1.  Risk Factors

There are many factors which directly or indirectly impact on the
Company’s business such as impact of oil price on our transportation and
distribution cost, impacts of material costs, particularly sugar, wages,
and excise tax on our production costs. Other factors such as the
unstable economy, the political chaos, the lack of consumers’ confidence
and the decline in their spending, also adversely impact the Company’s
sales and operations which can be summarized as follows:

Business Operation Risks: The increase in the sugar price of an
additional Baht 5 per kilogram since May 2008 had a significant impact
on production costs and the Company’s operating results. The impact of
the increasing diesel price which hit the highest level during this
year, led to an increase in transportation and distribution costs, and
had an influence on the increase of other material prices such as PET
bottles, cans, and crown caps. The adjustment of cost of living to the
employees according to the increase in minimum wages announced by the
government, also led to higher production and operating costs for the
Company. All these factors resulted in a decline in operating profit,
especially given that no price increase on the Company’s products had
been approved. Moreover, with the entry of new cola drinks in the market
and the change of consumers’ behavior towards other drinks and juices,
the Company has to respond to the change with new products and
innovation, as well as the introduction of new packaging design to keep
the appearance in trend with the desire of the market such as the launch
of Pepsi Max in a new packaging design, the launch of new soft- drinks
such as Mirinda Sherbet, Mirinda Pineapple. In addition, 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 above factors, the change of 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.

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. 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 resulted in a rapid
growth of soft drinks in non-returnable and bigger size packages, and
reduced the capacity of the filling machines with the production of
bigger size packages. In addition, with the sharp demand of Crystal
drinking water, there was also a need to invest in drinking water line.
During past 5 years, the Company has invested in 2 new returnable bottle
filling lines and one PET drink water line at Chonburi plant.

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 followed
the movement of the competitors closely and adapted itself to change in
the market by having 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 The global economic crisis, which badly
hit the economy of many countries in the world including Thailand,
resulted in declining profits or losses of many businesses. Some
companies have had to lay off their employees or close down the business
to prevent bankruptcy. In the current economic situation, the Company
has to exercise tight control on collection and credit control and
constantly follow-up on debts via 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: Most of the
agreements entered into by the Company are related to the production and
distribution of products. During the course of business operations, the
Company did not experience any major violation of the agreements.
Regarding marketing support agreements with key customers, the
management has carefully reviewed the contents and conditions in the
agreements before signing. Sales administrative team also closely
monitors the compliance to these agreements throughout the contract
periods. For purchasing or servicing contracts, the Company would made
settlement when the payments become due, or only after the receipt of
goods or the render of services. For construction or installation
agreements, final payment would be made only after getting bank
guarantees to safeguard the Company from any damages after the end of
contracts. With such measures, the Company is well protected against the
risk from non-compliance to agreement by counterparts.

Interest Rate Risk: Currently 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.