PERATION HIGHLIGHTS · However with the rise of “Trade Policy Review Mechanism”(TPRM), the ban...

43 Business Activities

48 Markets and Business Overview

63 Human Resources

64 Labor Relation

66 Environmental Protection Expenditure

68 Social Responsibility

69 Important Contracts

OPERATION HIGHLIGHTS

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4322004 Annual Report

BUSINESS ACTIVITIES

Scope of Business

Group Range of Business Division Revenue Ratio

Provisions Group Manufacturing and marketing of

grain &feeds, animal feeds, aquatic

feeds, edible oils and flour.

Foodstuff Division 15.64%

Animal Feed Division 8.49%

Aquatic Business Division 1.96%

Edible Oil Division 8.89%

Flour Division 2.60%

Instant Food

Group

Manufacturing and marketing of

instant noodle, rice noodle, fresh

food

Food Division 10.39%

Dairy & Beverage

Group

Manufacturing and marketing of soft

drinks, tea drink, dairy products and

chilled beverage.

Beverage Division 12.95%

Tea Beverage Division 8.86%

Dairy Product Division 14.99%

General Foods

Group

Manufacturing and marketing of

meat products, canned pickles &

seasoning products, frozen prepared

foods and ice cream products.

Meat Product Division

Sauce & Seasoning Division

Frozen Prepared Foods Division

Ice Cream Division

1.86%

2.36%

1.92%

1.05%

Consumer Health

Group

Manufacturing and marking of health

foods, breads, toasts and cakes

products.

Health Food Division 1.20%

Bread Division 5.80%

Others 1.04%

Products planned to developIn order to meet the rapid change in food industry, the company has devoted to develop new products.

Products planned to develop include bottled fresh milk “Dr. Milker”, functional health oil & soybean sauce, essence

of silkie children, “Chai-Li-Won” PET 600ml series, savory bread & other handmade-style bread and feed for baby

ornamental fish.

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2004 Annual Report244

Industry Outlook

The world economy in 2004 is prospering. In Taiwan, the economic growth rate grew 5.71%, which is back to

the level in 2000, and the private consumption grew 3.1%. The food industry is formed by native consumption and

closely associated with domestic economical trend. The ITIS statistics indicated that in 2004, Taiwan food industry

value increased about 5.9% to NTD 444 billion.

The principal factors that affected Taiwan food sales in 2004 were bird flu, higher input prices that consist of

foodstuff and package materials, and rising freight charge. This market condition favored suppliers of granulated

sugar, edible oil, frozen food, and animal feed, as well as milling and slaughtering businesses, with two-digit growth

rate. Oppositely, it hindered sales of consumer product categories such as confectionery, dairy product, dehydrated

food, soy sauce, non-alcoholic beverage and noodles.

Based on the industry analysis, in Taiwan, the wholesale price index (WPI) increased 7.03% whilst the consumer

price index (CPI) rose only 1.62% in 2004. Such disparity reflected plural operational impacts including rising cost,

descending purchasing power and low-priced imported goods that downstream food processors faced. These

impacts then caused profit to fall short of targeted results (the incremental raw material price cannot be immediately

passed onto the consumers). Yet, positively, it encouraged consumer goods suppliers to rally and reform their

business in order to promise the prevalence of domestic products.

The report of industry trend shows that, traditional food suppliers have been aggressively expanding their

businesses through international integration, and developing higher value added products. They work hard to

invest in brand loyalty, focus on comparative advantage and search for international strategic alliance/outsourcing

opportunities worldwide thus to flee from risks and toughen competitiveness. Moreover, they attempt to take hold

of growing herbal medicine and functional health food markets. The rise in health care food market is attributed to

SARS that brought on people’s conscious about health foods two years ago, and the approval by Executive Yuan on

amended draft of “Health Food Act” of Department of Health in May. It is the interests of most firms to leverage their

lead in food realm and step into the biotechnology food industry. The increasing consumer demand for health food

has brought on corporate emphasis on claims of “three low, three high” and “nature, organism, health” and shaped

a product development trend of small package, prepared meal and home meal replacement. Also, senior market is

another trend for product development.

With regard to the follow-up effect of WTO, due to the political factors and governmental attitude across the

strait, products imported from China are currently included in “negative list” which eases the pressure of domestic

commodities. However with the rise of “Trade Policy Review Mechanism”(TPRM), the ban is likely to be stopped.

In the future, domestic products will have to be struggled with imported goods made in Mainland China by large

European and American corporations for market share in Taiwan. It is important for domestic suppliers to discover

their international comparative advantage, build up a Pan-Asian layout and restructure its operation in order to

manage a long-standing business.

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Research and Development

Expenditure of Central Research Institute (CRI) in Past Two Years

Year 2003 2004 2005 (As of April 30)

Total Expenditure (NT$ thousands) 317,848 339,335 109,843

Achievements of Central Research Institute (CRI) in Past Two Years

Year 2003 2004 2005 (As of April 30)

Number of New Products Launched 176 193 9

Number of Research Reports 400 291 21

Number of PatentsApproved 1 2 0

Pending 8 4 13

Number of Major Self-Developed Technologies 22 30 4

Number of Technology Cooperation and

Introduction24 31 8

Number of Considerable Quality Improvement 18 17 11

The three essential guidelines of a healthy eating habit, which Uni-President continues to lead the consumers to

and to develop products upon, are:

* Functional: AB drinking yogurt, oligo-saccharides beverage, amino acid drink, rhodiola drink, collagen drink and

L-vitamin C drink.

* Healthy: Chicken essence (original, four-herb, ten-herb, and cardyceps flavors) and other herbal formulas that

could be served as food and medicine.

* Natural: Products made with natural sources, such as multigrain powder (32+3 grains, and yam & adlay flavor).

To provide more health food products, the Bioscience Center of CRI incorporates technologies of health food,

Chinese medicine and gene, and searches for functional ingredients, to develop foods that truly benefit the health

of consumers. Following the correct health care “prevention rather than treatment”, we have discovered herbal

formulas to alleviate feminine PMS, regulate human immune system, and protect liver function. Moreover, we have

created a caffeine-free beverage made with rhodiola (a traditional herb from Tibet) and applied “reverse-regulation

theory” in Chinese medical science to increase soluble oxygen in blood and boost metabolism.

1. Overview of Product Development

193 new products were launched in 2004. In past 3 years, total sales generated from new products

accounted for 10% of corporate sales. Over the years, CRI has been devoted to developing numerous leading,

innovative and breakthrough products, such as Imperial Big Meals (instant noodle with retort pouch), chilled

tea series, AB drinking yogurt series, Wagamama (Japanese flavor ramen) and nutritious milk flan series. These

products not only satisfied consumers' needs, but also were awarded several prizes by Chinese Food Technology

Association.

2. Overview of Research Achievement

CRI focuses on the development of dairy products, beverages, instant noodles, meat products, ice cream

products, flour, and edible oil. For many years, CRI has committed to improving its food-processing technology

and gradually building up its core competencies. Also, it has been retaining its leadership position in market and

in technology development.

(1) Assure product quality through continued innovation and technology

To 100% guarantee the product quality, CRI constantly seeks to food technology development. Selected

examples are as follows:

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* Sensory evaluation of off-flavored raw milk: This technology help preserve raw material quality and set up

critical quality measures for dairy products.

* Stabilization of emulsification of tea and coffee products: This technology help eliminate the floating oil of

diary products and thus improve consumption safety.

