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Th Hat fALASKA

2010 AnnuAL reporT


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Contents

1Financial Highlights /2Our Company /3Our Vision & Mission /4Our Business Portolio /8Chairmans Message / 10Presidents Message /14Childrens Hour / 16Alaska GK Village /18 Happyland /20 The Alaska Aces /22Values-Inspired Campaigns /24CFOs Report /

26Managements Discussion & Analysis o Operations /32Corporate Governance /36Board o Directors /40Management Committee /42AuditCommittee Report /

43Statement o Managements Responsibility or Financial Statements /

44Financial Statements/80Corporate and Shareholder Inormation

Corporate Social Responsibility is an intrinsic part o

Alaska Milk Corporations business operations. At the heart o our

advocacies and in line with our heritage o nutrition are programs

that put thrusts towards the areas o nutrition education

and physical development.

As a responsible corporate citizen, we strive to make a

diference in our country, especially in the community where

we operate. We engage and sustain partnerships with private

organizations, local government units and individuals

by providing unds and other means o viable support

to help uplit the lives o underprivileged Filipinos.

We also recognize our crucial role in promoting positive values

to address the moral challenges conronting modern society.

Going beyond creative relevance and executions,

our advertising campaigns are geared towards the development

o better societal values that support the ulillment o

better lives or our countrymen.


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Financial Highlights

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

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In million Pesos except per share data and ratios 2010 2009 Change

For the YearNet Sales 12,163 10,580 15%

Income rom Operations 2,327 1,889 23%

EBITDA1 2,762 2,241 23%

Net Income 1,816 1,409 29%

At YearEndTotal Assets 9,140 7,271 26%

Stockholders Equity 6,046 4,677 29%

Financial RatiosOperating Margin 19.1% 17.9% +1.2% pts

Return on Sales 14.9% 13.3% +1.6% pts

Return on Equity 30.0% 30.1% -0.1% pt

Current Ratio 1.93 1.55 +0.38

Debt-to-Equity Ratio 0.51 0.55 -0.04

Per Common ShareEarnings per Share 2.06 1.59 +0.47

Cash Dividends 0.50 0.20 +0.30

1

Earnings Before Interest, Taxes, Depreciation and Amortization

Index based on December 29, 2009 PSEi of 3,053 and AMC closing price of P7.10 per share

2010 AMC Stoc Price Performance Relative to PSEi

PSEi

AMC

2010 Annual Report


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Our Company


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PRODUCT DEVELOPMENT

We will continue to build on the strengths andcompetitive attributes o the ALASKA brand

and develop its ull marketing potential. We

will develop new products and identiy market

opportunities, mindul o our task to be responsive

to the ever changing and growing needs o our

consumers.

CUSTOMER SERVICECustomer relationships are integral in building the

Alaska business. We aim to provide our partners in

trade the best and most eicient service, makinguse o leading edge technology to ensure timely

product availability and accessibility. We strive

to know and understand our customers ully to

bridge the gap between what they need and

what we can oer.

QUALITYUltimately, the consumer whom we serve and

their level o satisaction with our products

become our nal judge and jury. We are

committed to deliver high quality milk andother consumer ood products rom production

to consumption. We will respond to the call to

deliver higher quality nutrition to every Filipino

home.

To be a leading consumer oods company with a diversiied portolio o consumer ood

brands and products that are market leaders in their respective categories.

PEOPLE

We recognize that our people, the Alaska TeamMembers, are one o our most important assets

and we are committed to promote their saety and

welare. Their wealth o experience, ideas, dedication

and strong work ethic lay the oundation or the

Companys continued success. It is our goal as

much as it is theirs, to pursue and reach their ull

potentials through continuing education, training,

and skills-enhancement programs. We challenge

each individual by providing the opportunity to

contribute to the Companys endeavors.

PROFITABLE GROWTHGrowth that creates value or our shareholders

is paramount. We will deploy our resources on

investment opportunities that are within our core

competence and yield excellent returns relative to

its risks and which are consistent with our growth

objectives.

SOCIAL RESPONSIBILITYWe recognize our role in nation building by

promoting the protection o the environmentand taking part in various community-building

projects that help enhance and uplit the quality

o lie o the underprivileged and the marginalized

sectors o our society.

Our Mission

Our Vision

32010 Annual Report


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Honde SalPaborito ng Pamilya!

Our Business Portfolio


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52010 Annual Report

LIQUID CANNED MILkFor nearly orty years, the Alaska brand has always been associated with

quality and nutrition. The Companys rst generation o milk products are Alaska

Evaporated Filled Milk and Alaska Sweetened Condensed Filled Milk. Collectively

known as the Classic Line, product usage has since expanded rom a nutritional

beverage to a multi-purpose cooking ingredient. To address the needs o the

low-income earners or more aordable products, the Company also developed

a Value Line o evaporated and sweetened condensed creamers in the market.

Priced competitively and with the same Alaska Milk seal o quality, Alaska

Evaporada and Alaska Condensada are the perect enhancers or various ood

and beverage preparations. The Alaska brand is the undisputed market leader in

both the Evaporated and Condensed Milk Categories.

The Company has urther strengthened its core business by acquiring /

licensing the liquid canned milk business o global ood giant Socit Des Produits

Nestl S.A. In a deal signed on April 16, 2007, Alaska Milk Corporation bought

rom Nestle the Alpine, Liberty and Krem-Top brands, including all trademark

properties. Also included in the deal is a long-term licensing agreement or AMC

to manuacture and sell the Carnation and Milkmaid brands or liquid canned milk

products. Each o these brands has a strong market position, a loyal customer base

and a brand name associated with quality.

In line with the Companys thrust o providing aordable and quality products

to a greater number o consumers, an economy brand was made available in

the market. Launched in 2009, Cow Bell Condensada addresses the needs o a

growing price-conscious market, speciically the low-income earners.

Today, Alaska Milk Corporation has a dominant position in the liquid

canned milk category, accounting or nearly 80% o the market.


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Our Business Portfolio

6 The Heart o Alaska

POWDERED MILkThe Company has likewise built a solid position in the Powdered Milk

Category. With the heritage gained by the Alaska line o liquid canned milk

products, the Companys Alaska Powdered Milk Drink, the most nutritious

powdered milk, has emerged as the second leading brand in the market.

The successul Growth Gap Campaign was instrumental in sustaining

consumer awareness on the beneits o drinking milk, especially among

school-age children where weight and height gained during inancy

progressively lessen over the years until the child reaches puberty.

UHT READY-TO-DRINk MILkAlaska Milk Corporation also oers a line o Ready-to-Drink milk products

that come in both plain and favored milk. The Companys line o Ready-to-Drink

milk products use Ultra Heat Temperature (UHT) process combined with aseptic

packaging to ensure product quality, hygiene and longer shel lie.

Alaska Fresh Milk contains the essential vitamins and minerals or healthy

bones and teeth. It also contains energy-giving carbohydrates to suit the active

liestyle o every member o the amily. Alaska Slim Milk, a 98% at-ree resh cows

milk, suits the nutritional needs o the weight and health conscious milk drinkers.

Alaska Slim has all the calcium and minerals o regular milk, with less o the at.

To encourage milk consumption among children, a range o ready-to-drink

favored milk drinks under the brand names Alaska Choco! and Alaska SweetMilk! are likewise available in the market.

Alaska Yoghurt Drink is a ready-to-drink milk naturally ermented with

good bacteria which promotes proper digestion. It comes in our ruity favors:

Strawberry, Blueberry, Orange and Green Apple.

UHT READY-TO-USE PRODUCTAlaska Crema All-Purpose Cream is a result o the Companys eort to

broaden its product portolio in higher value-added segments. Launched in

2003, Alaska Crema enhances the taste o a variety o ood preparations,

bringing gourmet goodness at home.

NON-DAIRY COFFEE CREAMERThe latest addition to the Companys portolio o quality products is Alaska

Krem-Top Coee Creamer. A non-dairy coee creamer, Alaska Krem-Top enhances

coee experience with its rich favor and aroma. In a blind test, more coee

drinkers in Metro Manila like Alaska Krem-Top better than the leading coee

creamer brand.


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Chairmans Message

The results or the year certainly relect our

strong commitment to deliver higher levels o

perormance and value to our customers, consumers

and shareholders.

The Philippine economy grew at its strongest

in 34 years at 7.3% in 2010 rom 1.1% in 2009, aided

by the recovery o exports and manuacturing,

accommodative monetary and iscal policies as wellas election spending. Sustained remittance infows,

combined by stable ood prices boosted consumer

spending which expanded by 5.3% rom 4.1% in 2009.

Investor sentiment likewise remained bullish, which

saw a 38% gain in the Philippine stock markets main

index. With the sharp rebound in the economy, the

Peso urther appreciated by 5.3%, to settle at P43.88 to

the U.S. dollar by year-end.

