DSG INTERNATIONAL THAILAND PUBLIC COMPANY LIMITED AS AT

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DSGT is held by the major shareholder DSGIL for 66 29 Currently DSGT has fully owned five subsidiaries with operational offices and facilities in Thailand Malaysia Indonesia and Singapore The corporate structure is shown as follows Corporate Structure of the Company and its Subsidiaries 31 December 2013

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Table of Contents,Part 1 Business Operation,1 Policy and Overview of Business Operation 1 6. 2 Characteristics of Business Operation 7 10,3 Risk Factors 11 14. 4 Assets Used in Business Operation 15 22,5 Legal Disputes 23. 6 General and Other Key Information 24, Part 2 Management Structure and Corporate Governance. 7 Securities and Shareholders Information 25 26,8 Management Structure 27 30.
9 Corporate Governance 31 43,10 Corporate Social Responsibility 44. 11 Internal Control and Risk Management 45 54,12 Related Transactions 55 64. Part 3 Financial Status and Operating Result,13 Key Financial Information 65 72. 14 Management Discussion and Analysis 73 76, Verification of the Correctness of the Information. Appendix 1 Details of the Directors Authorized Company s Executives 1 7. and Company s Secretary, Appendix 2 Details of the Directors of Subsidiaries 8.
Appendix 3 Details of the Authorized Person of the Internal Audit and 9. Compliance,Appendix 4 Details of the Asset Appraisal 10. BUSINESS OPERATION,1 Policy and Overview of Business Operation. 1 1 Vision Mission, To be the leading disposable diaper manufacturer in South East Asia. To provide products and services of the best quality and value to our customers. Principles and Values, Provide a healthy safe and positive work environment where everyone can feel valued. can learn and is expected to consistently strive to achieve their personal best with the. resources available, Encourage a high trust organization where everyone acknowledges they have a shared.
responsibility for success or failure within all departments. Manufacture a consistent high quality product at the lowest possible manufactured cost. that satisfies the needs of the consumer and the expectations of our trade customers. Build our customer partnerships through a Collaborative Approach. Business Goals, The Company vision is to be a leading provider of quality diaper care for babies and adults in. South East Asia It continues to provide the best in quality and value products to its customers. and consumers The Company has managed to consolidate its position in its key markets. through effective commercial strategies and product innovation The Company will continue to. invest in marketing and supply chain innovation and productivity and quality improvement to. build a solid foundation for sustainable long term growth in the South East Asia. Part 1 Business Operation Page 1,Product Portfolio. 1 Baby Diapers, The Company has further strengthened its market position in South East Asia with the. introduction of new product innovation such as BabyLove DayPants in the mass segment. and product performance improvement in BabyLove PlayPants with Power Absorbent. Gel in Q1 2013 The introduction of the new technology and product innovation also. heralded the Company to fulfill its portfolio in various segments and remain as the leading. company in disposable diaper industry,2 Adult Diapers. Certainty brand is the overall adult diaper market leader in Thailand and is a key player in the. South East Asian markets The introduction of Certainty Active pants since 2012 has. complemented the existing adult diapers category for the Company. 1 2 Significant Change and Development, DSG International Thailand PLC DSGT was established on 20 May 1994 The Company.
has conducted the business of manufacturing and marketing disposable baby and adult diapers in. South East Asia region with operational bases in Thailand Malaysia Indonesia and Singapore. Baby disposable diapers are branded under the brand name of BabyLove Pet Pet and. Fitti whilst adult disposable diapers are under the brand name of Certainty and Certainty. Active Currently the company has registered capital of Baht 900 million with ordinary shares. of 899 99 million shares at a par value of 1 00 Baht per share. Significant Changes and Development in 2011 2013 can be summarized as follows. 29 April 2011 The Meeting of Shareholders approved the Company s capital increase. from Baht 300 million to Baht 600 million by issuing 300 million new. ordinary shares at a par value of Baht 1 per share to accommodate the. Stock Dividend at the ratio of 1 existing share for 1 new share. December 2011 Restructured the shareholding in PTDSG from 60 shareholding to be. 100 shareholding to facilitate future expansion plans in Indonesia. 17 February 2012 The Meeting of Shareholders resolved to appoint Mr Chwan Der Alex. King as an Independent Director and Audit Committee. 20 September 2012 The Meeting of Shareholders approved the Company s capital increase. from Baht 600 million to Baht 900 million by issuing 300 million new. ordinary shares at a par value of Baht 1 per share to accommodate the. Stock Dividend at the ratio of 2 existing shares for 1 new share. Part 1 Business Operation Page 2, September 2012 Operated a new warehouse and production facilities located at Hemaraj. Saraburi Industrial Land to support future growth, 27 February 2013 The Board of Directors resolved to appoint Mr Yeoh Aik Cheong an. Executive Director as Company Secretary, April 2013 DSGMSB relocated its production plant from Subang Jaya to its fully. integrated warehouse and production facilities in Telok Panglima Garang. Banting Selangor, 24 April 2013 The Meeting of Shareholders resolved to appoint Mr Dicky Peter Yip as. an Independent Director and Audit Committee, 17 September 2013 Invested 99 99 shareholding of DSG Management Services Thailand.