* Production for sauce packs: Stock concentrate can be stored at room temperature without worsening the

freshness and quality.

CRI also had great achievements in enhancing the health benefits of foods:

* Fermented juices with living lactic acid bacteria: Uni-President implements this technology to produce

nutritious juice with living AB lactic acid bacteria.

* Tea extraction: This technology preserves full functional components in tealeaves of our tea products.

Moreover, CRI has established several analytic methods to detect pesticide residues and to measure

nutrients in order to safeguard the raw materials and retain nutrients in our products.

(2) Adopt innovative food-processing technology for producing distinct, unique and competitive products

CRI has developed several food-processing technologies and processes, such as technology for whole

soybean soymilk production, low-temperature extraction on tea, sterile filling technology for PET beverages,

juicy preservation of frozen dumplings, and soup pack filling. These refining processing technologies not only

increase our productivity, but also indirectly contribute to the mass production of food industry.

(3) Acquire raw material technology for reduction of production cost

To reduce the cost of raw materials, CRI customizes specification of raw materials and sets up a quality-

authentication system for screening the second suppliers. These increases Uni-President’s bargaining power

with suppliers and eliminates monopolize raw material supply.

Moreover, CRI has organized research teams of flavor and package, and gradually built up its expertise in

those two fields. The flavor team masters the basic flavor formulation and adopts higher concentration flavor

to reduce the stock of flavorings and inventory costs; package team, on the other hand, analyzes materials of

cartons to minimize wastes and reduce package costs.

3. Research Scope

(1) Discover latest production process and technologies for Chinese food and other new product development.

(2) Explore and apply natural additives, environmental packaging materials, and new functional ingredients.

(3) Research on microorganisms and scale up to full production for fermentation, including the application of

fungal fermented dairy products, fermented juice and health food.

(4) Expand fresh food business by applying relevant fruit and vegetable preservation technology.

(5) Research on biotechnology, medical and health care fields, and introduce applicable technologies.

(6) Develop products that are accepted universally.

4. Other R&D projects

(1) Construction of a new English-based network

CRI has constructed the English-based network platform that allows users to find useful information

online. Information includes specification of products and raw materials, production technology, research

and development and literature reference. This platform groups all researchers of Uni-President together for

faster creations and market trend at instant. At present, CRI is evaluating the IC chip authorization to increase

the confidentiality of the data.

(2) Application of health food claims for products

CRI integrates the platforms of functional materials screening, formula design, production technology,

ingredient analysis, clinical trial, and claim application. CRI has obtained five health claims from Department

of Health, including AB drinking yogurt, low sugar & high fiber soymilk, Cha-li-won, Ganoderma, and

Propolis. CRI also has projects ongoing for other health claims.

(3) Involvement in biotechnology

The short-term goal of CRI is to develop products and technologies targeting at health food market.

Health food development, screening of functional materials, and product evaluation are included. The long-

term goal of CRI is to exploit gene technologies that consist of therapy and dietary, biochip application, as

well as functional foods based on individual gene mapping.

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Long-term & Short-term Business Plan

Being the top food company in Asia is our goal to reach in long run. Our long-term strategy basically follows the

rule of “one hub, four pillars”, where one hub refers to brand, and four pillars refer to trade, channel, production &

research, strategic alliance & acquisition, and includes construction of a ”Pan-Asian Highway.” The progress in 2004

summarizes as follows:

Brand

We will stick to the superior multi-brands operation and develop international brands; structurally, we will level

up the brand management, emphasize and fortify brand’s core value and consumer’s recognition so to improve

each megabrand’s market position and keep brand asset in value.

Trade

In Taiwan, China, Indonesia, Vietnam, Thailand and the Philippines, we have established operating centers

respectively. These centers are not established to take on marketing tasks only, but they are also serving as our

global purchasing network. All goods can be traded freely and easily in this platform. For European and American

food companies, it is a gateway to enter into Asian market.

Channel

We will keep on improving our operation through team merchandizing with our channel partners. With more

openings of stores and the emergence of new channels, we will increase our products’ accessibility, and satisfy

consumers with greater convenience and more varieties of product choices. Meanwhile we are dedicated to

improving the effectiveness of our distribution network, spotting more business potentials, and developing new

channels and markets. We are planning to restructure our distribution unit into mobile retailing. We believe that by

exercising an efficient distribution system in conjunction with purchasing network, production network, marketing

network and retailing network, we could be one of the best qualified suppliers or agencies of major retail chains

and strong global brands.

Production and Research

We are committed to practicing effective production and research in order to bolster up core brands

development. We will fully utilize the world’s factory-China and set up a fleet-like manufacturing disposition

supported by our existing sixty OEM factories. Our priority in production for 2004 still is quality improvement.

We will review and update OEM and QA policies consistently, and construct a quality environment to keep an

international quality standard. Our products would contain no residue of pesticides, preservatives and artificial

additives. We will develop higher-valued products and services, and promote health-related knowledge and

products that developed from the concept of Honmono towards building a healthy mind, clean environment and

nutritious dietary.

Strategic alliances

The next three to five years is the time for us to progress global resource integration. We will consolidate the

resources from research, marketing and brand of all subsidiary companies in Asia, fully use our extensive knowledge

and well-established operating system in Greater China and in Asia, to closely ally with international corporations

and safeguard our market lead. More importantly, we are determined to pursue a strong growth by launching

a comprehensive market attack strategy, exploring market potentials, and leveraging economic of scale, regional

maneuver, organizational ability and marketing ability. Our goal is to greatly outperform others, and dominate the

whole Asian market.

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MARKET AND BUSINESS OVERVIEW

Market Share by Major Product Category

Category Market Share Category Market Share

Animal Feed 10.2% Fresh Milk 22.6%

Flour 14.3% Yogurt Drink 36.9%

Edible oil 14.8% Flavored Milk 44.1%

Instant Noodle 47.7% Flavored Soybean Milk 61.0%

Soy Sauce 32.2% Pudding 62.8%

Coffee Drink * 24.1% Meat Product 27.1%

Tea Drink * 48.5% Frozen Food 15.3%

Chicken Essence 16.0% Ice Cream Product 21.0%

* Chilled & Room Temperature

Market Analyses of Major Product Categories98% of corporate products are sold domestically. After considering the market challenges and trend, we arrive at

our 2005 sales objective. Sales volumes take in 1,634 thousand tons of provision, 488,468 thousand packs of instant

noodle, 58,840 thousand cartons of beverages, 28,950 thousand cartons of dairy products, 3,526 thousand dozens

of sauces and seasonings, and 52 thousand tons of frozen foods, baking products and meat products.

Market analyses of major product categories are as follows:

Foodstuff

Our foodstuff business provides numerous products and services, such as grains (soybean, maize), contract

feeds, food materials, fresh meats and agricultural materials.

During the first quarter of 2004, the international raw material prices and freight charges continued their steadily

rise from end 2003 and escalated the costs of imported grains (Chicago soybean future price rose to a climax in over

20 years). This has severely hindered Taiwan’s foodstuff industry, which was heavily dependent on imported goods.

Moreover, in addition to the significant increment of material costs, the shipping condition is volatile, and these

increased difficulties in sales and inventory control. In the second quarter, China’s macroeconomic control was in

effect, and along with the favorable weather and harvest condition, grain price fell even further, to half of the peak

price in first quarter. However, these dramatic changes were not foreseen by global enterprises, and thus created

complications to the feeds business.

