nformation Memorandum : SABINA

government has negotiated for bilateral and multilateral FTAs with many trade-partner countries to reduce the tariff among the member countries in order to enabling Thai manufacturers and those manufacturers in member countries to gain more competency than those in non-member countries. However, if Thailand signs the agreement with some other competent rivals, this may cause Thai manufacturers' to lose competitiveness as well. - Foreign Exchange Rate Risk: As the nature of OEM business of the Company and subsidiary is the manufacture of underwear by the orders of foreign clients, the Company and subsidiary may be affected by the volatility of foreign exchange rate. Revenue from sales of OEM products and the export sales of the subsidiary's own-branded products combined accounted for 63.61, 60.95, and 55.56 percent in 2005, 2006, and 2007 respectively. The Company curbs the impact of foreign exchange rate risk by using various strategies as follow. First, a natural hedge is carried out through importing raw materials which accounted for 26.19 and 38.84 percent of OEM sales revenue in 2006 and 2007 respectively while sales revenue is denominated in different major currencies. Second, the Company sets a policy to enter into US Dollar-denominated forward contracts with financial institutions on a monthly basis. The notional principal of the forward contracts are generally maintained in a range of 40 to 70 percent of OEM purchase order values of which the payment will be made within the next 3 months. Third, the Company generally set the price of OEM products to cover some foreign exchange rate risk, which help transfer the foreign exchange rate risk to OEM clients to some extent. - Risk associated with Reliance on a Few Major Clients: The top 10 major clients of the Company and its subsidiary, who are underwear distributors in foreign countries, accounted for 53.22, 49.48, and 52.54 percent of sale revenue in 2005, 2006 and 2007 respectively. Therefore, the Company's strategy for managing such risk is to maintain strong relationship with the clients and also continuously develop new styles and improve product quality. The Company and its subsidiary have maintained strong relationship with all these major clients for a long period of time. Besides, it has maintained the pricing policy of not increasing the selling price after the quotation is made and agreed with clients. Moreover, the Company has reduced the proportion of OEM products and increase the proportion of own-branded products since 2005 onward by increasing sales in young - 10 - adult and adult segment in the domestic market. Such strategy not only reduces the reliance on major clients but also increases the Company and subsidiary's gross profit margin and reduce foreign exchange rate risk, whereby the Thai Baht appreciated against US Dollar throughout 2007. - Risk associated with Reliance on a Few Major Suppliers: The proportion of raw materials purchased from top 10 major suppliers is 44.38, 53.55, and 60.65 percent of the total raw material purchase amount in 2005, 2006, and 2007 respectively. The Company and its subsidiary did not purchase raw materials from any single supplier for more than 15 percent of the total raw material purchase amount. Before placing large orders, the Company and its subsidiary usually observe the prices from many other suppliers, and also invite suppliers to bid for large orders. Moreover, the procurement unit keeps sourcing for new suppliers in order to disperse purchasing orders to various suppliers, which helps to reduce the reliance on major suppliers and mitigate the impact of shortage of raw materials. - Risk associated with Change in Consumer Behavior: Underwear consumer behavior usually changes according to the fashion trend, therefore, underwear become rapidly outdated. Moreover, launching new products might not be successful if the design does not satisfy consumers' need. To cope with regularly changing consumer behavior, its subsidiary has a designer team consisting of 7 designers with the budget of 5.0 million baht per year to create new designs. The designers research and catch up the fashion trends in both domestic market and foreign countries, and also launch new designs every month in order to serve the changing preference of consumers along the fashion trends. - Risk associated with Raw Material Price Volatility: Major raw materials for underwear manufacturing are fabric, elastics, and sponge, which accounted for 83.96 and 84.72 percent of total raw material cost in 2006 and 2007 respectively. During 2005 and 2007, the prices of major raw materials fluctuated around 3-5 percent. In order to reduce the risk associated with raw material price volatility, the Company has set effective procurement system by sourcing and selecting suppliers and procurement planning. In addition, the Company also prices OEM products based on the production costs, while sourcing for quality raw material with appropriate price; thus, allowing the Company to keep maintaining gross profit margin level and, in