serm suk public company limited

A N N U A L R E P O R T

2010Serm Suk Public Company Limited

Financial Data 1

Basic Information 2

Key Financial Data 5

Business Operation 6

Risk Factors 10

Capital Structure and Management 13

Connected Transactions 29

Financial Analysis and Explanation 32

Legal Disputation 34

Other Information 35

Report of the Board of Directors, Responsibility on The Financial Statements 37

Report of the Audit Committee 38

Audit Report of Certified Public Accountant 39

Balance Sheets 40

Statements of Income 43

Statements of Changes in Equity 44

Statements of Cash Flows 46

Notes to the Financial Statements 48

Report of the Board of Directors 93

SERM SUK PUBLIC COMPANY LIMITED

CONTENT

SERM SUK PUBL IC COMPANY L IM I TED

A N N U A L R E P O R T 2 0 1 0

Return on Equity

(Millions Baht)

Book Value per Share

Dividend per Share

Net Profit Margin Reture on Assets

Net Income Net Income per Share

0

200

400

600

0.0

0.5

1.0

1.5

2.0

0

20

10

30

40

(Baht)

(Baht)

(Baht)

0

2

4

6

8

10

(%)

0

1

2

3

4

(%) (%)

0

1

2

3

4

5

6

0.0

1.0

0.5

1.5

2.0

0

5,000

10,000

15,000

20,000

25,000

05 06 07 08 09 10 (Year) 05 06 07 08 09 10 (Year) 05 06 07 08 09 10 (Year)

05 06 07 08 09 10 (Year)05 06 07 08 09 10 (Year)05 06 07 08 09 10 (Year)

05 06 07 08 09 10 (Year) 05 06 07 08 09 10 (Year)

(Millions Baht) Revenue

2 0 1 0 2 0 0 9 2 0 0 8 2 0 0 7 2 0 0 6 2 0 0 5

Revenue (Millions Baht) 21,977 19,694 19,257 18,725 18,650 16,034

Net Income (Millions Baht) 467.9 353.7 139.6 330.7 520.7 510.8

Net Income per Share (Baht) 1.76 1.33 0.53 1.25 1.97 1.93

Book Value per Share (Baht) 37.63 24.02 23.42 23.79 23.55 22.63

Net Profit Margin (%) 2.1 1.8 0.7 1.7 2.8 3.2

Reture on Assets (%) 3.4 3.6 1.5 3.5 5.7 5.8

Return on Equity (%) 4.7 5.5 2.2 5.2 8.3 8.5

Dividend per Share (Baht) 1.25 2.0 0.75 0.9 1.0 1.0

Financial Data

2

Serm Suk Public Company Limited and its Subsidiaries

SERM SUK PUBLIC COMPANY LIMITEDANNUAL REPORT 2010

1. Basic Information 1.1 Company Profile Serm Suk Public Company Limited

Business: 1. Manufacturer and Distributor

Manufacturer and distributor of carbonated soft drinks under the brand names of Pepsi,

Pepsi Twist, Pepsi Max, Mirinda, Seven-Up, Mountain Dew, and Club

Manufacturer and distributor of Lipton Ice Tea in returnable bottles: lemon flavor

Manufacturer and distributor of Crystal drinking water and Crystal soda water

Manufacturer and distributor of Gatorade Sport Drink

Manufacturer and distributor of Tropicana Twister fruit juice - orange flavor in returnable

bottles

2. Distributor

Distributor of Red Carabao for Carabao Tawandang Co., Ltd.

Distributor of Oishi green tea for Oishi Trading Co., Ltd.

Distributor of ready-to-drink Lipton Ice Tea in cans and PET bottles for Pepsi Lipton

International Ltd.

Distributor of Tropicana Twister fruit juice - orange flavor in non-returnable bottles for

Pepsi-Cola (Thai) Trading Ltd.

Location of Head Office: Muang Thai–Phatra Complex, Tower 1, 27-28th Floor, 252/35-36

Rachadaphisek Road, Huay Kwang, Bangkok 10310

Registration Number: 0107537001650 (previously Bor. Mor. Jor. 412)

Telephone 0-2693-2255 - 65

Fax: 0-2693-2266

Paid-Up Capital Ordinary shares

Issued and Paid-Up 265,900,484 shares of Baht 1.00 each

Website www.pepsithai.com

www.sermsukplc.com

1.2 Shares Holding Information 1.2.1 Details of Businesses in which the Company Holds Shares of 10% or More

Serm Suk Holdings Co.,Ltd. (Direct Subsidiary)

Location of Head Office : Muang Thai – Phatra Complex, Tower 1, 27-28th Floor,

252/35-36 Rachadaphisek Road, Huay Kwang, Bangkok 10310

Telephone 0-2693-2255 – 65

Fax 0-2693-2266

Main Business Shares holdings and investment management

Number and Type of Issued Capital Number owned by the Company

Ordinary Shares (Shares) Par Value (Baht) Number of Shares %

50,000,000 10 49,999,993 99.99

Basic Information

3


SERM SUK PUBLIC COMPANY LIMITED ANNUAL REPORT 2010

Petform (Thailand) Co.,Ltd.

Location of Head Office : 75/102, 103 Asian Tower 2, 37th Floor, Sukhumvit 19 (Wattana),

Asoke Road, Klong Toey Nua, Klong Toey, Bangkok 10110

Telephone 0-2661-6661

Fax 0-2661-6664-5

Main Business Manufacture and distribution of PET polymers, PET bottles, and plastic closures



7,500,000 10 3,000,000 40

The Pet Co.,Ltd.

Location of Head Office : 23/4 Moo 2, Pathumthai-Latlumkaew Road, Ban Chang,

Muang Pathumthani, Pathumthani 12000

Telephone 0-2581-7950 – 2, 0-2581-6386

Fax 0-2581-5618

Main Business Manufacture of plastic and PET bottles



700,000 100 70,000 10

Petpack Co., Ltd.

Location of Head Office : 170/87 Ocean Tower 1, Bldg. 32nd Floor, New Rachadaphisek Road,

Klong Toey, Bangkok 10110

Telephone 0-2261-2357

Main Business Manufacture of plastic and PET bottles



800,000 100 80,000 10

1.2.2 Detail of Business in which Serm Suk Holding Co., Ltd. Holds Shares of 10% or More

Serm Suk Beverage Co.,Ltd. (Indirect Subsidiary)

Location of Head Office : Muang Thai – Phatra Complex, Tower 1, 27-28th Floor,

252/35-36 Rachadaphisek Road, Huay Kwang, Bangkok 10310

Telephone 0-2693-2255 – 65

Fax 0-2693-2266

Main Business Manufacture and distribution of beverages

Number and Type of Issued Capital Number owned by Serm Suk Holdings Co., Ltd.


68,958,615 10 68,958,609 99.99

Basic Information

4



1.3 Reference Parties A) Securities Registrar: Thailand Securities Depository Co.,Ltd.

62 The Stock Exchange of Thailand Building

Ratchadaphisek Road, Klong Toey, Bangkok 10110

Telephone: 0-2229-2800 Fax: 0-2654-5427

B) Proxy for Debenture Holder: - None -

C) Auditors: Mr. Nirand Lilamethwat Certified Public Accountant No.2316, and/or

Ms. Nittaya Chetchotiros, Certified Public Accountant No.4439

KPMG Phoomchai Audit Limited

Empire Tower, 22nd Floor, 195 South Sathorn Road, Bangkok 10120

Telephone: 0-2677-2000 Fax: 0-2677-2222

D) Legal Consultant: Weerawong, Chinnavat & Peangpanor Ltd.

540 Mercury Tower, 22nd Floor, Ploenchit Road, Lumpini,

Pathumwan, Bangkok 10330

Telephone: 0-2264-8000 Fax: 0-2657-2222

E) Consultant or Manager under Management Contract: - None –

Basic Information

5



2. KEY FINANCIAL DATA 2.1 Liquidity Ratio

CONSOLIDATED THE COMPANY ONLY

2010 2009 2008 2010 2009 2008

Current Ratio (Time) 1.7 1.8 1.8 1.6 1.8 1.8

Quick Ratio (Time) 0.8 0.8 0.7 0.7 0.8 0.7

Operating Cash Flow to Current Liability Ratio (Time) 0.4 0.4 0.2 0.4 0.4 0.2

Receivable Turnover Ratio (Time) 18.2 16.9 18.3 17.9 16.9 17.5

Average Collection Period (Day) 19.8 21.3 19.7 20.1 21.3 20.5

Inventory Turnover Ratio (Time) 34.7 35.8 31.9 36.1 36.8 34.1

Sales Turnover Ratio (Day) 10.4 10.1 11.3 10.0 9.8 10.5

Account Payable Turnover Ratio (Time) 12.0 12.8 14.0 12.0 12.7 13.9

Average Payment Period (Day) 30.0 28.2 25.7 30.1 28.4 26.0

Cash Cycle (Day) 0.1 3.2 5.2 (0.1) 2.7 5.1

2.2 Profitability Ratio


2010 2009 2008 2010 2009 2008

Gross Profit Margin (%) 23.5 24.5 24.1 23.2 24.3 23.9

Operating Profit Margin (%) 2.0 1.6 0.3 1.9 1.6 0.3

Non-operating Profit Margin (%) 0.9 0.8 0.8 0.8 0.7 0.8

Operating Cash Flow to Operating Profit (%) 302.6 370.8 1,125.1 307.4 356.0 866.0

Net Profit Margin (%) 2.1 1.8 0.7 1.9 1.7 0.7

Return on Equity (%) 4.7 5.5 2.2 4.4 5.4 2.3

2.3 Efficiency Ratio


2010 2009 2008 2010 2009 2008

Return on Assets (%) 3.4 3.6 1.5 3.2 3.5 1.5

Return on Fixed Assets (%) 6.3 10.0 3.8 5.9 10.1 4.0

Asset Turnover (Time) 1.6 2.0 2.1 1.7 2.1 2.1

2.4 Financial Policy Ratio


2010 2009 2008 2010 2009 2008

Debt to Equity Ratio (Time) 0.4 0.5 0.5 0.4 0.5 0.5

Interest Coverage Ratio (Time) * * * * * *

Operating Cash Flow to Total Cash Outflow Ratio (Time) 4.0 2.2 2.8 3.9 2.1 2.7

Dividend Payout Ratio (%) 71.0 150.4 142.7 77.8 158.3 143.0

* No Interest bearing loan and interest expense.

Key Financial Data

6



3. BUSINESS OPERATION The Company operates the beverage business, both as a manufacturer and distributor, and has an indirect subsidiary company,

Serm Suk Beverage Co., Ltd., which manufactures and co-packs Lipton Ice Tea, Gatorade isotonic drink, and Tropicana Twister fruit juice

and sells directly to the Company or through Pepsi-Cola (Thai) Trading Co., Ltd who sells the products to the Company for distribution.

Currently, 99.99 percent of Serm Suk Beverage Co., Ltd. shares are held by Serm Suk Holdings Co., Ltd., a direct subsidiary company

established on November 23, 2006 with the main objective being to hold shares and manage investment in Serm Suk subsidiaries.

The Company holds 40 percent of the equity in Petform (Thailand) Ltd., a manufacturer and distributor of PET polymers, PET

bottles, and plastic closures.

INCOME STRUCTURE

Structure of Sales Revenue

% Equity 2010 2009 2008

Baht: Million Holding Income % Income % Income %

Manufacturing and Distribution of Beverages

Operated by: Serm Suk PCL 100.0 22,177 91.6 19,738 92.6 19,356 92.9

Manufacturing and Distribution of Beverages

Operated by: Serm Suk Beverage Co., Ltd.

(Previously Serm Suk YHS Beverage Co., Ltd.) 99.9 596 2.5 558 2.6 439 2.1

Manufacturing and Distribution of PET polymers

Operated by: Petform (Thailand) Co., Ltd. 40.0 1,428 5.9 1,028 4.8 1,050 5.0

24,201 100.0 21,324 100.0 20,845 100.0

* Shares held by Serm Suk Holdings Co., Ltd., a wholly owned (99.99 percent) subsidiary of Serm Suk Plc.

Income of Serm Suk Beverage Co., Ltd. is mainly derived from the sale of its products to Serm Suk Public Co., Ltd. or from

co-packing fees from Pepsi-Cola (Thai) Trading Co., Ltd. for products that are resold to Serm Suk Public Co., Ltd. for distribution. The

costs of products purchased from Serm Suk Beverage Co., Ltd. or Pepsi-Cola (Thai) Trading Co., Ltd. are categorized as cost of sales for

Serm Suk Public Co., Ltd.

Part of the revenues of Petform (Thailand) Co., Ltd. represents the sale of PET bottles and pre-forms to Serm Suk Public Co., Ltd.,

and this is categorized as product cost for Serm Suk Public Co., Ltd.

Products and Services

Manufacturing and Distribution: The Company has been appointed by Pepsi-Cola International Ltd., New York to manufacture

and distribute carbonated soft drinks under the brand names of Pepsi, Pepsi Max, Pepsi Twist, Mirinda, Seven-Up, Mountain Dew, and Club

as well as concentrate, under the brand names of Pepsi, Mirinda, and Seven-Up. The exclusive bottling agreement does not specify an

expiry date and includes a significant condition that the Company must procure the supply of concentrate solely from Pepsi-Cola (Thai)

Trading Company Limited or its subsidiaries. The Company is also required to maintain product quality according to Pepsi standards.

In addition, the right to manufacture and distribute is exclusive and non-transferable. The Company is also the manufacturer and

distributor of drinking water and soda water under its own Crystal brand name, Lipton Ice Tea in returnable bottles for Pepsi Lipton

International Ltd., Tropicana Twister in returnable bottles for Pepsi-Cola (Thai) Trading Co., Ltd., and Gatorade Sport Drink under license

from Strokely-Van Camp Inc. USA.

Business Operation

7



Distribution: The Company is the distributor of Red Carabao for Carabao Tawandang Co., Ltd., a distributor of Oishi ready-to-drink

green tea for Oishi Trading Co., Ltd., a sole distributor of Lipton ready-to-drink tea in cans and PET bottles, and a sole distributor of

Tropicana Twister ready-to-drink orange flavored fruit juice, in non-returnable bottles for Pepsi-Cola (Thai) Trading Co., Ltd. Both Lipton

in PET bottles and Tropicana Twister are bottled by Serm Suk Beverage Co., Ltd. under co-packing agreements from both licensors while

Lipton cans are co-packed by Serm Suk Public Co., Ltd.

Marketing and Competition

Soft Drinks

The production and distribution of soft drinks is a major industry requiring modern machinery for production and quality control,

and large numbers of personnel for transport and delivery of products to customers. The business is important in supporting businesses

throughout an extensive value chain including those that produce sugar, glass bottles, plastic bottles, plastic cases and bottle caps.

Competition is a year-round factor in the carbonated soft drinks industry, but growth in this product category is not as high as

other beverages due to new entrants in the market and changes in consumer behavior in favor of drinking water, fruit juices, mineral

water and milk products. These products are now competing directly with carbonated soft drinks.

The keys to success in the soft drinks industry are the ability to offer products manufactured to high-quality standards, providing

good service and responsiveness to consumer demands. Opportunity in the beverages industry depends on the increase in distribution

channels and expansion in the business of established customers, such as large wholesale and retail outlets, supermarkets, convenience

stores and quick serve food outlets. Ultimately, the growth rate in the industry is largely determined by the economic fundamentals of

the country in which that industry operates.

The prospects for the growth and development of an individual soft drink enterprise are impacted by its ability to execute

marketing activities, including advertising, sales promotions, packaging design and the introduction of new flavors/variants that attract

consumers. All of these efforts can contribute to the expansion in the business.

Competition in the soft drink business has intensified in terms of pricing, emphasizing higher volumes and lower prices. In 2009

Serm Suk introduced several new non-returnable package sizes including 460 ml, 480 ml, 1.2 litre and 1.5 litre and combined them with

an aggressive pricing plan. This move has continued to be well received by the market in 2010, increasing soft drinks sales significantly.

In 2010, the Company stimulated soft drinks sales by launching a wide range of sales promotional activities. The Company also

introduced new flavors of soft drinks including Pepsi Cheer in recognition of the football season and Mirinda Orange Banana. Sales of

soft drinks increased 7%, which is the highest annual increase in five years.

Crystal Drinking Water

The success factors of Crystal drinking water are product quality, customer service and engaging marketing activations. These

factors are critical in the drinking water market, where a plethora of producers compete with no price differentiation. Today, in

addition to the Company’s Crystal drinking water and the products of other major players, there are an increasing number of entrants

to the market leading to consumer confusion and a cluttered retail environment. This profusion of new brands in the market has had a

significant impact on sales of drinking water. Despite strong competition in the drinking water business, sales of Crystal drinking water

continued to show very strong growth with a 15 percent increase of its sales volume last year.

The success of Crystal is attributed to its high quality including certification from NSF International, an international audit agency

that inspects and certifies quality standards of bottled drinking waters. Crystal is the first bottled drinking water in Thailand to have

received this certification.

Business Operation

8



Lipton Ice Tea

When Unilever Thai Holdings Co., Ltd., one of Thailand’s largest producers and distributors of consumer products, entered the

ready-to-drink tea market in Thailand with its Lipton Ice Tea, in both cans and bottles, it chose to employ Serm Suk’s expertise in the

soft drinks industry as both a producer and nation-wide distributor. Serm Suk was appointed as the licensed manufacturer and sole

distributor of Lipton Ice Tea. This made Serm Suk the first truly integrated beverage company in Thailand. Various promotional activities

were organized jointly by Unilever and Serm Suk resulting in the rapid growth in Lipton Ice Tea sales.

In 2004, PepsiCo and Unilever entered into a global joint venture, Pepsi Lipton International Ltd., to promote the sale of Lipton Ice

Tea primarily through the Pepsi bottling system. Serm Suk continues to manufacture and distribute Lipton Ice Tea in returnable bottles

and cans, but does so now under the authority of Pepsi Lipton International Ltd. This is another step forward in Serm Suk’s relations with

PepsiCo to co-operate and develop opportunities connected to non-carbonated beverages.

Lipton Ice Tea is available in 10 oz. and 15 oz. returnable bottles and 350 ml. 450 ml. and 1 Litr PET bottles, during 2010 Lipton

grew by a strong 18%. The bottling of this product is done by Serm Suk Beverage Co., Ltd., a subsidiary company of Serm Suk, while the

distribution continues to be handled by Serm Suk Public Co., Ltd.

Gatorade Sport Drink

The Company has been appointed by Strokely-Van Camp Inc. as its sole manufacturer and distributor in Thailand for

Gatorade Sport Drink, the world’s number one sport drink. Gatorade is a highly recognized and popular sports drink brand. Gatorade is

scientifically formulated to offer excellent absorption without carbonation and good taste, which makes it ideal for athletes and anyone

who loses fluids through perspiration. Gatorade currently has two flavors, lemon and grape and is distributed in a new 350 ml and the

500 ml PET bottles. Gatorade sales grew by 10% in 2010.

Tropicana Twister Fruit Juice

Another step towards being a total beverage company was the launch of 14% fruit juice under the Tropicana Twister brand. This

product is manufactured by Serm Suk Beverage Co., Ltd. and distributed by Serm Suk Public Co., Ltd. Tropicana Twister, orange flavor,

is available in 250 ml. returnable bottles as well as 250 ml. non-returnable glass bottles and 350 ml. PET bottles. Tropicana Twister with

pulp is available in 250 ml. non-returnable glass bottles and 350 ml. PET bottles to extend the brand franchise. Tropicana Twister is

another alternative for consumers who wish to purchase refreshing and healthy products.

Red Carabao

In October 2002, the Company was appointed the distributor of the Red Carabao energy drink by Carabao Tawandang

Co., Ltd. In 2010, sales of Red Carabao achieved the highest growth with strong support from Carabao Tawandang, Co., Ltd. in the areas

of advertising, sales promotion and product development, making Red Carabao, a well-established brand that has received sustained

consumer acceptance.

Oishi Green Tea

With the growing popularity of green tea, the Company was appointed the distributor of Oishi green tea for Oishi Trading

Co., Ltd. beginning in November 2005, for traditional trade channel. In the face of increasing competition, Oishi has enjoyed ongoing

sales growth every year. In 2010, sales of Oishi were up 8%.

Business Operation

9



Products and Services Sourcing

Sources of key materials are as follows:

• ConcentratesforPepsi, Pepsi Max, Pepsi Twist, Mirinda, Seven-Up, Mountain Dew and Club are sourced from Pepsi-Cola (Thai)

Trading Co., Ltd.

• ConcentratesforLipton are sourced from Pepsi-Cola (Thai) Trading Co., Ltd.

• ConcentratesforTropicana Twister fruit juice and Gatorade are sourced from Pepsi-Cola (Thai) Trading Co., Ltd.

by the co-packers.

• DistributedgoodssuchasRed Carabao and Oishi Green Tea are sourced directly from the manufacturers and product

owners.

• Othermaterialsforproductionsuchassugar,CO2, various chemicals, bottles, crown seals, plastic cases, PET bottles, cans,

shrink film, and cardboard trays and boxes are sourced locally.

