Annual Report'04 CPF (English)Annual Report CP

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Annual Report'04 CPF (English)Annual Report CPAnnual Report'04 CPF (English)Annual Report CPAnnual Report'04 CPF (English)Annual Report CP

Transcript of Annual Report'04 CPF (English)Annual Report CP

Page 1: Annual Report'04 CPF (English)Annual Report CP
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The Company at a glance 2

Message from the Chairman 4

Message from the President 5

Business Profile 6

Risk Factors 21

Management Discussion and Snalysis on Results and Financial Status 25

Management 31

Financial Statements 32

Quick Facts 54

Shareholding Structure 55

From Past to Present 56

Information of Companies in which the Company has Shareholding 58

Securities Issued by the Company in brief 64

References 69

Contents

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2 I Annual Report 2004 I Charoen Pokphand Foods Public Company Limited Contents Annual Report 2004 I Charoen Pokphand Foods Public Company Limited I 3Contents

The CPF Group strives to maintain its leading position in the agro-industrial and food industry and

successfully compete in the international arena. The Company is determined to fulfill its vision of

becoming the “Kitchen of the World”, placing significant importance on research and development

to improve production efficiency at every step of operations as well as develop products to meet the

satisfaction of customers and consumers. The Company is dedicated to providing food products which

are high in quality, nutritious, hygienic and safe. In addition, the Company is committed to operating its

business with environmental friendliness and continuously contributing back to society as a whole.

Charoen Pokphand Foods Public Company Limited and its subsidiaries or “CPF Group” is the

leading ago-industrial and food conglomerate in Thailand. Its market capitalization, as of

December 31, 2004 was THB 21,650 million.

The Company’s businesses divide into 2 main business lines: (1) the livestock business and

(2) the aquaculture business. Both these business lines comprise fully integrated operations, from sourcing

raw materials for animal feed production, manufacturing and distributing animal feed, breed the animals,

processing meat, to manufacturing further processed food products, mainly chicken, duck, swine, shrimp

and fish. The products in each of these 2 business lines can be classified into 3 main categories, namely

animal feed, animal breeder, and meat and food products.

In 2004, the Company’s total sales amounted to THB 91,790 million with sales from operations in

Thailand contributing to 85 % of total sales. Operations in Thailand include fully integrated agro-industrial

business of CPF and its subsidiaries in Thailand as well as foreign subsidiaries involved in importing and

distributing products in different countries. Domestic sales accounted for 82% while export sales

accounted for 18% of sales from this operation in Thailand.

Sales from overseas operations contributed to 15% of total sales. Operations overseas comprise

a fully integrated chicken operation in the Republic of Turkey, the feed production & distribution business

and aquatic farming in the People’s Republic of China, and the Thai restaurant business in the People’s

Republic of China.

Besides operating the core business mentioned above, the Company has also invested in an

information technology service provider business and a training service business to provide in-house

service to companies under the CPF Group. In addition, the Company has direct and indirect investments

in the agro-industrial business and other businesses, both locally and overseas.

Please note that “The Company” or “CPF Group” herein this Annual Report refers to Charoen Pokphand Foods Public

Company Limited (“CPF”) and its subsidiaries (companies that CPF has shareholding exceeding 50% of their paid-up

capital).

The Company at a Glance

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Financial Highlights in the Past 3 Years (THB million)

Consolidated Financial Statement 2002 2003 2004

Sales 75,147 83,109 91,790

• Operations in Thailand

• Livestock Business - Domestic Sales 39,661 43,325 47,117

• Livestock Business - Export Sales 9,688 12,419 9,923

• Aquaculture Business - Domestic Sales 14,675 16,564 16,943

• Aquaculture Business - Export Sales 6,714 4,158 3,697

• Overseas Operations

• Livestock Business 4,409 4,893 12,089

• Aquaculture Business 0 1,750 2,021

Net Profit 2,609 2,242 1,237

Earnings Per Share (THB) 0.67 0.42 0.23

Total Assets 57,282 64,721 72,218

Total Liabilities 30,529 34,217 40,589

Total Interest-bearing Debt 22,246 26,136 30,955

Shareholders’ Equity 26,753 30,504 31,628

Paid-up Capital 4,850 5,719 5,728

Par Value Per Share (THB) 1 1 1

Book Value Per Share (THB) 5.9 5.7 5.9

Business Structure

Operations in Thailand

Other InvestmentsCore Business

Overseas Operations

Livestock Business Main Products:

Chicken, Swine, Duck

Feed

Breeder

Meat - Domestic Sales

Meat - Export

Product Distribution in Other Countries

Aquaculture Business Main Products: Shrimp, Fish

Feed

Breeder

Meat - Domestic Sales

Meat - Export

Product Distribution in Other Countries

Information Technology

Service for Companies within the Group

Training Service for Companies within

the Group

Integrated Chicken Operation in the Republic

of Turkey

Aquaculture Business in the People’ s Republic

of China

Thai Restaurant Business in the People’ s Republic

of China

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Message from the Chairman

In 2004, the Thai economy experienced healthy economic growth, but the agro-industrial and food

sector, especially the chicken and shrimp businesses were negatively affected by uncontrollable

external factors such as the bird flu outbreak announced by the government in January 2004

and the shrimp anti-dumping case filed by the US against Thailand. Due to the above factors,

business operators in the industry were widely affected and unable to achieve previously

established targets. Charoen Pokphand Foods Public Company Limited, one of the agro-

industrial and food business operators in Thailand, then, could not avoid the impact from these

external obstacles.

The Company’s Board of Directors greatly recognizes that business diversification from having

a wide variety of products and investing in different countries as well as the ability of management

to adjust business strategies to stay abreast of changes in the business environment have built the

Company’s readiness and strength to efficiently compete in the world market and possessed

competitive advantage in business. The Company is, then ready to stride forward, continuously creating

business success and yielding proper return to shareholders, as the A rating awarded by TRIS Rating

Co., Ltd. attests to the Company’s strength and potential.

The Company firmly believes that every crisis provides opportunities and success for those

that are strong and have the capability to develop strategies and business plans to effectively seize the

opportunities. The Board of Directors has informed the President & CEO to focus on this issue,

particulary the implement of branding strategy, which is the main tool to create consumer awareness,

on the high quality of CPF’s products. In addition, importance has been given to improving risk

management and control.

Furthermore, the Board of Directors places utmost importance on good corporate governance

to ensure that the Company maintains integrity and sustainable business growth and return to

shareholders. The Board of Directors has also stipulated a policy to continuously develop the Company’s

human resources which is a crucial in achieving the Company’s vision. No less important, the Company,

as being part of Thai society, always and continuously dedicates to support social contribution activities

of many institutions.

On behalf of the Board of Directors, the Company wishes to express sincere gratitude to

its shareholders for their trust and support throughout the crisis. In addition, the Company wishes to

take this opportunity to thank its management and employees for their efforts and dedication for the

Company’ s ongoing success.

Mr. Dhanin Chearavanont

Chairman of the Board of Directors

On behalf of the Board of Directors

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Message from the President

2004 was a year in which Charoen Pokphand Foods Public Company Limited faced many

unprecedented external obstacles. Two major obstacles which prevented the Company from

achieving its targets in the domestic livestock business were the bird flu outbreak which caused

fear of chicken consumption among consumers and the ban on Thai raw chicken exports

imposed by importing countries which had a severe impact on the Thai broiler industry. In our

aquaculture business the Company faced the anti-dumping lawsuit in which USA charged

Thailand with dumping shrimp into the US market. This resulted in a slowdown in shrimp

farming and a reduction in Thai shrimp exports in the first half of the year.

The Company’s solidified its foundation of a wide variety of businesses, by further diversifying

into value-added products by developing ready-to-eat food products and cooked food products, and

by expansion to countries with high potential for business growth. The determination of management

and employees to initiate new strategies for the changing business environment helped the Company’s

total revenues to increase 10% from 2003 level to THB 91.79 billion. However, the steep decline in

prices and volume of chicken products compared to 2003 and the increase in marketing and public

relations expenses which were essential in creating consumer confidence during the crisis caused the

Company’s net profit to drop 45% from 2003 level to THB 1.237 billion or THB 0.23 per share.

From the crisis in the past 3-4 years, the Company has adopted a clear-sighted strategy to

create opportunities from the crisis to augment the Company’s growth. In this regard, the Company

has invested in businesses and joint-ventures with vast potential for growth both domestically and

overseas or businesses that enhance the Company’s strengths. In addition, the Company has adopted

branding strategies to create and strengthen consumer product awareness and understanding

towards CPF products. Products under its trademark are associated with high quality, international

standards of hygiene and safety, and chemical free for consumer.