Our sales volume in agricultural materials is estimated to grow 20% with enhanced distribution and channel

network, and broader selling items. Our grain business, due to the stalled livestock, feeds, and foodstuff industries

from unregulated imported meat, will be conservatively managed to generate strong profits. Sales of contract feeds,

fresh meats, and food materials are fairly stable and expected to increase 5%. It is our top priority to achieve higher

profitability in 2005.

Our business has several competitive advantages, for example, our inventory and cost controls are more versatile

than other companies since our materials can be used in production as well as be put on for resale. We also have

good corporate image that increases our brand equity. Our threats include rising costs and purchasing difficulties

from growing freight charge and raw material costs, and declining price and sluggish business performance

from market balance or excess supply. For the subsequent years, we will consolidate our purchasing and selling

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capabilities, and adopt more flexible strategies to deal with market uncertainties. We will also operate the integrated

foodstuff business across Taiwan Straits by using the extensive information and in-depth analysis that have studied.

Animal Feed

Major products are animal feeds for hogs, chickens, ducks, geese and cattle, as well as pet foods for dogs and

cats.

It is expected that the risks and opportunities will exist in animal feeds market. Animal feed sales are gradually

decreasing due to the unregulated imported agricultural products according to WTO agreement in 2005 and the

spread of Blue Bird Disease. Also, the unbalanced market supply and demand, and climbing grain prices and freight

charges have raised difficulties for poultry feeders and risks for feed producers. In terms of opportunities, the local

unique, organic and health agricultural and livestock products still exhibit potential. If foot-and-mouth disease were

clear, domestic pork meat is likely to be back on Japanese market. In addition, local branded pet foods earned

higher consumers’ trust after Pedigree branded products were discovered with pollutants. Within the next few years,

the ineffective feed manufactures will depart the market and leave those strong and promising manufacturers to

expand its market share through vertical integration.

We have already integrated the operation from material suppliers to the sales channels, and combined TMR

technology and professional service team to produce distinct products and segment markets in order to increase

products and service value. We also extended market scope into concentrated feeds to attain to niche management.

However due to the great maize and soybean imports required, we would lose profit upon material price

fluctuations. On the other hand, poultry feeders will face higher selling risks from the impacts of unbalanced market

condition, climbing costs and weak financial structure.

Being aware of relatively higher operating risks, we will increase our profit through raw materials regulation and

minimize loan risks by monitoring clients' credit lines and account receivables.

Aquatic Feed

Major products are floating feed, prawn feed, ornamental fish feed, fresh water fish feed and marine fish feed.

In 2004, the best selling products in Taiwan were floating grouper feed and ornamental fish feeds, growing

30.8% and 18.2% respectively, while prawn feed in pan-India Ocean territory and Southeast Asia contributed the

most income in export sales.

Due to the inflated oil prices and China’s macroeconomic regulation, the raw material and transportation cost

were getting higher. The price for imported raw material (accounted for 71% of total materials) increased and

that created a difficult operating environment for manufacturers and feeders, as their costs can not pass onto the

customers; sales went down 5.8% from that of last year.

Although confronted by these adversities, we are confident to carry out a sound operation because we have

good business image, clear brand perception, and professional researchers and producers. We could also adjust

our marketing strategies and produce distinct products in keeping with the market demand. We will leverage group

procurement to effectively control the raw material costs and qualities. However we cannot relocate the increasing

material costs onto the customers and that lowered our profit. In addition, the rising freight charges and unsteady

arrival time has shaken consumers’ faith. In such circumstances, we plan to sell higher-marginal products, improve

off-season marketing strategies, unite all sources and promote channel merchandising in order to reach higher

market shares and sales.

Flour

In Taiwan, flour market is fully-grown. In early days, due to the wheat import quota, nearly all millers in Taiwan

had received sizeable profits as of lesser supply. But recently, deregulated wheat imports have caused stern

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competition and drop millers’ profits dreadfully. Not only there had been many milling companies withdrawing

from the market, but also more exits are expected to come. Total demand for Taiwan flour market is approximately

750,000 tons per annum. We foresee a unification of mills that reduced current 28 companies to 13; small

companies disappear with only big companies present. Along with this new trend in milling industry, we will seek to

promote our sales volume in order to grasp more market shares.

We have access to the latest milling technologies and extensive sales network over the nation. Our formulations

are tested under varying conditions to ensure superior performance each and every time, and our sales network

and an after-sell service centre are available to offer pleasant service to our customers. To deal with the problems

of insufficient production capacities and factories, we will search out qualified partners to help co-produce our

products.

Edible Oil

The products in our edible oil business vary from soybean meal, cooking oil for commercial and family use, to

house cleaning products.

Since imports for meat products are deregulated, the domestic agricultural and livestock products are the first

to take on the pressure. Market supply and demand of soybean meal is likely to be out of balance in short run.

Commercial cooking oil continues to expand as more eat outs occur; by contrast, home-cooking oil diminishes. The

trend of house cleaning products will emphasize on individuality and environmental friendly.

Our competitive advantages are built upon good corporate image, well-known brand reputation, complete

distribution channel, and variable ideal product selections. Disadvantages are the volatile material prices that

fluctuated costs of good sold; higher operating risks from unbalanced market supply and demand; hard home

cooking oil operation due to the frequent changes in consumer purchases and usage patterns; lesser profits by sales

promotion.

To overcome the above disadvantages, we have in hand the report of real-time future price quotation and

market supply and demand data, and we will manage account receivables and clients’ credits with care to avoid

business risks. We will also restructure our product categories to adapt to the new market condition, including the

invention of higher priced and nutritional product to sustain our profits, as well as enhance our brand management

to improve market competitiveness.

Instant Noodle

Major instant noodle categories in 2004 were bowl, tub, cup, and bag noodle products. Amongst all products,

low-priced bag noodle contributed the most income. Leading brands are Tung-I, A-Q, Ke-Shiue-Mian, Imperial, One

More Cup and etc.

Although Taiwan’s instant noodle market was in disorder due to the invitation of price war by Master Kung in

2003, we still insist on quality and brand improvement and believe in their strength to help achieve higher sales.

Also, developing new inventions yearly is as important as retaining existing sales, such that our strategy in 2004 is

to produce distinctive quality product and extend product categories to satisfy consumer needs and dominant the

market. Meanwhile, we have developed non-fried noodle and intended to launch it in 2005. Though we foresee

a competitive instant noodle market, we still determined to deliver more innovative products to our customers and

retain our leadership.

We wil l succeed in the upcoming year with our continuous innovation, experienced marketing

force, solid distribution structure and the computerized production system. To resolve the problems

o f h igh personne l and marke t ing expense , and fas t tu rnover ra te fo r new products , we wi l l

re-engineer our human force and improve inef fect ive sel l ing i tems to reduce market ing wastes.

Moreover, we will establish a strong market research team to help speed up our product inventions.

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Dairy Product

Major product lines include fresh milk, flavored milk, yogurt drink, puddings, and cereal drinks.

In 2004, the Company’s overall operating revenue from fresh milk had a slight reduction over 2003, but

premium fresh milk (Rayshie) grew 6.7%. Regular milk showed a relatively larger decline, indicating higher

consumers’ expectation for premium quality milk sources and increasing demand for quality milk. On the other

hand, flavored milk did not shrink and sales rose 10.4%. Yogurt drink market has slackened, as consumers have not

yet gotten rid of its high calorie impression, sales declined 9.1%. Sales of puddings, with the successful launch of Big

Pudding Series, swelled 5%. Cereal drinks recorded a growth rate of 9.5%.