With the exception of concentrates which are supplied by the brand owners, the Company sources other raw materials and

packing materials from 3-4 suppliers in order to ensure a continual supply of raw materials and packing materials at reasonable prices.

Business Operation

10



4. RISK FACTORS In running its business, the Company has encountered several internal and external risk factors which directly or indirectly impact

the Company’s performance and financial status as well as its efforts to achieve its goals. The risk factors are as follows:

BUSINESS OPERATION RISKS:

There are several risk factors to ongoing business growth and profitability.

• Pricesandsufficiencyofingredientsandpackaging

Sugar, one of the key ingredients of the Company’s products, is controlled and regulated by the Government. The local

sugar price increased by Baht 5 per kilogram in May 2008. The new price was higher than global market price and this

had a significant impact on the Company’s product costs and operating results. The global price has increased even more

during 2009 due to tight sugar supply. Consequently, it led to concerns of possible supply shortages if the global sugar

supply situation continues. In 2010, the agricultural goods crisis was worsened due to climatic change. This situation

has led to insufficient global sugar supplies. The Company has contracted for the volume of sugar amount required for

production with its suppliers to ensure access to enough sugar to reach the Company’s annual sales target.

PET Bottle: Given the growing use of non-returnable products. including beverages in PET bottles, the price of PET

has been another major cost of the Company. Fluctuating oil prices have directly affected the PET price. In 2010, global

cotton yields were insufficient and subsequently polyester fiber has been used as a substitute in the textile industry. The

ingredients used in the production of polyester fiber are the same as those used to produce the plastic pellets used in PET

bottles, subsequently increasing production costs.

In addition to the aforementioned sugar and PET, other material prices, such as metal crown caps and cans vary in accor-

dance with the prices of steel and aluminum sheets. Some packaging has been redesigned done to ease the cost burden.

• Wages: The increase in basic wages announced by the Government has increased the Company’s costs of production

and operation. The shortage of labor in some areas, especially industrial estates or nearby communities was a problem.

Personnel development and operating adjustments have been used to increase the Company’s operating efficiency and

mitigate the impact of increased wages and a tight labor market.

• Excisetaxrate:The excise tax rate was a major external cost and is regulated by the Government. An adjustment of the

tax rate and basis of calculation was a significant risk factor. A team was assigned to deal with the relevant government

agencies and provide them with necessary information.

• Petrol price: The fluctuation in diesel prices has directly influenced the cost of transportation and distribution and

indirectly impacted other material prices such as PET bottles, cans, and metal crown caps. Political instability in several

oil producing nations has led to concerns about global petrol prices and supply. To minimize this risk, reduction of diesel

usage has been set as a key performance indicator and other alternatives have been closely studied by a dedicated team.

• Consumerbehavior: Given a more diverse range of beverages available and the change in consumer behavior towards

non-carbonated soft drinks, juices and functional drinks, the Company has responded with Crystal drinking water and a

variety of non-carbonated drinks. The increasing sales of these products have increased the contribution of non-carbonat-

ed products to the Company’s results.

• Climaticconditions:The intensity of changes to Thailand’s climate over the last several years has had significant impacts

on the Company’s business. The flooding in many provinces between September – early November 2010 had negatively

impacted the Company’s sales and expenses.

• Changeofgovernmentalpolicies for tax collection, price control, business laws and industrial regulations also lead to

uncertainty and risks to the Company’s operating and investment decisions.

To soften negative impact, the Company has emphasized on cost saving and expense control, revisiting and improving

working procedures to generate greater efficiency and productivity in all working units.

Risk Factors

11



PRODUCTION RISKS:

Due to the heavy investment in plant and machinery in the beverage industry, the Company depends on production with mass

volume and high efficiency to break-even. The seasonality of the business, with its peak period in the summer, also adds complexity

to the planning of production schedules and investment so as to avoid under-capacity during peak season and over-capacity for the

rest of the year. In addition, the sharp increase in demand for Crystal drinking water has led to the need to invest in additional drinking

water lines.

MANAGEMENT AND ADMINISTRATION RISKS:

The distribution of soft drinks and beverages still relies heavily on direct sales to customers, requiring the ability to provide

fast and reliable service and high returns. To operate the business, the Company closely followed the movement of its competitors

and adapted itself to changes in the market by maintaining 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 operational plan and accurate and updated information to be used

as management tools for decision-making. Investment in IT systems and qualified employees to implement and maintain these systems

is needed.

FINANCIAL RISKS :

• CreditControlandCollection:the Company has to exercise tight control over collections and credit while constantly

following-up on debts via the credit department and the management. In a situation of economic downturn or financial

crisis, which will adversely affect the economy, the Company will be more cautious before extending credits with more

stringent in following-up on debt repayments.

• Currency and Exchange Risks: Currency and exchange risks have a certain impact to the Company’s operating

costs. The Company has foreign currency liabilities and commitments that are limited to the import of new machines,

equipment and spare parts. The majority of the Company’s spending is transacted in the local currency.

• Riskfromnon-compliancetoagreementsbycounterpart: major agreements that are entered into by the Company

are;

The agreement related to the production and distribution of reliable products including carbonated beverages, Lipton

ready-to-drink tea and Tropicana Twister juice beverages. During the course of business operations, the Company did not

experience any major violation of its agreements.

In 2010, the audit committee reviewed (1) the Exclusive Bottling Appointment Agreement between Sermsuk Public

Company Limited (the “Company”) and Pepsi Co., Inc. and Seven-up International (“Pepsi”) entered into in 1998, under

which the Company is obligated to purchase concentrates from PepsiCo.,Inc. for manufacturing and bottling certain

CSD product items i.e. the products under the trademark of Pepsi, Pepsi Max, Pepsi Twist, Mirinda, Seven-Up, Mountain

Dew and Club, as well as (2) the Agreement for Cooperative Advertising and Marketing Principles between the Company

and Pepsi-Cola (Thai) Trading Co., Ltd. (“COOP”) entered into in 1997, collectively referred to as (the “Agreement between

the Company and Pepsi”). Given the fact that the Agreements between the Company and Pepsi were entered into

beyond a decade ago whereby the prevailing economic context has been prompted to evolve through ups and downs in

business cycles, both locally and globally, and differ substantially from the relevant factors constituting the current setting

of economic landscape. On 19 February 2010, the Independent Directors and audit committee thus cited in the report

and considered it appropriate to review whether the facts or factors used as a basis for determining the prices or terms

under the Agreement between the Company and Pepsi at the time have materially changed in substance. This is for

the independent Directors and audit committee to recommend the Board of Directors or executives of the Company as

course of proper actions for immediate situation and operational status facing the Company. Thereafter, the Extraordinary

General Meeting (EGM) of Shareholders of the Company No.1/2010 resolved to approve for the Board of Directors and

Risk Factors

12



persons empowered by it to negotiate for amendments to the Agreements in order to have better prices and terms and to

prepare a Future Business Plan of the Company as part of consideration whether to accept the prices and terms that result

from the negotiation between the Company and Pepsi. Then, the Company shall call an EGM of shareholders to approve

on one of the followings (1) An approval for the Company to amend the Agreements between the Company and Pepsi on

prices and terms resulting from the negotiation, or (2) An approval for the Company to proceed with the Future Business

Plan.

At the EGM of Shareholders No. 1/2011 on 15 February 2011, the meeting resolved to approve the Company to proceed

with the Future Business Plan (see detail in Section 9 Other Information Clause 9.2)

The Company received confirmation from Pepsi on 1 March 2011 to enter into new agreements with the essence

according to the resolution in EGM of Shareholders mentioned in clause 9.2. The new Agreements between the

Company and Pepsi must be entered into by 31 March 2011.

Regarding marketing support agreements with key customers, the management has carefully reviewed the content,

terms and conditions in the agreements before signing. The sales administration team also closely monitors compliance

with these agreements throughout the contract periods.

For purchase or service contracts, the Company would make settlement when payments become due, or only after the

receipt of goods or the rendering of services. For construction or installation agreements, final payment would be made

only after receiving bank guarantees to safeguard the Company from any damages after the end of contracts. With such

measures, the Company is well protected against risks from non-compliance to agreement by counterparts.

• InterestRateRisk:Currently, the Company and its subsidiaries operate as debt-free entities. In the future, if loans are

required for business expansion, interest rate movements may be a risk factor which the Company will need to consider

and evaluate in order to minimize the cost of funds before making any investment decision.

In addition to the aforementioned factors, there may be additional potential factors such as local political crises, environmental

regulations or others that may have a negative impact on the Company’s business.

Risk Factors

13



5. CAPITAL STRUCTURE AND MANAGEMENT 5.1 Shareholders list

As of the close of the Share Register Book on January 27, 2011 for invitation to the extraordinary shareholder meeting No. 1/2011

held on February 15, 2011:

Order Name Number of Shares % of Total Shares

1 SS National Logistics Co., Ltd. 86,732,207 32.62

2 ** Pepsi –Cola (Thai) Trading Co., Ltd. 66,321,960 24.94

3 ** Seven-Up Nederland, B.V. 44,140,000 16.60

4 * Thai NVDR Company Limited 27,678,916 10.41

5 Mr. Sarawuth Thiensuwan 12,574,800 4.73

6 Mrs. Saowanee Phatravanichanon 9,494,000 3.57

7 Mrs. Jarunee Chinwongvorakul 3,600,000 1.35

Remark:

* On February 23, 2011,

- Thai NVDR Co., Ltd. held 1.28% of Total Shares (sold 9.13% of Total Shares)

- SBK Beverage Limited held 9.13% of the Company of total shares.

5.2 Management Structure (1) The Management

The Board of Directors as of December 31, 2010 consisted of following Directors:

•Pol.Capt.PrasitTantsetthi Independent Director and Chairman of the Board

Educational Credential National Cert.(M.E.) Coventry Tech. Col. England 1953

Experiences Director, Bangkok Can Manufacturing Co., Ltd. (Previous)

• Mr.PhotipongLamsam Independent Director, Vice-Chairman of the Board, Member of Audit Committee

Educational Credential MBA, Temple University, USA.

Experiences Chairman, Muang Thai Life Insurance Co.,Ltd. (Current)

Chairman, Muang Thai Insurance Plc. (Current)

Chairman, Muang Thai Group Holding, Ltd. (Current)

Capital Structure and Management

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• Mr.SomchaiBulsook Director, President & CEO,

Member of Nominating and Corporate Governance Committee

Educational Credential Menlo School of Business Administration, Menlo Park California

Directors Certification Program (IOD Program, May 5 - December 3, 2003)

Experiences Chairman, Serm Suk Beverage Co.,Ltd. (Current)

Chairman, Petform (Thailand) Co., Ltd. (Current)

Chairman, Serm Suk Holdings Co., Ltd. (Current)

Independent Director, Member of Audit Committee, and Member of Human Resources

and Remuneration Committee Kasikorn Bank Plc.

Director, Bangkok Glass Co.,Ltd. (Current)

Independent Director, Royal Orchid Hotel (Thailand) Public Co., Ltd. (Current)

Director, Sheraton Royal Orchid Co., Ltd. (Current)

Director, Thai Royal Orchid Real Estate Co., Ltd. (Current)

Director, Ngow Hock Co.,Ltd. (Current)

Director, Ngow Hock Agency Co.,Ltd. (Current)

Director, Panjamitr Holding Co., Ltd. (Current)

• Mr.JakkrisBulsook Director

Educational Credential Bachelor of Engineering, Private Technishe Schule Von

Prof. Dr. Werner, Berlin, Germany

Experiences Director, Petform (Thailand) Co.,Ltd. (Current)

Director and Member of Audit Committee, Crown Seal Plc. (Previous)

• Mr.ManuAnand Director, Member of Compensation Committee,


Educational Credential Bachelor in Science with Honours in Physic, Delhi University

Chartered Accountant-Associated Member of Institute of Chartered

Accountants of India since 1982

Experiences President, India Region – PepsiCo International (Current)

General Manager, Southeast Asia Business Unit – Pepsi-Co International (Previous)

• Mr.PrasongSukhum Independent Director, Chairman of Audit Committee

Educational Credential MBA, Graduate School of Business, Harvard University

Experiences Vice Chairman, Osotspa Co., Ltd. (Current)

Chairman of Audit Committee, Union Textile Industries Plc. (Previous)

Director, White Group Plc. (Previous)

Secretary, Rural Development Program (Previous)

Deputy Minister, Ministry of Transportation and Communication (Previous)

Deputy Minister, Ministry of Commerce (Previous)


15



• Mr.RonaldStuartMcEachern Director,


Educational Credential M.B.A., Finance & Marketing, York University, Canada

Experiences President, PepsiCo International - Asia (Previous)

President, PepsiCo Beverages International - Asia (Previous)

General Manager, Asia Pacific Beverages, PepsiCo International (Previous)

General Manager, China Beverages, PepsiCo International (Previous)

• Mr.StefanoSartoretti Director,

Educational Credential MBA, Wharton School of Business, University of Pennsylvania, USA

Bachelor in International Finance and Accounting, Universita’LUISS, Rome, Italy

Experiences Senior Vice President & CFO, AMEA Division, PepsiCo International (Current)

Vice-President Planning & Strategy Development, AMEA Division,

PepsiCo International (Previous)

• Prof.KhunyingSuchadaKiranandana Independent Director and Member of Audit Committee

Educational Credential Master and Doctorial Degree (Statistics), Harvard University, USA

Bachelor of Commerce (First Honor), Chulalongkorn University

IDO Director Certification Program (DCP)

Experiences Independent Director and Member of Audit Committee, Kasikorn Bank

Plc. (Current)

Professor in Statistics Department, Chulalongkorn University (Current)

Chairman of Statistic Association, Thailand (Current)

Chairman of the Working Committee of the Phufah Store, Remoted Area

Children and Youth Development Fund (Current)

Director and Member of Audit Committee, Thai Red Cross (Current)

Member of the National Legislative Assembly, Thailand (Oct 2006-Mar 2008)

Rector of Chulalongkorn University (April, 2004-Mar 2008)


16



• Mr.SuchinWanglee Director, Member of Compensation Committee

Educational Credential BA in Electrical Engineering, Northrop Institute of technology, USA

Experiences Chairman of the Board of Directors, The Navakij Insurance Plc. (Current)

Chairman of the Board of Directors, Thai Reinsurance Plc. (Current)

Chairman of the Board of Directors, The Sathorn Thani Co.,Ltd. (Current)

Chairman of the Board of Directors, Rangsit Plaza Co.,Ltd. (Current)

Chairman of the Board of Directors, The Falcon Insurance Plc. (Current)

Vice Chairman of the Board of Directors, Thai Metal Drums Co., Ltd. (Current)

Independent Director, Thai-German Ceramics Industry Plc. (Current)

Independent Director, Varopakorn Co., Ltd. (Current)

Independent Director, and Member of Audit Committee

BTS Group Holdings Plc. (Current)

Director, Rajadamri Hotel Plc. (Current)

Director, The Pet Co., Ltd. (Current)

Director, Wanglee Co., Ltd. (Current)

Director, Aqua Infinite Co., Ltd. (Current)

Director, Wanglee Pattana Co., Ltd. (Current)

Director, Nuchapon Co., Ltd. (Current)

Director, The General Insurance Association (Current)

Fellow Member – Thai Institute of Directors (Current)

• Mr.WilliamEllwoodHeinecke Independent Director,

Chairman of Compensation Committee

Educational Credential Honorable Doctoral Degree of Business Administration in

Management, Yonok University

Director Certification Program (IOD Program, September 7

- November 2, 2005)

Experiences Chairman, The Minor Group. (Current)

Director, Rajdamri Hotel Plc. (Current)

Director, Everest Worldwide (Current)

Director, InsurExcellence Insurance Brokers Ltd. (Current)

Director, Indorama Ventures Plc. (Current)

• Mr.DhitivuteBulsook Director , General Plant Manager – Pathumthani

Educational Credential MBA of Babson College, USA

Experiences Director, The Bangkok Thonburi Insurance Co., Ltd. (Current)

Director, Crown Seal Plc. (Current)

Director, Petform (Thailand) Co., Ltd. (Current)

Director, Serm Suk Holdings Co., Ltd. (Current)

Marketing Director, Serm Suk Plc. (Previous)

Sales Director, Pepsi-Cola (Thai) Trading Co.,Ltd. (2000-2003)

Franchise Manager, Pepsi-Cola (Thai) Trading Co.,Ltd. (1997-2000)


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• Mr.TanmayaVats Director

Educational Credential Post Graduate in Economics with spl in Econometrics

Advance Management Program from Harvard Business School

Experiences Head – Global Value Innovation – Pepsi Co (Current)

Vice President - Commercial Capability – AMEA, PepsiCo (Previous)

Names of Number of Authorized Directors

Any two out of the following six directors may sign and affix the Company seal to legally bind the Company.

Pol. Capt. Prasit Tantsetthi, Mr. Dhitivute Bulsook, Mr. Somchai Bulsook, Mr. Manu Anand, Mr. Ronald Stuart McEachern, and

Mr. Jakkris Bulsook.

Executives

In addition to Mr. Somchai Bulsook, the Director, President and Chief Executive Officer, and Mr. Dhitivute Bulsook, Director and General

Plant Manager, Pathumthani, other executives are:

• Mr.ArthakritVisudtibhan Human Resources Director

Educational Credential Master Degree- Public Administration University of Southern California, USA

Experiences Working experience with Serm Suk Plc., 8 years

Director, Serm Suk Beverage Co.,Ltd. (Current)


Head of Human Resources-Standard Charter Nakornthon Bank Plc. (Previous)

• Mr.ParinyaPermpanich Marketing and Sales Operation Director

Educational Credential MBA, Kasetsart University


Director, Serm Suk Beverage Co.,Ltd. (Current)


Sales Operation Director, Serm Suk Plc. (Previous)

Marketing Manager, Serm Suk Plc. (Previous)

• Mr.SomnuekSuvanich Technical Director

Educational Credential Bachelor of Engineering (Mech.) Kasetsart University


Director, Petform (Thailand) Co., Ltd. (Current)

MIS Mgr., Philips Electronics of Thailand (Previous)

• Mr.SinKusri General Plant Manager – Nakornsawan

Educational Credential Vocational Certificate (Accounting), Silom Commercial College


General Plant Manager – Suratthani (Previous)

• Mr.KwanchaiMahapornprachak General Plant Manager – Nakornratchasima

Educational Credential Bachelor of Marketing, Assumption Business Administration College


Sales Manager – Green Spot (Thailand) Co. Ltd. (Previous)

Regional Sales Manager – Nestle (Thai) Co. Ltd. (Previous)

Regional Sales Manager – Dumex Co., Ltd. (Previous)


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• Mrs.DaruneeYindeepholcharoen Acting Finance Director, Assistant to the Finance Director

Educational Credential MBA, Western Michigan University, Michigan, USA


Finance Director, Thai Fuji-Xerox Co., Ltd. (Previous)

Finance and Accounting Manager, Nokia (Thailand) Co., Ltd. (Previous)

(2)NominationandAppointmentofDirectors

The Nominating and Corporate Governance Committee is responsible for the selection of qualified and experienced

individuals for the Board of Directors. These are then considered by the shareholders and elected as appropriate.

The Board of Directors is elected by the shareholders at a General Meeting according to the Company’s

Articles of Association, which set forth the following procedures:

1) A Shareholder shall have a number of votes which is equivalent to the number of shares held by him/her;

2) Each Shareholder may exercise all the votes he/she has to elect one or more persons as Directors, but he/she may not split

his/her votes among any such persons;

3) The persons receiving the highest number of votes in respective order shall be appointed Directors. The number of

Directors will depend on the requirements set at such time. In the event that a number of persons receive an equal

number of votes for the last directorship, resulting in the number of Directors being more than is required at such time, the

Chairman of the meeting shall have the deciding vote.

If a directorship becomes vacant for any reason other than by rotation, the Board of Directors shall elect a person, who is

qualified and does not have any prohibited characteristics as provided in Sections 68 of the Public Limited Company Act B.E. 2535, as a

director to fill the vacancy. The election shall take place at the subsequent Board of Directors’ meeting unless the remaining term of the

director is less than 2 months. The Director who fills the vacancy shall retain his office only for the remaining term of the office of the

Director whom he replaces. For these purposes the resolution of the Board of Directors shall require not less than three-fourths of the

votes of the remaining directors.

(3) DirectorsandManagement’sFeesandRemuneration

3.1)FeesandRemunerationinformofcash

a)DirectorRemuneration.

Directors remuneration comprises an annual fee, meeting allowance, and a bonus as approved by the Shareholders, as set

out in more detail in Item 10 of the 15 principles of good governance.

2009 2010

No. of Directors Total Amount (Baht) No. of Directors Total Amount (Baht)

Annual Fee 4,990,000,00 7,436,671.00

Bonus 6,000,000.00 14,000,000.00

Total 19* 10,990,000.00 18** 21,436,671.00

Remuneration paid excludes 2010 bonus reserved for payment upon shareholders’ meeting approval.