turn, enabling it to control risk associated with raw material price volatility. - Risk of Having Major Shareholders Holding Shares for more than 50 Percent: Major shareholders of the Company are the Thanalongkorn Family, who hold 88.12 percent of total paid up shares before the initial public offerings ("IPO"). After the IPO, shareholding proportion of the Thanalongkorn Family will be diluted to 74.81 percent of total paid up shares. This enables Mr. Viroj Thanalongkorn to gain control over majority of voting rights on most transactions, except for some issues, enforced by law or the Company's articles of association, which must be approved by at least three fourths of the voting rights. However, the Company has continuously grown under the management of Mr. Viroj Thanalongkorn; thus, with Mr. Viroj Thanalongkorn holding majority voting rights will bring great motivation for him to work towards shareholders' value maximization in the future. Furthermore, customers, distributors, and shareholders will be confident that the Company will be able to operate the business continuously as it has been and, thus creating shareholders' returns. Lawsuit None No. of Employees Total employees as of 31 December 2007 equaled to 4,684 persons - 11 - Company Background and Business Overview - Sabina Pubic Company Limited ("The Company") (originally named, "J&D Apparel Company Limited") was established on 17 August 1995 with the paid-up capital of 1 million baht, and Sabina Fareast Company Limited was established on 11 January 1977 with the paid-up capital of 1 million bath. J&D Apparel Company Limited and Sabina Fareast Company Limited manufacture and distribute female underwear under the brand "Sabina" and "Sabinie" and also manufacture OEM products for foreign clients. Afterward, on 18 May 2007, J&D Apparel Company Limited was renamed to Sabina Public Company Limited. - The Company and its subsidiary was founded by the second generation of the Thanalongkorn Family led by Mr. Viroj Thanalongkorn who accumulates more than 30 years of experience in the underwear business. The first generation of the Thanalongkorn family, Mrs. Jintana and Mr. Adul Thanalongkorn, the mother and father of Mr. Viroj Thanalongkorn, had set foot in the underwear business as they founded "Jintana Partnership Limited". - At present, Mr. Viroj Thanalongkorn is the director and major shareholder of the Company, whose proportion of holding in the Company's shares will be diluted to 74.81 percent of the total number of paid-up shares after the IPO and the Company's shareholding holding in the subsidiary is currently 99.90 percent. The Company and its subsidiary under the management of Mr. Viroj Thanalongkorn and his team, and Jintana Apparel Company Limited (the current company name of "Jintana Partnership Limited"), which is a direct competitor of the Company run by Mr. Viroj Thanalongkorn 's close relative have been entirely separately managed, operated, and controlled for more than 13 years. Shareholding Structure of the Company and Subsidiary as of 18 May 2007 Mr. Viroj Thanalongkorn Other Shareholders 87.87% 12.13% Sabina Public Company Limited 99.90% Sabina Fareast Company Limited Business Characteristics of The Company and Its Subsidiary Manufacture and Manufacture and Sell Manufacture and Export Distribute to Subsidiary OEM Products to Foreign Business Design Own-branded Clients Products The Company Subsidiary At present, the subsidiary owns 2 factories, with the total capacity of 3.87 million pieces of underwear per year, consisting of one factory in Nakhonpratom with the capacity of 1.81 million pieces of underwear per year, and another factory in Bangkok with the capacity of 2.06 million pieces of underwear per year. Investment in Subsidiary/ As of 31 December 2007 Associated/ Related Companies - 12 - (million baht) Name Type of business Paid-up capital % of shareholding Investment (at cost) 1. Sabina Fareast Company Limited Underwear Producer 145.00 99.90 144.84 and Distributor Change in Capital in the last 3 years (million baht) Date Capital increase (decrease) After the increase (decrease) Note Company 15 March 2007 145.0 295.0 Acquisition of and RO subscription in subsidiary 12 May 2008 52.5 347.5 IPO proceeds for working capital and repayment of short-term and long-term debt from financial institutions Accounting Period 1 January - 31 December Auditor Mrs. Kesree Narongdej A.M.T. & Associates Registrar The Thailand Securities Depository Company Limited Financial Advisor SICCO Advisory Company Limited Dividend Policy not less than 40 percent of the net profit after tax and legal reserve B.O.I. Certificates The Company obtains corporate tax exemption privilege from the Board of Investment (BOI) for Chainat factory at 50% corporate tax exemption until year 2009 and Yasothorn factory at full exemption until year 2011 and 50% corporate tax exemption until year 2016. Present to 2009 2009 to 2011 2012 to 2016 Chainat 50% corporate tax - - Factory exemption Yasothorn Full exemption Full exemption 50% corporate tax Factory exemption No. of Shareholders