Affected by entry to WTO, dairy market competition becomes more intense. New food manufacturers have

joined the dairy market and shared our growth. Since dairy products are mostly chilled and delivered on a daily

basis, efficiency and scale are two major elements in determining corporate competitiveness. In short run, the

market will undergo another shuffle: weak players depart, strong ones stay, whereas in long-term, market leader is

won by those with strong performance and brand power. In the future, processors will maximize the added value

of current incoming milk sources by offering various product combinations of fresh milk and flavored milk, and

achieving largest operating scale and effectiveness. Driven by the increasing health consciousness, we will apply the

advanced technology and make use of the functional values in fresh milk, flavored milk and yogurt drink to develop

higher quality and better taste products. The growth of dairy product industry is expectable, with another surge of

product upgrade. The Company will play an active role in leading the industry upgrade and pushing the product

quality and brand values to the maximum.

Our dairy business underwent reorganization in 2005. Tea and coffee products were taken from dairy product

division and become parts of beverage division, so operation will be more focused on the quality and brand

improvement of diary products. In addition, vertical integration with upstream suppliers and downstream sales

channels will be more effective and that lowers costs of raw materials and distribution management, forming a

resilient operation.

The Company is privileged with its strong brand strength. We are the leaders of many product categories,

which ensure the best effective and competitive advantage in the existing market scale. The unfavorable factors

are the increasing newcomers; frequent price war for short-term profit at the expense of brand value suggested

by channels. These lead to a decline in gross profit. Along with the fast change in consumers’ purchasing patterns,

products become harder to survive.

To strive against above-mentioned unfavorable factors, we decided to increase product value first, for example,

our AB has obtained dual health certification, and soybean milk has been proven to be able to lower human

cholesterol. We will compete against others through brand marketing instead of struggling in constant pricing

discounts. While we are attempting to please consumers and channels’ multivariate wants, numbers of SKU under

the strong brands have increased and that raised the operating costs. We will integrate supply chain, review each

brand’s performance on a regular basis, and study consumers’ needs, as well as reduce wastes from ineffective SKU

to lower the operating costs.

Beverage

Major product categories are tea, bottled water, juice and coffee.

In ready-to-drink (RTD) market, tea dominates nearly 40% of beverage market share and is the most ordinary and

demanding beverage in daily Chinese lives. It not only is the hottest selling beverage category at present time, but

is also likely to keep on expanding its market share in the future. The increasing consumers’ health consciousness

has made green tea, which includes lots of functional ingredients, become a healthy drink than just an obsessed

beverage. In year 2004, overall green tea market grew 11% which was attributed to the traditional black tea,

green tea, oolong tea, and milk tea as well as the feverish occidental flower tea that appeals to most females. As tea

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continues to be promoted by the manufactures and channels, its market is kept on expanding. Our tea production

has absolute advantage and our brands are managed with consumer-oriented mindset. In 2005, tea was run

independently by a newly established Tea Division and was devoted to the operation of three top name brands:

Mine-Shine, Uni-President Pure Tea, and Chai-Li-Won.

Bottled water, coffee, juice, and functional drinks capture the greatest market size worldwide. Under the

globalization, the future of these categories is promising. Even though we faced severe competitions from other

beverage giants, bottled water, juice, coffee, and some distribution brands performed well in sales volume in 2004.

Functional beverages, with the advanced technology and biotechnology breakthrough, numerous business models

have emerged and the market size is expected to grow steadily. In order to satisfy our consumers, we will leverage

our competitive advantage and develop higher value-added products.

Corporate advantages lie on the following facts. One, the state-of-art sterilizing facility and tea technology are

implemented in our production; two, our products launches are guaranteed with greater success via our close

relationship with CVS partners; three, our product developments are consistently searched for innovation and

branding strategies are set according to the marketing principal specified. However we still encountered severe price

competition from private label goods in hypermarket, as well as increasing costs of channel’s shelf costs, along with

the escalating material prices year after year.

Concerning to the disadvantages, our brands will compete with others on quality and insist on brand

management than involving in price discounts. We will customize more low-priced products to meet broader needs,

develop unique and innovative products, and take integrative corporate resources to bargain with suppliers and

retailers. Meanwhile we will make purchases in the purchasing platform to reduce management losses, optimize the

effectiveness of each machine and obtain lowest production costs through international co-procurement.

Baking Product

Major product lines are toast, bread, and cake, which are sold through convenient retailers including 7-11, OK,

Nikomart, Starbucks Coffee, bakeries, and other key channels.

In Japan, machine-made bread is well developed and products are quite diversified in CVS channels. Ever

since our baking factory was established in Taiwan twenty years ago, we have been consistently accumulating

manufacturing technique and know-how, and become the biggest machine-made bread maker in Taiwan.

Beginning from year 2000, Uni-President has been manufacturing in batches and delivering twice a day to 7-11

outlets to provide fresh, prompt and delicious bread to the customers at morning and at night.

Our advantage is that we have a strong R&D team that consistently presents creative products to satisfy

consumer wants. Also, we have built regional baking factories to deliver fresh and delicious bread. Our close

relationship with channels and utilization of mass medium allow us to create new market value. Disadvantage is

that extra costs from inflated raw material prices cannot pass onto consumers so material costs escalated and profits

suffered. The action we will take in the future is to minimize our costs, evaluate market strength for each product,

and apply advanced technology to provide delicious products.

Frozen Food

Our frozen food business include eight major product categories such as dumplings, buns, hotpot dishes, fish &

meat balls, chicken nuggets & fish fillet, 4°C meal, home meal replacement (HMR) and noodle, that are mainly sold

in CVS, hypermarket and supermarket stores.

Total sale of frozen food market in Taiwan is about NTD 8 billion. Among which, sales of dumplings, chicken

nuggets, 4°C meal and HMR account for more than 80%. National sales of dumplings, hotpot dishes and chicken

nugget are constant, but sales of buns and fish & meatballs decrease in 2004. Meanwhile, the production capacities

of dumpling, nugget and meatball/fish ball have been saturated and required additional production facilities. The

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sales revenue in 2004 exceeded the production volume in our frozen food plant. With the increasing HMR and 40C

meal demands, we have been seeking out for OEM manufacturers to help co-produce our products.

We can outperform others by means of supports from professional research team, inclusive distribution

channel and solid team-merchandising platform. To cope with the business condition of decreasing profit from

un-transferable material price increase, and low gross margin from the major selling channel-hypermarket, we will

keep product’s quality standard with reasonable costs, restructure parts of production, and improve production

volume. Meanwhile, we will strengthen the channel merchandising at supermarket chains and at convenient stores

to take control of price setting.

Ice Cream Division

There are ice cream bars, cones, sundaes, cup, dip, shaved ice and ice cream snack; among which, ice bar

contributes greatest income.

National ice cream sales reduced in 2004. Although higher CPI, emergent ice and teashops, and severe price

competition had eroded ice cream sales in Taiwan, our ice cream sales still went up 11% from last year with inflated

sales from cup ice cream and new items. By channels, except sales in traditional market stay consistent and reduce

slightly in niche market, sales in other channels expand.

The center of marketing strategies and product development in 2004 was to offer different competitive products

that were wanted by customers, develop new products under the strong brand names, and outsource the

unproductive items to other manufacturers. Moreover, we would seek to strategically ally with international leading

firms or be one of their qualified distributors or manufacturers in Taiwan in order to provide broader choices for

consumers.