With the avorable economic environment, your

Company made signiicant progress, capitalizing

on market opportunities as we continue to position

our business or long-term growth. Our ocus onpromoting and growing our brands, building on our

capability and expanding market presence as well as

share o market enabled us to surpass our volume and

proit goals or the year.

Net income in 2010 reached P1.82 billion, 29%

higher than the previous years net income and the

highest in the history o the Company. This was

achieved as a result o robust sales volume growth

across our product portolio, complemented by a stable

cost environment and continuing ocus on improving

operating eiciencies.

As consumer spending remained buoyant, we were

relentless in pushing our products in the market through

strategic advertising and promotional campaigns that

capture the interest and diverse needs o consumers.

Collaborative eorts with our retail trade partners

ensured extensive exposure or our brands. Every

initiative undertaken has been guided by a conscious

eort to satisy our consumers to the extent that they

consistently choose our products over competition.

Our marketing and sales strategies were

complemented by continuing investments in

manuacturing capacity expansion and operating

eiciencies. While we have begun to realize initial beneits

rom these capital investments, more gains will materialize

in the coming years with the completion o these projects.

With a growing product portolio and brand strategies,

we are well positioned to respond to deliver higher salesvolumes amidst stronger consumer demand.

In 2010, we entered the non-dairy coee creamer

category with the launch o Alaska Krem-Top Coee

Creamer. Alaska Krem-Top is a signiicant step in our

continuing eort to expand our business portolio and

provide the Filipino consumers with aordable and

quality products. With a strong heritage in the milk

industry, we believe we are in a unique position to

capitalize on this opportunity which will support our

overall long-term growth objective.

Our strong inancial perormance and competitive

dividend yield continue to generate strong interest romthe investing public. From a share price o P7.10 at the start

o 2010, AMC share price gained 85% to close at P13.10 by

year-end, outperorming the local composite index which

increased by 38% during the comparable period.

Our accomplishments in 2010 have deinitely

established a higher perormance level moving orward.

In December 2010, the Board reviewed managements

strategic plan that ocuses on continuing high growth

and sustained proitability. Our priority in the immediate

term is to continue to extract growth rom our core milk

products and ast-track development o new products

and entry into new categories.

We entered 2011 amidst growing infationary

pressures, adding uncertainties to economic recovery

around the world. Soaring oil, ood and commodity

prices have been eeding infation, which puts pressure

on household budgets. Our assessment o the current

market conditions highlight the need to continuously

innovate in our marketing and selling eorts to

eectively communicate our value proposition to

This is my first report as Chairman of Alaska Milk Corporation after twelve years as ViceChairman and I write to you with mixed emotions. One borne out of humility, for the trust and

confidence the Board has bestowed on me and that of pride, for the great accomplishments we

have achieved for the year.


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92010 Annual Report

ANTONIO H. OZAETA

Chairman o the Board

Our accomplishments

in 2010 have definitely

established a higher

performance level moving

forward.

our consumers. This will be supported with trade and

distribution strategies to strengthen market coverage

and product availability. In these challenging times,

we will ensure that our company will live up to the

expectations o our consumers and we will ace these

challenges equally.

On behal o the Board, I wish to take this

opportunity to express our deepest gratitude and

appreciation to our ormer Chairman, the late WilredUytengsu, Sr., or his valuable contribution to the

growth o Alaska Milk. It was under his stewardship

and vision that we now have a strong and highly

committed organization, built under the solid

oundation o mutual respect and integrity. Thus, it is

an honor or me to build upon this legacy as I step into

a bigger role and responsibility o charting the next

course or Alaska Milk.

In closing, I would like to recognize the valuable

contribution o each and every Team Member in the

organization, or their dedication and commitment to

the objectives o the Company; to our business partners

and consumers, or their abiding trust and support; and

inally, to our shareholders, who continue to believe in the

inherent value o Alaska Milk Corporation.


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As the Philippine economy expanded to its strongest level in over three decades, I am pleased to reportthat your Company capped another year of solid financial results. Revenues for the year expanded

by 15% to P12.16 billion from P10.58 billion in 2009 as a result of sales volume gains in our core milk

products as well as incremental sales generated from new product launches. With the improvement

in the Companys cost structure, combined with a disciplined approach on spending, net income for the year surged

to a new record high of P1.82 billion, a 29% jump over the P1.41 billion net income earned in 2009.

Our achievements or the year can be credited to two

actors. First, the soundness o our business platorm which

consists o: harnessing the strengths and ull potential o

our brands, deepening our relationships with customers

and consumers and maintaining a strong balance sheet.

Second, is the dedication and expertise o our TeamMembers across the organization.

Dismissing conventional wisdom that a mature

market limits growth, we continued to create demand in

order to generate sales and expand our consumer base

through value-added marketing initiatives. We have

expanded our brand portolio and packaging options to

address the needs o an economically diverse market.

As a result, we maintained our dominance in the liquid

canned milk category, solidiied our position as the

second leading brand in the powdered milk market and

carved a bigger market share in the UHT ready-to-drink

and ready-to-use segments.Cognizant o our thrust to capitalize on the market

value o our acquisitions and develop new avenues o

growth in the uture, Alaska Krem-Top Coee Creamer was

ormally launched in July 2010. With a superior product

proile, we are conident that Alaska Krem-Top will achieve

a signiicant ollowing in the non-dairy coee creamer

market. As we build on our revenue base, we continue to

explore opportunities and rontiers within the dairy industry

which have strong growth potentials and where we can

become an important player. We are continuing to develop

new products as we work to leverage the equity our brands

have in the market and products that will meet and exceed

consumer expectations.

As reported last year, the devastation wrought by

Typhoon Ondoy impacted us signiicantly in the ourth

quarter o 2009, causing disruptions in our supply chain and

alling short o market requirements. Through extensive

rehabilitation eorts, your Company ully recovered rom

this unexpected calamity. With our ongoing expansion and

modernization programs, we stand ready with increased

President & CEOs Message

production capacity and the conidence that the current

strong demand is sustainable.

We recognize that our supply chain is a vital cog in our

aspiration to provide nutrition to every Filipino home. And

as such, we continue to hone our logistics and distribution

network in our resolve to bring our products to the smallestsari-sari stores and ultimately to the humblest homes.

Supply quality and stock availability programs were carried

out in earnest during the year. Technology enhancements,

through the interconnection o all provincial warehouses

under an integrated and seamless inventory management

system, have enabled us to distribute our products more

eiciently and cost-eectively than beore.

We have been resolute in growing our business by

sharpening our engagement with our consumers at the

point o purchase. To maximize trade coverage and spur

consumer trial and re-trial or our products, our sales eorts

concentrated on improving visibility and reach throughaggressive penetration drives.

Close collaboration with modern retailers enabled

us to capitalize on their store expansions. Specialized

in-store promotions and trade programs aorded us

the fexibility to bolster the presence o our products

in newly urbanized areas, capturing new consumers

almost immediately. For 2011, about 130 new stores

are expected to be opened by the Companys top retail

accounts, representing a real growth opportunity as we

bring our products closer to the consumers.

Our investments in brands and inrastructure would

be ineective without corresponding investments in

human capital. Along this line, we continue to develop

the capabilities and competencies o our Team Members

across the organization as well as those o our distributor-

partners. Through development programs that are

attuned to the ever-changing selling dynamics, we are

able to draw out the best in our people and make them

better understand and be more responsive to the growing

needs o a highly segmented market.


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12010 Annual Report

A welcome treat or the year was the victory o our

proessional basketball team, the Alaska Aces, in the 2010

Philippine Basketball Associations Fiesta Conerence. This

brings the total number o championship titles or the

team to 13 in 25 years, making the Alaska Aces the second

winningest team in terms o number o championship wins

in the history o the PBA.

This year, however, we are once again aced with strong

infationary pressures similar to those experienced in 2008,a concern that is shared by businesses and governments

around the world. With memories o the 2008 infation surge

still vivid, rising energy cost and soaring global ood prices

pose downside risks especially on consumer spending,

threatening economic recovery.

Prices o skimmed milk powder, a key ingredient in most

o our products, have risen sharply early on in 2011 driven

by global demand and poor weather conditions in Australia

and New Zealand, two o the worlds largest exporter o dairy

products. Furthermore, local costs o sugar and coconut oil have

likewise increased drastically, adding pressure to proit margins.

It is unlikely that this trend in commodity prices will reverse in

the short-term. While we recognize the realities o the marketplace,

we take these as a challenge or us to better ourselves. We intend

to retain our competitive vigor, determined to urther cementing

our position in the domestic milk market and delivering on our ull

potential as an organization. I am conident that the soundnesso our business model and strategies will give us stability through

diicult times and optimistic that this will make us stronger.