* Including 4 directors who completed directorship term and resigned during the year

** Including 5 directors who completed directorship term and resigned during the year

CapitalStructureandManagement

19



Detail of Director’s remuneration paid in 2010:

Remuneration Amount Total Amount

PolCapt.PrasitTantsetthi •Directorfee 240,000.00

•Meetingallowance 480,000.00

•2009Directorbonus 1,600,000.00 2,320,000.00

Mr. Cherdpan Bulsook 1 •Directorfee 53,753.00


•2009Directorbonus 1,200,000.00 1,283,753.00

Mr.SomchaiBulsook •Directorfee 240,000.00


•AnnualfeeandmeetingallowanceNominating 85,000.00

& Corporate Governance Committee

•2009Directorbonus 1,600,000.00 2,485,000.00

Mr.JakkrisBulsook •Directorfee 120,000.00

•MeetingAllowance 220,000.00

•2009Directorbonus 800,000.00 1,140,000.00

Mr. John William Hancock 2 •Directorfee 111,781.00



and Corporate Governance Committee

•2009Directorbonus 800,000.00 1,321,302.00

Mr. Joseph Georges Zakaria 3 •Directorfee -

•MeetingAllowance -

•2009Directorbonus 135,890.41 135,890.41

Mr.ManuAnand •Directorfee 120,000.00



and Corporate Governance Committee

•AnnualfeeandmeetingallowanceCompensation 85,000.00

Committee

•2009Directorbonus 800,000.00 1,330,000.00


20



Remuneration Amount Total Amount

Mr.PhotipongLamsam •Directorfee 155,178.00


•Annualfeeandmeetingallowance 230,000.00

Audit Committee

•2009Directorbonus 800,000.00 1,515,178.00

Mr.PrasongSukhum •Directorfee 120,000.00



Audit Committee

•2009Directorbonus 800,000.00 1,430,000.00

Mr.RonaldStuartMcEachern •Directorfee 120,000.00



•2009Directorbonus 800,000.00 1,245,000.00

Mr.StefanoSartoretti •Directorfee 120,000,00


•2009Directorbonus 800,000.00 1,060,000.00

Prof.KhunyingSuchadaKiranandana •Directorfee 120,000.00



Audit Committee

•2009Directorbonus 800,000.00 1,390,000.00

Mr. Surajit Wanglee 4 •Directorfee 35,836.00

•2009Directorbonus 800,000.00 835,836.00

Mr. Surin Osathanugrah 5 •Directorfee 52,274.00



Compensation Committee

•2009Directorbonus 800,000.00 1,039,699.00

Mr.WilliamEllwoodHeinecke •Directorfee 120,000.00




•2009Directorbonus 800,000.00 1,355,000.00


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Remuneration Amount TotalAmount

Mr.TanmayaVats •Directorfee 120,000.00


•2009Directorbonus 664,109.59 924,109.59

Mr. Dhitivute Bulsook 6 •Directorfee 84,164.00

•MeetingAllowance 220,000.00 304,164.00

Mr. Suchin Wanglee 6 •Directorfee 84,164.00


•Annualfeeandmeetingallowance

Compensation Committee 37,575.00 321,739.00

Total Director Compensation paid in 2010 21,436,671.00 21,436,671.00

1 Completed directorship and Vice-Chairman of the Board of Directors Term on April 20, 2010

2 Resigned from directorship on December 7, 2010

3 Resigned from directorship on March 4, 2009

4 Completed directorship term on April 20, 2010

5 Resigned from directorship on June 9, 2010

6 Appointed as director on April 20, 2010

b) Executive remuneration and compensation

The President and Chief Executive Officer and 6 other executives are remunerated as follows:

2009 2010

No of Executives Total Amount (Baht) No of Executives Total Amount (Baht)

Salary 62,143,998.51 66,138,735.00

Provident Fund 3,373,872.00 3,047,562.15

Remuneration/Bonus 9,780,391.00 6,171,187.20

Total 10 75,298,261.51 7 75,357,484.35

3.2)OtherCompensation

Executives Long-term Incentive Plan (Phantom Plan)

The Board of Directors’ meeting No. 4/2006 held on June 13, 2006 passed a resolution approving the establishment of a new

long-term incentive program to the Company’s executives (Phantom Plan) replacing the Executive Stock Incentive Plan (ESIP) of which

the final allotment for its 5th year was completed in 2005. The new incentive program is a 5 year program covering 2006 – 2010

giving each executive the non-transferable incentive units calculated as a fixed percentage of salary divided by the conversion price.

The conversion price is set at the earnings per share of the year prior to the grant date multiplied by approved target growth and

a tenfold price earnings ratio. The incentive payment will be made in the form of cash payment to each executive 3 years after the

granting date of the incentive units. The payment will equal the number of incentive units multiplied by the redemption price whereas

the redemption price is calculated from the 3 year average EPS multiplied by 10 times of the price earnings ratio. The second payment

of incentives was paid in 2010 and the third payment will be paid in 2011.


22



(4) Corporate Governance

The Company’s Board of Directors consists of 13 members elected by the resolution of the Shareholders’ meeting as mandated

by the Company’s Articles of Association. The Board of Directors appoints the Chairman of the Board and the President and Chief

Executive Officer. The President and Chief Executive Officer is authorized to manage the Company’s business under usual business

norms and the direction from the Board of Directors. Seven directors from the Board are authorized Directors whose signatures,

together with the Company seal, will legally bind the Company.

A Board of Directors meeting is held once every 2 months. However, in order to resolve any urgent issues, a special meeting may

be called as necessary. In 2010, there were total 14 meetings.

The Board of Directors appoints an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance

Committee. The composition and responsibility of these committees is set out under Item 12 of the 15 Principles of Good Governance.

The Board of Directors exercises its managerial role through the review of management reports made at Board of Directors

meetings as to the Company’s operations and performance, compared to the operating plan and performance of the previous year.

Moreover, the Board’s approval or ratification is required for the implementation of important policies and projects, for example,

projects involving substantial investment, transactions with related parties, etc.

The Board of Directors is committed to adhering to the Code of Best Practices for the Directors. Review and scrutiny of the

Company management has been carried out regularly to ensure compliance with laws, the Company’s objectives and regulations, and

the resolutions of the shareholders’ meeting, with due care for the Company’s benefits and responsibility to the shareholders.

As required by the Securities Exchange Commission and Stock Exchange of Thailand that all listed companies disclose their

compliance with the 15 principles of good governance, the Company summarizes its compliance status as follows:

1. Policy on Corporate Governance: The Board of Directors Meeting has approved the Company’s Corporate Governance

Policy as follows:

The Board of Directors believes in the principles of good corporate governance and recognizes its importance in strengthening the trust

of its shareholders, its stakeholders and the public at large, and increasing shareholder value. The Board of Directors is thus committed to

compliance with corporate governance guidelines issued by the regulatory bodies that govern the operations of public companies, and to the

implementation of such other standards that are appropriate to the proper conduct of the business of the Company.

2. Shareholders – Rights and Equitable Treatment: The Company encourages shareholders to exercise their legal

rights, such as rights to receive their share of profits in the form of dividends, rights to freely transfer the Company’s stock, rights

to access the Company’s news and information, rights to attend and vote in the shareholders’ meetings. To ensure shareholders’ access

to updated news and information, the Company announces its operating results and important information to the shareholders via the

Securities Exchange of Thailand and on the Company’s website. For each shareholders’ meeting, the Company will send shareholders

an invitation letter at least fourteen days before the meeting, setting out the meeting agenda and including the supporting documents

(via the Company Registrar), so as to provide Shareholders enough time to review the detailed information. The invitation letter and

other Annual General Shareholders’ Meeting materials will also be posted on the Company’s website. The Company also publishes the

Shareholder invitation letter in a daily newspaper, both Thai and English, 3 days before the meeting.

In 2010, Annual General Meeting of Shareholders was held on April 20, 2010.

3. Stakeholders’ Rights: The Company recognizes the Stakeholders’ rights and the protection of their interests in the Company

as per the following policies:


23



• Shareholders: The Company acknowledges the responsibility to increase the shareholders’ benefit and provide sufficient

information on the Company’s operations and performance to all shareholders. With this objective, the business operations of the

company have been conducted carefully and transparently in order to increase sales, profits and financial strength. The Company

has also continuously improved its business processes to increase operating efficiency and cost control, which has resulted in better

performance.

• Employees: Employees’ ethics and discipline in the operation of the business are strongly stressed, as they result in a good

reputation and image for both the Company and its employees. The Company provides a good working environment, equal

opportunity and fair treatment to all employees, with no discrimination on the basis of sex, race or religion.

•Customers:TheCompanyrealizestheimportanceofcustomersandconsumers’rightstoreceivegoodqualityproductsatafair

price, including product trial opportunities and the benefits from sales promotion campaigns. The Company has established an active

system to receive customer complaints regarding products and services, providing quick responses and corrective actions.

•Suppliers,BusinessPartners,andCompetitors:TheCompanyhasapurchasingpolicyforsupplierstoallowopenbids,inorderto

ensure a fair deal based on good quality products and services at a reasonable price. The Company is committed to free trade and fair

competition according to the law.

•Community:TheCompanyishighlycognizantofitssocialresponsibilitywithactivitiescontributingtothewellnessofsociety,

such as the Song Bulsook Foundation’s scholarships to students, projects to promote health through sports among youth, ongoing

work in the areas of environmental protection and sustainability, and donations to victims of floods and other natural disasters.

• Environmental Protection: The Company actively participates in environmental protection and energy saving programs to

prevent air and water pollution and manage unused materials by using Clean Technology and the 3R (Reduce, Reuse and Recycle)

concept in all of its manufacturing and distribution procedures. The Company has operated under the 5 Serm Suk Green Dimensions

which are water, packaging, energy, environment and human resources. The Company has broadened its environmental activation to

the public by being an environmental conservation and protection model for external parties and other enterprises, aiming to form

a major force that drives environmental and social sustainability in Thailand and allows Serm Suk to grow in a good and sustainable

environment in Thailand.

4. Shareholders’ Meetings: The Company allocates enough time at Shareholders’ meetings for Shareholders to express their

opinions and question the Chairman, Board Members, and Board Committees about the Company’s operations.

5. LeadershipandVisionof theBoardofDirectors: The members of the Board of Directors are qualified and experienced

individuals who have vision, exercise independence in making important decisions, and set up policies and directions for the benefit of

the Company and shareholders.

6. Conflicts of Interest: The Company believes in the need for the independence of its directors and management, to prevent

any conflict of interest, and to strictly comply with the direction and regulations of the Securities and Exchange Commission – especially,

conflict of interest regarding connected persons from connected transactions or the conflict of interest of an employee from his respon-

sible duty. The Company Code of Conduct for Directors provides that at a Board of Directors meeting, a director who has an interest in

any item on the agenda is not permitted to attend the meeting during the discussion of such matter and is not entitled to vote.

7. Business Ethics: The Company emphasizes business ethics throughout its operations by providing quality products

and services to its customers and consumers, cooperating with governmental agencies and ensuring its compliance with laws

and regulations. The Company Code of Conduct for Directors and the Employee’s Code of Conduct (for all employees from middle

management up to senior executives) contain specific provisions in this respect.


24



8. BalanceofPowerforNon-ExecutiveDirectors:

Definition of “Independent Director”:

An Independent Director is the director elected by shareholders who:

• Holds shares of not more than 1 percent of paid-up capital of the Company, affiliated company, associated company or related

company, which shall be inclusive of the shares held by related persons;

•Doesnottakepartinthemanagement,orbeinganemployee,staffmemberoradvisorwhoreceivesaregularsalary,orhavingdirector

indirectbenefitorinterestinthefinanceandmanagementoftheCompany,affiliatedcompany,associatedcompanyormajorityshareholder

of the company;

•IsnotarelatedpersonorcloserelativeofanymanagementmemberormajorityshareholderoftheCompany;

•IsnotappointedasarepresentativetosafeguardinterestsoftheCompany’sdirectors,majorityshareholdersorshareholderswhoare

relatedtotheCompany’smajorityshareholders;

• Is capable of performing duties, giving opinions as a director free and clear of the control of the management or the majority

shareholders of the Company including related persons or close relatives of the said persons.

The Company acknowledges the need to appoint outside and independent directors. The Board of Directors as at December 31,

2010 consisted of 2 executive directors, 6 non-executive directors (not independent) and 5 independent directors.

9. Aggregation or Segregation of Duties: The positions of Chairman of the Board of Directors and the Chief Executive Officer

are held by different persons, in order to clearly segregate duties in setting corporate policy and daily management. Approval from the

Board of Directors and/or shareholders is required on major and material matters. The Company operating performance is reported at

the Board of Directors Meetings, and the Board is able to review and ask questions about operating performance and the management.

10. Directors Fees and Management Remuneration: Directors’ remuneration consists of directors’ fees and directors’ bonuses,

as approved by the shareholders in the Annual General Meeting No. 1/2010 held on April 20, 2010. The Chairman of the Board and the

President and Chief Executive Officer each receives an annual fee of Baht 240,000 and a meeting allowance of Baht 40,000/meeting, the

Vice Chairman of the Board receives an annual fee of Baht 180,000 and a meeting allowance of 30,000/meeting, and other directors each

receive an annual fee of Baht 120,000 and a meeting allowance of 20,000/meeting. In addition, the Board of Directors received a total

bonus of Baht 14 million for 2009 performance, which was allocated between directors in proportion to their annual director’s fees.

Sub-committees’ remuneration was approved by the shareholders in the Annual General Meeting No. 1/2008 held on April 29,

2008 as follows:

The Audit Committee – The Chairman of the Audit Committee receives a Baht 160,000 annual fee and meeting allowance of Baht

50,000 per meeting. Members of the Audit Committee each receive a Baht 80,000 annual fee and meeting allowance of Baht 25,000 per

meeting.

The Compensation Committee – The Chairman of the Compensation Committee receives a Baht 80,000 annual fee and meeting

allowance of Baht 25,000 per meeting. Members of the Compensation Committee each receive a Baht 40,000 annual fee and meeting

allowance of Baht 15,000 per meeting.

The Nominating and Corporate Governance Committee – The Chairman of the Nominating and Corporate Governance Commit-

tee receives a Baht 80,000 annual fee and meeting allowance of Baht 25,000 per meeting. Members of the Nominating and Corporate

Governance Committee each receive a Baht 40,000 annual fee and meeting allowance of Baht 15,000 per meeting.


25



The Management’s remuneration, both cash and non-cash (i.e. Stock Ownership Program or Executive Stock Incentive Plan) is

recommended by the Compensation Committee for approval by the Board of Directors and/or the shareholders, as appropriate.

11.Board of Directors’ and Board Committee Meetings: The Board holds meetings once every two months, Directors’

meetings are pre-scheduled with notices of the meeting sent out to Directors at least 7 days prior to the meetings. There is enough

time provided for discussion. Questions raised by the directors are explained and clarified by the responsible executives. The written

minutes of the meetings as approved by the Board of Directors are maintained for future verification. In 2010, there were 14 Board of

Directors meetings.

Other sub-committee meetings are held as appropriate. In 2010 there were 6 Audit Committee meetings, 3 Compensation

Committee meetings, and 3 Nominating and Corporate Governance Committee meetings, with the attendance of directors and

members of committees as follows:

TheAttendanceofBoardofDirectorsMeetingsandSub-CommitteeMeetingsin2010

Board of Audit Compensation Nominating and Annaul General

Directors’ Committee Committee Corporate Shareholders’

Meetings Meetings Meetings Governance Meeting

Committee

Meetings

Pol. Capt. Prasit Tantsetthi 1 12/14 1/1

Mr. Cherdpan Bulsook 2 1/14 0/1

Mr. Somchai Bulsook 14/14 3/3 1/1

Mr. Jakkris Bulsook 11/14 1/1

Mr. John William Hancock 3 13/14 3/3 1/1

Mr. Tanmaya Vats6 7/14 1/1

Mr. Prasong Sukhum 1 10/14 3/6 0/1

Mr. Photipong Lamsam 1 13/14 6/6 1/1

Mr. Manu Anand 6 12/14 3/3 3/3 1/1

Mr. Ronald Stuart McEachern 6 12/14 3/3 1/1

Mr. Stefano Sartoretti 6 7/14 0/1

Prof. Khunying Suchada Kiranandana 1 12/14 6/6 0/1

Mr. Surajit Wanglee 2 0/14 0/1

Mr, Surin Osathanugrah 4 7/14 2/3 0/1

Mr. William Ellwood Heinecke 1 14/14 3/3 1/1

Mr. Suchin Wanglee 5 10/14 1/3 0/0

Mr. Dhitivute Bulsook 5 11/14 0/0

1 Independent Directors

2 Completed Directorship Term on April 20, 2010

3 Resigned from Directorship on December 7, 2010

4 Resigned from Directorship on June 9, 2010

5 Appointed as Director on April 20, 2010

6 Non-resident Directors


26



12. Committees: The Board of Directors has set up following sub-committees to work in particular areas:

Audit Committee The Audit Committee consists of three members as follows:

Mr. Prasong Sukhum Chairman

Mr. Photipong Lamsam

Prof. Khunying Suchada Kiranandana

The Audit Committee is responsible for the review of the Company’s financial statements and internal control, including

review of compliance with rules and regulation set by the Securities and Exchange Commission and Stock Exchange of Thailand,

or related laws. The Audit Committee considers and recommends the appointment of the Company’s auditors and the disclosure

of related transactions to ensure their accuracy and correctness. The Audit Committee also prepares the Audit Committee Report to

summarize the completion of the activities assigned by the Board of Directors.

In 2010, there were totally 6 Audit Committee meetings to review and approve the Company’s quarterly and annual financial

statements prior to their submission to the Stock Exchange of Thailand. The meetings also reviewed the audit points and corrective

actions observed by the internal and external auditors on the Company’s internal control, making an assessment about the adequacy

of internal control processes, reviewing the connected transactions and transactions which would cause a conflict of interest to ensure

compliance with the regulations set by the Securities Exchange Commission and the highest benefits to the Company, appointing

external auditors and fixing the audit fee, and preparing the Audit Committee report to the shareholders in the Company’s annual report.

Nominating and Corporate Governance Committee The Nominating and Corporate Governance Committee consists of

four members as follows:

Mr. Somchai Bulsook

Mr. Ronald Stuart McEachern

Mr. Manu Anand

Remark : Mr. John William Hancock, Chairman of Nominating and Corporate

Governance Committee resigned from Directorship on December 7, 2010.

The Nominating and Corporate Governance Committee is responsible for the selection of qualified and experienced

individuals to propose to the Board of Directors and shareholders for election as Directors; to make proposals for evaluation of Directors,

and to develop and recommend to the Board appropriate actions to ensure good corporate governance.

In 2010, there were 3 meetings held by the committee to review many issues relating to corporate governance, including

the Company’s Corporate Governance Policy, the Directors Code of Conduct, and the Charter of the Compensation Committee; the

nature of connected transactions in order to avoid a conflict of interest of the executives and persons involved with setting policy; the

qualifications of independent directors; the policy for nominating directors and committee members; evaluating Board performance;

preparation of the Director’s Manual; directors’ training with IOD; and the disclosure of information on the Company’s website.

Compensation Committee The Compensation Committee consists of three members as follows:

Mr.William Ellwood Heinecke Chairman

Mr.Manu Anand

Mr.Suchin Wanglee *

Remark :

* Mr.Suchin Wanglee was appointed as Director on April 20, 2010 and member of Compensation

Committee on August 3, 2010.

Mr. Surin Osathanugrah resigned from Directorship on June 9, 2010.

The Compensation Committee is responsible for setting up the policy and compensation structure to ensure fairness to

and motivation of the employees and management. The Compensation Committee considers the annual salary adjustment, bonus

payment, and the allocation of securities to the Company’s executives and makes proposals to the Board of Directors and shareholders

for approval.


27



The meetings of the committee were held as necessary. In 2010, there were 3 meetings to review and approve the merit

increase and bonus payment for the President and CEO; to approve the operating objectives for the CEO, and to consider and approve

the 5th year targets for the executives’ long-term incentive plan and propose to the Board of Directors for approval.

13. Control System and Internal Audit: The audit of the Company’s operations are conducted by the internal audit team,

who work closely with the system’s development team to implement policies and procedures for good internal control and

effectiveness of the operations of all units. The audit findings together with audit recommendation are reported to the President and

CEO after completion of the audit, and reported to the Audit Committee on a quarterly basis.

14. Directors’ Report: All directors are responsible for the preparation of the Company’s financial statements, and are

required to certify that report individually in section 3 of Annual Report Form 56-1 submitted to the Stock Exchange of Thailand, and for

acknowledgement of shareholders and investors. In addition, the Management (i.e. President and CEO, and Finance Director) also certify

quarterly as to the correctness of the information in compliance with the rules and regulations of the Stock Exchange of Thailand.

The report of the Board of Directors’ Responsibility on the Financial Statements appears on page 39-92 of this annual report.