In the past year, the Company experienced great pride when its subsidiaries received the

2004 Outstanding Place of Business Operation Award in the category of Work Safety, Hygiene and

Working Environment from the Department of Labor Protection and Welfare, the Ministry of Labor and

Social Welfare. The Company places equal importance on the working safety of its employees as

producing high quality products.

By swiftly adapting to changes, implementing strategies which strengthen the organization by

controlling costs and improving efficiency, planning and adjusting to the ever-changing business

conditions, and continuously developing the competencies of its employees, the Company is now

ready to strengthen its brand and expand distribution channels, making CPF food products successful

both in Thailand and around the world. This will ultimately lead the Company to being the world

leader in the agro-industrial and food business and achieving its vision of becoming the “Kitchen of the

World”. In addition, the Company is prepared to surmount all obstacles and generate the highest

benefits for all shareholders on a long-term basis.

Mr. Adirek Sripratak

President & CEO

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Business Profile

Charoen Pokphand Foods Public Company Limited is the flagship of Charoen Pokphand Group’s

agro-industrial business in Thailand, operating agro-industrial business related to animal farming

and the manufacture of food product from meat in Thailand and overseas. The Company’s

business operations are mainly located in Thailand.

The fully integrated operations in Thailand, that operate by CPF and its subsidiaries, including

raw material sourcing for animal feed production, animal feed production and distribution, animal

breeding and farming, meat processing, and the manufacture of ready to eat cooked meat products.

This operation is divided into two main business lines; (1) livestock business - comprising chicken,

duck and swine (2) aquaculture business - comprising shrimp and fish. The company’s products can be

divided into 3 main categories, namely 1) animal feed, 2) animal breeder, 3) meat and foods product.

As of December 31, 2004, CPF had a total of 38 subsidiaries, comprise of 24 companies that

operate fully integrated agro-industrial business in Thailand, 5 companies that operate agro-industrial

business overseas, 5 companies that are the trading of processed meat and ready to eat foods products

overseas, and 4 companies in other businesses. Details are as follows:

Company Abbreviation Business Operation

Direct and

Indirect

Shareholding

Percentage

Subsidiaries in which operate businesses in Thailand and operate business related to operations in Thailand Livestock Business

1. Bangkok Farm Co., Ltd. BKF Livestock farming & processing plant 99.99%

2. Bangkok Feedmill Co., Ltd. BFM Livestock feedmill and farming 99.99%

3. Bangkok Livestock Processing Co., Ltd. BLP Broiler Integration 99.99%

4. B.P. Feedmill Co., Ltd. BPF Livestock feedmill and farming 99.99%

5. Charoen Pokphand Industry Co., Ltd. CPIN Livestock feedmill and farming 99.99%

6. C.P. Agro-Industry Co., Ltd. CPAI Livestock farming 99.99%

7. C.P. Food Industry Export Co., Ltd. CPEX Food processing plant 99.99%

8. C.P. Food Products Co., Ltd. CP FOOD Food processing plant 99.99%

9. C.P. Merchandising Co., Ltd. CPM Investment and international trading 99.99%

10. International Pet Foods Co., Ltd. IPF Pet Food Production and Distribution 99.99%

11. Rajburi Feedmill Co., Ltd. RBF Livestock feedmill and farming 99.99%

12. Vee Food Products Co., Ltd. VFP Food processing plant and distribution 99.99%

13. Universal Foods and Marketing Co., Ltd. UF&M Wholesale & retail of food products, 99.99%

and fast food outlets

14. Bangkok Agro-Industrial Products Plc. BAP Livestock feedmill and farming 99.90%

15. Charoen Pokphand Northeastern Plc. CPNE Livestock feedmill and farming 99.61%

16. Bangkok Produce Merchandising Plc. BKP Animal feed raw material distribution 99.44%

and broiler integration

17. CPF Europe S.A. CPF EU Importer and distributor of processed meat 99.99%

and food products in EU

18. CPF Tokyo Co., Ltd. CPF TK Importer and distributor of processed meat 99.99%

and food products in Japan

19. Fusion Foods Limited FF Importer and distributor of processed meat 52.00%

and food products in UK

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Company Abbreviation Business Operation