Company Limited DMS with the registered capital of Baht 10 million. 12 November 2013 The Board of Directors resolved to appoint Ms Chachanee. Anantwatanapong General Manager Thailand as an Executive Director. 1 3 Corporate Structure, DSGT is held by the major shareholder DSGIL for 66 29 Currently DSGT has fully owned. five subsidiaries with operational offices and facilities in Thailand Malaysia Indonesia and. Singapore The corporate structure is shown as follows. Corporate Structure of the Company and its Subsidiaries. 31 December 2013,100 100 100 100 99 99,DSGML DSGMSB PTDSG DSGS DMS. Part 1 Business Operation Page 3,DSG International Limited DSGIL. DSG International Limited DSGIL was registered in the British Virgin Islands on 31. December 1991 DSGIL s principal office is based in Hong Kong. Formerly DSGIL has subsidiaries that are in the business of manufacturing and marketing of. baby and adult disposable diapers under the brand names of BabyLove Pet Pet Fitti. Dispo123 Handy and Certainty in United States of America Hong Kong China. Thailand Malaysia Indonesia and Singapore, In 2013 DSGIL sold Associated Hygienic Products AHP a U S maker of store brand infant. diapers in United States of America to Domtar Corporation DSGIL has remained the business. in Hong Kong China and through DSGT in South East Asia region. DSGIL holds 66 29 of the total subscribed shares of the Company. DSG International Thailand Public Company Limited DSGT. DSG International Thailand PCL was incorporated on 20 May 1994 with the objective of. manufacturing and marketing of baby and adult disposable diapers Its brand names include. BabyLove Pet Pet Certainty and Certainty Active for both export and domestic. DSGT holds approximately 100 in DSGML DSGMSB DSGS PTDSG and 99 99 in. DSGT Subsidiaries,1 Disposable Soft Goods Malaysia SDN BHD DSGML.
DSGML was founded on 16 October 1995 with authorised share capital of Ringgit 100 000. divided into 100 000 shares at par value of Ringgit 1 per share with the paid up share capital of. Ringgit 3 On 29 November 2004 the Company increased its authorised share capital to. Ringgit 5 million divided into 5 million shares at par value of Ringgit 1 per share with paid up. share capital of Ringgit 3 000 003 DSGML operates the business of distributing and marketing. of disposable baby and adult disposable diapers in Malaysia. In 2013 the office was relocated to the new location in Wisma Consplant Subang Jaya. Part 1 Business Operation Page 4,2 DSG Malaysia SDN BHD DSGMSB. DSGMSB was founded on 2 December 1998 with authorised share capital of Ringgit 5 million. divided into 5 million shares at par value of Ringgit 1 with paid up share capital of Ringgit 2. On 8 April 1999 the Company increased its paid up share capital to Ringgit 3 400 002. Subsequently on 30 November 1999 the Company increased its authorised share capital to. Ringgit 10 million with paid up share capital of Ringgit 3 400 002 DSGMSB operates the. business of manufacturing baby disposable diapers, In 2013 the factory was relocated to the new location in Telok Panglima Garang Banting. 3 PT DSG Surya Mas Indonesia PTDSG, PTDSG was founded on 25 April 1997 by DSGIL holding approximately 60 percent and Mr. Abdul Alek Soelystio an Indonesian citizen holding 40 percent with registered share capital of. Rupiah 28 824 million divided into 12 000 ordinary shares at par value of Rupiah 2 402 000. and paid up share capital of 7 200 shares at total value of Rupiah 17 294 40 million with the. objective to operate a business of manufacturing disposable baby diapers and distributing the. products through PT Panca TalentaMas in Indonesia PT Panca TalentaMas is 95 owned by. such Indonesian partner, In December 2007 PTDSG issued 3 800 ordinary shares of which DSGT was allotted 2 280. shares and Mr Abdul Alek Soelystio was allotted with 1 520 shares As at December 31 2008. the subscription was completed with paid up share capital of 11 000 shares Therefore DSGT. held approximately 60 with 6 599 shares while the local shareholder held approximately 40. with 4 400 shares The PTDSG plant is located at Cikande Serang Indonesia. In December 2010 DSGT acquired the remaining of the 40 of the paid up share capital of. PTDSG from Mr Abdul Alek Soelystio and PTDSG became a wholly owned subsidiary of. Part 1 Business Operation Page 5,4 Disposable Soft Goods S Pte Limited DSGS.