15. Relations with Investors: The Company reports its performance and important information to the Securities and Exchange

Commission and the Stock Exchange of Thailand via the assigned media on a regular basis, and arranges meetings with individual

investors by designated representatives of the Company.

(5) Control of Internal Information The Company employs a strict policy on the use of internal information, particularly confidential information about operations,

business plans and performance of the Company which, if released inaccurately or prematurely, would cause damage to the Company

and/or its shareholders.

The Company has established control measures for its directors, executives, and employees to prevent unauthorized use

information for their own or other parties’ benefit. The Company also requires its directors and executives to inform the Securities

and Exchange Commission and the Stock Exchange of Thailand about their holdings and trading of the Company’s stocks to ensure

transparency and fairness.

To restrict the release of internal information and that related to information technology, the Company has established a strict

control on the use, access, and prevention of loss of information. Authorized personnel are equipped with passwords to operate and

use information at different levels. For confidential information and information the release of which is prohibited by the Securities and

Exchange Commission regulations, directors and management are obliged not to release or comment on that information outside the

Company.

Moreover the Company has, in the Employee’s Code of Conduct, stated that it would take disciplinary actions against the

management and employees for the improper use of information, including the use of information for their own benefit. In line with

the Securities and Exchange Commission regulations, Directors and management are required to file a report with the SEC to declare

the status of their holdings of the Company’s stock every time they buy or sell such stock, and are not to allow any act that impacts on

the share transactions of the Company and its related company.


28



(6) Internal Control The Company values the importance of internal control in protecting it from possible damage. The Company sets clear

objectives, operating plans, strategies, and procedures as operating and measurement tools.

To ensure a good internal control and audit system, the Audit Committee is assigned to make regular assessments to the

Company’s internal control system, at least once a year, and to report the findings to the Board of Directors after each assessment.

In 2010, 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 organizational structure and environment, risk management, control over management, operations,

information technology and communication, and follow-up procedures.

•Organizational Structure and Environment, The structure and operating environment of the Company promotes effective

operations and sufficient internal controls. 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 undertakes

measurement of results, taking into account all variable factors such as the economic situation, market conditions and competition.

• Risk Management, The Company closely follows the changes in risk factors such as taxation, the increase of raw

material prices and other costs, in order to assess the impact and set up action plans for the survival of the business. The Company

holds meetings with its management and employees on a regular basis to communicate the situation and the impact of external risks

influencing the Company’s operations and continuously sets up measurements to minimize the impact of those risks. In each operating

units, the head of the unit is responsible for risk management and prevention in his/her own unit.

•ManagementControl, The Company sets clear responsibilities, duties, and authorization of the management emphasizing

the segregation of duties for authorization, recording, and safeguarding 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

ensure the greatest benefit to the Company. The Company has an operating manual of authorization limits and approvals, and has set

up a physical asset verification procedure to ensure the completed count on every item is done within three years and there is a sample

count by the internal audit function to reconcile with the fixed asset register and accounting record.

• InformationSystemandCommunication, The Company submits sufficient and accurate information necessary for Board of

Directors’ decisions. Record keeping and accounting transactions are prepared according to recognized accounting standards, and are

audited and reviewed by the Audit Committee and the external auditors.

•Follow-upProcedures, The Company monitors its performance compared to its objectives and reports the results 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.

5.3 Dividend Policy The Company has a policy to pay dividends with a payout ratio not less than 40% of its net profit of each fiscal year of separate

financial statements after providing a legal reserve and carrying forward losses (if any) as required by law. However, the actual dividend

payment will depend on the Company’s cash flow position, investment plan, obligations and other conditions of the agreements as well

as other necessities and appropriateness in the future.


29



6. Connected Transactions

6.1 Related Parties

Pepsi-Cola(Thai)TradingCo.,Ltd.

Main Business Importing, producing, buying, selling, distributing, packing in cartons, bottling, and

exporting all types of beverages, including raw materials or ingredients used in production.

Relationship Major shareholder and incurs business transactions.

Seven-UpNederland,B.V.

Main Business Foreign Investment

Relationship Major shareholder

Serm Suk Holdings Co., Ltd. – Direct Subsidiary

Main Business Shareholding and investment management for Serm Suk group

Relationship Wholly owned subsidiary company of Serm Suk Public Co. Ltd.

Serm Suk Beverage Co., Ltd.– Indirect Subsidiary

Main Business Manufacture, distribution, and import and export agent for all types of beverages

Relationship Wholly owned subsidiary company of Serm Suk Holdings Co. Ltd. and incurs

business transactions with Serm Suk Public Co. Ltd.

Petform (Thailand) Co., Ltd.

Main Business Manufacture and distribution of plastic containers and PET polymers

Relationship An associated company of Serm Suk Public Co., Ltd. and a supplier of plastic

performs, PET bottles, and closures.

Crown Seal Public Co., Ltd.

Main Business Manufacture and distribution of crown seal, aluminum caps, lids, and other metal products

for local market and export.

Relationship A company in which Serm Suk Public Co., Ltd. has invested and incurs business transactions.

Petpack Co., Ltd.

Main Business Buying and selling plastic and all plastic products both raw materials and finished products,

construction material, tools of all kinds, paint, painting tools, and decorating materials.


The Pet Co., Ltd.

Main Business Manufacture and distribution of packaging products made from plastic, PVC, metal,

paper, foam, or other recycled materials.


Connected Transactions

30




• A direct subsidiary company, Serm Suk Holdings Co., Ltd., was set up with Baht 500 million registered capital (50 million

ordinary shares at par value of Baht 10 each) of which Baht 350 million were paid up. The Company holds total 49,999,993 shares

of the registered capital. Business objective of this newly set up company is to hold shares and manage investment of Serm Suk group

of companies. In November 2006, the Company sold and transferred shares in Serm Suk Beverage Co., Ltd. (indirect subsidiary) to

Serm Suk Holdings Co., Ltd. for Baht 337.9 million and incurred Baht 172.4 million losses on the transaction.

•Purchaseofrawmaterialsandfinishedproducts,subsidyofmarketingexpenses,andsellingandadministrativeexpensesin2010

Baht 4,084 million.

- Purchase of raw materials and finished products, marketing subsidy, and selling and administrative expenses were made

according to the conditions and sum specified in the relevant agreements. These connected transactions with the major shareholders,

the company where Serm Suk Public Co., Ltd. has an investment or joint directors/management, have been recorded according to the

agreed amount and in accordance with the normal business norm.

- Transactions with the indirect subsidiary company (Serm Suk Beverage Co., Ltd.) were the purchase of the manufactured or

co-packed products such as Lipton Ice Tea in returnable glass bottles, Lipton in PET bottles, Tropicana Twister fruit juice both in the

returnable bottles and non-returnable PET and glass bottles, Gatorade in the PET bottles, directly from the indirect subsidiary or through

Pepsi-Cola (Thai) Trading Co. Ltd. Sales revenues of Serm Suk Beverage Co., Ltd. therefore derived from sales of the manufactured

products to the Company or Pepsi-Cola (Thai) Trading Co., Ltd. for resale to the Company for distribution. The sales were recorded as

cost of sales for Serm Suk Public Company Limited.

- Transactions with the associated company in which the Company holding 40 per cent share were the purchases of raw

materials which have been included as production costs of the Company.

•Salesofproductsorservices Baht207million

•Purchaseofassets -none-

•Salesofassetstotherelatedparties -none-

•Borrowing,lending,orguaranteeing

- Loan to The Pet Co., Ltd. Baht 5.0 million

Loans to The Pet Co., Ltd. are long term loan agreements amounting Baht 3 and 2 million and repay within 20 may 2014 and

31 January 2015, respectively. These agreements shall continue to be in effect for another period of five years if there is no change at

the maturity date. Interests are quarterly payable at the rate of MLR of a domestic commercial bank at the beginning of each quarter

plus 3% p.a.

•Interestincomefor2010 Baht0.5million

•Guaranteeonbankloanstothesubsidiary -none-

•Potentialcompetingproductsorservices -none-

•Agreementsformanagementorassistance:Advertisingandmarketingagreement,asperconditionsandsumspecifiedinthe

agreement.

•Transactionswithsubsidiaryandassociatedcompanies:

Purchase of goods from indirect subsidiary company for distribution, and purchase of raw materials from associated company have

been presented with amount combined.


31



6.2 Necessity for the Connected Transactions

Serm Suk Public Co., Ltd. has been licensed to manufacture and distribute the products under brand names belong

to Pepsi-Cola International Ltd., Pepsi Lipton International Ltd., and Strokely Van Camp Inc. To maintain the quality of the products

as specified by the licensor, the Company needs to source major raw materials from the licensor or its representative. In fixing the

purchase price, the Company has bargained and made agreements for reasonable prices and support for marketing, and sales and

administrative expenses from the seller in order to maximize the Company’s benefits. The purchase from the indirect subsidiary

company is planned to facilitate the expansion of product lines distributed by the Company. Both parties negotiated and entered into

a distribution agreement for the acceptable prices and margin. Purchase of raw materials and products with other related parties is to

ensure the uninterrupted and consistent supply of quality raw materials.

6.3 Procedure for the Approval of Connected Transactions

Every connected transaction has been carefully considered and analyzed by the management for its pros and cons before

entering into an agreement. All connected transactions with the related parties which have significant legal implications, have to be

proposed to the Board of Directors for approval before any commitment is made.

6.4 Policy or Trend for Future Connected Transactions

The trend for future connected transactions continue to be the purchase of raw materials and finished products including

marketing support between the Company, its associate and subsidiary companies, as well as the major shareholders, which were the

normal business transactions of the Company.


32



7. FINANCIAL ANALYSIS AND EXPLANATION

Assets Composition and Capital Structure

The Company’s assets shown in the consolidated financial statements mainly consist of fixed assets such as land, buildings,

machinery and equipment (54 percent of total assets), inventories (18 percent), cash, bank deposits, and short-term investment

(11 percent), accounts receivable (9 percent), and other assets for the balance (8 percent).

The liability to equity ratio is 1 to 2.8 indicating the strong financial position of the Company. 25 percent of total liabilities are

deposits for bottles and cases whereas accounts payable and other payables represent 53 percent, accrued expenses and corporate

income tax payable 14 percent, and other liabilities 8 percent. The capital structure consists of Baht 266 million paid-up capital, Baht

1.342 billion premium on share capital, Baht 3.656 million surplus on land revaluation and retained earnings of Baht 4.733 billion.

Operating Results

Net profit for 2010 is stated in the Consolidated Profit and Loss Statement at Baht 467.9 million, an increase of Baht 114.3 million

from the previous year. The major reason for the increase in profit was the increase in sales volume yielding an increase of Baht 337.8

million gross profit margin. Selling and administrative expenses grew by Baht 198.0 million due to rising staff expenses and higher

diesel prices. The Company has undertaken the cost control and efficiency improvement program in relation to product costs and

lowering selling and administrative expenses.

Sales revenues of Baht 21.976.7 billion in 2010 increased by Baht 2,282.3 million or 11.6 percent over 2009. This was the result of

promotional activities, the launching new value packages and a long period of warm weather. Changes of consumer behavior toward

alternative beverages, including fruit juice, functional drinks and more players in the industry continued to be key challenges. The

Company added several new products and organized advertising and sales promotion campaigns to stimulate consumer demand.

During the year new product flavors including Pepsi Cheer and Mirinda Orange Banana were launched. Further, several new package

sizes that were introduced in 2009 to attract value oriented consumers including 460 ml., 480 ml., 1.2 litre, and 1.5 litre continued to

receive a positive consumer response in 2010. The Company supported advertising and sales promotions through a range of media

including television, newspapers, billboards, and posters as well as sales promotional activities such as lucky draws and discounts.

Other income of Baht 147.8 million in 2010 rose by Baht 49.8 million, or 50.7 percent from last year.

Cost of sales of Baht 16.813.9 billion, increased by Baht 1,944.5 million or 13.1 percent, due to incremental sales volume and

the growth in each product. Another factor that increased costs was the incremental cost of fuel. Several cost control and efficiency

improvement measures were continued, such as the reassigned production line and manning in order to improve efficiency and the

change of packing format in order to reduce costs but maintain product quality and promote brand image.

Sellingandadministrationexpenses of Baht 4,593.4 million in 2010 increased by Baht 198.0 million from last year as a result of

increasing staff costs based on the Company’s annual staff performance review, rising wages, growing employee benefits as well as the

increase in diesel prices. The Company remained committed to undertaking cost control and efficiency improvements while modern-

izing its transportation and distribution systems and rationalizing its sales routes and logistical arrangements to be in line with its sales &

service areas. Other advances were stringent application controls of fuel, water supply, power, and other utilities, efficient management

of selling, administration, marketing and sales promotional expenses. With such efforts, the Company has partially reduced the impacts

arising from higher expenses.

Shareofprofitfromanassociate,netofincometax of Baht 52.0 million baht in 2010 declined by 10.0 million baht or 16.1%.

Corporateincometax for the year was Baht 175.4 million, an increase of Baht 55.0 million or 45.7% due to higher profit before

income tax, according to the income tax reduction measure as announced in 2008. The measure defines the income tax rate of 25% for

the first 300 million baht tax and it had been effective from 2008 until 2010.

FinancialAnalysisandExplanation

33



The Company made concerted efforts to minimize the impact of negative factors by executing a multifaceted cost reduction and

efficiency program while simultaneously driving sales of high margin products and packages in both the carbonated and non-carbonat-

ed beverage categories. These efforts have allowed the Company to enjoy a profitable performance with preliminary earnings per share

of Baht 1.76 in 2010, an increase of Baht 0.43 from last year.

The Company’s financial position reported in the consolidated financial statements as of December 31, 2010 revealed

total assets of Baht 13,647.7 million with strong financial liquidity consisting of cash on hand, bank deposits, and short-term invest-

ments, of Baht 1,446.7 million. Cash available was determined after accounting for all financial requirements for operations and capital

investment. Trade receivables of Baht 1,207.8 million increased from last year by Baht 37.5 million due to the increase in sales revenue

in the last quarter. Inventories of Baht 2,413.4 million increased from last year by Baht 22.1 million. Land, buildings, and equipment of

Baht 7,426.5 million, increased by Baht 3,888.6 million mainly due to the net increase of 3,636.2 million in adjusted land value based on

the depreciated replacement cost approach. Buildings and equipment grew by 949.1 million baht with annual depreciation of 693.2

million baht under the stringent control of asset investments.

Total liabilities of Baht 3,642.1 million increased by Baht 259.1 million from last year mainly due to increased trade payables of Baht

231.7 million, which were related to the increase in sale revenue in the last quarter, accrued expenses were 84.3 million baht, which was

mainly from additional provisions for employee welfare benefits and higher accrued marketing costs. Corporate income tax dropped by

Baht 36.0 million which coincides with the before tax profits for the second half of 2010 that was lower than 2009 and that was in line

with non-current liabilities which were mainly from the additional provision for employee retirement. Shareholders’ equity increased by

Baht 3,876.7 million to Baht 13,647.7 million, as a result of increased surplus of Baht 3,655.7 million on land revaluation. Net profit was

Baht 467.9 million in 2010 after the deduction of 2009 dividend of Baht 530.6 million.

In the Statements of Cash Flows, cash outflows for investing activities included the spending on fixed assets of Baht 951.2 million.

The spending was the purchase of production machines and equipment, vehicles, repair and maintenance, expansion of plants and

warehouses, and marketing equipment to support sales and distribution.

FinancialAnalysisandExplanation

34



8. Legal Disputation

8.1 A petition submitted by Pepsi-Cola Thai Trading, the company’s major shareholder, to the court

On November 14, 2010, the Company received a petition dated November 3, 2010 of Pepsi-Cola (Thai) Trading Co., Ltd., which

was submitted to the Civil Court under Black Case No. 4128/2553, seeking the court to issue an order to cancel the shareholders’

resolutions obtained at the Extraordinary General Meeting of Shareholders No. 1/2010. The Court scheduled the first hearing on

January 17, 2011.

On January 17, 2011, the Company duly filed an objection to the Court. As a result of the filing, the Court has fixed consecutive

witness examinations whereby the Claimant shall have 3 days, during July 5-7, 2011, and the Company, respondent, shall have 4

days, July 8, and 12-14, 2011 for witness examination.

On January 29, 2011, the Company received a petition dated January 13, 2011 of Pepsi-Cola (Thai) Trading Co., Ltd., which was

submitted to the Civil Court under Black Case No. 112/2554, seeking for the Court to issue an order to cancel the shareholders’

resolutions obtained at the Extraordinary General Meeting of Shareholders No. 2/2010. The Petitioner stated in the petition that

it was not allowed to exercise its voting right on Agenda item No. 3 at such shareholders’ meeting. It was the agenda item for the

meeting of shareholders to ratify the postponement of the matters previously prescribed to be taken at the Extraordinary General

Meeting of Shareholders No. 2/2010 within December 15, 2010 and to consider an approval for the Company to call an Extraor-

dinary General Meeting of Shareholders No. 1/2011 within February 15, 2011. The Court scheduled the first hearing on March 28,

2011, which was the same topic as the petition dated November 3, 2010.

The petitioners of both cases did not call the company to make any payment for damages.

The Company has an honest belief that it has completely and correctly complied with the relevant laws and has taken into

consid eration legal rights that shareholders are entitled to. Further, the Company has done all actions in the best interest of

the Company and its shareholders as a whole. The Company will respectfully comply with any judgment or order that the Court

may render.

8.2 Other than the petition in No. 8.1, the company was involved in no significant legal disputes.

Legal Disputation

35



9. Other Information

9.1 In 2010, there were 2 Tender Offers.

The 1st Tender Offer:

On 27 April 2010, Strategic Beverage (Thailand) Co., Ltd. launched a Voluntary Tender Offer. The objective is to acquire a

significant stake in the Company to collectively with the Offeror’s related parties reached 51% shareholding in the Company. Therefore,

the Offeror intent to acquire at least 25,147,287 shares at Baht 29.00 per share. The Tender period was taking a total of 25 working days

from 30 April 2010 to 10 June 2010.

CIMB, Independent Financial Advisor (“the IFA”) was appointed from the Company’s Board of Directors to review and render

opinion on the tender offer. On 14 May 2010, the IFA had the opinion that the tender offer price of Baht 29.00 per share lower than

the calculated fair value of Baht 39.3 -41.9 per share or 26.2-30.8 percent lower from fair value. As ending of tender period, Strategic

Beverage (Thailand) Co., Ltd cancelled the offer due to number of shares offered to sell less than minimum shares required.

The 2ND Tender Offer:

On 28 October 2010, SS National Logistics Company Limited launched a Voluntary Tender Offer. The objective is to acquire a

significant stake in the Company by holding not less than 25% of total voting rights in the Company. Therefore, the Offeror intent to

acquire at least 66,475,121 shares at Baht 42.00 per share. The Tender period was taking a total of 25 working days from 29 October 2010

to 2 December 2010.

CIMB, Independent Financial Advisor (“the IFA”) was appointed from the Company’s Board of Directors to review and render

opinion on the tender offer. On 17 November 2010, the IFA had the opinion that the tender offer price of Baht 42.00 per share is

appropriate as it lies in the optimal range of Baht 40.1 -42.4 per share. Aside the share price, the IFA noted that the shareholders should

consider potential impact from the amendment of the Exclusive Bottling Appointment Agreement and Marketing Agreement. As

ending of tender period, there were 86,732,207 shares offered to sell of which were more than minimum shares required. SS National

Logistics Company Limited confirmed to purchase such shares.

9.2 In 2010, there were 2 Extraordinary General Meetings of Shareholders and 1 Extraordinary General Meeting of Shareholders in

Quarter 1/2011.

ExtraordinaryGeneralMeetingofShareholders1/2010on4October2010

Important agendas were (1) to approve the Board of Directors or persons empowered by the Board to negotiate an

amendment of the Exclusive Bottling Appointment Agreement between company and Pepsi Co Inc. and Seven-Up International

and Cooperative Advertising and Marketing Agreement between company and Pepsi-Cola (Thai) Trading Co., Ltd. in order to have

better prices and terms and prepare future business plan of the Company for shareholders’ consideration whether to accept the prices

and terms (2) to approve the Board of Directors to call Extraordinary General Meeting of Shareholders within 15 December 2010 to

acknowledge and approve negotiation result or future business plan.

ExtraordinaryGeneralMeetingofShareholders2/2010on14December2010

Important agendas were (1) to acknowledge the updated progress of the negotiation and the preparation of future

business plan and (2) to ratify the rescheduling of actions, which were previously determined to be conducted at the Extraordinary

General Meeting of Shareholders within 15 December 2010 and approve the Board of Directors to call the Extraordinary General

Meeting of Shareholders 1/2011 within 15 February 2011.

Other Information

36



ExtraordinaryGeneralMeetingofShareholders1/2011on15February2011

Important agendas were (1) to acknowledge the result of the negotiation and future business plan. CIMB (IFA) rendered

opinion that Pepsi’s proposal did not add significant economic value while exclusivity scope restricts the Company from pursuing the

new business plan. Moreover, condition of change in Control is beyond the control of the Company. The Board of Directors is of the

opinion that the shareholders should not approve the Company to amend the Agreements which are result of the negotiation and

approve the Company to proceed with future business plan. The meeting considered and resolved to proceed with future business plan.