Direct and

Indirect

Shareholding

Percentage

Aquaculture Business

20. Chanthaburi Aquaculture Farm Co., Ltd. CAF Shrimp farming 99.99%

21. Pokphand Aquatech Co., Ltd. PAT Aquatic feed production and distribution 99.99%

22. Seafoods Enterprise Co., Ltd. SFE Shrimp processing plant 99.99%

23. Klang Co., Ltd. KLANG Shrimp processing plant 99.99%

24. Trad Prawn Culture Co., Ltd. TRAD Shrimp farming 99.91%

25 Thai Prawn Culture Center Co., Ltd. TPCC Shrimp farming & shrimp processing plant 99.89%

26. Savee Farming Co., Ltd. SAVEE Shrimp farming 99.84%

27. Shrimp Improvement Systems (Thailand) Co., Ltd. SIST Shrimp hatchery business 51.00%

28. Aqua Beauty, Inc. AQB Importer and distribution of seafood products 99.99%

(incorporated in USA) in USA

29. Aqua-Agri Foods International, Inc. AAFI Importer and distribution of seafood products 99.99%

(incorporated in USA) in USA

Other Business

30. CPF IT Center Co., Ltd. CPF IT Information technology service provider 99.99%

31. CPF Training Center Co., Ltd. CPF TN Training center service provider 99.99%

Subsidiaries in which operate businesses overseas Livestock Business

32. C.P. Food Product (Shanghai) Co., Ltd. CPF SH Thai food restaurant in the People’s Republic 100.00%

(incorporated in the People’s Republic of China) of China

33. Charoen Pokphand (USA), Inc. CP USA Broiler integrations 99.95%

(incorporated in USA) (Operation wound up in March 2004)

34. C.P. Standart Gida Sanayi ve Ticaret A.S. CPS Chicken Integration 84.49%

(incorporated in Turkey)

Aquaculture Business

35. C.P. Aquaculture (Beihai) Co., Ltd. CPB Aquatic feed production & distribution 100.00%

(incorporated in the People’s Republic of China) and aquaculture farming in the People’s

Republic of China

36. C.P. Aquaculture (Hainan) Co., Ltd. CPH Aquatic feed production & distribution 100.00%

(incorporated in the People’s Republic of China) and aquaculture farming in the People’s

Republic of China

Investment Business

37. CPF Investment Limited CPFI Investment 100.00%

(incorporated in British Virgin Island)

38. BKP Holdings Limited BKPH Investment 99.44%

(incorporated in British Virgin Island)

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In addition, as of December 31, 2004, the Company invested in affiliates and other companies

as follows:

Company Business Operation

Direct and

Indirect

Shareholding

Percentage

Business OperationLivestock Business

1. Arbor Acres Thailand Co., Ltd. Chicken breeding and distribution 49.99%

2. Ross Breeders Siam Co., Ltd. Chicken breeding and distribution 49.99%

3. Charoen Pokphand Holdings Investment holding, of which invested 100.00% 49.64%

(Malaysia) Sdn. Bhd. in 9 livestock feed production & livestock farming

(incorporated in Malaysia) companies in Malaysia

4. C.P. Vietnam Livestock Co., Ltd. Livestock feed production & farming in Vietnam 40.00%

(incorporated in Vietnam)

5. Charoen Pokphand (India) Private Ltd. Livestock feed production & farming in India 19.00%

(incorporated in India)

Aquaculture Business

1. C.P. Aquaculture (India) Private Ltd. Livestock feed production & farming in India 31.70%

(incorporated in India)

Other Business

1. Lotus CPF (PRC) Investment Co., Ltd. Investment holding in 5 companies (63%, 81%, 90%, 40.00%

(incorporated in British Virgin Island) 90%, and 90%) which operate the “Lotus” wholesale

stores in the People’s Republic of China

2. Nava 84 Co., Ltd. Investment holding, of which invested 99.93% in 25.00%

economic crop plantation company in Thailand

3. Allianz C.P. General Insurance Co., Ltd. Insurance business 24.46%

4. C.P. Seven Eleven Plc. Convenience store business in Thailand, under 21.32%

“7-Eleven” trademark

5. Kinghill Limited Investment holding, of which invested 100.00% in 20.84%

(incorporated in Cayman Island) company that manages shopping center,

“Super Brand Mall”, in the People’s Republic of China

6. ACME ECI Investment Co., Ltd. Investment holding 17.95%

(incorporated in Cayman Island)

7. Trillion Brewery Co., Ltd. Investment holding 17.95%

(incorporated in Cayman Island)

8. CPPC Plc. (formerly known as Plastic products manufacturing & distribution 12.48%

Charoen Pokphand Petrochemical Co., Ltd.)