We are proficient in extending brands across product categories, establishing creative marketing strategies

and strategically allying with leading foreign companies. However there still exist few problems, such as mounting

material costs and stern price competitions. We will avoid getting trapped into a price war, stabilize market price,

and strengthen R&D to improve products’ worth.

Soy Sauce and Seasonings

The main products are soy sauce and seasoning products, and brands are Uni-President, Four Season and

Kikkoman.

The sales volume for soy sauce market is quite stable with an annual average growth rate of 3%, but sales

growth has gradually slowed down during the past three years. For the sake of retaining our leading position in soy

sauce market, we work very hard at our existing channel management, and reinforce inclusive selling network and

successful marketing tactics to ensure a room for growth. In an attempt to establish market-leading brands, we stuck

to the strategy of high quality product development and adjusted product portfolios to include various product lines,

from ketchup, spicy sauce, rice wine, to stewing sauce. Some special seasonings are imported and some corporate

products are exported to take our stand in the globe.

Apparently we have several competitive advantages. One, our cooperation with international sauce giant

Kikkoman enhances our professional skills in sauce production. Two, the extensive channel network increases our

product accessibility. Three, consistent research and development ensures a long-lasting operation. Four, the global

layout of Uni-President Group pave a smooth path for establishing strong seasoning brand names internationally.

Although our business is encouraged by these advantages, soy sauce sales still grow slowly, which is unfavorable

to the capital investment and for renovation. Also, higher raw material cost rises operating costs. Therefore we will

try to minimize the cost at each process, and leverage distinct and superior strategies to reduce the impacts of price

competitions. Food service and new product category development become the two central operations in our

sauce business.

UN I-PR E S I DEN T


Meat Product

Our meat business offers a wide range of products, ranging from Chinese-style processed meat product

(sausage, dried meat and fish floss) to western-style processed meat product (hot dog, ham and bacon). The

strategies are the combination of multi-channel and brand management. Key channels are traditional market,

hypermarket, CVS, and food service channels. Imperial is the chief brand in Chinese-style meat category while Proker

is the major brand in western-style meat category.

The meat processing industry has becoming fully-grown and the channels guided the marketing. Since

environment is surrounded by higher channel costs, fresh meat prices and the lower retailing price, meat processors

faced more difficulties with squeezed profits. Market sales were either declining (sausage, hotdog and ham) or

stagnant (other products). In such a market situation, the high quality and high-priced products will be the trend for

future product development.

We have absolute advantages over others because our research and development ability are strong and

will help create many higher quality and better taste leading products. Meanwhile, our products are accessible

nationwide with the inclusive distribution and selling network. Disadvantage is that the supply of domestic hogs

is insufficient so the costs of materials are kept at high-end and thereby influencing our gross profit. Also, the

homogeneity of the products is high, price competition is fierce and consumption pattern frequently changes.

For the upcoming years, we will seek to adopt clean and certified raw materials into our production and

offer consumers a broader variety of healthy, delicious and easy prepared premium products in small-sized pack.

Meanwhile, to seize the opportunities from eat-outs in food service business, we will develop more apt products for

food service operations and expand our sales accordingly.

Health Food

Main selling products are chicken essence, Meiji milk powder, grain powder and health food, and key channels

consist of hypermarket, traditional market, specialty stores and convenient stores. The action we took in 2004 was

the increment of selling channels, such as drugstores, cosmetic shop, direct selling market, mail-in order and TV sales

that increased products’ visibility and brought in higher sales.

Our flavored chicken essence is the leading brand in chicken essence market. To strengthen our competitiveness,

we have reformulated our products by lowering its salt level. By mid-2005, four-herb and ten-herb chicken essence

will be fully upgraded and higher-priced chicken essence will be launched to expand our product lines. Our baby

milk powder business continues to distribute Meiji Milk Powder in Taiwan. Due to the stern competition of infant

milk powder market, and decreasing birth rate in Taiwan, our operation is challenging. Right now, our strategy is

to expand further penetration in hospitals and drugstores. As for our cereal business, few brands are perceived with

professionalism. Since few products are recognized with hard stirring, we will try to solve the stirring problem and

enhance functional claims and consumers’ awareness about our products’ qualities simultaneously. Overall, our plan

for health food business is to offer healthy, natural and functional products, and submit most products to health

bureau for approval of health food certificates.

Our business is supported by a group of excellent research and development talents, fertile product (material)

resources and data, so we are capable of leveraging our production technology to enhance production capacity

and approaching consumers through extensive channel network. Though we are constrained by divergent and

limited marketing resources, we will commit ourselves in brand synergies and put our marketing resources into best

uses.

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The Producing Procedure of Animal Feed

raw materials scale

by-product scalping

scalpin storing

mixing train sporp

storing pelleting cooling crimping sifted

pelleted feed packaging

premix miled fat molasses

scalping package tank mash feed

crimping

grinding

screening

storing automatic scale

wheat separator scourer tempering mixer scourer separator magnetic separator

myfa intense tempering

break roller sifter purifier reduction roller sifter insect impacter silo mixer

secure Sifter weighter package flour product

by-product package wheat bran

The Producing Procedure of Main Products

The Producing Procedure of Flour

UN I-PR E S I DEN T


The Producing Procedure of Instant Noodle

lard garliconion

boiling

medium protein flourflavor water

premix

mix

mixer

sheeting

sheeting roller

threading

noodle slit ter

steaming

pressurized

seasoning seasoning powder packweighing scale mixing

mixer

filling

packet filler

imperial big meals

tetort pouch fehydrated meat/veg.

boiling stewing indexingfilling

packet filler

sterlizing

sterlization

drying

dryer

storage

finished goods

cutting into portion

cutting

spray seasoning sopp frying

seasoning sopy oil

cooling

cooler

packaging

cartoning machine

case wrapper

colling freezing

freezer

mixing

mixer

filling

packet filler

oil packs

sugar ingredient reception

sugar syrup fissolving & giltration

storage

raw material reception

raw material treatment

raw juice storage

fructose reception

UHT-sterilization

aseptic filling

straw application

tray packing

film shrink packing palletizing

folk lift

storage in warehouse

random inspection before distribution delivery

mixing

The Producing Procedure of Aseptic Brink Juice

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The Producing Procedure of Aseptic PET Tea

The Producing Procedure of Fresh Milk

raw milk QC store QC QCblend clarify

QC refrigemned milk

pasteurize fill

bottle bottle washing QC

pure pack QC

PS mold

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UN I-PR E S I DEN T


The Producing Procedure of Soybean Milk

The Producing Procedure of Drinking Yogurt

soybean QC preheat mill cook centrifuge cool mix

QC clarify sterilize fill QC palletize rechecklong life

soymilk

additives QC blend nomogenize cool

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water

yeast

final fermentation

baking cooling cutting packing finished item

flour

weighting mixing mixing

raw material

basic germentation

proofer

divided

divider

roundintermediate fermentation

intermediate proofer

rounding

rounder

The Producing Procedure of Bread

UN I-PR E S I DEN T


Supply Status of Main Materials

Product Raw Material Source Supply Status

Feed Corn, Soybean, Fish Meal USA, South America Stable

Wheat Flour Wheat USA, Australia Stable

Edible Oil Soybean USA, South America Stable

Instant Noodle Wheat Flour

Edible Oil

Self-Produced

USA, South-East Asia

Stable

Beverage & Juice Sugar

Fructose

Conc. Juice

Tea

Domestic, Thailand

Domestic

Brazil, Mainland China

Domestic, Vietnam

Stable

Dairy Products Raw Milk

Milk Powder

Domestic

New Zealand, Australia

Stable

Meat Products Pork

Beef

Domestic, USA

Australia, New Zealand

Stable

Major Suppliers and Clients

Major Suppliers

Net purchases of major Suppliers are less than 10% of total purchases.