Further, the Company must receive confirmation from Pepsi that it accepts to enter into agreements that contain term and condition

proposed by the Board of Directors within 15 days from the date of Meeting of Shareholders passes the resolution or by 2 March 2011.

The new agreement must be entered within 31 March 2011. In the event that the Company does not receive confirmation from Pepsi

within 15 days from the date of Meeting of Shareholders passes the resolution, the Company shall terminate the Agreements between

the Company and Pepsi immediately and the termination shall be effective as the Board of Directors considers appropriate but no later

than 12 months.

On 1 March 2011, the Company received confirmation from Pepsi. The essence are as follows :

(1) It shall contain the formula of calculating the price of the concentrates which result in the price of concentrate to drop 9%

per year from the price under the present EBA;

(2) If Pepsi insists on preserving the right to terminate the agreement upon change of control in the Company, there shall

not be provisions regardings penalty and damages to be incurred by the Company and the term “Control” shall have a

definition which is clear and generally acceptable;

(3 The Company shall not be subject to restriction on the production and sale of the beverages under the Agreements with

Pepsi, unless the beverages are of the same kind and type and are in competition with each other, such as Cola;

(4) With respect to other proposed Commercial terms in relation to sale promotion and marketing budget, Contractual Term

and Pepsi’s Requests, unless otherwise prescribed under (1)-(3) or (5) herein, shall be in accordance with Pepsi’s Proposals;

and

(5) Other provisions and conditions must be reasonable, such as the period of a notice to terminate the agreement, and the

agreement shall not have provisions or conditions which are not to direct commercial points for the agreements of such

nature, such as provision of right of Pepsi to appoint an executive, or provisions which are beyond the Control of the

Company.

Other Information

37



Board of Directors of Serm Suk Plc. is responsible for the financial statements of Serm Suk Plc. and the consolidated financial

statements of the Company and its subsidiary including all financial information disclosed in the Company’s annual report. The financial

statements were prepared in accordance with Thailand’s Generally Accepted Accounting Principles, using appropriate and consistent

accounting policies. The Management exercised due care in the preparation and disclosure of all significant financial information. The

financial statements were examined by an independent certified public accountant who expressed unqualified opinion in the Auditor’s

report. The financial statements provide true and reliable information on the Company’s financial position, revenues and expenses, and

cash flow to the shareholders and investors.

Board of Directors ensures the existence of appropriate and efficient risk management and internal control systems to safeguard

and maximize the use of the Company’s assets.

Board of Directors has appointed Audit Committee consisting of independent directors to oversee overall business operations,

to ensure the quality of financial reports and the adequacy of internal control system. Scope of responsibility of the Audit Committee is

summarized in the Audit Committee Report.

Board of Directors has an opinion that the Company maintains appropriate and adequate internal control system which

helps ensuring the accuracy and reliability of the financial statements of the Company and its subsidiary for the year ended

December 31, 2010.

Report of The Board of Directors’ Responsibility on The Financial Statements

38



To The shareholders

Serm Suk Public Company Limited

The Audit Committee, appointed by the Board of Directors on December 9, 2008, consists of 3 independent directors whose

records of attendance during 2010 are as follows.

1) Mr. Prasong Sukhum Chairman Attending 3 of 6 meetings

2) Mr. Photipong Lamsam Member Attending 6 of 6 meetings

3) Prof. Khunying Suchada Kiranandana Member Attending 6 of 6 meetings

In 2010, the Audit Committee held 6 meetings. 4 Ordinary meetings to review the operations of the Company and its

subsidiaries, including the assessment of the sufficiency and efficiency of the internal control system, the review of the internal audit

plan and audit reports, the following-up on the issues raised by the auditors and providing corrective suggestions, the assessment

of the risk management, the review of the quarterly and the annual financial sttements together with the management, the internal

auditor, and the external auditor to ensure the sufficiency and correctness of the financial statements and the disclosures according

to the generally accepted accounting principles, the review of the connected transactions or transactions which could possibly lead to

the conflict of interest, the review of overall operation to ensure the compliance to laws and regulations, the appointment of external

auditor and fixing audit fee.

2 extra ordinary meetings to consider and provide opinion to the board of directors for the report of Independent financial advisor

about the appropriate of tender price from Tender Offerer.

The operations of the Company and its subsidiaries in 2010 revealed the adequacy of the internal control system. The financial

statements and disclosures were prepared and reported according to the generally accepted accounting principles and the governed

laws and regulations.

Prasong Sukhum

Chairman of the Audit Committee

February 25 , 2011

Report of The Audit Committee

39



To the Shareholders of Serm Suk Public Company Limited

I have audited the accompanying consolidated and separate balance sheets as at 31 December 2010 and 2009, and the

related statements of income, changes in equity and cash flows for the years then ended of Serm Suk Public Company Limited and its

subsidiaries, and of Serm Suk Public Company Limited, respectively. The Company’s management is responsible for the correctness

and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial

statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform

the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial

statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated and separate financial statements referred to above present fairly, in all material respects, the financial

positions as at 31 December 2010 and 2009 and the results of operations and cash flows for the years then ended of Serm Suk Public

Company Limited and its subsidiaries, and of Serm Suk Public Company Limited, respectively, in accordance with generally accepted

accounting principles.

(Nittaya Chetchotiros)

Certified Public Accountant

Registration No. 4439

KPMG Phoomchai Audit Ltd.

Bangkok

25 February 2011

Audit Report of Certified Public Accountant

40



Current assets

Cash and cash equivalents 7 1,434,677,640 1,503,499,946 1,344,226,123 1,445,701,095

Current investments 8 12,000,000 12,853,852 - 2,932,128

Trade accounts receivable 6, 9 1,207,782,024 1,170,307,500 1,228,364,220 1,166,403,855

Short-term loans to related parties 6 341,636,798 463,117,651 386,295,226 506,259,975

Inventories 10 2,413,420,750 2,391,300,851 2,355,012,750 2,349,830,541

Prepaid crown tax and lids taxes 243,436,833 196,625,389 242,425,081 196,310,506

Other current assets 11 128,105,306 99,746,690 103,095,101 76,942,953

Total current assets 5,781,059,351 5,837,451,879 5,659,418,501 5,744,381,053

Non-current assets

Restricted deposits at financial institution 36 2,414,753 2,402,828 2,414,753 2,402,828

Investment in a subsidiary 12 - - 350,000,000 350,000,000

Investment in an associate 13 244,451,913 233,576,470 30,000,000 30,000,000

Other long-term investments 14 122,118,638 96,924,022 122,118,638 96,924,022

Long-term loans to a related party 6 5,000,000 3,000,000 5,000,000 3,000,000

Property, plant and equipment 15 7,426,545,370 3,537,990,383 7,176,634,478 3,332,269,832

Intangible assets 16 45,352,488 40,959,213 45,075,076 40,609,950

Other non-current assets 17 20,764,199 18,717,613 20,764,199 18,717,613

Totalnon-currentassets 7,866,647,361 3,933,570,529 7,752,007,144 3,873,924,245

Total assets 13,647,706,712 9,771,022,408 13,411,425,645 9,618,305,298

Balance sheets As at 31 December 2010 and 2009

Consolidated Separate financial statements financial statementsAssets Note 2010 2009 2010 2009 (in Baht)

The accompanying notes are an integral part of these financial statements.

41



Balance sheets

As at 31 December 2010 and 2009

Consolidated Separate financial statements financial statementsLiabilities and equity Note 2010 2009 2010 2009 (in Baht)

Current liabilities

Trade accounts payable 6, 18 1,378,843,104 1,147,189,766 1,393,267,036 1,162,486,828

Accounts payable to related parties 6 23,953,958 15,840,000 23,140,000 15,840,000

Other payables 458,412,091 539,606,619 452,069,395 533,595,528

Accrued expenses 504,701,448 420,409,077 492,855,657 406,633,077

Income tax payable 19,419,105 55,427,573 19,412,296 55,416,436

Dividends payable 32 75,052,204 74,372,131 75,052,204 74,372,131

Customers’ deposits on bottles

and cases 896,747,454 880,286,227 896,747,454 880,286,227

Other current liabilities 19, 21 80,769,715 47,765,162 79,885,191 45,632,817

Total current liabilities 3,437,899,079 3,180,896,555 3,432,429,233 3,174,263,044

Non-current liabilities

Employee benefits 20 185,598,497 186,529,111 185,598,497 186,529,111

Long-term provision 21 18,576,635 15,562,138 18,576,635 15,562,138

Totalnon-currentliabilities 204,175,132 202,091,249 204,175,132 202,091,249

Total liabilities 3,642,074,211 3,382,987,804 3,636,604,365 3,376,354,293


42



Equity

Share capital 22

Authorized share capital 265,900,484 265,900,484 265,900,484 265,900,484

Issued and paid-up share capital 265,900,484 265,900,484 265,900,484 265,900,484

Additional paid-in capital 23

Premium on ordinary shares 1,342,448,425 1,342,448,425 1,342,448,425 1,342,448,425

Unrealised surpluses (deficits)

Surpluses on land revaluation 3, 23 3,655,703,421 - 3,611,942,071 -

Fair value changes on investments 14 8,822,178 (15,708,388) 8,822,178 (15,708,388)

Retained earnings

Appropriated

Legal reserve 23 26,795,766 26,795,766 26,795,766 26,795,766

General reserve 23 4,089,000,000 4,282,000,000 4,089,000,000 4,282,000,000

Unappropriated 616,962,227 486,598,317 429,912,356 340,514,718

Total equity 10,005,632,501 6,388,034,604 9,774,821,280 6,241,951,005

Total liabilities and equity 13,647,706,712 9,771,022,408 13,411,425,645 9,618,305,298

Consolidated Separate financial statements financial statementsLiabilities and equity Note 2010 2009 2010 2009 (in Baht)

Balance sheets

As at 31 December 2010 and 2009


43



Consolidated Separate financial statements financial statements Note 2010 2009 2010 2009 (in Baht)

Statements of income

For the years ended 31 December 2010 and 2009

Revenues

Revenue from sale of goods and rendering of services 6 21,976,697,155 19,694,422,521 22,035,150,917 19,738,337,449

Other income 6, 25 147,835,698 98,077,265 182,794,909 140,439,872

Total revenues 22,124,532,853 19,792,499,786 22,217,945,826 19,878,777,321

Expenses

Cost of sales of goods and rendering of services 6 16,813,938,482 14,869,390,334 16,931,249,135 14,946,908,275

Selling expenses 6, 26 3,262,665,270 3,238,895,537 3,242,738,059 3,221,372,547

Administrative expenses 27 1,330,740,751 1,156,481,259 1,319,141,635 1,141,536,584

Management benefit expenses 6, 28 125,863,554 115,608,878 122,493,001 112,568,891

Totalexpenses 21,533,208,057 19,380,376,008 21,615,621,830 19,422,386,297

Share of profit of an associate,

net of income tax 13 51,975,443 61,935,507 - -

Profitbeforeincometaxexpense 643,300,239 474,059,285 602,323,996 456,391,024

Income tax expense 30 175,380,221 120,392,190 175,370,250 120,366,414

Profit for the year 467,920,018 353,667,095 426,953,746 336,024,610

Basic earnings per share 31 1.76 1.33 1.61 1.26


44



Balanceat1January2009 265,900,484 1,342,448,425 - (22,145,130) 26,795,766 4,282,000,000 332,273,163 6,227,272,708

Unrealised gain

Available-for-sale investments Net change in fair value recognised in equity - - - 6,436,742 - - - 6,436,742

Net income recognised directly in equity - - - 6,436,742 - - - 6,436,742

Profit for the year - - - - - - 353,667,095 353,667,095

Dividends 32 - - - - - - (199,341,941) (199,341,941)

Balanceat31December2009 265,900,484 1,342,448,425 - (15,708,388) 26,795,766 4,282,000,000 486,598,317 6,388,034,604


Unrealised gain

Surplus on land revaluation 3, 23 - - 3,655,703,421 - - - - 3,655,703,421

Available-for-sale investments

Net change in fair

value recognised in equity - - - 24,530,566 - - - 24,530,566

Net income recognised

directly in equity - - 3,655,703,421 24,530,566 - - - 3,680,233,987


Transfer to unappropriated 4 - - - - - (193,000,000) 193,000,000 -

Dividends 32 - - - - - - (530,556,108) (530,556,108)

Balance at 31 December 2010 265,900,484 1,342,448,425 3,655,703,421 8,822,178 26,795,766 4,089,000,000 616,962,227 10,005,632,501

Consolidated financial statements Additional Unrealised paid-in capital surpluses (deficits) Retained earnings Issued and Premium paid-up on ordinary Surpluses on Fair value changes Legal General Total Note share capital shares land revaluation on investments reserve reserve Unappropriated equity (in Baht)

Statements of changes in equity



45



Separate financial statements Additional Unrealised paid-in capital surpluses (deficits) Retained earnings Issued and Premium paid-up on ordinary Surpluses on Fair value changes Legal General Total Note share capital shares land revaluation on investments reserve reserve Unappropriated equity (in Baht)


Unrealised gain Available-for-sale investments Net change in fair value recognised in equity - - - 6,436,742 - - - 6,436,742

Net income recognised directly in equity - - - 6,436,742 - - - 6,436,742


Dividends 32 - - - - - - (199,341,941) (199,341,941)

Balanceat31December2009 265,900,484 1,342,448,425 - (15,708,388) 26,795,766 4,282,000,000 340,514,718 6,241,951,005


Unrealised gain

Surpluses on land revaluation 3, 23 - - 3,611,942,071 - - - - 3,611,942,071 Available-for-sale investments Net change in fair value recognised in equity - - - 24,530,566 - - - 24,530,566

Net income recognised directly in equity - - 3,611,942,071 24,530,566 - - - 3,636,472,637


Transfer to unappropriated 4 - - - - - (193,000,000) 193,000,000 -

Dividends 32 - - - - - - (530,556,108) (530,556,108)

Balance at 31 December 2010 265,900,484 1,342,448,425 3,611,942,071 8,822,178 26,795,766 4,089,000,000 429,912,356 9,774,821,280

Statements of changes in equity



46



Statements of cash flows


Cash flows from operating activities

Profit for the year 467,920,018 353,667,095 426,953,746 336,024,610

Adjustmentsfor

Depreciation and amortization 709,988,292 743,672,860 688,359,852 703,692,879

Interest income (9,103,780) (8,571,594) (8,566,099) (8,272,925)

Dividend income (12,566,867) (8,025,336) (53,666,867) (57,525,336)

Unrealized loss on exchange 851,531 193,127 851,531 193,127

(Reversal of) allowance for doubtful accounts (2,265,433) 4,903,468 (2,265,433) 4,903,468

(Reversal of) allowance for devaluation of inventories 18,197,702 (36,771,341) 19,134,745 (35,379,979)

Loss on land revaluation 19,467,127 - 19,467,127 -

Gain on disposal of sparepart and equipment (24,935,480) (8,968,528) (20,944,491) (6,398,482)

Gain on written off assets and liabilities (3,180,589) (442,548) (3,180,592) (564,723)

Employee benefits 10,611,641 47,487,727 10,611,641 47,487,727

Provision 20,512,412 18,758,235 20,512,412 18,758,235

Share of profit of an associate, net of income tax (51,975,443) (61,935,507) - -

Income tax expense 175,380,221 120,392,190 175,370,250 120,366,414

1,318,901,352 1,164,359,848 1,272,637,822 1,123,285,015

Changes in operating assets and liabilities

Trade accounts receivable (29,418,900) (120,889,059) (53,904,741) (65,332,000)

Receivables from related parties 119,511,476 (126,921,703) 117,995,372 (136,518,490)

Inventories (40,589,396) 93,789,941 (24,319,498) 58,402,522

Prepaid crown tax and lid taxes (46,811,444) (23,107,816) (46,114,575) (24,846,290)

Other current assets (40,953,894) (2,090,757) (45,605,496) (4,546,785)

Trade accounts payable 231,653,338 110,391,330 230,780,208 107,704,270

Accounts payable to related parties 8,113,958 8,952,469 7,300,000 8,952,469

Other payables (82,056,527) 129,364,513 (82,388,132) 127,067,807



47



Statements of cash flows



Accrued expenses 101,231,626 80,308,323 103,161,835 72,307,203

Customers’ deposits on bottles and cases 16,461,227 (17,165,119) 16,461,227 (17,165,119)

Other current liabilities 25,138,074 (11,991,268) 26,385,895 (13,769,249)

Employee benefits paid (9,631,435) - (9,631,435) -

Provision paid (11,542,256) (9,138,951) (11,542,256) (9,138,951)

Income tax paid (218,211,674) (92,163,332) (211,374,390) (85,774,742)

Net cash provided by operating activities 1,341,795,525 1,183,698,419 1,289,841,836 1,140,627,660

Cash flows from investing activities

Interest received 8,965,086 8,816,242 8,462,490 8,425,938

Dividends received 53,666,867 57,525,336 53,666,867 57,525,336

Current investment 853,852 (12,853,852) 2,932,128 (2,932,128)

Short-term loan to a related party 2,000,000 - 2,000,000 -

Restricted deposits at financial institution (11,925) 2,848,532 (11,925) 2,848,532

Purchase of long-term investments (664,050) (9,365,625) (664,050) (9,365,625)

Long-term loans to a related party (2,000,000) (3,000,000) (2,000,000) (3,000,000)

Purchase of property, plant and equipment (951,224,369) (568,359,916) (928,809,087) (562,004,331)

Sale of sparepart and equipment 28,674,139 13,295,433 23,884,450 8,248,705

Purchase of intangible assets (18,179,194) (11,161,560) (18,079,444) (10,995,000)

Other non-current assets (2,822,202) (10,545,239) (2,822,202) (7,015,239)

Net cash used in investing activities (880,741,796) (532,800,649) (861,440,773) (518,263,812)

Cash flows from financing activities

Dividend paid to equity holders of the Company (529,876,035) (199,134,624) (529,876,035) (199,134,624)

Net cash used in financing activities (529,876,035) (199,134,624) (529,876,035) (199,134,624)

Net increase (decrease) in cash and cash equivalents (68,822,306) 451,763,146 (101,474,972) 423,229,224

Cash and cash equivalents at beginning of year 1,503,499,946 1,051,736,800 1,445,701,095 1,022,471,871

Cash and cash equivalents at end of year 7 1,434,677,640 1,503,499,946 1,344,226,123 1,445,701,095


48

Notes to the financial statements




These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the directors on 25 February 2011.

1 General information

Serm Suk Public Company Limited, “the Company”, is incorporated in Thailand and has its head office registered office at Muang

Thai-Phatra Complex, Tower 1, 27-28th Floor, 252/35-36 Rachadapisek Road, Huay Kwang, Bangkok 10310. The Company also has 5

factories for producing and distributing as follows:

1) Patumtani : 63 Nontaburi-Patumtani Road, Thumbon Bang Kayang, Amphur Muang, Patumtani

2) Nakornratchasrima : 211 Moo 4 , Nakornratchasrima-Kabinburi Road, Amphur Muang, Nakornratchasrima

3) Nakornsawan : 72 Paholyothin Road, Thumbon Nakornsawan Ook, Amphur Muang, Nakornsawan

4) Surattani : 11 Moo 5, Asia Road 41, Thumbon Ta Rongchang, Amphur Punpin, Surattani

5) Chonburi : 700/369 Moo 6, Thumbon Nhongmaidang, Amphur Muang, Chonburi

The Company’s warehouses are located in the important regions in Thailand.

The Company was listed on the Stock Exchange of Thailand in 1975.

The major shareholders of the Company, which held more than 10% of the share during the financial year SS National Logistics Co.,

Ltd. being in corporate in Thailand were Pepsi-Cola (Thai) Trading Co., Ltd. being incorporated in Thailand, Seven-up Nederland, B.V.

being incorporated in the Netherlands and Thai NVDR Co., Ltd. being incorporated in Thailand.

The principal businesses of the Company are to produce and distribute soft drinks, drinking water, mixers and other beverages,

including as distributor of energy drinks. Details of the Company’s subsidiaries as at 31 December 2010 and 2009 were as follows:

Country of Ownership interest

Name of the entity Type of business incorporation (%)

2010 2009

Direct subsidiary

Serm Suk Holdings Co., Ltd. Investment and holding Thailand 99.99 99.99

shares in other companies

Indirect subsidiary

Serm Suk Beverage Co., Ltd. Produce and distribute Thailand 99.99 99.99

tea, fruit juice and

sports drinks

49





2 Basis of preparation of the financial statements

The financial statements issued for Thai reporting purposes are prepared in the Thai language. This English translation of the

financial statements has been prepared for the convenience of readers not conversant with the Thai language.

The financial statements are prepared and presented in Thai Baht. All financial information presented in Thai Baht has been rounded

in the notes to the financial statements to the nearest thousand unless otherwise stated. They are prepared on the historical cost

basis except as stated in the accounting policies.