DSGS was founded on 12 August 1983 with authorised share capital of SGD 2 million which. is divided into 2 million shares at par value of SGD 1 and paid up share capital of SGD 1 5. million with the objective of distributing and marketing of baby and adult disposable diapers in. On April 1 2010 DSGS changed its business model to a distributor operation by appointing a. sole distributor for all its products, 5 DSG Management Services Thailand Company Limited DMS. DMS was founded on 17 September 2013 with authorised share capital of Baht 10 million with. the objective of providing management services to the Company s subsidiaries or affiliates both. in and outside of Thailand, 1 4 Relationship to the Affiliates of the Major Shareholders. DSGT operates the main business without any relationship significantly to the affiliates of the. major shareholders Although the Company has been manufacturing and marketing baby and. adult disposable diapers with the same brand name as some affiliates the market is segregated. by geographical region The Company is focus on manufacturing and distributing its products. mainly in Southeast region, However DSGT believes that the synergy of global sourcing bargaining power strong. presence of same brand named products and technical knowledge sharing in the existence of. the affiliates would be beneficial to DSGT for operational efficiency improvement. The detail of being dependent on DSGIL the major shareholder of the company is stated in. Risk Management and Risk Factors section,Part 1 Business Operation Page 6. 2 Characteristics of Business Operation,Revenue structure.
The Company s revenue structure and that of its subsidiaries are as shown in tables below. Value of Sales of the Products of the Company s and its Subsidiaries. After Elimination of Inter company Transactions,Revenue structure. 2009 1 2010 1 2011 1 2012 1,MM THB MM THB MM THB MM THB MM THB. Domestic sales, Baby diapers 2 507 84 72 97 3 358 03 76 89 4 646 29 80 93 5 394 82 80 41 6 000 89 79 58. Related Parties 111 41 3 24 85 87 1 96 0 7 0 01 0 0 0 0 0 0 0 0. Others 2 396 43 69 73 3 272 16 74 93 4 646 99 80 94 5 394 82 80 41 6 000 89 79 58. Adult diapers 779 43 22 68 805 17 18 44 910 19 15 85 1 125 61 16 78 1 251 72 16 60. Related Parties3 91 28 2 66 77 74 1 78 2 59 0 05 0 0 0 0. Others 688 15 20 02 727 43 16 66 912 78 15 90 1 125 61 16 78 1 251 72 16 60. Export sales, Baby diapers 51 13 1 49 56 34 1 29 97 92 1 71 49 17 0 73 135 49 1 80. Related Parties 1 35 0 04 0 47 0 01 44 65 0 78 0 04 0 00 88 74 1 18. Others 49 78 1 45 55 87 1 28 53 27 0 93 49 13 0 73 46 75 0 62. Adult diapers 19 39 0 56 60 53 1 39 10 62 0 18 40 02 0 60 14 58 0 19. Related Parties 15 81 0 46 51 37 1 18 9 56 0 16 39 32 0 59 13 09 0 17. Others 3 58 0 10 9 16 0 21 1 06 0 02 0 70 0 01 1 49 0 02. Other sales5 79 03 2 30 87 09 1 99 76 46 1 33 99 11 1 48 137 96 1 83. Total income 3 436 82 100 00 4 367 16 100 00 5 741 48 100 00 6 708 73 100 00 7 540 64 100 00. Exchange Rate,Exchange rate 2009 2010 2011 2012 2013.
1 Malaysian Ringgit 9 6861 10 1676 9 9665 10 0691 9 7561. 1 000 Indonesian Rupiah 3 5239 3 4808 3 4808 3 3207 2 9353. 1 Singapore dollar 23 6898 23 2380 24 1667 24 8663 24 5700. Domestic Sales mean Sales in Thailand Malaysia Indonesia and Singapore. Related Parties means PT Panca TalentaMas,Related Parties means DSGL DSGZ and DSGIL. Other sales include sales from non diaper products i e absorbent sheet and cool refresh towels. Part 1 Business Operation Page 7,2 1 Characteristics of the products. The Company s and its subsidiaries products are divided into 2 categories as follows. 1 Disposable Baby Diapers,1 1 Disposable Baby Diaper Tape. Market Mid Range Mid Range Mass Mass,Brand BabyLove Tape Pet Pet Fitti Basic. Motherhood Made Good Quality,Key Benefit Easy Tape Easier Smart choice.