WILFRED STEVEN UYTENGSU, JR.

President & Chie Executive Oicer

We intend to retain

our competitive vigor,

determined to further

cementing our position

in the domestic

milk market.


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The Heart


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of ALASKA


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Childrens Hour began with a noble dream wrapped in a single package: to create a brighter

uture or Filipino children. It was in 1999 when Childrens Hour began as an end-o-the-millennium

campaign built on the promise that the one hours worth o annual earnings o each individual,

employee, corporation and organization would be able to start the change that we all dreamt o.

At present, Childrens Hour is now a ull orce non-proit organization that raises unds through the

power o one hour. These unds are then deployed to careully selected projects that help children

in the areas o education, nutrition, shelter, protection and total development in the orm o grants.

All children deserve to get an education, to live healthy and happy lives, and to look orward

to a brighter uture where they can ulill their potential. The truth is, everyone who has a job and

a regular income, no matter how small, can make a dierence in the lives o marginalized children,

explains Ms. Emily Abrera, Chairperson o Childrens Hour Philippines, Inc.

Emily AbreraChildrens Hour Director

The Alaska Milkcampaigns for Childrens

Hour are always creative

and unique.

To date, rom the contributions o

individuals, organizations and partnercorporations, Childrens Hour has unded 545

projects that beneitted over 600,000 children

all over the country.

Alaska Milk Corporation and Childrens

Hour have enjoyed a long collaboration,

spanning 10 years o shared goal o nurturing

the Filipino children. The Company was

one o the irst companies to join Childrens Hour in 1999 and has been recognized as one o the

organizations Top 20 contributors. Since Childrens Hours inception, oicers and employees o

Alaska Milk Corporation have raised a total o P2.2 million with an average employee participation

rate o 90%.

A staunch supporter o the Childrens Hour, AMC President and CEO Wilred Steven Uytengsu

went the extra mile by personally raising unds by competing in the 2009 Ironman World

Championships in Kona, Hawaii.

Ms. Abrera adds, Fred Uytengsu is one o our strongest champions. He himsel is tireless in

promoting our cause within the company, as well as raising extra unds via the Alaska Aces and

through his personal contacts. The Alaska Milk campaigns or Childrens Hour are always creative

and unique and unlike most o our donors, it is Alaska Milk who comes up with the ideas and

presents those to us.

To commemorate the 25th year o the Alaska Aces, Alaska Milk and Childrens Hour is launching

yet another co-branding project wherein or every 1 liter o Alaska Fresh and Alaska Slim sold, 25

centavos will go to the Childrens Hour.

Alaska Milk looks orward to a continuing partnership with Childrens Hour in making the world

a better place, one hour at a time.

Childrens Hour


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[ children lie at the heart of alaska ]


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6

[ home is where the heart is ]


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Alaska GK Village

12010 Annual Report

In 2005, Alaska Milk Corporation together with the municipality o San Pedro, Laguna and the

Gawad Kalinga Community Development Foundation laid the groundwork to build a community o

100 homes or the poorest o the poor.

Gawad Kalinga (GK), which means to give care in Filipino, is a community development model

and social movement ounded in the Philippines in 1995. Its mission is to transorm a nation by

creating peaceul and sel-reliant communities, anchored on the values o caring and generosity. It

seeks to restore the dignity o the poor. People struggling to survive one day at a time and living in

Alaska Milk believes that

providing decent homes

and livelihood programs

are just the beginning ofthe transformation of a

person, a family

and a community.

makeshit homes are given a chance to build

their own homes and re-build their lives. More

than providing a decent roo over their heads,

GK also aims to develop community leaders

and transorm residents to be productive

members o society, instilling in them the heartand capacity to help not only themselves but

others as well.

Guided by the belie that good community

relationships is key or the business, the housing

project is Alaska Milk s modest way o giving

back to the people o San Pedro who have contributed so much to the companys growth. San Pedro

is home to the companys manuacturing acilities or nearly 40 years.

Through the spirit o bayanihan (cooperation), the AMC-Gawad Kalinga Housing Project bore

witness to a deeper meaning o social awareness and volunteerism among Alaska Milk employees.

Under warm camaraderie, company employees, rom senior management to plant personnel,

worked together with the intended beneiciaries in constructing homes. More than providing

inancial assistance, the housing project is all about active involvement in building a shared

community, nourishing the homeless dream or a better lie.

Five years later, 30 additional or a total o 130 homes now stand in what used to be a barren

area. Wastelands have now been replaced by a multi-purpose hall, a day care center and a

basketball court. As importantly, AMC used their hopes or better lives by conducting training

and skills development programs that will help address the residents economic needs. Livelihood

training programs such as urniture making and making bags out o recycled packaging materials

have been started within the community, with recyclable materials being supplied by Alaska Milk.

Alaska Milk believes that providing decent homes and livelihood programs are just the

beginning o the transormation o a person, a amily and a community. Long ater the last brick has

been laid, Alaska Milk will continue to support its adopted community. Ater all, home is where the

heart is and where your heart is, there shall your riches be.


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Jim Libiran (Direk Jim), a ormer broadcast journalist, gained acclaim as an independent ilm maker

through his debut ilm Tribu in 2007. The ilm, which shows street lie and gangster culture in Tondo rom an

impoverished boys point o view, bagged Best Film, Best Actor and Best Sound Awards in the Philippines 2007

Cinemalaya Festival. The ilm was given the Pari de lAvenir Award by the Festival Paris Cinema in 2008.

Fast orward to 2010, Direk Jim returns once more to the streets o Tondo or his second movie

Happyland. I Tribu showed the dark and violent side o poverty in the Philippines, Happyland tells about

inding hope and redemption in the ace o desperate circumstances. It tells o a story o how ones

ambition survived in one o Manilas poorest and roughest slums. The movie, based on true events that

happened during the 1970s 80s, traces how an odd group o young misits ound inspiration in ootball.

These boys eventually ormed a ootball team that became legendary or playing bareoot (utkaleros)

because they could not aford to buy shoes. Direk Jim describes the ilm as a coming-o-age story about

poor young kids who learned to dream big and dared to ight or their simple goal.

Direk Jim saw the need to develop grassrootsootball in the country. From this dream, he envisioned,

what he calls a three-legged social project an NGO to

teach Futbol sa Kalye, a Tondo Futbol Team as proo o

success, and a ilm to inspire the young (Happyland).

The ilm is just part o a bigger dream.

But to turn the vision into reality, Direk Jim

needed support rom the private sector.

Thanks to what he considered divine intervention,

Direk Jim got introduced to Alaska Milk Corporations own sports development program the Alaska Football

Power Camp. Alaska Milk has always believed that structured recreations can serve as a powerul tool in building

a childs character and sel-conidence. The Company also saw the movie as a vehicle to promote its advocacy on

health and nutrition among the youth.

A tie-up was then orged between Direk Jim and Alaska Milk Corporation, with the latter providing

invaluable support to make the movie a reality. The best parts o the ilm are the ootball match scenes which

give insights on how the ultkaleros play the game. For his part, Direk Jim is thankul or the partnership with

Alaska Milk and its support to this creative endeavor.

Doing service to the community is good business and good business goes hand-in-hand with a healthy

nation. The movie is an ideal it to Alaska Milks CSR activities considering its products are milk-based and

children are its primary market, Direk Jim adds.

Following good reviews or the ilm, plans are underway to show Happyland in schools and poor

communities all over the country to help bring the message o hope and resilience amidst adversities. Direk Jim

hopes the ilm will inspire more youth to take up ootball and get them out rom a drug and crime-illed lie.

Alaska Milk Corporation is one in supporting Direk Jim and Happyland in its mission o promoting positive valuesamong the youth and inspiring them to reach their ull potential or a better Philippines.

These are challenging times or us as a nation, Direk Jim says. I we want to reach the peak o

progress and Filipino potential, we need to orge new relationships, new alliances, and develop new ways o

doing business and art.

Jim LibiranIndependent Film Director

Happyland is a coming-

of-age story about poor

young kids who learned

to dream big and dared to

fight for their simple goal

Happyland


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[ striking a goal in the hearts of youth ]


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6

[ heart of a champion ]


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Values-Inspired Campaigns


Over the years, Alaska Milk Corporation has created communication campaigns that help build a

strong connection between its products and its consumers. With the timeless tagline: Sa sustansyat

lasa, wala pa ring tatalo sa Alaska (in nutrition and taste, nothing beats Alaska), Alaska Milk has since

been associated with providing quality milk products or good nutrition and health.

As a responsible corporate citizen, we are committed to making a dierence to society at large.

Along this line, the Company believes that its brands can be used as a tool to uplit the lives o

Filipinos by championing social causes that promote changes in behavior and attitudes.

the Company believes that

its brands can be used as

a tool to uplift the lives of

Filipinos by championing

social causes that promote

changes in behavior

and attitudes.