The financial statements are prepared in accordance with Thai Financial Reporting Standards (“TFRS”); including related interpreta-

tions and guidelines promulgated by the Federation of Accounting Professions (“FAP”); applicable rules and regulations of the Thai

Securities and Exchange Commission; and with generally accepted accounting principles in Thailand.

During 2010, the FAP announced the re-numbering of the following TFRS.

Former no. Revised no. Topic

TAS 11 TAS 101 Doubtful Account and Bad Debts

TAS 26 TAS 102 Income Recognition For Real Estate Business

TAS 27 TAS 103 Disclosures in the Financial Statements of Banks and Similar Financial Institutions

TAS 34 TAS 104 Accounting for Troubled Debt Restructuring

TAS 40 TAS 105 Accounting for Investment in Debt and Equity Securities

TAS 42 TAS 106 Accounting For Investment Companies

TAS 48 TAS 107 Financial Instruments Disclosure and Presentation

The Group has adopted the revised Framework for the Preparation and Presentation of Financial Statements (revised 2009), which

was following issued by the FAP during 2010 and effective on 26 May 2010. The adoption of the revised framework does not have

any material impact on the consolidated or separate financial statements.

The FAP has issued during 2010 a number of new and revised TFRS which are not currently effective and have not been adopted in

the preparation of these financial statements. These new and revised standards and interpretations are disclosed in note 38.

The preparation of financial statements in conformity with TFRS requires management to make judgements, estimates and assump-

tions that affect the application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ

from estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the

period in which estimates are revised and in any future periods affected.

Information about significant areas of estimation uncertainly and critical judgments in applying accounting policies that have the

most significant effect on the amounts recognized in the financial statements is included in the following notes:

Note 20 Employee benefits

Note 21 Provision

50





3 Change in accounting policy

During 2010, the Group has changed its accounting policy about accounted for land from cost to revalued amount. Revaluations

are performed by an independent professional valuer. Net increase in value of land in the consolidated and separate financial state-

ments amounted to Baht 3,636.24 million and Baht 3,592.48 million, respectively. The Group recognised surplus on land revaluation

under equity in the consolidated and separate financial statements by Baht 3,655.70 million and Baht 3,611.94 million, respectively,

and recognised loss on land revaluation of Baht 19.46 million in the consolidated and separate statements of income.

4 Significant transactions

Significant transactions occurring during the year ended 31 December 2010 were as follows;

a) At the annual general meeting of the shareholders of the Company held on 20 April 2010, the shareholders approved the

appropriation of Appropriated Retained Earnings in the General Reserve in the amount of Baht 193 million to be unappropriate

retained earnings for the purpose of further dividend payment.

b) On 27 April 2010, Strategic Beverages (Thailand) Co., Ltd. (“Offeror”) sent the tender offer for securities of the Company to

Securities and Exchange Commission, The Stock Exchange of Thailand, directors and shareholders of the Company. The Offeror

intended to acquire at least 25,147,287 common shares which price Baht 29 per share starting from 30 April 2010 to 10 June

2010. At the end of said period, the tendered shares was lower than 25,147,287 shares, the Offeror was cancel the tender offer

on 11 June 2010.

c) On 28 October 2010, SS National Logistics Co., Ltd. (“Offeror”) sent the tender offer for securities of the Company to Securities

and Exchange Commission, The Stock Exchange of Thailand, directors and shareholders of the Company. The Stock Exchange

of Thailand, directors and shareholders of the Company. The Offeror intended to acquire the entire common shares which price

Baht 42 per share starting from 29 October 2010 to 2 December 2010. At the end of said period, the tendered shares is 86,732,207

shares or 33% of total paid-up shares of the Company, the Offeror bought all that shares.

d) On 3 November 2010, Pepsi – Cola (Thai) Trading Co., Ltd., the Company’s major shareholder, petitioned the Civil Court to issue

an order to revoke the resolution of the Extraordinary General Meeting no.1/2010 on 4 October 2010. And on 17 January 2011,

the Company filed an objection to the Civil Court. The court case is pending judgement.

51





5 Significant accounting policies

(a) Basis of consolidation

The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the

Group’s interests in associates.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern

the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiar-

ies are included in the consolidated financial statements from the date that control commences until the date that control ceases.

The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group.

Associate

An associate is an entity in which the Group has significant influence, but not control, over the financial and operating policies.

Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. The

consolidated financial statements include the Group’s share of the income, expenses and equity movements of an associate, from

the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses

exceeds its interest in an associate, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued

except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated

in preparing the consolidated financial statements. Unrealised gains arising from transactions with an associate are eliminated

against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as

unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to Thai Baht at the foreign exchange rates ruling at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to Thai Baht at the foreign

exchange rates ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of income.

Non-monetary assets and liabilities measured at cost in foreign currencies are translated to Thai Baht using the foreign exchange

rates ruling at the dates of the transactions.

(c) Derivative financial instruments

Forward exchange contracts are treated as off-balance sheet items.

52





(d) Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits and highly liquid short-term investments. Bank overdrafts that are

repayable on demand are a component of cash and cash equivalents for the purpose of the statement of cash flows.

(e) Trade and other accounts receivable

Trade and other accounts receivable are stated at their invoice value less allowance for doubtful accounts.

The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer

payments. Bad debts are written off when incurred.

(f) Inventories

Inventories are stated at the lower of cost and net realisable value.

Cost of finished goods, work in progress, other supplies and bottles and cases is calculated using the weighted average cost

principle and cost of raw materials, supplies, and spare part is calculated using the moving-average cost principle. Cost comprises all

costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on

normal operating capacity and is calculated using standard cost adjusted to approximate average cost.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs to complete and to

make the sale.

The Group records an allowance for decline in value of inventories for all deteriorated and obsolete inventories.

(g) Investments

Investments in subsidiaries and an associate

Investments in subsidiaries and an associate in the separate financial statements of the Company are accounted for using the cost

method. Investment in an associate in the consolidated financial statements is accounted for using the equity method.

Investments in other equity securities

Marketable equity securities are classified as available-for-sale investments. Available-for-sale investments are, subsequent to initial

recognition, stated at fair value, and changes therein, other than impairment losses and foreign currency differences on available-

for-sale monetary items, are recognised directly in equity. Impairment losses and foreign exchange differences are recognised in the

statement of income. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity

is recognised in the statement of income.

Equitysecuritieswhicharenotmarketablearestatedatcostlessanyimpairmentlosses.

The fair value of securities classified as available-for-sale is determined as the quoted bid price at the reporting date.

53





Disposal of investments

On disposal of an investment, the difference between net disposal proceeds and the carrying amount together with the associated

cumulative gain or loss that was reported in equity is recognised in the statement of income.

If the Group disposes of part of its holding of a particular investment, the deemed cost of the part sold is determined using the

weighted average method applied to the carrying value of the total holding of the investment.

(h) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation, allowance for loss of marketing promotion

equipment and impairment losses except for land which is stated at its revalued amounts. The revalued amount is the fair value

determined on the basis of the property’s existing use at the date of revaluation.

Revalued assets

Revaluations are performed by independent professional valuers with sufficient regularity to ensure that the carrying amount of

these assets does not differ materially from that which would be determined using fair values at the reporting date.

Any increase in value, on revaluation, is credited to equity under the heading ‘revaluation surplus’ unless it offsets a

previous decrease in value recognised in the statement of income in respect of the same asset. A decrease in value is recognised

in the statement of income to the extent it exceeds an increase previously recognised in equity in respect of the same asset. Upon

disposal of a revalued asset, any related revaluation surplus is transferred from equity to retained earnings and is not taken into

account in calculating the gain or loss on disposal.

Depreciation

Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of each part of an item of

property, plant and equipment. The estimated useful lives are as follows:

Buildings, warehouses and improvement 20 years

Machinery and equipment 5-10 years

High voltage equipment 10 years

Vehicles 5 years

Furniture and office equipment 3-5 years

Plastic pallets 5 years

Marketing promotion equipments 5 years

No depreciation is provided on freehold land or assets under construction and installment.

54





(i) Negative goodwill

Negative goodwill in a business combination represents the excess of the fair value of the Group’s share of the identifiable net

assets acquired over the cost of acquisition. The Group has changed its accounting policy for goodwill with effect from 1 January

2008 as follows:

Acquisitions prior to 1 January 2008

Goodwill and negative goodwill were stated at cost from the date of initial recognition and amortised over its estimated useful

life. Negative goodwill carried in the financial statements as at 31 December 2007 was derecognised by crediting unappropriated

retained earnings on 1 January 2008.

Acquisitions on or after 1 January 2008

Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment as described in note 3 (k).

Negative goodwill is recognised immediately in the statement of income.

(j) Intangible assets

Intangible assets that are acquired by the Group which have finite useful lives, are stated at cost less accumulated amortisation and

impairment losses. Other intangible assets are amortised in the statement of income on a straight-line basis over their estimated

useful lives from the date that they are available for use. The estimated useful lives are as follows:

Rights for distribution of goods 2-15 years

Software licences 10 years

(k) Impairment

The carrying amounts of the Group’s assets are reviewed at each reporting date to determine whether there is any indication of

impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill, the recoverable amount is

estimated at each reporting date, and as and when indicators of impairment are identified.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.

The impairment loss is recognised in the statement of income.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objec-

tive evidence that the value of the asset is impaired, the cumulative loss that has been recognised directly in equity is recognised

in the statement of income even though the financial asset has not been derecognised. The amount of the cumulative loss that is

recognised in the statement of income is the difference between the acquisition cost and current fair value, less any impairment loss

on that financial asset previously recognised in the statement of income.

55





Calculation of recoverable amount

The recoverable amount of available-for-sale financial assets is calculated by reference to the fair value.

The recoverable amount of a non-financial asset is the greater of the asset’s value in use and fair value less cost to sell. In assessing

value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current

market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows

largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the

asset belongs.

Reversals of impairment

An impairment loss in respect of a financial asset is reversed if the subsequent increase in recoverable amount can be related

objectively to an event occurring after the impairment loss was recognised. For available-for-sale financial assets that are equity

securities, the reversal is recognised directly in equity.

An impairment loss in respect of goodwill is not reversed. Impairment losses recognised in prior periods in respect of other

non-financial assets are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An

impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment

loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been

determined, net of depreciation or amortization, if no impairment loss had been recognised.

(l) Trade and other accounts payable

Trade and other accounts payable are stated at cost.

(m) Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the statement of income as

incurred.

Employeeretirementplan

The Company has established an unfunded retirement plan to provide benefits for its employees who work until the retirement age.

The Company is committed to pay the employee benefits according to the law upon retirement including provident fund and other

benefits in total not less than one month of the last salary multiplied by years of service. The employee retirement benefit is recog

-nised as a liability in the balance sheets based on the said factors and management’s estimate.

56





(n) Provisions

A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable

that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of

the obligation.

Provision for long-term executive incentive plan

Provision for long-term executive incentive plan is an estimation of the Company’s liabilities under a incentive program for

executives. This program is for a period of 5 years and gives incentive in the form of non-transferable incentive units. Such incentive

units are calculated as fixed percentage of salary divided by the conversion price which equals 3 years average EPS multiplied by 10

times the price:earnings ratio. The incentive payment will be made 3 years after the grant date of the incentive units.

(o) Revenue

Revenue excludes value added taxes and is arrived at after deduction of trade discounts.

Sale of goods and services rendered

Revenue is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the

buyer. No revenue is recognised if there is continuing management involvement with the goods or there are significant uncertain-

ties regarding recovery of the consideration due, associated costs or the probable return of goods. Service income is recognised as

services are provided.

Dividend income

Dividend income is recognised in the statement of income on the date the Group’s/Company’s right to receive payments is

established.

Interest income and other income

Interest income and other income is recognised in the statement of income as it accrues.

(p) Expenses

Lease payments

Payments made under operating leases are recognised in the statement of income on a straight line basis over the term of the

lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease payments made.

Contingent rentals are charged to the statement of income for the accounting period in which they are incurred.

Finance costs

Interest expenses and similar costs are charged to the statement of income for the period in which they are incurred.

Other expenses are recognised as they accrue.

57





(q) Income tax

Income tax on the profit or loss for the year comprises current tax. Current tax is the expected tax payable on the taxable income for

the year, using tax rates enacted at the reporting date and any adjustment to tax payable in respect of previous years.

6 Related party transactions and balances

Related parties are those parties linked to the Group and the Company as shareholders or by common shareholders or directors.

Transactions with related parties are conducted at prices based on market prices or, where no market price exists, at contractually

agreed prices.

Relationships with related parties that control or jointly control the Company or are being controlled or jointly controlled by the

Company or have transactions with the Company/Group were as follows:

Name of entities Country of Nature of relationships

incorporation/nationality

Serm Suk Holdings Co., Ltd. Thailand Direct subsidiary and common director

Serm Suk Beverage Co., Ltd. Thailand Indirect subsidiary and common director

Pepsi-Cola (Thai) Trading Co., Ltd. Thailand Major shareholder and common director

Petform (Thailand) Company Limited Thailand Associate and common director

Bangkok Glass Company Limited Thailand Common director

Pepsi-Cola International USA Shareholder of the major shareholder

The Pet Company Limited Thailand Common equity holder and director

Crown Seal Public Company Limited Thailand Common equity holder and director

Petpack Company Limited Thailand Common equity holder

The pricing policies for particular types of transactions are explained further below:

Transactions Pricing policies

Sales of goods and rendering of services Cost plus gross profit margin

Interest income MLR of a domestic commercial bank plus 3% per annum

Purchase of finished goods and raw materials Cost of finished goods and raw materials plus gross profit margin

Subsidy for marketing expenses Actual price stated in invoice

Directors’ remuneration expenses representing

salary, director bonus and meeting allowance Approval by the Company’s directors and shareholders

58





Subsidiary

Sale of goods and rendering of services - - 265,884 223,755

Purchase of finished goods - - 378,587 370,491

Associate

Purchase of raw materials 868,926 702,231 868,926 702,231

Dividend income 41,100 49,500 41,100 49,500

Other related parties

Sale of goods and rendering of services 207,479 179,403 - -

Purchase of finished goods and

raw materials and subsidy for

marketing expense 3,215,288 4,637,060 3,204,953 4,628,469

Interest income 465 486 465 486

Dividend income 12,567 5,022 12,567 5,022

Other income 9,024 8,072 9,024 7,610

Directors’ remunerations 26,436 19,990 26,436 19,990

Retirement fund and other benefits 20,635 21,436 20,635 21,436

Consolidated Separate

financial statements financial statements

2010 2009 2010 2009

(in thousand Baht)

Significant transactions for the years ended 31 December 2010 and 2009 with related parties were as follows:

59





Balances as at 31 December 2010 and 2009 with related parties were as follows:

Trade accounts receivable from Consolidated Separate

related parties financial statements financial statements

2010 2009 2010 2009

(in thousand Baht)

Subsidiary

Serm Suk Beverage Co., Ltd. - - 47,405 19,272

Other related party

Pepsi-Cola (Thai) Trading Co., Ltd. 26,823 23,175 - -

Total 26,823 23,175 47,405 19,272

Short-term loans to related parties Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Comprising:

Other receivable from related parties 341,637 461,118 386,295 504,260

Short-term loan to a related party - 2,000 - 2,000

Total 341,637 463,118 386,295 506,260

Other receivable from related parties Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Subsidiary



Pepsi-Cola (Thai) Trading Co., Ltd. 340,052 460,815 339,983 459,230

Bangkok Glass Company Limited 1,371 120 1,371 120

The Pet Company Limited 214 183 214 183

Total 341,637 461,118 386,295 504,260

Short-term loan to a related party Consolidated Separate

Interest rate financial statements financial statements

2010 2009 2010 2009 2010 2009

(% per annum) (in thousand Baht)

Other related party

The Pet Company Limited - 10 - 2,000 - 2,000

Total - 2,000 - 2,000

60





Long-term loans to a related party Consolidated Separate

Interest rate financial statements financial statements

2010 2009 2010 2009 2010 2009

(% per annum) (in thousand Baht)

Other related party

The Pet Company Limited 9.38 9.25 5,000 3,000 5,000 3,000

Total 5,000 3,000 5,000 3,000

Movement of loans to a related party for the year ended 31 December 2010 and 2009 as follows;

Short-term loan to a related party Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Other related party

As at 1 January 2,000 5,000 2,000 5,000

Decreased (2,000) (3,000) (2,000) (3,000)

Asat31December - 2,000 - 2,000

Long-term loans to related party Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Other related party

As at 1 January 3,000 - 3,000 -

Increased 2,000 3,000 2,000 3,000

As at 31 December 5,000 3,000 5,000 3,000

61





Trade accounts payable to related parties Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Subsidiary


Associate

Petform (Thailand) Company Limited 169,721 135,681 169,721 135,681


Pepsi-Cola (Thai) Trading Co., Ltd. 161,491 119,150 161,491 119,150

Bangkok Glass Company Limited 66,993 62,976 66,993 62,976

The Pet Company Limited 57,349 48,877 57,349 48,877

Crown Seal Public Company Limited 52,063 49,999 51,425 49,174

Petpack Company Limited 45,261 59,214 45,261 59,214

Total 552,878 475,897 589,050 510,712

Accounts payable to related parties Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)


Directors’ remuneration 22,090 15,000 22,090 15,000

Pepsi-Cola (Thai) Trading Co., Ltd. 1,864 840 1,050 840

Total 23,954 15,840 23,140 15,840

Employee benefits Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Management 102,902 103,617 102,902 103,617

62





Significant agreements with related parties

Loan agreement

On 21 May 2009 and 31 January 2010, the Company and a related company, “Borrower”, agreed to change subordinated loan agree-

ments totalling Baht 5 million to long-term loan agreements in the amount of Baht 3 million and Baht 2 million, respectively, and

repay within 20 May 2014 and 31 January 2015, respectively. These agreements shall continue to be in effect for another period

of five years if there is no change at the maturity date. Interests are quarterly payable at the rate of MLR of a domestic commercial

bank at the beginning of each quarter plus 3% p.a.

Exclusive bottling appointment agreement

The Company entered into an agreement with the major shareholder of the Company to be appointed to bottle, sell and distribute

carbonated drinks solely in the whole Kingdom of Thailand. The Company has to comply with certain conditions contained in the

agreement for which the duration is not specified.

A subsidiary entered into a “Co-packing agreement” with the major shareholder of the Company to produce bottled tea drinks.

The subsidiary has to comply with certain conditions contained in the agreement for a period of 3 years including a renewal option.

A subsidiary entered into a “Co-packing agreement” with the major shareholder of the Company to produce bottled fruit juices.

The subsidiary has to comply with certain conditions contained in the agreement for a period of 3 years including a renewal option.

Distributorship agreement

The Company entered into an agreement with the major shareholder of the Company to be appointed to distribute bottled tea

and fruit juices solely in the whole Kingdom of Thailand. The Company has to comply with certain conditions contained in the

agreement for a period of 3 years including a renewal option.

Cooperative advertising and marketing agreement

The Company entered into an agreement with the major shareholder of the Company for both parties to participate in a Coopera-

tive Advertising and Marketing Program in the territory. Both parties agree to spend for advertising and marketing of the products

for the term and the amount as specified in the agreement. Each agreement is effective for a period of 1 year.

63





7 Cash and cash equivalents



2010 2009 2010 2009

(in thousand Baht)

Cash on hand 55,310 70,126 55,292 70,111

Call deposits 489,368 492,678 438,934 434,894

Three - month fixed deposits - 12,139 - 12,139

Bills of exchange 890,000 928,557 850,000 928,557

Total 1,434,678 1,503,500 1,344,226 1,445,701

Cash and cash equivalents of the Group and the Company as at 31 December 2010 and 2009 were denominated entirely in

Thai Baht.

8 Current investments



2010 2009 2010 2009

(in thousand Baht)

Six - month fixed deposits - 2,932 - 2,932

Bill of exchange 12,000 9,922 - -

Total 12,000 12,854 - 2,932

Current investments of the Group and the Company as at 31 December 2010 and 2009 were denominated entirely in Thai Baht.

64





9 Trade accounts receivable


Note financial statements financial statements

2010 2009 2010 2009

(in thousand Baht)

Related parties 6 26,823 23,175 47,405 19,272

Other parties 1,222,328 1,196,557 1,222,328 1,196,557

1,249,151 1,219,732 1,269,733 1,215,829

Less allowance for doubtful accounts (41,369) (49,425) (41,369) (49,425)

Total 1,207,782 1,170,307 1,228,364 1,166,404

2010 2009 2010 2009

(in thousand Baht)

Bad and doubtful debts

expenses (reversal) for the year (8,056) 2,623 (8,056) 2,623

Aging analyses for trade accounts receivable were as follows:



2010 2009 2010 2009

(in thousand Baht)

Related parties

Within credit terms 26,823 23,147 47,405 19,272

Overdue:

Over 3 months - 28 - -

Total 26,823 23,175 47,405 19,272

65







2010 2009 2010 2009

(in thousand Baht)

Other parties

Within credit terms 1,074,477 958,344 1,074,477 958,344

Overdue:

Not over 1 month 99,680 188,966 99,680 188,966

More than 1 month to 3 months 30,313 31,905 30,313 31,905

Over 3 months 17,858 17,342 17,858 17,342

1,222,328 1,196,557 1,222,328 1,196,557


Net 1,180,959 1,147,132 1,180,959 1,147,132

Total 1,207,782 1,170,307 1,228,364 1,166,404

The normal credit term granted by the Group ranges from 10 days to 60 days.