Major ClientsUnit: NT$ thousands

Name

2004

Name

2003

AmountRatio of

Net SalesAmount

Ratio of

Net Sales

Tung Ang Enterprises Corp. 5,825,896 14% Tung Ang Enterprises Corp. 5,450,599 14%

Uni-President Cold Chain Corp. 4,540,454 11% Uni-President Cold Chain Corp. 4,473,824 12%

Variance Analysis for Deviation over 10%: No significant change.

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Production over the Last Two YearsUnit: NT$ millions

Product 2004 2003

Name Unit Capacity Quantity Amount Capacity Quantity Amount

Feeds * 507 504 4,927 507 457 3,847

Flours * 88 82 877 88 85 854

Wheat Bran * 33 32 126 33 32 114

Barley Cereal * 43 19 139 43 23 133

Instant Noodle ** 532 448 2,696 540 437 2,535

Rice Noodle ** 28 21 149 25 21 129

Noodle ** 8 7 79 8 7 82

Beverages *** 67,571 39,227 4,641 51,507 32,943 4,129

PP Juice *** 10,695 10,017 1,278 10,695 10,506 1,332

Dairy Products *** 15,319 14,102 3,938 15,319 15,068 4,208

Soy Bean Milk *** 1,949 1,596 339 1,949 1,931 411

Yogurts Drink *** - - - 202 200 27

Puddings *** 13,000 12,173 665 12,000 11,233 614

Frozen Foods * 6 5 417 6 6 435

Healthy Foods * 2 1 304 2 2 476

Breads * 28 25 1,167 26 23 1,101

Cakes * 10 8 529 10 6 441

Meat Products * 6 5 708 6 6 816

Ice Cream Products * 4 3 321 4 4 339

* 1,000 tons; **1,000,000 packs; *** 1,000cases

UN I-PR E S I DEN T


Net Sales over the Last Two YearsUnit: NT$ millions

Product2004 2003

Local Export Local Export

Name Unit Quantity Amount Quantity Amount Quantity Amount Quantity Amount

Feeds * 529 5,227 9 341 469 4,305 11 405

Flours * 58 746 - - 58 679 - -

Wheat Bran * 33 148 - - 31 121 - -

Barley Cereal * 19 149 - - 23 166 - -

Soybean Powder * 176 2,160 - - 162 1,627 - -

Edible Oil * 42 1,349 - 5 45 1,185 - -

Grain & Feeds * 666 5,008 - - 689 4,065 - -

Instant Noodle ** 446 3,482 15 148 441 3,490 15 150

Rice Noodle ** 17 137 3 23 17 124 3 24

Noodle ** 6 96 - 3 7 95 - 3

Fresh Foods ** 16 350 - - 11 225 - -

Beverages *** 55,539 6,313 1,206 176 48,919 5,965 1,162 133

PP Juice *** 10,017 2,002 - - 10,506 2,100 - -

Dairy Products *** 14,016 5,131 85 29 15,020 5,628 48 16

Soy Bean Milk *** 1,596 455 - - 1,931 550 - -

Yogurts Drink *** 645 148 - - 557 109 - -

Puddings *** 12,173 704 - - 11,025 636 - 28

Pickles **** 425 69 9 3 278 51 12 3

Soy Sauce **** 2,788 859 15 6 2,764 827 17 6

Frozen Foods * 13 782 - - 8 619 - 3

Milk Powders * 1 183 - 18 1 159 - 54

Healthy Foods * 1 288 - - 1 318 - -

Breads * 25 1,366 - - 23 1,329 - -

Cakes * 8 616 - - 6 572 - -

Meat Products * 7 754 - 2 7 810 - 2

Ice Cream Products * 6 425 - 3 11 666 - -

Others - - 580 - - - 704 - -

39,527 757 37,125 827

* 1,000 tons; ** 1,000,000 packs ; *** 1,000cases ; ****1,000 dozens.

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HUMAN RESOURCES

An Analysis of Uni-President Employees

Year 2003 2004 2005 (As of April 30)

Number of Employees 5,156 5,131 5,070

Average of Age 37.4 38.3 38.8

Average Years of Service 12.6 13.3 13.8

Percentage by Education

1Ph. D. 0.08% 0.06% 0.06%

1MS / MA 6.17% 6.86% 6.59%

1College 33.11% 34.13% 34.16%

1High School 45.58% 45.00% 45.92%

1Others 15.06% 13.95% 13.27%

Employee TrainingEver since our company was established, we have been convinced of human resources as our most precious

asset and have been putting forth our best efforts on employee training. The principles of lifelong learning, career

planning and multi-target education are incorporated into our human resource development in the hope to

enhance our human forces, incubate potential management staffs and cultivate fine corporate culture.

Employee training is a long-term and specialized work. We have specially detailed three guidelines for training

programs - education-training-development balanced, ability-oriented, supervisor participation and set up a long-

range, systematic and diversified training programs for our employees according to their education backgrounds,

potentialities, and professional skills, as well as the managerial positions and the organizational functions they are

charged with. Besides, we enlarge employees’ potentialities by assigning them to overseas or affiliated companies to

further implant personal career development into company’s long-standing future.

In order to implement employee training well, we set up a specialized unit, Employee Training Section, on 1

June 1982 for the execution of training programs. On 13 November 1996, the employee training section was

officially established (licensed by government official approval # 115). Its responsibility is to draw out the policies,

build up the system, evaluate the performance and carry out managerial and newcomers’ training programs, as

well as implement professional training for each sales or supporting unit. The company-wide training procedure had

been standardized and certified by ISO9001 2000.

The overall performance of employee training in 2004 is stated as below:

In-house Training

(Number of classes)

In-house Training

(Number of hours)

Outside Training

(Number of hours)

Training Expense

(thousands of NTD)

1,642 110,636 13,723 23,930

Since 1996, the employee training section has been awarded excellence by several governmental agencies

many times. We took it as a great recognition of our best efforts. For the future, we will continue to adhere to our

training principles of life-long learning, career planning and multi-target education and construct a better learning

organization and environment for our company and employees to stay in.

UN I-PR E S I DEN T


LABOR RELATION

I. The implementation of a complete set of employee welfare, education, training, retirement, as well as the conducts, rights and obligations established between the employer and worker.

Labor Relation Operation

Over thirty years of operation, Uni-President has believed in harmonious labor- employer relation as well as agree on a

mutual benefit for employer and workers.

The Company would like to practice the followings:

1. Improve the rationalization of personnel system

To strongly support the organization unification, rational disposition of human resources, attraction and retention of talents

with good pay, promotion scheme and cultivation of international talents for higher personnel productivity.

2. Carry out employee career enrichment plan

To assist employee in planning his career life, and to carry out the plan in the course of working experiences, work

requirements, educational training and performance evaluation, making sure the worker’s expectation is in line with

organizational needs.

3. Provide better employee welfare

To make food, clothes, accommodations, transportation, education and entertainment easier to reach in workers’ daily

lives, including the supplies of dormitories, delicious but inexpensive meals, health check-ups, and employee fringe. We hope

to create a safe and nice working environment for the employees and to offer them the best welfare we can.