In 2010, two award-giving bodies

recognized two o the Companys advertising

campaigns or marketing excellence.

The Ginang Alaska Integrated Marketing

Communication (IMC) Campaign won the

Silver Prize or Best Family-Oriented Brand

Campaign and the Bronze Prize or Best

Established Product Brand Campaign in the

2010 UA&P Tambuli Integrated Marketing

Communications Eectiveness Awards. The UA&P Tambuli Awards is the irst and only award in

the Philippines that recognizes both the business and societal values o marketing communication

campaigns. It complements existing industry awards based solely on either creative merit or human

values by recognizing integrated campaigns proven to deliver positive results or both the companies

shareholders and society at large.

The multi-media campaign o Liberty Condensada, entitled Lambing, on the other hand, won

the Silver Medal or Reverence or Family Unity and the Inviolability o Marriage Category in the 2010

Araw Value Awards. Liberty Condensadas Lambing is a concentrated area marketing campaign

implemented in Visayas and Mindanao which communicated the sharing o lies sweetest moments

among amily members. The Araw Value Awards is organized by the Advertising Foundation o the

Philippines, the social development institution o the advertising and marketing communications

industry. The awards recognize advertising and marketing communications that promote values or

national progress.

Moving orward, Alaska Milk Corporation pledges that its marketing campaigns will continue to

be relevant with the times, going beyond creative executions. As always, they will be driven by the

same purpose that has distinguished the Company one that is aligned with the aspirations and

development goals o our nation.


25/84

[ the heart of our campaigns ]


26/84

Chief Financial Officers Report


Alaska Milk Corporation delivered another year of solid performance, ending 2010 with a newrecord net income of P1.82 billion, a 29% improvement over the P1.41 billion net income

earned in 2009. Fueling the growth was the strong sales volume expansion across the

Companys portfolio of milk products alongside lower input costs as well as prudent spending.

Net sales or 2010 grew by 15% to P12.16 billion

rom P10.58 billion a year ago, underpinned by the

double-digit growth o the domestic milk market as

the Philippine economy sharply rebounded rom the

slowdown in 2009. In addition, sustained advertising

campaigns and demand-generating promotional

initiatives help pushed sales volumes higher year-

on-year, a signiicant achievement amidst aggressivecompetition and market challenges.

The year 2010 also saw a moderation in price

movements o production inputs. This was largely

achieved as a result o the Companys strategic buying

initiatives to secure orward supply contracts or key

commodities skimmed milk powder, sugar, coconut

oil and tinplates. With the avorable cost environment

coupled with the appreciation o the Philippine Peso

against the U.S. Dollar, cost o sales or the year grew at

a slower pace o 11% at P7.56 billion rom P6.82 billion

in 2009. As a result, gross proit jumped 22% to P4.60

billion or 37.8% o net sales rom P3.76 billion or 35.6%o net sales the prior year.

Operating expenses or the year increased

signiicantly, by 22% at P2.28 billion rom P1.87

billion in 2009. The increase can be attributed to

higher advertising and promotional spending to

boost consumer demand or Alaska Milk products. In

addition, higher distribution-related charges attendant

to increased sales volume pushed operating expenses

higher year-on-year. This put operating income or the

year at P2.33 billion or 19.1% o net sales, a 23% increase

rom the 2009 operating income o P1.89 billion or

17.8% o net sales.

As Alaska Milk carried on to improve its proitability,

we kept our commitment to reward our shareholders

and at the same time, ensure that signiicant capital is

set aside or reinvestment to support uture business

plans. For 2010, the Company declared a total P0.50

per share in regular and special cash dividends. This

translates to a 4.8% cash dividend yield based on

a weighted average share price o P10.43 and is

equivalent to a 31% payout o 2009 net income.

During the year, 7.3 million common AMC shares worth

P50.5 million were re-acquired under the Companys

share buy-back program, a testament to Managements

conidence in the underlying value o

the business. Market capitalization at year-end stood

at P11.5 billion, up 82% rom P6.3 billion in the sameperiod last year.

The Company continues to generate strong cash

fows rom its operations, which amounted to P1.75

billion in 2010. This pushed interest income or the

year higher at P48.75 million rom P24.65 million in

2009. Internally generated unds were used to und

the Companys capital expenditure requirements

which amounted to P347 million in 2010. Cash, cash

equivalents and short-term investments as o end-

December 2010 totaled P2.94 billion compared to

P1.90 billion in the same period last year. This puts

our Company in a solid position to pursue growthobjectives that will create value in the years to come.

Our balance sheet likewise remained sound. As

o December 31, 2010, total assets stood at P9.14

billion, posting a 26% increase rom the December

31, 2009 level o P7.27 billion bolstered by a higher

cash balance. Total inventories ended the year higher

at P2.12 billion rom P1.15 billion in the same period

last year on account o higher cost per unit o raw

materials combined with the purposive build-up

o skimmed milk powder position going into 2011.

Notwithstanding the 15% increase in net sales, total

trade receivables at year-end edged 3% lower at P825

million rom P849 million a year-ago on the back o

improvements in collection turnover.

Total liabilities stood at P3.09 billion, 19% higher

than the end-2009 liabilities o P2.59 billion attributed

to higher import bills and trade payables attendant

to increased commodity prices as well as higher

cash dividend payable due to a higher cash dividend


27/84

22010 Annual Report

JOSELITO J. SARMIENTO, JR.

Senior Vice President & Chie Financial Oicer

declaration or 2010. The current ratio as o end-

December 2010 was 1.93:1.00, an improvement rom

the 1.55:1.00 current ratio or the same period last year.

Debt-to-equity ratio, on the other hand, improved to

0.51:1.00 rom 0.55:1.00 in 2009.

Indeed, our perormance or the year refects our

resolve as an organization to develop clear-cut strategies

and to execute them eectively, promoting healthy

growth while at the same time, ensuring inancial stability.

Despite the challenges acing global economies in 2011,

we remain committed towards a more solid inancial

position that will enable our Company to withstand even

the most trying business conditions.

We remain committedtowards a more solid

financial position that

will enable our Company

to withstand even the

most trying business

conditions.


28/84

Managements Discussion &Analysis of Operations


Through programs designed to take ull advantage

o a growing economy, Alaska Milk Corporation achieved

record revenues and proits in 2010. From P10.58 billion a

year ago, net sales or 2010 grew 15% to P12.16 billion onaccount o higher sales volume. Sales volume growth was

broad-based, with all business segments registering healthy

growth rates alongside market share gains.

Collectively, sales volume o the Companys liquid

canned milk business evaporated milk and sweetened

condensed milk, posted strong double-digit growth

rates or the year as product availability became more

stable ollowing supply disruptions in the atermath o

the September 2009 fooding. Investments in capacity

expansion provided manuacturing headroom to meet

growing demand and seasonal surges.

Alaska Milk maintained its dominance o the liquidcanned milk market despite the continuing presence o

cheaper imported milk brands. In 2010, the Company

capitalized on the growing trend towards economy brands

with the nationwide distribution o Cow Bell Condensada,

winning new customers and to some extent, regaining the

interest o lapsed milk users.

Alaska Evaporada and Alaska Condensada continue

to be regarded as the most preerred milk creamer in

the market. Creative marketing initiatives stimulated

excitement in the industry especially during high-demand

seasons. Renewed emphasis was placed on developing

new markets to expand consumer base, especially among

grassroots businesses.

The Alaska Classic Line o liquid canned milk products

Alaska Evaporated Filled Milk and Alaska Sweetened

Condensed Milk, continued to enjoy strong patronage

among its core loyal patrons. Tactical promotions and

brand-building programs strengthened the products

position in the upscale market segment.

Carnation, Milkmaid, Liberty and Alpine, the Companys

licensed and acquired milk brands, likewise perormed

well on robust sales. Various consumer initiatives as well as

advertising campaigns that encourage everyday usage omilk through multiarious culinary applications contributed

to strong sales volume growth. Channel-speciic sales and

marketing programs strengthened the brands leadership

position in key regions o the Philippines.

While our marketing objectives do not include winning

advertising awards but rather reinorcing the image o

our brands, which mostly strongly and closely represents

the values and aspirations o our consumers, two o our

brand campaigns were recognized or their marketing

excellence. The Ginang Alaska Integrated Marketing

Communication Campaign won the Silver Prize or Best

Family-Oriented Brand Campaign and Bronze Prize or BestEstablished Product Brand Campaign in the 2010 Tambuli

Integrated Marketing Communications Eectiveness

Awards. Organized by the University o Asia and the Paciic

(UA&P), the Tambuli Awards is the irst and only award

in the Philippines that recognizes both the business and

societal values o marketing communications campaigns.