Trade accounts receivable of the Group and the Company as at 31 December 2010 and 2009 were denominated entirely in

Thai Baht.

66





10 Inventories



2010 2009 2010 2009

(in thousand Baht)

Finished goods 484,451 415,678 469,613 406,005

Work in progress 15,821 18,672 15,821 18,672

Raw materials and supplies 224,941 216,880 199,102 201,790

Spare parts 105,956 103,042 101,844 98,380

Other supplies 6,133 5,416 3,976 3,897

Bottles and cases 1,693,344 1,730,955 1,680,946 1,718,557

2,530,646 2,490,643 2,471,302 2,447,301

Less allowance for decline in value (117,225) (99,342) (116,289) (97,470)

Net 2,413,421 2,391,301 2,355,013 2,349,831



2010 2009 2010 2009

(in million Baht)

The cost of inventories which was

recognised as an expense in cost of

sales of goods for the year ended

31 December 16,624.41 14,612.79 16,834.41 14,855.75

67





11 Other current assets



2010 2009 2010 2009

(in thousand Baht)

Other receivables 72,912 46,108 72,843 42,873


Net 46,848 25,835 46,779 22,600

Advance payment 7,194 14,150 7,194 14,150

Prepaid expenses 34,985 34,235 34,145 31,544

Withholding tax 23,528 16,705 - -

Others 15,550 8,822 14,977 8,649

Total 128,105 99,747 103,095 76,943 Bad and doubtful debts expenses for the year 5,790 2,280 5,790 2,280

The currency denomination of other current assets as at 31 December was as follows:



2010 2009 2010 2009

(in thousand Baht)

Thai Baht (THB) 127,351 99,747 102,341 76,943

Euro (EUR) 754 - 754 -

Total 128,105 99,747 103,095 76,943

68





12 Investments in a subsidiary

Investment in a subsidiary as at 31 December 2010 and 2009, and dividend income from this investment for the years then ended were as follows:

Separate financial statements

Ownershipinterest Paid-upsharecapital Costmethod Dividendincome

2010 2009 2010 2009 2010 2009 2010 2009

(%) (in thousand Baht)

Serm Suk Holdings Co., Ltd. 100 100 350,000 350,000 350,000 350,000 - -

Total 350,000 350,000 350,000 350,000 - -

13 Investment in an associate



2010 2009 2010 2009

(in thousand Baht)

At 1 January 233,576 221,141 30,000 30,000

Share of net profit of investment

- equity method 51,976 61,935 - -

Dividend income (41,100) (49,500) - -

At 31 December 244,452 233,576 30,000 30,000

Investment in an associate as at 31 December 2010 and 2009, and dividend income from this investment for the years then ended

were as follows:

Consolidated financial statements

Ownership Paid-up share

Interest capital Cost method Equity method Dividend income

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009


Petform (Thailand)

Company Limited 40 40 75,000 75,000 30,000 30,000 244,452 233,576 41,100 49,500

Total 75,000 75,000 30,000 30,000 244,452 233,576 41,100 49,500

69






Ownership Paid-up share

interest capital Cost method Dividend income

2010 2009 2010 2009 2010 2009 2010 2009


Petform (Thailand) Company Limited 40 40 75,000 75,000 30,000 30,000 41,100 49,500

Total 75,000 75,000 30,000 30,000 41,100 49,500

The following summarised financial information on an associated company which has been accounted for using the equity method

is not adjusted for the percentage of ownership held by the Group:

Owner- Total Total Total Net

ship assets liabilities revenues Profit

(%) (in million Baht)

2010

Petform (Thailand) Company Limited 40 1,345.78 734.29 1,430.81 129.78

2009

Petform (Thailand) Company Limited 40 1,162.52 578.06 1,033.82 155.00

14 Otherlong-terminvestments

Other long-term investments as at 31 December 2010 and 2009, and dividend income from these investments for the years then

ended were as follows:

Consolidated financial statements and


Cost method Dividend income

2010 2009 2010 2009

(in thousand Baht)

Equity securities available for sale

Crown Seal Public Company Limited 31,732 31,732 1,058 814

Future Park Property Fund 30,000 30,000 3,285 3,003

61,732 61,732 4,343 3,817

Less valuation adjustment 8,822 (15,708) - -

70,554 46,024 4,343 3,817

70







Cost method Dividend income

2010 2009 2010 2009

(in thousand Baht)

Non marketable equity securities

The Pet Company Limited 7,000 7,000 1,750 1,750

Bangkok Glass Company Limited 36,564 35,900 874 458

Petpack Company Limited 8,000 8,000 5,600 2,000

51,564 50,900 8,224 4,208

Total 122,118 96,924 12,567 8,025

Movements during the years ended 31 December 2010 and 2009 of equity securities were as follows:

Consolidated financial

statements and Separate

financial statements

2010 2009

(in thousand Baht)

Equity securities available for sale

At 1 January 46,024 39,587

Valuation adjustment 24,530 6,437

At 31 December 70,554 46,024

Non marketable equity securities

At 1 January 50,900 41,535

Purchases during the year 664 9,365

At 31 December 51,564 50,900

Other long-term investments of the Group and the Company as at 31 December 2010 and 2009 were denominated entirely in

Thai Baht.

71





15 Property, plant and equipment


Buildings, Assets under

Land warehouses Machinery High Furniture Marketing construction

Historical Surplus on and and voltage and office Plastic promotion and

Cost revaluation improvement equipment equipment Vehicles equipment pallets equipments installation Total

(in thousand Baht)

Cost/revaluation

At 1 January 2009 478,412 - 1,720,382 4,270,060 29,284 1,744,868 236,213 323,233 3,358,605 151,811 12,312,868

Additions - - 2,221 66,600 2,201 12,604 9,442 5,786 119,570 349,935 568,359

Transfers - - 84,503 111,181 - 8,501 11 - 54,532 (258,728) -

Disposals - - (1,909) (24,516) - (24,470) (11,795) - (21,240) (95) (84,025)

At 31 December 2009

and1January2010 478,412 - 1,805,197 4,423,325 31,485 1,741,503 233,871 329,019 3,511,467 242,923 12,797,202

Additions - - 9,923 147,727 1,932 30,817 15,254 8,500 125,570 609,375 949,098

Surplus on revaluation - 3,655,703 - - - - - - - - 3,655,703

Loss on revaluation (19,467) - - - - - - - - - (19,467)

Transfers - - 86,998 248,037 6,690 189,502 27,686 - 23,274 (582,187) -

Disposals - - (570) (68,690) - (71,081) (2,996) - (18,535) - (161,872)

At 31 December 2010 458,945 3,655,703 1,901,548 4,750,399 40,107 1,890,741 273,815 337,519 3,641,776 270,111 17,220,664

Accumulated depreciation

At 1 January 2009 - - 923,137 2,986,558 20,270 1,351,314 199,966 256,499 2,868,547 - 8,606,291

Depreciation charge

for the year - - 76,455 250,639 1,253 156,028 16,950 26,337 201,774 - 729,436

Disposals - - (801) (23,956) - (24,192) (11,795) - (21,101) - (81,845)

At 31 December 2009

and1January2010 - - 998,791 3,213,241 21,523 1,483,150 205,121 282,836 3,049,220 - 9,253,882

Depreciation charge

for the year - - 79,814 251,523 1,476 133,516 18,177 21,835 186,845 - 693,186

Transfers - - 328 (353) - - 25 - - - -

Disposals - - (570) (67,535) - (68,663) (2,987) - (18,525) - (158,280)

At31December2010 - - 1,078,363 3,396,876 22,999 1,548,003 220,336 304,671 3,217,540 - 9,788,788

72










(in thousand Baht)

Allowance for loss of marketing promotion equipment

At 1 January 2009 - - - - - - - - 5,330 - 5,330

Additions - - - - - - - - - - -

Disposals - - - - - - - - - - -

At 31 December 2009 and1January2010 - - - - - - - - 5,330 - 5,330

Additions - - - - - - - - - - -

Disposals - - - - - - - - - - -

At31December2010 - - - - - - - - 5,330 - 5,330

Net book value

At1January2009 478,412 - 797,245 1,283,502 9,014 393,554 36,247 66,734 484,728 151,811 3,701,247

At 31 December 2009

and1January2010 478,412 - 806,406 1,210,084 9,962 258,353 28,750 46,183 456,917 242,923 3,537,990

At 31 December 2010 458,945 3,655,703 823,185 1,353,523 17,108 342,738 53,479 32,848 418,906 270,111 7,426,546

73










(in thousand Baht)

Cost/revaluation

At 1 January 2009 408,719 - 1,557,811 3,931,916 29,284 1,738,542 230,805 299,373 3,358,605 129,846 11,684,901

Additions - - 1,935 64,067 2,200 11,948 9,308 5,786 119,570 347,190 562,004

Transfers - - 82,393 91,226 - 8,501 12 - 54,532 (236,664) -

Disposals - - (1,909) (10,302) - (24,083) (11,796) - (21,240) - (69,330)

At 31 December 2009 and1January2010 408,719 - 1,640,230 4,076,907 31,484 1,734,908 228,329 305,159 3,511,467 240,372 12,177,575

Additions - - 9,397 141,878 1,933 26,143 14,967 8,500 125,570 598,294 926,682

Surplus on revaluation - 3,611,942 - - - - - - - - 3,611,942

Loss on revaluation (19,467) - - - - - - - - - (19,467)

Transfers - - 80,626 240,778 6,690 189,502 27,686 - 23,274 (568,556) -

Disposals - - (570) (16,347) - (70,933) (2,987) - (18,535) - (109,372)

At 31 December 2010 389,252 3,611,942 1,729,683 4,443,216 40,107 1,879,620 267,995 313,659 3,641,776 270,110 16,587,360

Accumulated depreciation

At 1 January 2009 - - 843,537 2,707,708 20,270 1,345,965 195,657 236,217 2,868,547 - 8,217,901

Depreciation charge for the year - - 68,135 221,453 1,253 155,476 16,573 24,890 201,774 - 689,554

Disposals - - (801) (9,978) - (23,805) (11,795) - (21,101) - (67,480)

At 31 December 2009 and1January2010 - - 910,871 2,919,183 21,523 1,477,636 200,435 261,107 3,049,220 - 8,839,975

Depreciation charge for the year - - 71,288 241,524 1,476 132,480 17,727 20,390 186,845 - 671,730

Transfers - - 328 (353) - - 25 - - - -

Disposals - - (570) (15,624) - (68,612) (2,978) - (18,525) - (106,309)

At31December2010 - - 981,917 3,144,730 22,999 1,541,504 215,209 281,497 3,217,540 - 9,405,396

74










(in thousand Baht)

Allowance for loss of

marketing promotion

equipment

At 1 January 2009 - - - - - - - - 5,330 - 5,330

Additions - - - - - - - - - - -

Disposals - - - - - - - - - - -

At 31 December 2009 and1January2010 - - - - - - - - 5,330 - 5,330

Additions - - - - - - - - - - -

Disposals - - - - - - - - - - -

At31December2010 - - - - - - - - 5,330 - 5,330

Net book value

At1January2009 408,719 - 714,274 1,224,208 9,014 392,577 35,148 63,156 484,728 129,846 3,461,670

At 31 December 2009 and1January2010 408,719 - 729,359 1,157,724 9,961 257,272 27,894 44,052 456,917 240,372 3,332,270

At 31 December 2010 389,252 3,611,942 747,766 1,298,486 17,108 338,116 52,786 32,162 418,906 270,110 7,176,634

The gross amount of the Group’s fully depreciated property, plant and equipment that was still in use as at 31 December 2010 and

2009 is summarised as follows:



2010 2009 2010 2009

(in thousand Baht)

Buildings and equipment 6,925,237 6,429,961 6,668,199 6,132,238

The carrying amount of land which is held for planned future business operations as at 31 December 2010 amounted to Baht 20.15

million (2009 Baht : 20.15 million), as part of land in the balance sheets.

75





16 Intangible assets


Right for

Software distribution

licenses of goods Total

(in thousand Baht)

Cost

At 1 January 2009 19,809 87,500 107,309

Additions 11,162 - 11,162

At 31 December 2009 and 1 January 2010 30,971 87,500 118,471

Additions 5,361 15,000 20,361

At 31 December 2010 36,332 102,500 138,832

Accumulated amortization

At 1 January 2009 19,527 44,275 63,802

Amortization charge for the year 100 13,610 13,710


Amortization charge for the year 2,354 13,614 15,968

At 31 December 2010 21,981 71,499 93,480

Net book value

At 1 January 2009 282 43,225 43,507


At 31 December 2010 14,351 31,001 45,352

76






Right for

Software distribution

licenses of goods Total

(in thousand Baht)

Cost

At 1 January 2009 18,958 87,500 106,458

Additions 10,995 - 10,995


Additions 5,261 15,000 20,261

At 31 December 2010 35,214 102,500 137,714

Accumulated amortization

At 1 January 2009 18,958 44,275 63,233

Amortization charge for the year - 13,610 13,610


Amortization charge for the year 2,182 13,614 15,796

At 31 December 2010 21,140 71,499 92,639

Net book value

At1January2009 - 43,225 43,225


At 31 December 2010 14,074 31,001 45,075

77





17 Othernon-currentassets



2010 2009 2010 2009

(in thousand Baht)

Deferred moulds and packaging cylinders 3,525 3,525 - -

Less Accumulated amortization (2,453) (2,453) - -

Allowance for impairment loss (1,072) (1,072) - -

Net - - - -

Rental payment in advance - net 11,172 11,208 11,172 11,208

Loans to employees 851 91 851 91

Deposits 8,741 7,419 8,741 7,419

Total 20,764 18,718 20,764 18,718

The rental payments in advance as at 31 December 2010 and 2009 were shown net of accumulated amortization of Baht 3.56

million and Baht 2.79 million, respectively. The amortization is charged to the statement of income over the period of the contract.

18 Trade accounts payable



Note 2010 2009 2010 2009

(in thousand Baht)

Related parties 6 552,878 475,897 589,050 510,712

Other parties 825,965 671,293 804,217 651,775

Total 1,378,843 1,147,190 1,393,267 1,162,487

Trade accounts payable of the Group and the Company as at 31 December 2010 and 2009 were denominated entirely in Thai Baht.

78





19 Other current liabilities



Note 2010 2009 2010 2009

(in thousand Baht)

Accrued value added tax 44,745 28,645 44,142 27,055

Provision - current 21 17,498 9,631 17,498 9,631

Retention payable 2,666 5,341 2,666 5,341

Others 15,861 4,148 15,579 3,606

Total 80,770 47,765 79,885 45,633

20 Employee benefits



Employee

retirement Other

plan benefits Total

(in thousand Baht)

At 1 January 2009 137,431 1,610 139,041

Increase during the year 47,421 67 47,488


Increase during the year 10,541 71 10,612

Decrease during the year (11,543) - (11,543)

At 31 December 2010 183,850 1,748 185,598

79





21 Provision



(in thousand Baht)

Provision for executive incentive plan

At 1 January 2009 15,574

Provisions made 18,758

Provisions used (9,139)

At 31 December 2009 and 1 January 2010 25,193

Provisions made 20,513

Provisions used (9,631)

At 31 December 2010 36,075

At 31 December 2009 and 1 January 2010

Current 9,631

Non-current 15,562

Total 25,193

At 31 December 2010

Current 17,498

Non-current 18,577

Total 36,075

80





22 Share capital

Par value 2010 2009

per share Number Baht Number Baht

(in Baht) (thousand shares / thousand Baht)

Authorised

At 1 January

Ordinary shares 1 265,900 265,900 267,958 267,958

Reduction of shares 1 - - (2,058) (2,058)

At 31 December

Ordinary shares 1 265,900 265,900 265,900 265,900

Issued and paid-up

At 1 January

Ordinary shares 1 265,900 265,900 265,900 265,900

At 31 December

Ordinary shares 1 265,900 265,900 265,900 265,900

At the annual general meeting of the shareholders of the Company held on 21 April 2009, the shareholders approved the reduction of authorised share capital from 267,957,660 shares with a par value of Baht 1 per share to 265,900,484 shares with a par value of Baht 1 per share. The Company registered the reduction in its authorized share capital with the Ministry of Commerce on 28 April 2009.

23 Additionalpaid-incapitalandreserves

Share premium

Section 51 of the Public Companies Act B.E. 2535 requires companies to set aside share subscription monies received in excess of

the par value of the shares issued to a reserve account (“share premium”). Share premium is not available for dividend distribution.

Legal reserve

Section 116 of the Public Companies Act B.E. 2535 Section 116 requires that a company shall allocate not less than 5% of its annual

net profit, less any accumulated losses brought forward, to a reserve account (“legal reserve”), until this account reaches an amount

not less than 10% of the registered authorised capital. The legal reserve is not available for dividend distribution.

General reserve

The general reserve comprises amounts appropriated from profit for expansion of the Company’s operations.

Fair value changes

The fair value changes account within equity comprises the cumulative net changes in the fair value of available-for-sale financial

assets until the investments are derecognised or impaired.

81





Surplus on land revaluation

Surplus on land revaluation within equity is in the financial statements at valuation until such land is sold or otherwise disposed of.

In May 2010, the Group appraised its land based on the depreciated replacement cost approach by C.I.T. Appraisal Co., Ltd. which

is an independent professional valuer. The Group made adjustments to net increase in value of land in the consolidated and sepa-

rate financial statements by Baht 3,636.24 million and Baht 3,592.48 million, respectively. The Group recognised surplus on land

revaluation under equity in the consolidated and separate financial statements by Baht 3,655.70 million and Baht 3,611.94 million,

respectively, and recognised loss on land revaluation of Baht 19.46 million in the consolidated and separate statements of income.

Surplus on land revaluation is not available for dividend distribution.

24 Segment information

Management considers that the Group operates in a single line of business, namely the production and distribution of beverages,

and in a single geographic area, namely in Thailand, and has, therefore, only one major business segment and only one geographic

segment.

25 Other income



2010 2009 2010 2009

(in thousand Baht)

Sale of scrap 61,837 53,145 60,225 51,883

Interest income 9,103 8,571 8,566 8,273

Net gain on foreign exchange - 17 - 7

Gain on disposal of sparepart and

equipment 24,926 9,065 20,935 6,399

Dividend income 12,567 8,025 53,667 57,525

Others 39,402 19,254 39,402 16,353

Total 147,835 98,077 182,795 140,440

82





26 Sellingexpenses



2010 2009 2010 2009

(in thousand Baht)

Personnel expenses 1,079,864 1,058,224 1,077,509 1,056,311

Marketing expenses 995,886 1,044,043 995,886 1,045,214

Depreciation and amortization 341,140 365,385 341,110 365,385

Distribution 232,148 215,435 214,947 199,110

Fuel 256,610 214,998 256,610 214,998

Others 357,017 340,811 356,676 340,355

Total 3,262,665 3,238,896 3,242,738 3,221,373

27 Administrativeexpenses



2010 2009 2010 2009

(in thousand Baht)

Personnel expenses 691,548 634,027 686,082 630,003

Depreciation and amortization 68,081 78,387 66,129 72,396

Fuel 163,552 124,228 163,552 124,228

Net loss on foreign exchange 5,624 - 5,624 -

Net loss on land revaluation 19,467 - 19,467 -

Others 382,469 319,839 378,288 314,910

Total 1,330,741 1,156,481 1,319,142 1,141,537

83





28 Employeebenefitexpenses



2010 2009 2010 2009

(in thousand Baht)

Management

Salaries, wages and other benefits 96,225 92,095 92,945 89,140

Contribution to defined contribution plans 3,129 3,452 3,047 3,374

Contribution to social fund 73 72 64 65

99,427 95,619 96,056 92,579

Other employees

Salaries, wages and other benefits 2,031,523 1,913,799 1,994,092 1,883,816

Contribution to defined contribution plans 83,916 82,787 82,809 81,817

Contribution to social fund 63,153 49,710 62,240 49,005

2,178,592 2,046,296 2,139,141 2,014,638

Total 2,278,019 2,141,915 2,235,197 2,107,217

Provident fund

The Group has a provident fund for those employees who indicate their willingness to join. Contributions are made monthly by

the employees at 3% of their basic salaries and by the Group at from 5% to 12% of the employees’ basic salaries. The provident

funds are registered with the Ministry of Finance as juristic entities and are managed by a licensed Fund Manager.

The employees who do not join the provident fund managed by the financial institution may still subscribe to the initial provident

fund which is managed by the Company. The Company’s contribution is treated as an expense in the year when the service is

provided.