1 2 Disposable Baby Diaper Pants,Market Premium Mid Range Mass. Brand BabyLove NightPants BabyLove PlayPants BabyLove DayPants. Key Benefit Extra Night Guard Its Power Absorbent Gel Affordable Day Time. 2 Disposable Adult Diapers,2 1 Disposable Adult Diaper Tape. Market Mass,Brand Certainty Tape,Key Benefit Superior Absorbency and Dryness. 2 2 Disposable Adult Diaper Pants,Market Mid Range. Brand Certainty Active Pants,Key Benefit Extra Fit and Comfort.
Part 1 Business Operation Page 8,2 2 Characteristics of market and competition. 2 2 1 Marketing Policy, The Company has diversified their product portfolio and competes in various product. segments ranging from premium to mass segment In addition the Company has strategically. focused on product innovation and productivity improvement to remain competitive in the. 1 Industry Outlook for Disposable Baby Diapers, Baby diaper growth generally continues to be healthy across Thailand Malaysia and Indonesia. as a result of the country demographics Strong population growth coupled with increasing. affluence and urbanization represent the key growth drivers for the future and present significant. opportunities, The key demographic of over 600 million populations in South East Asia and robust birth rate. in most of the countries poses a dynamic market for the Company to sustain robust growth in the. 2 Industry Outlook for Disposable Adult Diapers, Demographics also indicate a strong future for the adult diaper market growth in South East.
Asia The population will continue to age at varying rates per country with Thailand and. Singapore leading in terms of the percentage of elderly 65 and above while Malaysia and. Indonesia will form the basis of aging population in the longer term This coupled with. increased life expectancy as well as increasing affluence augurs well for the long term growth. of the adult diaper market,2 2 2 Market Competition. The market for disposable diapers has experienced continual growth resulting in strong. competition in terms of price quality and marketing investments The main competitors of the. Company and its subsidiaries are 1 Unicharm the manufacturer of baby diapers under the. brand name of Mamy Poko and the manufacturer of adult diapers under the brand name of. LiFree 2 SCA the manufacturer of baby diapers under the brand name of Drypers in Asia. and the manufacturer of adult diapers under the brand name of Tena 3 Kimberly Clark the. manufacturer of baby diapers under the brand name of Huggies 4 Procter Gamble the. manufacturer of baby diapers under the brand name of Pampers 5 Elleair the manufacturer of. baby diapers under the brand name of Goo n 6 Kao the manufacturer of baby diapers under. the brand name of Merries All of them are companies of significant size and resources with. significant influence on pricing consumer and trade promotional activities and sales as well as. technology innovation,Part 1 Business Operation Page 9. 2 3 Procurement of Raw Materials, Raw materials used in the manufacture of disposable baby and adult diapers are wood pulp. non woven moisture transfer blockage sheets glues and Super Absorbent Polymer SAP. whose total cost make up more than half of total cost of raw materials DSGIL which is the. parent company of the Company has entered into supplier purchasing arrangement with several. key suppliers distributors The procurement of the raw materials under those arrangements also. includes the Company and its subsidiaries purchase of raw materials The consolidation of. demand of DSGIL and its affiliates provides bargaining power with the suppliers. The raw materials used in the production of baby and adult diapers have the characteristics of. being commodity and imported raw materials The cost of the raw materials are subject to global. supply and demand and can fluctuate on several factors such as crude oil price production. capacity etc,Part 1 Business Operation Page 10,3 Risk Factors. The Company implements Risk Management policies to mitigate all foreseeable potential risks. and govern the mitigation plan in achieving its goal. The risk factors mentioned in this clause are risks of material significance that may have a. negative impact on the Company and the Company s shares price However this does not. include other risk factors that are not known to the Company at the present time or which the. Company deems to be risks of no material significance at the present time Any forward. looking statements from the Company are also subject to certain risks and uncertainty Caution. should be taken not to place undue reliance on any such forward looking statements. Risk from the fluctuation of raw materials prices, Important raw materials used in the manufacture of disposable baby and adult diapers are wood.
