1.  Risk Factors

There are many factors which could directly or indirectly impact on the
Company’s business such as oil price which is still unstable, the
shortage of sugar supply resulting in a price increase in March 2006,
the September coup d’etat, the terrorism activities in the southern
provinces, the bombings in Bangkok, and the recent Bank of Thailand’s
reserve requirement for capital inflows aiming to prevent Thai Baht
speculation. These factors and events caused an interruption to the
economic, investment, and tourism growth in the country, shook
consumers’ confidence, and adversely impacted on the Company’s sales and
operations which can be summarized as follows:

Business Operation Risks: Impact from diesel price increases after the
lift of Government subsidy in June 2005, led to an increase in
transportation and distribution cost, and had an influence on the
increase in other material prices such as PET bottles, cans, and crown
caps. Moreover, price increases for other main production raw materials,
particularly sugar since March 2006 to help sugar crane growers in the
low harvest season and from the controlled low domestic sugar price,
cost of living adjustment to the employees according to the increase of
minimum wages announced by the government, the higher adjustment of
excise tax calculation base compared to price increase for soft drinks
granted by Internal Trade Department for the first time in past 7 years,
have all led to higher production and operating costs for the Company.
In response to the crisis, the Company has emphasized cost cutting and
expense control, adjusting working procedures to gain more efficiency
and productivity in all working units.

In addition to the impact of high production and operating costs, the
uncertain governmental policies for tax collection, price control,
business laws and industrial regulations also lead to uncertainty and
risks to the Company’s operating and investment decisions. Examples of
the regulations that the government has imposed are the restrictions of
truck loads on the highways, the restriction on the usage of deep well
water, the control of land usage according to the new zoning regulations
which limits the expansion of factory or warehouses in certain areas,
and the possible collection of a packaging tax from the packaging used
in the Company’s products.

In addition, the change of consumer behavior toward more healthy
products had shifted consumption from carbonated soft drinks to other
beverages such as fruit juice, green tea, and pure drinking water. The
Company had foreseen this change and adapted its strategy to be the
first company with a “total beverage” concept, to produce and distribute
a wide range of beverages such as drinking water, tea, energy drinks,
and isotonic drinks, green tea, and most recently Tropicana Twister
fruit juice in 2006.

Production Risks: Due to the heavy investment in plant and machinery in
the beverage business, the Company has to depend on high production
volume to break-even. The seasonality of the business, which has a peak
season in summer, also adds to the complexity for the management in
planning its production schedule and investment budget to avoid the
under-capacity during peak season and over-capacity for the rest of the
year.

One other factor that has a direct impact on the production planning
schedule and investment decision has been the change of consumers’
demand in soft drinks from the returnable bottles to the non-returnable
bottles, as well as the changing trend towards bigger package sizes
demanded by the consumers for 15 oz. returnable bottles and 1.25 litre
PET bottles during the recent years. This change occurred simultaneously
with the expansion and development of the modern wholesale and retail
outlets and the change in consumers’ behavior from soft drinks
consumption in restaurants and food shops towards home consumption. Such
changing trends result in a rapid growth of soft drinks in
non-returnable packages and bigger size packages, and reduce the
capacity of the filling machines with the production of bigger size
packages. In response to the increasing consumer demand in bigger size
returnable bottle (15 oz) and to cope with the capacity issue, the
Company thus invested in the installation of one additional returnable
bottle filling machine at Chonburi Plant in late 2003, with production
commencing in first quarter of 2004. In addition, with the sharp demand
of Crystal drinking water, a new PET drinking water line was installed
in Chonburi plant with production commenced in early 2006. Subsequently,
the second returnable bottle filling machine was also installed with
production run started in mid 2006.

Management and Administration Risks The distribution of soft drinks and
beverages still relies heavily on direct sales to the customers,
requiring the ability to provide fast and reliable service and high
returns to the customers. To operate the business, the Company needs to
have an effective distribution network and qualified personnel. To
retain and motivate good employees is another challenge for the Company.

In addition, the Company needs to maintain a well-defined operations
plan and accurate and updated information to be used as management tools
for decision making. Investment in IT system and qualified employees to
implement and maintain the system is needed.

  Financial Risks

Credit Control and Collection Although the Company has employed a very
efficient credit control system with a satisfactory level of debt
collection, in the current economic situation, the Company is still
exposed to certain credit control and collection risks. The Company has
minimized the risk by tightening its credit control policy and
constantly following-up on debts by both the credit department and the
management.

Currency and Exchange Risks Currency and exchange risks have a certain
impact to the Company’s operating costs. However, since the Company does
not have any foreign currency loan and most of the spending and
purchases are transacted in local currency, the currency and exchange
risks are limited only to those related to the import transactions of
equipment and spare parts.

Risk from non-compliance to agreement by counterpart: Even with high
efficiency in credit control and collection, the Company still tightly
monitors its credit control and collection policy and process, including
close follow up by the management. Accounts receivable in the Company
balance sheet represent the net book value after deduction of the
allowance for doubtful accounts, and are the highest value of risk from
non-compliance to the agreement.

Interest Rate Risk: After the settlement of bank loans by the subsidiary
in 2006, the Company and its subsidiaries operate as debt-free entities.
In the future, if loans are required for business expansion, interest
rate is a risk factor which the Company needs to consider and evaluate
in order to minimize cost of fund before making any investment decision.