84





29 Expensebynature

The statement of income included an analysis of expenses by function. Expenses by nature disclosed in accordance with the requirements of various TFRS were as follows :



Note 2010 2009 2010 2009

(in thousand Baht)

Changes in inventories of

finished goods and work in progress 3,908,540 3,354,812 3,724,371 2,930,238

Raw materials and consumables use 12,106,451 11,038,100 11,851,229 10,790,342

Employee benefit expenses 28 2,278,019 2,141,915 2,235,197 2,107,217

Directors’ remunerations 6 26,436 19,990 26,436 19,990

Depreciation and amortisation 15, 16, 17 709,988 743,673 688,360 703,693

Marketing expenses 26 995,886 1,044,043 995,886 1,045,214

Distribution 26 232,148 215,435 214,947 199,110

Fuel 26, 27 420,162 339,226 420,162 339,226

Loss on land revaluation 27 19,467 - 19,467 -

Others 836,111 483,182 1,439,567 1,287,356

Totalexpenses 21,533,208 19,380,376 21,615,622 19,422,386

85





30 Incometaxexpense



2010 2009 2010 2009

Current tax expense (in thousand Baht)

Current year 175,380 120,392 175,370 120,366

Reconciliation of effective tax rate Consolidated financial statements

2010 2009

Rate (in thousand Baht) Rate (in thousand Baht)

(%) (%) Baht)

Profit before income tax expense 643,300 474,059

Income tax using the Thai corporation tax rate 30.00 192,990 30.00 142,218

Income not subject to tax (19,363) (20,988)

Expenses not deductible for tax purposes 26,336 16,730

Current year losses of subsidiaries for which

no deferred tax asset was recognised 324 92

Income tax reduction (15,843) (15,809)

Utilisation of previously unrecognised tax losses (9,064) (1,851)

Total 27.26 175,380 25.40 120,392

Reconciliation of effective tax rate Separate financial statements

2010 2009

Rate (in thousand Baht) Rate (in thousand Baht)

(%) (%) Baht)

Profit before income tax expense 602,324 456,391

Income tax using the Thai corporation tax rate 30.00 180,697 30.00 136,917

Income not subject to tax (16,100) (17,258)

Expenses not deductible for tax purposes 26,616 16,516

Income tax reduction (15,843) (15,809)

Total 29.12 175,370 26.37 120,366

Income tax reduction

Royal Decree No. 475 B.E. 2551 grants companies listed on the Stock Exchange of Thailand a reduction in the corporate income tax

rate from 30% to 25% for taxable profit not exceeding Baht 300 million for the three consecutive accounting periods beginning on

or after 1 January 2008.

86





31 Earnings per share

Basic earnings per share

The calculations of basic earnings per share for the years ended 31 December 2010 and 2009 were based on the profit for the years

attributable to equity holders of the Company and the weighted average number of ordinary shares outstanding during the years

as follows:



2010 2009 2010 2009

(in thousand Baht/thousand shares)

Profit attributable to equity holders of

the Company (basic) 467,920 353,667 426,954 336,025

Shares outstanding (basic) 265,900 265,900 265,900 265,900

Earnings per share (basic) (in Baht) 1.76 1.33 1.61 1.26

32 Dividends

At the annual general meeting of the shareholders of the Company held on 20 April 2010, the shareholders approved the

appropriation of dividend of Baht 2 per share with rights to received dividend 265.28 million shares, amounting to Baht 530.56

million. The dividend was paid to shareholders during the year 2010. The unclaimed portion is presented as unpaid dividends in

the balance sheet.

At the annual general meeting of the shareholders of the Company held on 21 April 2009, the shareholders approved the

appropriation of dividends of Baht 0.75 per share with rights to received dividend 265.79 million shares, amounting to Baht 199.34

million. The dividend was paid to shareholders during the year 2009. The unclaimed portion is presented as unpaid dividends in

the balance sheet.

33 Financial instruments

Financial risk management policies

The Group is exposed to normal business risks from changes in market interest rates and currency exchange rates and from non-

performance of contractual obligations by counterparties. The Group does not hold or issue derivative financial instruments for

speculative or trading purposes.

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an accept-

able balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the

Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

87





Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain

future development of the business. The Board monitors the return on capital and also monitors the level of dividends to ordinary

shareholders.

Interest rate risk

Interest rate risk is the risk that future movements in market interest rates will affect the results of the Group’s operations and its

cash flows. The Group does not expect that changes in interest rates will materially affect its operations.

Foreign currency risk

The Group is exposed to foreign currency risk relating to purchases inventory and fixed assets which are denominated in foreign

currencies. The Group expects that changes in exchange rates for liabilities denominated in foreign currencies in the balance sheet

will not materially affect its financial position and results of operations since the Group does not have any foreign currency loans

and most of the spending and purchases of raw and packing materials are transacted in local currency, exchange rate risks are

limited only to those related to imported spare parts and equipments.

The Group primarily utilizes forward exchange contracts with maturities of less than one year to hedge such financial liabilities

denominated in foreign currencies. The forward exchange contracts entered into at the reporting date also relate to anticipated

purchases inventory and fixed assets, denominated in foreign currencies, for the subsequent period.

At 31 December, the Group and the Company were exposed to foreign currency risk in respect of financial assets and liabilities

denominated in the following currencies:



Note 2010 2009 2010 2009

(in thousand Baht)

Euro

Other receivables 11 754 - 754 -

Other payables (416) (2,787) (416) (2,787)

Grossbalancesheetexposure 338 (2,787) 338 (2,787)

Estimated forecast purchases (1,828) (193,125) (1,828) (193,125)

Grossbalancesheetexposure (1,490) (195,912) (1,490) (195,912)

Currency forwards - (123,693) - (123,693)

Netexposure (1,490) (72,219) (1,490) (72,219)

88







Note 2010 2009 2010 2009

(in thousand Baht)

United States Dollars

Other payables (4,978) (4,258) (4,978) (4,258)

Grossbalancesheetexposure (4,978) (4,258) (4,978) (4,258)

Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and

contractual obligations to the Group as and when they fall due.

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are

performed on all customers requiring credit over a certain amount. At the reporting date there were no significant concentrations

of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance

sheet. However, due to the large number of parties comprising the Group’s customer base, Management does not anticipate

material losses from its debt collection.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to

finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and

non-financial assets and liabilities. The fair value is the amount for which an asset could be exchanged, or a liability settled,

between knowledgeable, willing parties in an arm’s length transaction. Fair values have been determined for measurement and/

or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in

determining fair values is disclosed in the notes specific to that asset or liability.

The fair value of cash and cash equivalents, current investment, trade accounts receivable, short-term loan to related parties and

current assets is taken to approximate the carrying value.

The fair value of investments in equity securities, which are available for sales, are determined by reference to their quoted bid

price at the reporting date.

Other long-term investments, which are non marketable equity securities, have their fair values approximate to their carrying

value.

The fair value of trade accounts payable, short-term loans from related parties, other payable, accrued expenses, income tax

payable and other current liabilities is taken to approximate the carrying value.

89





The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not

available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward

price at the reporting date for the residual maturity of the contract using a risk-free interest rate (based on government bonds).

Although the management uses its best judgment in estimating fair values of financial instruments, estimation methodologies and

assumptions used to estimate fair values are inherently subjective. Accordingly, the use of different estimation methodologies and

or market assumptions may have a significant effect on the estimated fair values.

34 Commitmentswithnon-relatedparties Consolidated Separate


2010 2009 2010 2009

(in thousand Baht)

Capital commitments

Contracted but not provided for:

Buildings, warehouses and improvement 4,636 67,716 4,636 67,082

Machinery and equipment 1,828 193,125 1,828 193,125

Furniture and office equipment - 1,200 - 1,200

Intangible assets 20,965 24,155 20,965 24,155

Total 27,429 286,196 27,429 285,562



2010 2009 2010 2009

(in thousand)

Commitments on operating lease agreements

Within one year 23,942 16,942 23,675 16,808

After one year but within five years 26,652 20,556 26,630 20,556

After five years 44,665 57,139 44,665 57,139

Total 95,259 94,637 94,970 94,503



2010 2009 2010 2009

(in thousand)

Other commitments Thai Baht

Unused letters of credits for goods and supplies 1,828 980 1,828 980

Forward and swap contracts - 123,693 - 123,693

Bank guarantees 33,320 32,109 30,232 29,880

Total 35,148 156,782 32,060 154,553

90







2010 2009 2010 2009

(in thousand)

Euro

Unused letters of credits for fixed assets 45 4,013 45 4,013

The Company entered into land, building, structure and other assets lease agreements for the Company’s operation for periods

from one year to thirty years and expiring in various periods up to December 2038.

35 Credit facilities

As at 31 December 2010 the Group and the Company had unutilised credit facilities totalling Baht 2,072 million and Baht 1,875

million, respectively (2009: Baht 2,047 million and Baht 1,867 million, respectively)

36 Litigation

The Company had a contingent liability arising from a claim for compensation of Baht 8.97 million in connection with undelivered

goods. The court case is pending judgment. However, the Company’s fixed deposit of Baht 2.41 million has been pledged with

the court.

37 Events after the reporting period

a) On 13 January 2011, Pepsi-Cola (Thai) Trading Co., Ltd. the Company’s major shareholder, petitioned the Civil Court to issue an

order to revoke the resolution of the Extraordinary General Meeting no.2/2010 held on 14 December 2010. The court case is

pending judgement.

b) At the extraordinary general meeting of the shareholders of the Company held on 15 February 2011, the Shareholders

approved for the Company to proceed with the future business plan which includes proceeding with matters in relation to the

agreements between the Company with Pepsi-Cola International and Pepsi-Cola (Thai) Trading Co., Ltd. Therefore, in the event

that the Company receives confirmation from Pepsi-Cola International and Pepsi-Cola (Thai) Trading Co., Ltd. within 15 days

from the date of extraordinary general meeting of the shareholder of the Company which to be due on 2 March 2011 and shall

enter into new agreement within 31 March 2011, if the Company does not receive the confirmation due on 2 March 2011, the

Company shall terminate the agreements immediately. The termination shall be effective as the board of directors considers

appropriate but no later than 12 months from the date of such terminate letter.

91





38 Thai Financial Reporting Standards (TFRS) not yet adopted

The Group has not adopted the following new and revised TFRS that have been issued as of the reporting date but are not yet

effective. The new and revised TFRS are anticipated to become effective for annual financial periods beginning on or after 1

January in the year indicated in the following table.

TFRS Topic Year effective

TAS 1 (revised 2009) Presentation of Financial Statements 2011

TAS 2 (revised 2009) Inventories 2011

TAS 7 (revised 2009) Statement of Cash Flows 2011

TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors 2011

TAS 10 (revised 2009) Events after the Reporting Period 2011

TAS 12 Income Taxes 2013

TAS 16 (revised 2009) Property, Plant and Equipment 2011

TAS 17 (revised 2009) Leases 2011

TAS 18 (revised 2009) Revenue 2011

TAS 19 Employee Benefits 2011

TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates 2013

TAS 23 (revised 2009) Borrowing Costs 2011

TAS 24 (revised 2009) Related Party Disclosures 2011

TAS 27 (revised 2009) Consolidated and Separate Financial Statements 2011

TAS 28 (revised 2009) Investments in Associates 2011

TAS 29 Financial Reporting in Hyperinflationary Economies 2011

TAS 33 (revised 2009) Earnings per Share 2011

TAS 34 (revised 2009) Interim Financial Reporting 2011

TAS 36 (revised 2009) Impairment of Assets 2011

TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets 2011

TAS 38 (revised 2009) Intangible Assets 2011

TAS 40 (revised 2009) Investment Property 2011

TFRS 2 Share-based Payment 2011

TFRS 5 (revised 2009) Non-current Assets Held for Sale and Discontinued Operations 2011

Management expects to adopt and apply these new TFRS in accordance with the FAP’s announcement and has made a

preliminary assessment of the potential initial impact on the consolidated and separate financial statements of those new

standards assessed to have the greatest potential impact on the financial statements in the period of initial application. These

standards are as follows:

TAS16 (revised 2009) – Property, plant and equipment

The principal changes introduced by the revised TAS 16 and affecting the Group is that (i) costs of asset dismantlement, removal

and restoration have to be included as asset costs and subject to annual depreciation; (ii) the depreciation charge has to be deter-

mined separately for each significant part of an asset; and (iii) in determining the depreciable amount, the residual value of an item

of property, plant and equipment has to be measured at the amount estimated receivable currently for the asset if the asset were

already of the age and in the condition expected at the end of its useful life. Furthermore, the residual value and useful life of an

asset have to be reviewed at least at each financial year-end.

92





The revised TAS 16 permits as a transitional provision that these changes may be introduced prospectively from the year of

introduction. Management intends to adopt this transitional provision and accordingly the introduction of the revised TAS 16

from 1 January 2011 has no impact on the financial statements of 2010 or prior years. Management is currently reviewing the

impact on the financial statements of introducing the revised TAS 16 from 1 January 2011.

TAS19– Employee benefits

There is currently no Thai accounting standard covering employee benefits and the Group does partially present account for other

long-term employee benefits. The Group does not presently account for and termination benefits until such costs are incurred. The

new TAS 19 includes the requirements to recognise and account for such costs in the period in which the service is performed. The

requirements are complex and require actuarial assumptions to measure the obligation and expense. Moreover, the obligations

are measured on a discounted basis because they may be settled many years after the employees render the related service. The

transitional provisions of TAS 19 permit the transitional liability to be recognised and accounted for in one of four different ways:

(i) retrospectively

(ii) immediately in equity (retained earnings) at the transition date.

(iii) immediately in profit of loss at the transition date.

(iv) as an expense on a straight-line basis over up to five years from the transition date

Management is currently reviewing the impact on the financial statements of introducing the TAS 19 from 1 January 2011.

39 Reclassification of accounts

Certain accounts in the 2009 financial statements have been reclassified to conform to the presentation in the 2010 financial

statements as follows:

2009 Consolidated Separate financial statements financial statements Before After Before After reclassified Reclassified reclassified reclassified Reclassified reclassified (in thousand Baht)

Balance sheet

Assets

Current investments 12,932 (78) 12,854 2,932 - 2,932

Restricted deposits at

financial institution 1,165,573 4,734 1,170,307 1,166,404 - 1,166,404

Short-term loans to related parties 470,732 (7,614) 463,118 509,140 (2,880) 506,260

Other current assets 110,478 (10,731) 99,747 87,674 (10,731) 76,943

Long-term loans to related parties - 3,000 3,000 - 3,000 3,000

Other non-current assets 2,766 15,951 18,717 2,766 15,951 18,717

Liability

Other current liabilities (42,503) (5,262) (47,765) (40,292) (5,340) (45,632)

- -

The reclassifications have been made to be appropriate to the Group’s business.

93



Auditor’sRemuneration

AuditFees

2010 Annual audit fee: Serm Suk Public Company Limited 1,270,000 Baht

2010 Annual audit fee: Serm Suk Beverage Co., Ltd. 590,000 Baht

2010 Annual audit fee: Serm Suk Holdings Co., Ltd. 140,000 Baht

OtherServices

- None -

REPORTOFTHEBOARDOFDIRECTORS

1.Name,Address,NatureofBusiness,andtheNumberandTypeofIssuedSharesofSubsidiaries.

SermSukHoldingsCo.,Ltd. (registered on November 23, 2006.)

Muang Thai - Phatra Complex, Tower 1,27-28th Fl, 252/35-36 Rachadaphisek Road, Hway Kwang, Bangkok 10310

Nature of Business: Shares holding and investment management for Serm Suk group of companies

Shares Issued: 50 million common shares at 10 baht per share, 70% paid-up

SermSukBeverageCo.,Ltd.(previouslySermSukYHSBeverageCo.,Ltd.)

Muang Thai- Phatra Complex, Tower 1,27-28th Fl, 252/35-36 Rachadaphisek Road, Hway Kwang, Bangkok 10310

Nature of Business: Manufacture and distribution of beverages

Shares Issued: 68.9 million common shares at 10 baht per share, 100% paid-up

(Registered share capital increase from 43.9 million shares of Baht 10 each to 68.9 million shares of Baht 10 each on September

15, 2006. 99.99 percent of shares currently held by Serm Suk Holdings Co., Ltd.)

2. InvestmentsinOtherCompaniesorOtherPrivateCompaniesinwhichSermSukPublicCo.,Ltd.Holds

Atleast10%oftheIssuedSharesasat31December,2010

Company Nature of Business Registered Capital (million Baht) % Investment

Serm Suk Holdings Co. Ltd. Investment Management 500 99.99

Serm Suk Beverage Co., Ltd. Manufacture of Beverage 689 99.99*

Petform (Thailand) Co., Ltd. Manufacture of PET polymers, PET

bottles, plastic closures 75 40

Petpack Co., Ltd. Manufacture of Plastic and

PET Containers 80 10

The Pet Co., Ltd. Manufacture of Plastic and

PET Containers 70 10

*Held by Serm Suk Holdings Co., Ltd.

ReportofTheBoardofDirectors

94



3. Details Reported by Directors to Serm Suk Public Company Limited.

3.1 Benefits or liabilities, whether direct or indirect resulting from any agreement entered into by the Company during the

accounting period of 2010.

- None –

3.2 Director’s Shareholding in the Company or its subsidiaries :

3.2.1 Shares Held by Directors in the Company

Board of Directors Shares Held As of 31/12/2010 Age Relation to the Management

Pol. Capt. Prasit Tantsetthi -0- 80 None

Independent Director, Wife -0-

Chairman of the Board

Mr. Photipong Lamsam -0- 76 None

Independent Director,

Vice-Chairman of the Board,

Member of Audit Commitee

Mr. Somchai Bulsook -0- 68 Relative to Director,

Director,President,andChefExecutive Wife -0- Mr. Jakkris Bulsook and

Officer,MemberofNominatingand Father to Director,

Corporate Governance Committee Mr. Dhitivute Bulsook

Mr. Jakkris Bulsook -0- 66 Relative to the President and

Director Chief Executive Officer

Mr. Manu Anand -0- 52 None

Director, Member of Compensation

Committee, Member of Nominating and

Corporate Governance Committee

Mr.Prasong Sukhum -0- 81 None


Chairman of Audit Committee

Report of The Board of Directors

95




Board of Directors Shares Held As of 31/12/2010 Age Relation to the Management

Mr. Ronald Stuart McEachern -0- 57 None

Director,

Member of Nominating and Corporate

GovernanceCommittee

Mr. Stefano Sartoretti -0- 46 None

Director

Prof. Khunying Suchada Kiranandana -0- 65 None


Member of Audit Committee

Mr. Suchin Wanglee -0- 74 None

Director,

Member of Compensation Committee

Mr. William Ellwood Heinecke -0- 61 None

Independent Director, Chairman of


Mr. Dhitivute Bulsook -0- 42 Son of the President and

Director, Chief Executive Officer

General Plant Manager, Pathumthani

Mr.TanmayaVats -0- 51 None

Director

96



3.2.2 Shares Held by Directors in Subsidiary Companies

Serm Suk Beverage Co., Ltd.

Board of directors Position Shares Held As of December 31, 2010

Mr. Somchai Bulsook President 1 Share

Mr. Jakkris Bulsook - None - 1 Share

Mr. Dhitivute Bulsook - None - 1 Share

Serm Suk Holdings Co., Ltd.

Board of directors Position Shares Held As of December 31, 2010

Mr. Somchai Bulsook President 1 Share

Mr. Dhitivute Bulsook Director 1 Share

4. Benefits, Remuneration, Shares, Debentures, or other Privileges Received by the Directors from the Company During

Fiscal Year 2010

4.1 Benefits, remuneration or other privileges received by the Directors from the Company in the form of Director fees and

director remuneration for 2010 amounting to Baht 21.44 million.

4.2 Shares or debentures received by the Directors from the Company:

-None-

5. Main Businesses :

Manufacturer and distributor of:

•Carbonatedsoftdrinksunderthe“Pepsi”, “Pepsi Max”, “Pepsi Twist”, “Mirinda”, “Seven-up”, “Mountain Dew”,

and “Club” trademarks

•Drinkingwaterandsodawaterunderthe“Crystal” trademark

•“Lipton Ice Tea” lemon flavor in returnable bottles for Pepsi Lipton International Ltd.

• “Tropicana Twister” fruit juice in returnable bottles for Pepsi-Cola (Thai) Trading Co., Ltd.

•Manufactureranddistributorof“Gatorade” sport drink, for Strokely-Van Camp Inc., USA

Distributor of:

• “Red Carabao” for Carabao Tawandang Co.,Ltd.

•“Oishi Green Tea” for Oishi Trading Co., Ltd.

•“Lipton Ice Tea” in PET bottles and cans for Pepsi-Cola (Thai) Trading Co., Ltd.

•“Tropicana Twister” fruit juice in non-returnable bottles for Pepsi-Cola (Thai) Trading Co., Ltd.


Serm Suk Public Company LimitedMuang Thai-Phatra Complex,Tower 1, 27-28th Floor, 252/35-36 Rachadapisek RoadHuay Kwang, Bangkok 10310 Tel. 66-2693-2255-65 Fax: 66-2693-2266

www.sermsukplc.com

serm suk public company limited

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