The Liberty Condensada multi-media campaign entitled

Lambing, on the other hand, won the Silver Medal or

Reverence or Family Unity and the Inviolability o Marriage

Category in the 2010 Araw Values Award. The Araw Value

Awards, organized by the Advertising Foundation, is one o

the most prestigious creative competition in the Philippineadvertising industry.

Sales volume o the Companys powdered milk

business likewise expanded on the back o increased

consumption alongside brand-building activities. Amidst

ierce competition rom rival brands, Alaska Powdered

Milk Drink continued to strengthen its hold as the second

leading brand in the powdered milk market. Branding

Riding on the heels o a resurgent consumer market, domestic consumption o both liquid

canned milk and powdered milk products grew at double-digit rates compared to 2009 levels,

their astest in ive years. The milk markets expansion was likewise stimulated by continuing

eforts among key industry players to encourage demand through extensive advertising

campaigns and promotional activities.


29/84

Gelli de BelenPopular Television Host and Celebrity

My ties with ALASKA is notjust business; it has evolved

into friendship and family.

I can honestly say that I never

experienced that in my 25 years

in the entertainment industry.

I grew up on ALASKA products

and I am very grateful for the

support the company hasgiven me. We share a long,

time-tested relationship

which I truly treasure.

Janice de BelenPopular Television Host and Celebrity


30/84

Managements Discussion & Analysis of Operations


campaign to improve perception and consumer loyalty

was carried out alongside sponsorship o sales-generating

events that support the Alaska brands equity in health and

sports. In an eort to make the Alaska Powdered Milk Drink

aordable or almost every consumer, a new economical,

33g packaging ormat was launched in 2010.

The Companys UHT ready-to-drink and ready-to-use

business sustained its growth trajectory, with sales volume

posting high double-digit growth rates, signiicantly aster

than the markets expansion. Consumers appetite or the

Companys portolio o ready-to-drink milk products: Alaska

Choco, Alaska Sweet Milk, Alaska Fresh, Alaska Slim and

Alaska Yoghurt Drink, remained strong on improved brandand retail management. On-site consumer promotions

were executed to sustain demand and increase point-o-

sale purchases.

Signiicant gains were equally achieved or Alaska

Crema All-Purpose Cream. Alaska Crema continued its

strong showing with sales volume growth maintained at

robust levels on the back o the brands pricing advantage.

Relevant consumer marketing events as well as cross-

promotional initiatives and co-branding activities enhanced

the proile o Alaska Crema, making it the second leading

brand in the category.

During the year, Alaska Krem-Top Coee Creamerwas launched to capitalize on the opportunities in the

non-dairy coee creamer market. Alaska Krem-Top

Coee Creamer has gained overwhelming consumer

response, maniested by very positive consumer eedback

on the products superior taste and quality. Alaska Milk

also began a strong marketing campaign in line with its

strategic thrust to bring Alaska Krem-Top Coee Creamer

in the mainstream market alongside eorts to extend

distribution and reach or the product.

Complementing the success o AMC in dierentiating

its product oerings through communication campaigns

is the continuing improvements in its distribution system,which enabled the Company to capture untapped and

underserved retail outlets. Emphasis was placed on

developing institutional accounts and strengthening

customer relationships. Focused account management

and trade-channel executions, supplemented by trade

incentives and tactical distribution drives, urther enhanced

availability and visibility o Alaska Milk products in primary

outlets. Logistical operations was also enhanced to

improve product distribution, in the most eicient and

cost-eective manner.

Cost o sales or the year grew at a slower pace

o 11%, at P7.56 billion rom P6.82 billion a year ago,

stemming rom a stable cost environment combined

with improvements in operating eiciency. Successul

commodity hedging contracts made during the latter part

o 2009 and early 2010 preserved the lower cost o key raw

materials through most o the year, notwithstanding the

sharp increases in commodity prices during the second

hal o 2010. The general weakness o the US Dollar

against the Philippine Peso likewise mitigated the impacto rising cost o imported raw and packaging materials,

including skimmed milk powder and tinplates. In addition,

improved production and process capability on account

o investments made in new machineries and equipment

translated to higher eiciencies and better yields on

material usages. All told, gross proit or 2010 swelled by

22% to P4.60 billion rom P3.76 billion a year ago. Gross

proit margin or the year likewise improved to 37.8% rom

35.5% in 2009.

Operating expenses or the year rose 22% to P2.28

billion rom P1.87 billion in 2009 on the back o heightened

trade marketing support and brand advertising to sustainsales volume growth and drive consumer demand or

Alaska Milk products. In addition, higher distribution-

related charges attendant to increased sales volume

pushed operating expenses higher year-on-year. This

brought operating income or the year at P2.33 billion, 23%

higher than year-ago operating income o P1.89 billion.

Operating margin was likewise higher by 1.2 percentage

points at 19.1% compared to 17.9% in 2009.

Net interest earned income or the year amounted to

P48.7 million rom P22.2 million in 2009 as a result o higher

cash balance, despite lower interest yields. The Company

incurred oreign exchange losses o P40.32 million onaccount o the unexpected appreciation o the Philippine

Peso against the US Dollar. Ater considering corporate

income tax, net income or the year ended at a record-

high o P1.82 billion or 14.9% o net sales, 29% higher than

year-ago net income o P1.41 billion or 13.3% o net sales.

Earnings per share or 2010 was up 30% at P2.06 against the

2009 level o P1.59.


31/84

2,762

2,241

789

1,199

633

1,816

1,409

291

667

402

464

514

12,163

10,580

9,968

9,082

5,921

Net Sales(In million pesos)

10

09

08

07

06

0 2000 4000 6000 8000 10000 12000 14000

Net Income(In million pesos)

0 200 400 600 800 1000 1200 1400 1600 1800 2000

10

09

08

07

06

Operating Income(In million pesos)

0 500 1000 1500 2000 2500

10

09

08

07

06

950

2,327

1,889

0 1000 2000 3000

10

09

08

07

06

EBITDA(In million pesos)

22010 Annual Report

Cesar Montano with Samantha and ChescaPopular TV Host, Actor and Director

As a father, I only want whats best for my children. Thats why I only

give them milk with the highest level of nutrients relevant to the

Growth Gap years Alaska Powdered Milk Drink


32/84

Ryan AgoncilloPopular Television Host and Celebrity

I love how good the coffee

smells with Alaska Krem-Top.

And even if you look at the

consistency, you can tell its

creamier and finer.


33/84

9,140

7,271

6,307

7,126

5,128

0.50

0.20

0.30

0.300.20

2.06

1.59

0.32

0.70

0.42

Managements Discussion & Analysis of Operations

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2

10

09

08

07

06

Earnings Per Share

6

Cash Dividend Per Share

0.0 0.2 0.4 0.

10

09

08

0706

Total Assets at Year-End(In million pesos)

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

10

09

08

07

06

000

32010 Annual Report

The Companys total assets amounted to P 9.14 billion

as o December 31, 2010, an increase o 26% rom P7.27

billion in 2009 mainly due to higher cash balance and

higher inventory.

Cash and short-term investments ended the year 55%

higher at P2.94 billion rom P1.90 billion largely attributable

to higher proitability. Owing to higher cost per unit o

primary raw materials and purposive build-up o skimmed

milk powder position going into 2011, inventories as o end

December 2010 amounted to P2.12 billion, 84% higher than

year-ago inventories o P1.15 billion.

Property, plant and equipment, net o depreciation

and retirement, amounted to P1.56 billion rom P1.52 billiondue to capital investments made during the year.

Total liabilities increased by 19% to P3.09 billion rom

P2.59 billion on account o higher import bills attendant to

higher cost o skimmed milk powder. Also contributing to

the increase in liabilities is the higher income tax payable on

higher taxable income and higher cash dividends payable

attributed to higher cash dividend declaration in 2010.

Total stockholders equity, on the other hand, increased

to P6.05 billion rom P4.68 billion in 2009 primarily due

to the higher net income realized in 2010, net o cash

dividends declared or the year o P434 million. During the

year, the Company re-acquired 7.3 million o its commonshares under its Share Buy-Back Program or a total value o

P50.5 million.

The Companys current ratio as o December 31,

2010 was 1.93:1.00, higher than year-ago current ratio o

1.55:1.00. The level o indebtedness, on the other hand,

improved with a debt-to-equity ratio o 0.51:1.00 compared

to 0.55:1.00 a year ago.

Pete Jacobs2010 Cobra Energy Drink Ironman 70.3 Philippines

Professional Mens Champion

To strengthen my body, I rely on the

calcium and energy that milk

builds into my bones.


34/84

Corporate Governance


Alaska Milk Corporation acknowledges the importance o good governance in carrying out its

corporate mission o creating long-term value to its shareholders.

