currently, own-branded products are distributed to the U.A.E., Singapore, Bahrain, Denmark, South Korea and England. The Company sets a budget for the product exhibition of 5 million per year on average in the future. - Lean Manufacturing System Project for Production Efficiency Development: The Company plans to apply Lean Manufacturing System into production process in order to improve efficiency through rational resources utilization, convenient and speedy production, cost and time reduction, and quality improvement in production process. Related Party Transaction In 2006 and 2007, the Company and its subsidiary had entered into related party transactions with connected persons. All of these related party transactions were made on the ordinary course of business and on general trading conditions and were reviewed by the Audit Committee. Details of the related party transactions, including business transactions and pricing policies, are as follows; 1. General Transactions between Sabina Public Company Limited or Sabina Fareast Company Limited and Other Connected Persons Details Transaction Value (Million Rationale and Necessity of Transaction Baht) 2005 2006 2007 1. Revenue from sewing The Company and its subsidiary provided the underwear sewing service to Jintana Apparel Company Limited on general business terms with the normal - Between the Company - 0.23 0.32 price and payment terms. and Jintana Apparel Company Limited (Major The Company and its subsidiary has no policy to shareholders, the provide sewing services to Jintana Apparel directors of the Company Limited on a large scale and a Company and Jintana continuous basis. All previous services were Apparel Company provided to Jintana Apparel Company Limited Limited are close when the Company and its subsidiary had relatives)* available capacity which could be utilized for maximum efficiency. Necessity of transaction between the Company or the subsidiary and Jintana Apparel Company - Between the - 1.67 0.16 Limited: When the Company and its subsidiary has Company's subsidiary available capacity while Jintana Apparel Company and Jintana Apparel Limited or other companies need to outsource its Company Limited (Major sewing process, the Company and subsidiary, shareholders, the therefore, perform the service to Jintana Apparel directors of the Company Limited in order to effectively use up the Company and Jintana available capacity. Apparel Company Limited are close relatives)* 2. Mr. Viroj Mr. Viroj Thanalongkorn provided personal Thanalongkorn, as a guarantee major shareholder, on the credit lines from financial institution to provided personal the Company in order to facilitate the operation of guarantee, without the Company. Such credit line comprises O/D, guarantee fees, on the P/N, L/C , T/R , P/C , L/G, long term loan, and credit lines from forward contract. financial institution to - Sabina Public Company 391.00 693.37 693.37 Limited * - Sabina Fareast 1,195.00 1,213.00 1,243 Company Limited * Note* The details of transactions were not reported in the notes to financial statements. 2. Shareholding Structure Realignment Details of Transaction Rationale and Necessity Transaction Value in 2006 (Million Baht) 1. J&D Apparel Company Limited 2.00 On 18 October 2006, J&D Apparel Company Limited (original name of Sabina Public bought the land that was a part of office building, Company Limited) bought land from factory, and warehouse located at 177 Moo 8, -7- Details of Transaction Rationale and Necessity Transaction Value in 2006 (Million Baht) Mrs. Viyada Thanalongkorn, a sister Wangkaituen, Hanka, Chainat from Mrs. Viyada of Mr. Viroj Thanalongkorn, who is a Thanalongkorn, who held the owner right of the major shareholder and director. land together with the Company. The land acquisition price was based on the appraisal value by UK Valuation and Agency Company Limited and was proportionate to her land holding proportion. Details of Transaction Transaction Rationale and Necessity Value in 1Q 2007 (Million Baht) 1. Sabina Fareast Company Limited 12.10 On 6 February 2007, Sabina Fareast Company bought land with building from Mr. Limited bought land with building, warehouse, and Viroj Thanalongkorn, major single-storey building located at 93/8 Soi shareholder and director, before Petchkasem 7, Petchkasem Rd., Wad Thapra, completion of shareholding structure Bangkok Yai, Bangkok, where the underwear realignment. manufacturing plant of Sabina Fareast Company Limited is located. The asset acquisition price was equal to the appraisal value by UK Valuation and Agency Company Limited. 2. Sabina Fareast Company Limited 12.30 On 6 February 2007, Sabina Fareast Company bought land with building from Mr. Limited bought land with building and five-storey Viroj Thanalongkorn, major building which is the factory building of Sabina shareholder and director, before Fareast Company Limited located at 93/47 Soi completion of shareholder Petchkasem 7, Petchkasem Rd., Wad Thapra, restructuring. Bangkok Yai, Bangkok. The asset acquisition price was equal to the appraisal value by UK Valuation and Agency Company Limited. 3. Sabina Fareast Company Limited 21.40 On 27 February 2007, Sabina Fareast Company bought land from Mr. Viroj Limited bought land which is the location of office Thanalongkorn, major shareholder and underwear manufacturing plant located at 30/5 and director, before completion of Putthamonthon Sai 5 Rd., Rai King, Sampran, shareholder restructuring. Nakorn Pratom. The asset acquisition price was equal to the appraisal value by UK Valuation and Agency Company Limited. 4. Sabina Fareast Company Limited 52.10 On 27 February 2007, Sabina Fareast Company bought land from Mr. Viroj Limited bought land which is the location of office Thanalongkorn, major shareholder and underwear manufacturing plant located at 30/11 and director, before completion of Putthamonthon Sai 5 Rd., Rai King, Sampran, shareholder restructuring. Nakorn Pratom. The asset acquisition price was equal to the appraisal value by UK Valuation and Agency Company Limited. 