4. Better communication with labor union

The Company would maintain good communications within all channels in order to reach a common consensus and

effectively build up workers’ commitments to work. For example, we arrange regular meetings for workers and employers,

so the employer can understand worker’s needs and try to satisfy them as possible. On the other hand, representatives of

labor unions are invited to attend business meetings and this provides opportunity for workers to be fully understood about

corporate operation as well as express their opinions.

The Retirement Program

1. Abided by the Labor Standards Law, Uni-president has made rules for retirement and set up a supervisory committee of

retirement fund to oversee the allocation and payment of retirement fund.

2. Employees who have worked in the company for more than 15 years and reached age 55, plus employees worked for more

than 25 years must apply for retirement according to our retirement scheme and receive payment as stated by the regulation.

3. We will abide by the enactment of Taiwan’s new Labor Pension Act on 1 July 2005 and implemented the set of laws listed.

Labor Relation Condition

The Company has insisted on the harmonious relationship with its workers, and is very concern about the employee’s welfare

and career planning. So far, no employer and labor conflicts ever occurred, and no losses of this kind are expected to come.

Employer keeps a friendly relationship with his workers now and intends to carry on this attitude in the future.

Protection for Workplace and Labour Safety

The Company’s occupational policy is to construct a comfortable, safe and healthy workplace for the workers in order to

secure their lives. “Zero Occupational Accident” is regarded as our target, and becomes our common consensus. We form a

good culture of occupational safety.

Our company pays much attention to the employees’ safety and health, including the traffic safety during the rush hour,

pre-employment physical examinations, periodic health examinations, safety propaganda, maintenance of the machine and

equipment, and the operational manual of employees in workplace, etc. All mentioned above have had perfect standards and

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been practiced well. In the aspect of the fire prevention and emergency exit, we would check the fire fighting and escape

equipment monthly, and carry out various emergency-response practices to the accidents yearly. In addition, we would

conduct the personnel first aid training to completely prevent the occurrences of the accidents. The management of labor

safety and health would perform unscheduled safety and health checks, and supervisors of environmental health would audit

and propagate environmental health and safety. Recently, we have introduced the concept of detriment identification/risk

management/safety checks, expecting to manage the employee safety effectively. In the aspect of the contractors, all of the

contractor’s workers who work in the factory site of Uni-President Enterprises Corp. are regarded as Uni-President’s employees

and requested to obey the same safety and health rules in order to prevent possible loopholes in safety.

In early 2003, our company established the “Emergency Response Team for the Prevention and Cure of SARS” to avoid the

spread of SARS. Moreover, starting in early 2004, we renamed the “Emergency Response Team for the Prevention and Cure

of SARS” to the “Emergency Response Group for the Prevention and Cure of Major Infectious Diseases” to react to numerous

diseases such as Bird Flu. Since 2003, we have established environmental protection and occupational safety website to expedite

the release of occupational safety and health information via this powerful wide-spreading network. In addition, the activity of

“Environmental Protection and Occupational Safety Week” would be held at every plant every year. It will include relaxing and

interesting activities, and the practical training to enhance employees’ recognition of self-protection, and create a fine culture of

the occupational safety.

In the meantime, in order to avoid endangering employees’ lives, we would reduce the rate of occupational accidents. On

the 1st of December 2004, the Uni-President Enterprises Corp. decided to establish the OHSAS 18001(Occupational Health and

Safety Assessment Systems 18001) and began the system at Hsinshu general plant first.

Although we are demonstrated with slight improvement in employee protection, we are not self-contend with up-to-date

achievement. We still believe in continuous enhancement and pursue the progress through effective management system

and advanced occupational safety techniques and tools. It is our plan to take advantage of “Three Principles of Industrial

Safety Precaution” - supervisory-protection, self-protection and cooperative-protection to attain to the final objective of "zero

occupational accident".

II. Estimated Losses from Labour Relation Conflicts during the Past Two years and the Future and our planned reaction: none

III. The Regulations for Employee’s Behavior and MoralityValue of integrity and morale

Uni-President has always been appreciative for customers’ support and faith and intending to payback to customers,

employees, and stockholders whenever possible. In addition, Uni-President is committed in making contribution to the society

and building up a sense of duty of high business morality. Our recruitment values more on the employees’ integrity and morality

than his capabilities.

The employees regulations:

(1) Employees shall be fully devoted to his job and follow the company’s regulations and supervisors’ ordinary orders. Meanwhile,

supervisors should treat employees with patience and kindness.

(2) Employees shall not engaged in unrelated business works during working hours.

(3) Employees should work hard, cherish public property, cut-down waste levels, improve quality, increase production and keep

business data confidential.

(4) Employees should follow the corporate and organization morality and ethics.

(5) Employees should not meet with friends, family or be absent during the work hours without being approved.

(6) Externally, employees are prohibited from using the company’s name under any circumstances excluding for handling

corporate business.

(7) Without prior permission, employees should not hold multiple jobs or be employed by another company of the same nature

that may interrupt the execution of the labor contract. Also, employee cannot run the similar business for himself/herself or

others.

UN I-PR E S I DEN T


ENVIRONMENTAL PROTECTION EXPENDITURE

The Company, since setting up the factory, has been focusing on the planning and the execution of the

environmental protection. In addition to the establishment of environmental management system, implementation

of environmental checkup and the vast investment in environmental protection facilities, we have established a task

team to take on the operation, maintenance and improvement of the preventive equipment in wastewater, offal

and waste gas. The relevant operational cost of environmental protection was NTD 109.3 million in 2004.

I. Losses from environmental pollution this year:

Pollution Status (type, level) Poison (Note 1) Offal (Note 2)

Division that execute punishment Environmental Protection Bureau, Tainan County Government

Environmental Protection Bureau, Tainan County Government

Amount of compensation NTD 60,000 NTD 6,000

Other losses None None

Note 1: Fail to report a hazardous waste liquid produced in an experiment by Central Research Unit in October

2004 and stored for over a month. The waste liquid has already been disposed by a Grade-A firm and

completed with all required declarations online.

Notes 2: Fail to report the offal online as the mud at animal farm had been provided to farmers for free prior to

May 2004. We now have re-arranged our offal disposal and entrust legal company to do it. Meanwhile

we have completed reports to the environmental bureau and monitor the disposing process.

II. Reaction:

1. Parts for Improvement

(1) Improvement plan

A. We will look over our environment, improve daily internal control and comply with the law to dispose the

offal, report and monitor the process.

B. Increase employees’ conscious of environmental regulation.

C. People will be assigned to attend seminars of poison disposal organized by environmental departments in

order to obtain relevant information, rules and regulations. The content of the seminar will then be passed

onto other colleagues. All disposals shall be dealt according to the stated law.

D. Environmental protection unit shall effectively manage and dispose the waste liquid production from each

unit.

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(2) Possible capital expenditure for environmental protection in the following two years

Year 2005 2006

Planned purchase of pollution control facility or other facilities for building up a healthy environment

(1) Shingshi plant: Install a wastewater treatment facility and improve rain/sewage ditch

(2) Yeongkang Plant: Install a deodorizing facility in waste water field

None

Expected Improvement Accord with the environmental protection decree Improve working environment

None

Expense NTD 23.5 million -

(3) Effects after Improvement

A. On net profit: No significant impact.

B. On competitive position: Accord with the environmental protection decree.

2. Parts with no reaction: Not applicable.

UN I-PR E S I DEN T


SOCIAL RESPONSIBILITY

Ever since the company was established in 1967, Uni-President Enterprises Corp. has been operating in

compliance with the management principle of “3-Goods (good quality, good credibility, and good service)” and

“1-Fairness (fair price)” and the care to the lives and society to offer innumerable consumers’ favorite foods. While we

have committed to being a friendly, responsible corporate citizen by assuming social responsibility with compassion

and aggressive action, we are always sought to act upon the belief of taking what is from the society and exercising

it to arrive at the best for the society. Our ongoing effort has then been crediting with utmost appraisal and

recognition from public.