The Company espouses the highest level o integrity, transparency and accountability across all

levels o the organization in the conduct o its business. The Companys policies and guidelines on

governance are principally contained in its Manual on Corporate Governance.

Through the Manual, Alaska Milk Corporation has likewise adopted the Securities and Exchange

Commissions (SEC) Corporate Governance Sel Rating Form in evaluating the level o compliance o

the Company, its directors, oicers and employees.

On January 28, 2011, the Company submitted its Compliance Report on Corporate Governance

or the Year 2010 to the Philippine Stock Exchange, Inc. (PSE), refecting the Companys level o

adoption o the PSE recommended corporate guidelines or publicly-listed companies under PSE

Memorandum No. 2010-0574 dated 26 November 2010.

In addition, on February 21, 2011, Alaska Milk Corporation submitted to the SEC and PSE itsrevised Manual on Corporate Governance to adopt all the mandatory provisions o the Revised

Code o Corporate Governance in compliance with SEC Memorandum Circular No. 6, Series o 2009.

The Company constantly keeps its corporate governance provisions under review to conorm,

where applicable, with best practices and principles.

THE BOARD OF DIRECTORS

The Board o Directors plays an integral role in overseeing the strategic direction o the

Company, monitoring operational and inancial perormances as well as protecting the interests o

all stakeholders.

The Companys Board members have successul careers in business, academe and public

service. With their wealth o experience, they add signiicant perspective and direction into how

management shapes and executes business strategies. The proiles o each director are ound inthe Board o Directors section o this Annual Report.

The Board is currently composed o nine (9) directors, six (6) o whom are independent

directors. The Company deines an independent director as independent o management and ree

rom any business or other relationship with the Company which could interere with the exercise

o independent judgment in carrying out the responsibilities o a director.

In compliance with SEC Memorandum No. 16 Series o 2002 and with the Companys Manual

on Corporate Governance, the Nomination Committee reviews the qualiications o all directors

nominated or election. In addition, all nominees or independent directors possess all the

qualiications and none o the disqualiications prescribed under the Securities Regulation Code

Rule 38.

The directors are elected at each Annual Stockholders Meeting by stockholders entitled to vote

in accordance with the Companys By-Laws. Each director holds oice until the next annual election

and until his predecessor is duly elected; unless he resigns rom oice, is incapacitated and is unable to

carry out his duties as director, or is removed prior to such election.

The Board members are given a per diem o P5,000 per board or committee meeting. In

addition, the Board members are entitled to a share in the Companys operating income based

on their attendance. The remuneration is intended to provide a reasonable compensation to the

directors in recognition o their responsibilities and the potential liability they assume as a result o

the high standard o best practices required o the Board as a body, and o the directors individually,


35/84

32010 Annual Report

under the Securities and Exchange Commission promulgated Code o Corporate Governance.

Aside rom the aorementioned, there are no other arrangements under which any director o the

Company is compensated, whether directly or indirectly.

The total compensation paid to non-executive directors or 2010 and 2009 amounted to

P8.5 million and P1.9 million, respectively. None o the directors, in their personal capacity, has been

contracted and compensated by the Company or services other than those provided as a director.

In 2010, the Board held our (4) board meetings, one (1) special meeting and one (1)

organizational meeting. All directors have individually complied with the Securities and Exchange

Commissions (SEC) minimum attendance requirement o 50%.

Annual Stockholders

Meeting, OrganizationalMeeting & Special Meeting

Legend: P Present A Absent

Feb 9 Aug 10 Dec 1 May 4

Antonio H. Ozaeta P P P P 100%

Juan B. Santos P A P P 75%

W. Steven Uytengsu, Jr. P P P P 100%

Roberto F. de Ocampo P A P P 75%

Jose R. Facundo P P P P 100%

Grahame S. Tonkin P P P P 100%

Michael R.B. Uytengsu P P P P 100%

Atty. Ramon S. Esguerra P P P P 100%

Bernardo M. Villegas P P P P 100%

Regular MeetingDirector Percentage

None o the members o the Companys directors and senior management own 1.0% or more

o the Companys outstanding capital stock.

To assist the Board in its unction and to secure the Companys sustained competitiveness in a

manner consistent with its iduciary responsibility, the Board has established our (4) committees with

oversight responsibilities. The committees are the Audit and Risk Committee, Nomination Committee,

Compensation and Remuneration Committee and Governance Committee.

AUDIT AND RISk COMMITTEE

The Audit and Risk Committee is composed o three (3) members o the Board, all o whom

are independent directors. The Audit and Risk Committee has oversight responsibility on inancial

management unctions, especially in the areas o inancial reporting process and internal controls. It has

the duty to ensure transparency and integrity in the Companys inancial management system.

Through the Committee, the Board is responsible or overseeing the implementation o

adequate internal control procedures as well as the scope o audit engagement o the Companys

external auditor Sycip Gorres Velayo and Co.


36/84

Corporate Governance


The Committee is likewise tasked to (a) oversee the ormulation o an enterprise-wide risk

management system; (b) review, analyze and recommend the policy, ramework, strategy and

method to be used by the Company to manage risks or threats; (c) review with management the

corporate perormance in the areas o legal risks and crisis management; and (d) identiy, review

and assess the likelihood and magnitude o the impact o material events on the Company and to

recommend measures to avoid or mitigate risks.

NOMINATION COMMITTEE

The Nomination Committee is comprised o three (3) members o the Board, two (2) o whom

are independent directors. The Nomination Committee is mandated by the Board to review the

qualiications o all members o the Board. All candidates nominated to the Board are pre-screened

to ensure that they have all the necessary qualiications and none o the disqualiications as set

orth in the Companys Manual on Corporate Governance.

COMPENSATION AND REMUNERATION COMMITTEE

The Compensation and Remuneration Committee is composed o three (3) members o

the Board, two (2) o whom are independent directors. An independent director chairs the

Compensation Committee. The Compensation Committee is tasked to review the Companys

remuneration structure as well as the reasonableness o its incentive plans and compliance with all

statutory requirements.

GOVERNANCE COMMITTEE

The Governance Committee is composed o three (3) members o the Board, two (2) o whom

are independent directors. An independent director chairs the Governance Committee. The

Governance Committee is mandated to develop, maintain and review the Companys corporategovernance policies and procedures.

Antonio H. Ozaeta (Chairman)* Member Chairman

Juan B. Santos (Vice Chairman)* Member Chairman

Wilred Steven Uytengsu, Jr. Chairman Member

Dr. Roberto F. de Ocampo* Chairman

Jose R. Facundo* Member

Grahame S. Tonkin* Member

Michael R.B. Uytengsu

Atty. Ramon S. Esguerra Member

Dr. Bernardo M. Villegas* Member Member

Board CommitteesAs o December 31, 2010)

Directors

*Independent Director

AuditCommittee

NominationCommittee

CompensationCommittee

GovernanceCommittee


37/84

32010 Annual Report

MANAGEMENT COMMITTEE

The Companys President and CEO is assisted by his senior management team, collectively

known as the Management Committee, in the day-to-day operations o the business as well as

in the development and execution o business strategies. The Management Committee meets

regularly to discuss operating perormances, market and industry developments and plans oactions in the attainment o corporate goals and objectives. In addition, management provides

the Board with inormation on the results o operations o the Company on a quarterly basis.

Management is also required to prepare the inancial statements or each preceding calendar year

in accordance with generally accepted accounting standards in conormity with Philippine Financial

Reporting Standards. Managements statement o responsibility or the Companys inancial

statements is included in this annual report.

DISCLOSURE AND TRANSPARENCY

Alaska Milk Corporation is committed to the highest standards o disclosure and transparency

to apprise the investing public on the Companys perormance. The Company regularly updates the

investing public with operating and inancial inormation through adequate and timely disclosures

iled with the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange

(PSE). In addition, any material, market-sensitive inormation as well as mandatory reportorial

requirements are likewise disclosed to the SEC and PSE. In addition, Quarterly Updates are provided

to und managers and investors, analysts, media and those who speciically requested or copies.

All corporate disclosures, including the Quarterly Updates, are made available on the Companys

website (www.alaskamilk.com.ph). This ensures that all stakeholders have equal opportunity and

access to corporate inormation. The Companys Investor Relations oice is also available to address

investor queries and requirements.