pulp non woven sheets glues and Super Absorbent Polymer SAP whose total costs make. up more than half of the total cost of production These raw materials have the characteristics. of being commodities of which the prices are subject to global supply and demand and can. fluctuate due to external factors such as oil price supplier production capacity global demand. etc The fluctuation of raw material costs has a direct impact on production costs and gross. profit of the Company and its subsidiaries, As crude oil prices are increasing in volatility due to geo political uncertainties there exists the. possibility that the disposable diaper industry could face greater volatility in raw material. Mitigation Approach The Company mitigates the supply and foreign exchange risks for raw. material purchases with local source supply and also cooperates with group central purchasing. for global sourcing to ensure cost competitiveness. Risk from being dependent on DSGIL the major shareholder of the Company. The Company is a subsidiary of DSG International Limited DSGIL which has various. affiliates in the business of manufacturing and distribution of baby and adult disposable. diapers The Company and its subsidiaries are dependent on DSGIL in the following major. primary areas,Part 1 Business Operation Page 11, 1 Procurement of Raw Materials DSGIL has entered into supplier purchasing. arrangements with several suppliers distributors The said procurement of the raw. materials under those arrangements also include the Company s and its subsidiaries. purchase of raw materials, The consolidation of raw material demand of DSGIL and its affiliates provides bargaining. power with the suppliers However the price of raw materials in each region might be. different due to the demand and freight cost in each respective region. 2 Research and Development The research and development of the Company and of its. subsidiaries is conducted by DSGIL which innovates and develops new materials and. technologies for new products and product improvements The Company and its. subsidiaries have the option to choose to use or not to use and to apply or not to apply the. new materials and technologies Major product quality improvements and new product. introductions are therefore dependent on the Research and Development of DSGIL. 3 Operation Management Assistance DSGIL provides management services to the. Company and its subsidiaries The Company and its subsidiaries pay management fees. to DSGIL under the Management Agreement based on the level of services provided by. DSGIL The said agreement will be automatically renewable unless either party decides. to terminate the Agreement by way of giving a written notice to the other party at least. 12 months before the expiration of the Agreement, 4 Trademark License The Company and its subsidiaries in Thailand and Malaysia pay. the royalty fee for the use of the said trademark at 1 5 while PTDSG pay 2 5 the. contract of which is renewable automatically every year for a further one year term. Mitigation Approach The Company believes that DSGIL in the capacity as a major. shareholder is committed to continue providing support for the operations for the Company. and its subsidiaries as a result of DSGT Group s performance as a flagship in South East Asia. SEA as well as the regional hub to under penetrated emerging markets in Asean Economic. Community AEC,Part 1 Business Operation Page 12, Risk from related companies which are affiliates of DSGIL operating in the same business.
DSGIL the parent company owns other affiliated companies other than the Company and its. subsidiaries Those affiliates are also in the same business of manufacturing and marketing of. baby and adult disposable diapers as that of the Company and its subsidiaries In that sense. each of the affiliates of DSGIL is a potential competitor of the Company and its subsidiaries. and the Company and its subsidiaries are potential competitors to each of these affiliated. companies of DSGIL Such affiliates are wholly owned by DSGIL and are located in Hong. Kong and the People s Republic of China Moreover some of the directors management of. the Company and its subsidiaries are the directors management of related companies. DSGIL and its affiliates have covenanted not to compete against nor to allow permit or license. the Trademark to any third person to compete against the Company and its subsidiaries in. production sales and or distribution of the disposable diapers or any related product. manufactured with the Trademarks in the Licensed Territory namely Thailand Malaysia. Indonesia and Singapore unless the sales and distribution are made by means of inter. company sales through the Company and its subsidiaries until the termination of Trademark. License Agreement which is automatically renewable for a period of one year. Mitigation Approach Through Licensed Territory the Company and its subsidiaries is capable. to conduct its business through geographic expansion in South East Asia or any countries. currently not being penetrated by DSGIL and its affiliates except by means of inter company. Risk from fluctuation of exchange rate, As most of the Company s and its subsidiaries raw materials are imported the Company and. its subsidiaries may be impacted by exchange rate fluctuations which will directly impact raw. materials costs and the gross profit Most of the imports as well as exports of the Company and. its subsidiaries are in US dollar denomination, Besides the impact on raw material costs the fluctuation of exchange rates also has an impact. on the presentation of the Company s financial statements as the Company must record and. report its investments in various subsidiaries in its Financial Statements in Thai Baht. Mitigation Approach The Company and its subsidiaries have continuously attempted to reduce. such risks by entering into forward exchange contracts.

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