In retrospect our community contributions in past years, in particular, the Dream Park Series has created many

healthy and joyful living experiences and are subjected to the most favorite of consumers. The series featured

activities from Family Sketch Contests, Little Environmental Protectors, Dream Park Singing Concerts, Evergreen

Cup Talent Companionships, and Triathlon International Invitational Tournaments to the 10 Golden Years

Culture Seminars and etc. By sponsoring and organizing diversified public welfare activities in areas of culture,

entertainment, sports, art and others, consumers and we can jointly generate a healthy and joyful 21st century.

In 2000, Uni-President introduced “Millenary Love-- A Kiss to the Spirit of the Future”, and based on this concept,

we have planned a ten-year humanities project and been embarking upon four major claims - “Respect Lives”, “Care

for Others”, “Be Close to Nature”, and “Be Optimistic and Progressive”. We have undertaken many appealing and

expressive events like Triathlon Asia Series Matches, Manuscript Love Letter Solicitations, Child Sketch Contest, Classic

Team Reading Competition and others for the hopes to deliver a life that is filled with health and happiness.

Every year attributed to our dedication to the promotion and engagement in culture and art business, Uni-

President Enterprise Corp. was granted “Wen Hsin Award” from Council of Cultural Affairs, Executive Yuan. Our

commitments of cultural responsibility, inducing creativity from culture and art, and build-up competitive advantage

have made Uni-President Enterprise Corp. one of the cultural citizens in Taiwan.

Meanwhile Uni-President has long been concerning about the living of these minorities and endeavoring to look

after the people in critical needs. The recipients were provided aid from Uni-President Social Welfare and Charity

Foundation established in 1978 in which its income is accumulated from the monthly interest earned of NTD 200

million donated by Uni-President Enterprise. The number of succors by end 2004 is 24,776 with amount over NTD

180 million.

In April 2003, for the sake of advising consumers the appropriate health dietary, Uni-President Enterprise Corp.

unified with its affiliates including 7-Eleven to initiate the establishment of Health Foundation of Millenary Love. The

members of this foundation consist of all areas of professionals, including the business, academia and government

that came together to generalize the awareness of nutritious health, social education, research and development

and international communication of the preventive medicine. So far the foundation has studied the topics on “Post

SARS Health Care”, “Preventive Brain Cardiovascular Disease” and “Digestive Health care”, and undertaken several

related public educational and academic activities. All projects and events coordinated herein are treasured and

appreciated by consumers.

In October 2004, Uni-President was selected to receive Taiwan’s Best Prestigious Enterprise Benchmark award.

The prize is set up by Common Wealth Magazine in 1994 and acclaimed as Enterprise Oscar. For ten consecutive

years, Uni-President has obtained NO. 1 position in food industry. Only five enterprises were awarded this great

honor from a field of many notable players.

Uni-President will upgrade itself from a traditional food manufacturer and work to become a healthy consumer

service business. We are aspired by love and care to compose and perform pieces of cultural, organic, happy

and living food symphonies that demonstrate our practice of Spiritual Love in new century. With consumer’s

involvement, we will create a healthy, happy and bright future.

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IMPORTANT CONTRACTSAs of 04/30/2005

Agreement Counter party Period Major Contents Restriction

OEM TTET Union Corp. 2005.01.01~2005.12.31 Soybean Manufacture for Uni-President

1. Maintenance fees increase five dollars per ton per year.

2. The prices of Hexane and heavy-oil fluctuate according to the list price of Chinese Petroleum Corp.

Sales Agent President Kikkoman Inc. 1999.05.01~2009.04.30 General Agents Agreement obtained for the territory of Taiwan

1. No transfer to third party allowed without period consent from President Kikkoman Inc.

2. President Kikkoman Inc. has right to cancel the General Agents Agreement in the event that congregate revenue of NT$30 million is not reached within a consecutive three-month period.

Sales Agent Meiji Milk Corp. 2003.04.01~2004.03.31 General Agents Agreement obtained for the territory of Taiwan

No export to other countries is allowed without prior consent from Meiji Milk Corp.

OEM Kou Feng Industrial Co., Ltd.

2004.01.01~2004.12.31 Substitute for manufacturing wheat powder 5 million tons per month at least, and 30 million tons per month at most.

1. Kou Feng is not allowed to sell finished goods owing to the contract to others.

2. Kou Feng is not allowed to transfer the production to third parties.

3. Uni-President may stop the contract any time due to operating failure occurred on Kou Feng.

Term Loan The Farmers Bank of China

2004.06.25~2009.06.25 Facility amount NTD 600 Million

None

Term Loan Cathay United Bank 2001.12.17~2006.12.17 Facility amount NTD 500 Million

None

Term Loan Jihsun Bank 2004.06.25~2006.06.15 Facility amount NTD 500 Million

None

Term Loan Far Eastern International Bank


None

Term Loan Hua Nan Commercial Bank


None

Term Loan Taiwan Industrial Bank 2003.12.16~2006.06.16 Revolving Facility Amount NTD 350 Million

None

Term Loan Sunny Bank 2004.11.30~2006.11.30 Facility amount NTD 300 Million

None

Term Loan China Development Industrial Bank Inc


None

Term Loan First Commercial Bank 2004.08.29~2006.08.29 Facility amount NTD 400 Million

None

UN I-PR E S I DEN T


Agreement Counter party Period Major Contents Restriction

Term Loan Tachong Bank 2004.10.31~2006.10.31 Facility amount NTD 400 Million

None

Term Loan Tainan Business Bank 2004.07.16~2006.07.16 Facility amount NTD 340 Million

None

Term Loan Taishin Bank 2004.08.31~2006.08.31 Facility amount NTD 400 Million

None

Term Loan Chinatrust Commercial Bank


1. Tangible Net Worth shall be above NTD 30 Billion. (Based on consolidated Annual Financial Statement)

2. (Debt + Contingent Liability) to Net Worth shall be below 150%.

3. Interest Coverage Ratio shall be above 1.5 times

4. Current Ratio should be above 75%.

Term Loan Syndicate of Banks:Bank of Taiwan, BNP Paribas, The Development Bank of Singapore Ltd., and Standard Chartered Bank as arrangers

2002.09.18~2007.09.18 Facility amount NTD 4.8 Billion (Including Term Loan Facility 3.68 Billion and Note Issuance Facility 1.12 Billion)



3. Interest Coverage Ratio shall be above 2 times


Term Loan Taipei Fubon Bank 2004.11.16~2006.11.16 Facility amount NTD 500 Million




Term Loan Syndicate of Banks: Chinatrust Commercial Bank, Bank of Taiwan, BNP Paribas, and Standard Chartered Bank as arrangers

2004.08.02~2009.09.03 Facility amount NTD 9.8 Billion, including term loan facility 6.1 billion(2004.9.1~2009.9.3) and note issuance facility 3.7 billion (2004.8.2~2009.8.2)





IMPORTANT CONTRACTS (Continued)

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Transcript of PERATION HIGHLIGHTS · However with the rise of “Trade Policy Review Mechanism”(TPRM), the ban...