38/84

Standing from left to right:

WILFRED STEVEN UYTENGSU, JR. Director); DR. ROBERTO F. DE OCAMPO (Independent Director)

Seated from left to right:

ANTONIO H. OZAETA Chairman, Independent Director); JUAN B. SANTOS Vice Chairman, Independent Director)

Board of Directors



39/84


GRAHAME S. TONkIN (Independent Director); JOSE R. FACUNDO (Independent Director); MICHAEL R.B. UYTENGSU (Director)

Seated from left to right:

DR. BERNARDO M. VILLEGAS (Independent Director); ATTY. RAMON S. ESGUERRA Director)

32010 Annual Report


40/84

Board of Directors Profile


ANTONIO H. OZAETAIndependent Director, Chairman of the Board since 2010,Vice Chairman of the Board from 1998 to 2010

President,PhilippineTrustCompany(PHILTRUSTBank)

ChairmanoftheBoardofDirectorsofPhilippine

Commercial Capital, Inc., Ancel Holdings Corporation

and Magellan Capital Holdings Corporation

BoardMemberofPHILTRUSTBank,InsularHealthCare,Inc.

and Home Credit Mutual Building and Loan Association

FormerPresidentandChiefExecutiveOfficerofPhilippine

Commercial International Bank (PCIBank) and ormer

Chairman o the Board o Manila Electric Company

(Meralco) EducatedattheAteneodeManilaUniversity(B.S.

Economics), De La Salle University (B.S. Business

Administration) and Harvard University (Masters in

Business Administration)

JUAN B. SANTOSIndependent Director, Vice Chairman of the Board since 2010,

Director since 2007

FormerSecretaryofTradeandIndustryoftheRepublic

o the Philippines

BoardMemberofGrepalifeFinancials,Inc.,First

Philippine Holdings Corporation, Philex MiningCorporation, Philippine Long Distance Telephone

Company (PLDT), Pilipino Telephone Corporation and

Zuelling Group, Inc.

Consultant,MarsmanDrysdaleGroupofCompanies

Member,BoardofAdvisorsofCocaColaBottlers

Philippines, Inc. and East-West Seeds Co., Inc.

Member,BoardofTrusteesofSt.LukesMedicalCenter

FormerChairmanandPresidentofNestlePhilippines,Inc.

FormerChiefExecutiveOfficerofNestleGroupof

Companies in Thailand and o Nestle Singapore Pte Ltd.

EducatedattheAteneodeManilaUniversity(B.S.

Business Administration) and took his postgraduatedegree at the Thunderbird Graduate School o

Management in Arizona, USA

WILFRED STEVEN UYTENGSU, JR.Director since 1994 PresidentandChiefExecutiveOfficerofAlaskaMilk

Corporation

PresidentofGenOSI,Inc.andJadestoneInvestmentsLLC

BoardMemberoftheMakatiBusinessCluband

Childrens Hour Philippines, Inc.

PastChairman,YoungPresidentsOrganization

AwardedPhilippinesEntrepreneuroftheYearand

Master Entrepreneur or 2007 by Ernst & Young

FormerExecutiveVicePresidentandChiefFinancial

Oicer o General Milling Corporation

EducatedattheUniversityofSouthernCalifornia(B.S.Business Administration)

DR. ROBERTO F. DE OCAMPOIndependent Director since 1999

FormerSecretaryofFinanceoftheRepublicofthe

Philippines

ChairmanoftheBoardofAdvisorsoftheRFOCenterfor

Public Finance and Regional Economic Corporation

BoardMemberofEEICorporation,GlobeTelecom,

Robinsons Land Corporation, Rizal Commercial

Banking Corporation, House o Investments, PHINMA

Corporation, DFNN Inc., Philippine Phosphate FertilizerCorporation, AB Capital & Investment Corporation,

Paciic Gaming Investments Pte. Ltd., Bankard, Inc.,

Beneicial Lie Insurance Co., Inc. and Salcon Power

Corporation

Member/AdvisoryBoardMember;TheConference

Board, the Trilateral Commission, the BOAO Forum or

Asia and the Emerging Markets Forum

MemberoftheBoardofTrusteesofAsianInstituteof

Management

FormerPresidentoftheAsianInstituteofManagement

FormerChairmanandChiefExecutiveOfficerof

Development Bank o the Philippines EducatedattheAteneodeManilaUniversity(A.B.

Economics), University o Michigan (Masters in Business

Adminisration) and London School o Economics (DDA

Fellow in Developmental Administration)


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32010 Annual Report

JOSE R. FACUNDOIndependent Director since 1994 BoardMemberofSecurityBankCorporation,

Aboitiz Power Corporation and Siemens Philippines, Inc.

FormerPresidentandChiefExecutiveOfficerof

CityTrust, ormer President o BPI Capital Corporation

and ormer Senior Managing Director o Ayala

Corporation

FormerChairmanofthePhilippineClearingHouse

EducatedattheAteneodeManilaUniversity(Bachelor

o Arts degree in Engineering) and took post graduate

studies in Statistics at the University o the Philippines,

and in Engineering at the Technical University o Munich

GRAHAME S. TONkINIndependent Director since 1998

Director,FoodandBeverageAustraliaLtd.andSmythe

Road Vintners Pty. Ltd.

ChiefExecutiveOfficeroftheAboriginalFoundationof

South Australia, Inc.

FormerExecutiveDirectorofFoodSouthAustraliaand

ormer Managing Director o Tarac Australia Pty. Ltd.

FormerChiefExecutiveOfficerofAustralianDairy

Corporation and o Inchape, Asia Paciic (Wines and Spirits)

QualifiedAccountant,FellowCPA,FellowCharteredSecretary and Fellow o the Australian Institute o

Company Directors

MICHAEL R.B. UYTENGSUDirector since 1998

President,BrookstoneHoldings,Inc.(USA)

FormerinvestmentbankeratSalomonBrothers

(New York and Hong Kong)

ObtainedhisBachelorsDegreeinBusinessfromthe

University o Southern Caliornia

ATTY. RAMON S. ESGUERRADirector since 2003 ManagingPartner,Esguerra&BlancoLawOffices

PresidentoftheIntellectualPropertyAssociationof

the Philippines, Inc.; Director o the Integrated Bar o he

Philippines Cavite Chapter

ProfessionalLecturer,GraduateSchoolofLawofthe

Pamantasan ng Lungsod ng Maynila

FormerUndersecretary,DepartmentofJustice

FormerPartneratCastilloLamanTanPantaleon&

San Jose Law Oices

FormerPresidentoftheLicensingExecutivesSocietyof

the Philippines EducatedattheUniversityofSantoTomas(A.B.Economics)

and University o the Philippines (Bachelor o Laws)

DR. BERNARDO M. VILLEGASIndependent Director from 1999 to 2006, Re-elected in 2008

UniversityProfessorattheUniversityoftheAsiaandthe

Paciic and a Visiting Proessor at the IESE Business

School in Barcelona, Spain

Member,BoardofTrusteesofInsularLifeandPhinma

Properties

FormerSeniorVicePresidentoftheUniversityofAsia

and the Paciic FormerChairmanoftheCenterforResearchand

Communication

EducatedatDeLaSalleUniversity(Bachelorsdegrees

in Commerce and the Humanities) and Harvard

University (M.A. in Economics and Ph.D. in Economics)


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10

Management Committee


ALFREDO B. JAVIER AVP, Internal Audit); REYCELLE M. RODRIGUEZ Director, Materials Management);

ARNOLD L. ABAD VP, Accounting and Controller)

Seated from left to right:MA. BELEN M. FERNANDO VP, Marketing); WILFRED STEVEN UYTENGSU, JR. President and Chie Executive Oicer)



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11


SANTIAGO A. POLIDO VP, Corporate Afairs and Corporate Secretary); ANSELMA G. CABANTAN AVP, Inormation Systems);

RENE D. FERNANDEZ Director, Engineering Services); THOMAS NILSSON Director, UHT Operations)

Seated from left to right:JOSELITO J. SARMIENTO, JR. SVP and Chie Financial Oicer); FRANCISCO T. IDIAN VP, Sales);

AARON D. FULTON Director, Plant Operations)

42010 Annual Report


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The Audit Committees roles and responsibilities are dened in the Audit Committee Charter approved by the Board o Directors. It assists the

Board o Directors in ullling its oversight responsibility to the shareholders relating to the (i) integrity o the Companys nancial statements

and its nancial reporting process; (ii) system o internal controls; (iii) risk management; (iv) perormance o internal and external auditors; and

(v) compliance with legal and regulatory matters and other reporting standards.

In compliance with the Audit Committee Charter, we conrm that:

An independent director chairs the Audit Committee;

We had ve (5) meetings during the year, which included executive sessions with the internal and / or independent auditors;

We have reviewed and discussed the quarterly unaudited nancial statements and the 2010 audited annual nancial statements

o Alaska Milk Corporation (the Company), including Managements Discussion and Analysis o Financial Condition and Results o

Operations, with the Companys management and SyCip Gorres Velayo & Co. (SGV & Co.), the Companys external auditor. Theseactivities were perormed in the ollowing context:

Management is responsible or the preparation and air presentation o the Companys nancial statements in accordance with

Philippine Financial Reporting Standards; and

SGV & Co.s responsibility is to express an opinion on the Companys nancial statements based on their audit conducted in

accordance with Philippine Standards on Auditing.