As of 12 May 2008 No. of shareholders No. of shares % of paid-up capital 1. Strategic shareholders 1.1 Directors, manager, and executive management 5 51,997,400 74.82 including related persons and associated persons 1.2Shareholders who have a holding of above 5% - - - including related persons 1.3 Controlling Shareholders - - - 2. Non-Strategic shareholders hold > 1 trading unit 1,555 17,502,600 25.18 3. Non-Strategic shareholders hold < 1 trading unit - - Total Shareholders 1,560 69,500,000 100.00 - 13 - Major Shareholders As of 12 May 2008 Before IPO After IPO Shareholders' Name % of Shares % of Shares No. of Shares No. of Shares Holding Holding 1. Thanalongkorn Group - Mr. Viroj Thanalongkorn 51,841,400 87.8668 51,841,400 74.5919 - Mrs. Viyada Thanalongkorn 150,000 0.2542 150,000 0.2158 2. Mrs. Wannee Thongluk 2,800,200 4.7461 2,800,200 4.0291 3. Ms. Ratchanee 2,100,200 3.5597 2,100,200 3.0219 Nivatchaibundit 4. Mr. Solot Iamamornphan 2,100,200 3.5597 2,100,200 3.0219 5. Mr. Chaiyakorn 0 0.00 1,500,000 2.1583 Siriratatsadorn 6. Mr. Surachai Jiemsamarn 0 0.00 1,500,000 2.1583 7. Mr. Nonttawat Prasertwanit 0 0.00 1,000,000 1.4388 8. Mr. Anurak Tuangkarawakun 0 0.00 1,000,000 1.4388 9. Ms. Vilai Puntagernamorn 0 0.00 625,000 0.8993 Total 58,992,000 99.9864 64,617,000 92.9741 * Mr. Viroj Thanalongkorn's sister Foreign Shareholders As of 12 May 2008 No. of foreign shareholders 1 persons Total no. of share held 6,100 or 0.01 % of paid-up capital (Note : The Company has a limitation on the percentage of equity shares held by foreign shareholders stated in the article of association clause 12 Section 3 that "the Company's shares are transferable without any restriction, except in the case that such transfer causes foreign shareholders to hold more than 49 percent of total paid-up shares) Board of Directors Mr. Viroj Thanalongkorn Position: Director Start Date: 3 May 2007 Mr. Bunchai Punturaumporn Position: Director/Managing Director Start Date: 3 May 2007 Mr. Apisit Jongkittipong Position: Director Start Date: 3 May 2007 Mrs. Somsri Sripatoomrak Position: Director Start Date: 3 May 2007 Mr. Amornthep Asepunya Position: Director Start Date: 3 May 2007 Audit Committee: The board of directors meeting / shareholders meeting No. 4/2550 held on 3 May 2007 passed a resolution appointing the audit committee. Members of the audit committee are totally 3 persons as follows. Chairman Mrs. Rawewan Peyayopanankul Member Mr. Yuthana Adipath Member Mr. Somchai Vanavit By Ms. Nuanchan Hansakulbunterng is the secretary of the audit comitee Scope of duties and responsibilities 1. Review and ensure that the Company and its subsidiary's financial statements are correct and adequately disclosed by cooperating with the audit firms and the executives who are responsible for preparing the interim and year-end financial statements. During the auditing, the Audit Committee may recommend the audit firm to review or inspect any transactions deemed necessary and important. 2. Review that the Company and its subsidiary contain appropriate and effective internal control and internal audit procedures. 3. Review that the Company and its subsidiary comply to The Securities and Exchange Act, the Stock Exchange of Thailand's notifications, or regulations concerning the Company and its subsidiary's businesses. 4. Review, select, appoint the audit firms as well as consider remuneration fees of the Company and its subsidiary's audit firms by taking into account, resourcefulness, the volume of audit cases as well as the experience of the - 14 - auditors who are assigned to audit the Company and its subsidiary's financial statements. 5. Ensure that the Company and its subsidiary conduct correct and complete information disclosure in case of connected transactions or transactions that may contain conflict of interests. 6. Prepare and disclose the Audit Committee's corporate governance report, signed by the Chairman of the Audit Committee, in the annual report of the Company. 7. Conduct Any other responsibilities assigned by the board of directors of the Company and its subsidiary and accepted by the Audit Committee. Terms for holding office 1. Chairman 2 year 2. Member 2 year (According to the Articles of Association clause 17 section 4, in each annual meeting, directors must resign in a proportion of one-thirds. If the number of directors cannot be divided by 3 directors must resign in a proportion closet to one thirds. Directors who resign in the first and second year are chosen from the draw lot, for latter year, directors are chosen from the directors who stay in the position for the longest period. Directors who resigns can be reelected.) Listing Conditions None Silent Period Shareholders, who own common shares before the Company's public offering, holding 38,225,000 shares or 55% of paid up capital after the initial public offering certify to the Stock Exchange of Thailand that their shares will not be sold for the period of one year from the first trading date. Upon the expiry of 6 months period of the prescribed time, those shareholders will be (more)