10. Internal Control

The Company values the importance of internal control in protecting it
from possible damages. The Company sets clear objectives, operating
plan, strategies, and operating procedures as operating and measurement
tools.

  To ensure good internal control and audit system, the Audit Committee
  is assigned to make an assessment to the Company’s internal control
  system and to report the findings to the Board of Directors after each
  assessment.

  In 2006, the Audit Committee assessed the Company’s internal control
  system by conducting questioning and discussion with management. Such
  assessment revealed that the Company had sufficient internal controls
  over the 5 major parts of its operations, namely, the organization
  structure and environment, risk management, control over the
  management operations, information technology and communication, and
  the follow-up procedures.

-   Organization Structure and Environment, The structure and operating
    environment of the Company promotes effective operations and
    sufficient internal control. Clear segregation of duties creates a
    check and control system in each working process. Operating manuals
    and procedures ensure standard practice in each of the operating
    units. Subsystem process and reduction of double work are reviewed
    regularly for efficiency improvement. The Company also sets clear
    and attainable annual targets and measurement of results, taking
    into account all variable factors such as economic situation, market
    condition and competition.

-   Risk Management, The Company closely follows the changes of risk
    factors such as taxation, the increase of raw material prices and
    other costs, in order to assess the impact and set up action plan
    for the survival of the business. The Company holds meetings with
    its management and employees on regular basis to communicate the
    situation and impact of the external risks influencing the Company’s
    operations and continuously sets up the measurements to minimize the
    effect of those risks.

-   Management Control, The Company sets clear responsibility, duties,
    and authorization of the management emphasizing the segregation of
    duties for authorization, recording, and safeguard of assets. The
    transactions with major shareholders, directors, and management
    require approval from the Board of Directors to ensure no conflict
    of interest in the authorized transactions and to aim for highest
    benefit to the Company. The Company has an operating manual of
    authorization limit and approval, and has set up the physical asset
    verification procedure to ensure the completed count on every item
    is done within three years and there is a sampling count by internal
    audit function to reconcile with the fixed asset register and
    accounting record.

-   Information System and Communication, The Company submits sufficient
    and accurate information necessary for Board of Directors’ decision.
    Record keeping and accounting transactions are prepared according to
    the accounting standards, and are audited and reviewed by the Audit
    Committee and the external auditors.

-   Follow-up Procedures, The Company monitors the performance compared
    to the objectives and reports to the Board of Directors’ meeting
    every two months. Any major changes in factors affecting the
    Company’s operations will result in a modification of the operating
    plan.

During June and July 2006, an audit on the Company’s operating
procedures and internal controls was carried out by the audit team of
Pepsi-Co Ltd. A “satisfactory high” rating was received from such audit.