We have discussed and approved the overall scope and the respective audit plans o the internal auditors and SGV & Co. We have also

discussed the results o their audits, the internal auditors assessment o the Companys internal controls and the overall quality o the

nancial reporting process;

We have reviewed and approved all audit-related services provided by SGV & Co. to the Company;

We have reviewed the reports o the internal auditors, where applicable, ensuring that Management is taking appropriate corrective

actions in a timely manner, including addressing internal control and compliance issues; and

We have reviewed and discussed the adequacy o the Companys enterprise-wide risk management process, including the nature

o signicant risk exposures and the related risk mitigation eorts and initiatives. This activity was reviewed in the context that

management is primarily responsible or the risk management process.

Based on the reviews and discussions undertaken, and subject to the limitations on our roles and responsibilities reerred to above, the Audit

Committee recommends to the Board o Directors that the audited nancial statements be included in the Annual Report or the year ended

December 31, 2010 or ling with the Securities and Exchange Commission. We are also recommending to the Board o Directors the re-

appointment o SGV & Co. as Alaska Milk Corporations external auditor or 2011 based on the review o their perormance and qualications.

March 11, 2011

Dr. Roberto F. de Ocampo

Chairman Audit Committee

Jose R. Facundo Dr. Bernardo M. Villegas

Member Member

42 The Heart of Alaska

Report o the Audit Committee


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The management o Alaska Milk Corporation is responsible or all inormation and representations contained in the balance sheets as at December

31, 2010 and 2009 and the related statements o comprehensive income, changes in stockholders equity and cash ows or each o the three

years in the period ended December 31, 2010. The nancial statements have been prepared in accordance with Philippine Financial Reporting

Standards and reect amounts that are based on the best estimates and inormed judgment o management with an appropriate consideration

to materiality.

In this regard, management maintains a system o accounting and reporting which provides or the necessary internal controls to ensure that

transactions are properly authorized and recorded, assets are saeguarded against unauthorized use or disposition and liabilities are recognized.

The management likewise discloses to the Companys Audit Committee and to its external auditor: (i) all signicant deciencies in the design

or operation o internal controls that could adversely aect its ability to record, process, and report nancial data; (ii) material weaknesses in the

internal controls; and (iii) any raud that involves management or other employees who exercise signicant roles in internal controls.

The Board o Directors reviews the nancial statements beore such statements are approved and submitted to the stockholders o the

Company.

SyCip Gorres Velayo & Co., the independent auditors appointed by the Board o Directors and stockholders, have audited the nancial statements

o the Company in accordance with Philippine Standards on Auditing and have expressed their opinion on the airness o presentation upon

completion o such audit, in their report to the Board o Directors and stockholders.

Antonio H. Ozaeta Wilfred Steven Uytengsu, Jr.Chairman President & Chie Executive Ofcer

Joselito J. Sarmiento, Jr. Arnold L. AbadSr. Vice President & Chie Financial Ofcer Vice President Accounting & Controller

42010 Annual Report

Statement o ManagementsResponsibility or Financial Statements


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The Stockholders and the Board o Directors

Alaska Milk Corporation

Report on the Financial Statements

We have audited the accompanying nancial statements o Alaska Milk Corporation, which comprise the balance sheets as at December 31, 2010 and 2009, and the

statements o comprehensive income, statements o changes in stockholders equity and statements o cash ows or each o the three years in the period ended

December 31, 2010, and a summary o signicant accounting policies and other explanatory inormation.

Managements Responsibility or the Financial Statements

Management is responsible or the preparation and air presentation o these nancial statements in accordance with Philippine Financial Reporting Standards,

and or such internal control as management determines is necessary to enable the preparation o nancial statements that are ree rom material misstatement,

whether due to raud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these nancial statements based on our audits. We conducted our audits in accordance with Philippine Standards on

Auditing. Those standards require that we comply with ethical requirements and plan and perorm the audit to obtain reasonable assurance about whether the

nancial statements are ree rom material misstatement.

An audit involves perorming procedures to obtain audit evidence about the amounts and disclosures in the nancial statements. The procedures selected depend

on the auditors judgment, including the assessment o the risks o material misstatement o the nancial statements, whether due to raud or error. In making

those risk assessments, the auditor considers internal control relevant to the entity s preparation and air presentation o the nancial statements in order to design

audit procedures that are appropriate in the circumstances, but not or the purpose o expressing an opinion on the eectiveness o the entitys internal control.

An audit also includes evaluating the appropriateness o accounting policies used and the reasonableness o accounting estimates made by management, as well

as evaluating the overall presentation o the nancial statements.

We believe that the audit evidence we have obtained is sufcient and appropriate to provide a basis or our audit opinion.

Opinion

In our opinion, the nancial statements present airly, in all material respects,the nancial position o Alaska Milk Corporation as at December 31, 2010 and 2009,

and its nancial perormance and its cash ows or each o the three years in the period ended December 31, 2010 in accordance with Philippine Financial

Reporting Standards.

Report on the Supplementary Information Required Under Revenue Regulations 15-2010

Our audits were conducted or the purpose o orming an opinion on the basic nancial statements taken as a whole. The supplementary inormation on taxes,

duties and license ees in Note 31 to the nancial statements is presented or purposes o ling with the Bureau o Internal Revenue and is not a required part o the

basic nancial statements. The inormation is also not required by Securities Regulation Code Rule 68. Such inormation is the responsibility o the management

o Alaska Milk Corporation. The inormation has been subjected to the auditing procedures applied in our audit o the basic nancial statements. In our opinion,

the inormation is airly stated in all material respects in relation to the basic nancial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Ramon D. Dizon

Partner

CPA Certicate No. 46047

SEC Accreditation No. 0077-AR-2

Tax Identication No. 102-085-577

BIR Accreditation No. 08-001998-17-2009,

June 1, 2009, Valid until May 31, 2012

PTR No. 2641521, January 3, 2011, Makati City

March 17, 2011

44 The Heart of Alaska

Independent Auditors Report


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December 31

2010 2009

ASSETS

Current Assets

Cash and cash equivalents (Notes 5, 26 and 27) P1,110,623,996 P857,054,066

Short-term investments (Notes 6, 24, 26 and 27) 1,833,983,891 1,044,563,465

Trade and other receivables - net (Notes 7, 26, 27 and 30) 827,839,418 893,566,768

Inventories (Note 8) 2,117,670,472 1,153,181,393

Prepaid expenses and other current assets (Notes 26 and 27) 38,970,814 33,263,909

Total Current Assets 5,929,088,591 3,981,629,601

Noncurrent Assets

Available-or-sale investments (Notes 9, 26 and 27) 2,556,403 2,556,403

Property, plant and equipment - net (Note 10) 1,562,810,605 1,515,257,935

Intangible assets - net (Notes 11 and 25) 1,310,444,899 1,481,438,498

Deerred tax assets - net (Note 21) 260,587,503 197,984,388

Net pension assets (Note 20) 44,836,138 49,260,438

Other noncurrent assets (Notes 26 and 27) 29,460,456 42,786,207

Total Noncurrent Assets 3,210,696,004 3,289,283,869

P9,139,784,595 P7,270,913,470

LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities

Trade and other payables (Notes 12, 25, 26 and 27) P2,096,022,469 P1,839,819,125

Acceptances payable (Notes 26 and 27) 704,782,480 560,124,762

Income tax payable 131,913,063 109,980,839

Dividends payable (Notes 14, 26 and 27) 125,099,266 52,097,499

Current portion o obligation under nance leases (Notes 25, 26 and 27) 7,227,315 4,019,227

Total Current Liabilities 3,065,044,593 2,566,041,452

Noncurrent Liability

Obligation under nance leases - net o current portion (Notes 25, 26 and 27) 28,638,522 27,465,248

Stockholders Equity (Note 26)

Capital stock (Notes 13 and 22) 971,432,578 968,074,878

Additional paid-in capital (Note 22) 152,393,329 118,361,998

Retained earnings (Note 14):

Appropriated or various capital investment projects

and share buy-back program 2,075,000,000 1,625,000,000

Unappropriated 3,249,867,801 2,318,019,622Treasury stock (Notes 13 and 14) (402,592,228 ) (352,049,728 )

Total Stockholders Equity 6,046,101,480 4,677,406,770

P9,139,784,595 P7,270,913,470

See accompanying Notes to Financial Statements.

42010 Annual Report

Balance Sheets


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Years Ended December 31

2010 2009 2008

NET SALES P12,162,709,978 P10,580,440,474 P9,967,757,268

COST OF SALES (Notes 15 and 30) 7,558,650,096 6,821,522,353 7,903,815,821

GROSS PROFIT 4,604,059,88

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