5. Mr. Viroj Thanalongkorn, major 10.85 On 27 February 2007, Mr. Viroj Thanalongkorn shareholder and director of J&D bought 3,900 shares of J&D Apparel Company Apparel Company Limited and Sabina Limited from Sabina Fareast Company Limited at Fareast Company Limited, bought book value according to the audited financial the shares of J&D Apparel Company statement as of year-end 2005 of 2,782.02 Baht per Limited from Sabina Fareast share (with the par value of 1,000 baht per share) Company Limited The transaction was part of the shareholding structure realignment of Sabina Public Company Limited and Sabina Fareast Company Limited 6. J&D Apparel Company Limited 44.85 On 16 March 2007, J&D Apparel Company Limited bought shares of Sabina Fareast bought shares of Sabina Fareast Company Limited Company Limited from the following from the shareholders and directors at the persons: acquisition price equal to the par value of 100 baht -8- Details of Transaction Transaction Rationale and Necessity Value in 1Q 2007 (Million Baht) - Mr. Viroj Thanalongkorn, major per share for the purpose of shareholding structure shareholder and director of J&D realignment of the Company and its subsidiary. Apparel Company Limited, and his wife (Mrs. Wacharee Thanalongkorn, shareholder of J&D Apparel Company Limited) - Mr. Apisit Jongkittipong, director of J&D Apparel Company Limited - Mr. Bunchai Punturaumporn, director of J&D Apparel Company Limited - Mr. Amornthep Asepunya, director of J&D Apparel Company Limited Note: On 18 May 2007, J&D Apparel Company Limited was renamed to Sabina Public Company Limited. Policy for Related Party Transaction Pursuant to the Board of Directors' Meeting of Sabina Public Company Limited No. 1/2550 held on 11 May 2007, the Board of Directors made a resolution to approve the policy for related party transactions, both regular and continuous transactions, and discretionary extraordinary transactions whereby the approval procedures are as follow: 1. Normal Business Transaction Normal business transactions i.e. raw material purchase will take places on a continuous basis in the future. The Company, therefore, set guidelines for entering into the normal business transactions such that the transactions will be carried out with the normal business terms and conditions, at fair and appropriate market price, based on a rational ground, and be available for investigation. The Audit Committee approves normal business transactions and the guidelines in principal, and has the authority to review such transactions from time to time. 2. Extraordinary Transaction For extraordinary transactions such as share acquisition, the Audit Committee will provide opinions regarding the reasonableness of the transactions, the fairness of price and terms & conditions. If the Audit Committee lacks expertise to review some transactions, the Company shall arrange the independent experts or the auditor to investigate such transactions. The opinion from the Audit Committee or the independent experts will be used for an approval from the Board of Directors or the shareholders, as required by the relevant regulations. 3. Financial Assistance Policy In the future, financial assistance to the Company will only be in form of personal guarantee, without guarantee fee, from major shareholders and/or directors on the Company and subsidiary's borrowings from financial institutions. For connected transactions which may take place in the future, the Board of Directors of the Company must comply to the rules and regulations of the Stock Exchange of Thailand and the Securities and Exchange Commission. The Internal Audit Department will randomly review the connected transactions and present the findings for the review by the Audit Committee in the Audit Committee's meeting. Besides, the Company shall disclose the connected transactions in the notes to the audited financial statements, Form 56-1, and Form 56-2 by complying to the generally accepted accounting standards. Contingencies and Commitments The Company's Contingencies and Commitments as of 31 December 2007 are as follow: - Long-term property lease agreement with the rental fee of 142,500.00 baht per month. - Letter of Guarantee issued by financial institution on behalf of the Company in an amount of 97.29 million baht. - Financial advisory fee as stated in the financial advisory service agreement. -9- Risk Factors - Risk associated with Free Trade Policy: Thailand must conform to the GATT Treaty by eliminating the international trade barrier namely quota system. However, the elimination of quota system has not been effectively implemented. As a result, Thailand is still able to gain advantages as export of goods from Thailand has not been restricted from the quota system. Nonetheless, if the quota elimination becomes fully effective, it would adversely affect Thai garment manufacturers. For OEM market, Thai manufacturers may become less competitive compared to foreign manufacturers which have lower production cost structure. For domestic market, the competition in both price-sensitive and premium segments will be more aggressive. Although the elimination of quota system will be perfectly implemented in the future, the Company expects that the FTAs will have a little effect on its OEM segment. The reason is that the OEM clients of the Company sell premium products to the middle-income segment, which is different from those of Chinese manufacturers, who dominate economical-priced segment. The Company's own-branded segment will possibly be impacted more than its OEM segment because there should be more foreign manufacturers, selling in middle-income segment, entering to grab the market share in the domestic market. To mitigate the impact of GATT Treaty on Thai manufacturers, Thai (more)