9. Chia Tai (Jilin) Co., Ltd. Investment holding, of which invested 50.00% in 9.99%

(incorporated in Hong Kong) company that operates feedmill business and farming

in the People’s Republic of China

10. Siam Makro Plc. Wholesale business under “Makro” trademark 9.13%

11. Vee Rum Choke Co., Ltd. Real estate business 9.00%

12. CP Land Co., Ltd. Real estate business 6.49%

13. Ayudhya Allianz C.P. Life Plc. Insurance business 3.47%

14. True Corporation Plc. Telecommunication business 3.33%

(formerly known as TelacomAsia Corporation Plc.)

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1. Scope of Business The Company’s agro-industrial and food operations are fully integrated, with expansion both

vertically and horizontally. Vertical integration refers operations that cover every step of the agro-in-

dustrial and food industry, from sourcing raw materials for animal feed production, manufacturing and

distributing animal feed, breeding animals, processing meat and manufacturing ready to eat cooked

food products. Horizontal integration refers to the range of animal types, which is divided into 2 main

business lines. The livestock business comprises broiler, layer, duck and swine, while the aquaculture

business consists of shrimp and fish. The products in each business line can be classified into 3 main

categories, namely 1) animal feed, 2) animal breeder and 3) meat and food products. The Company’s

business structure is as follows:

Product Animal feed Animal breeder Live animals, meat and food products

Raw Feed Animal

Commercial Manufacture Branding materials

production breeding animal Processing of cooked and

sourcing farming food products Distribution

Livestock business Broiler • • • • • • Layer • • • • • • Swine • • • • • • Duck • • • • • •Aquaculture business Shrimp • • • • • • Fish • • • • • •Definition : Broiler refers to the productions that are related to produce chicken meat and food products from chicken meat for consumption.

Layer refers to the productions that are related to produce chicken table eggs and processed food products from eggs for consumption.

2. Sales Structure 2002 2003 2004

THB million % THB million % THB million %

1. Operations in Thailand 70,738 94 76,466 92 77,680 85

1.1 Livestock Business (1) 49,349 66 55,744 67 57,040 62

• Feed 16,958 23 18,059 22 16,295 18

• Breeder 2,250 3 2,013 2 2,026 2

• Meat - Domestic Sales 19,466 26 21,760 26 27,011 29

• Meat - Export Sales 9,688 13 12,419 15 9,923 11

• Others 987 1 1,493 2 1,725 2

1.2 Aquaculture Business (2) 21,389 28 20,722 25 20,640 23

• Feed 12,403 17 12,636 15 12,775 14

• Breeder 416 1 1,128 1 1,184 1

• Meat - Domestic Sales 916 1 1,906 2 2,474 3

• Meat - Export Sales 6,714 9 4,158 5 3,697 4

• Others 940 1 894 1 510 1

2. Overseas Operations 4,409 6 6,643 8 14,110 15

2.1 Livestock Business (3) 4,409 6 4,893 6 12,089 13

2.2 Aquaculture Business (4) 0 0 1,750 2 2,021 2

Total 75,147 100 83,109 100 91,790 100

Note : (1) From the operations of CPF, CPNE, BAP, BKP, CPM, BFM, BPF, RBF, BLP, BKF, CP FOOD, CPEX, CPIN, CPAI, VFP,

UF&M, IPF, CPF EU, FF and CPF TK

(2) From the operations of CPF, CPNE, BAP, BKP, CPM, BFM, BPF, RBF, CPIN, CPAI, VFP, UF&M, SFE, TRAD, SAVEE,

TPCC, KLANG, PAT, CAF, AQB, CPF EU, and CPF TK

(3) From the operations of CP USA, CPF SH, CPH and CPS

(4) From the operations of AQB, CPB, and CPH

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3. Business ObjectivesThe Company’s vision is to become the “Kitchen of the World”, producing high quality,

nutritious, hygienic and safe foods for consumers. The Company is dedicated to developing and adding

value to existing products to meet the needs and ever-changing consumption behavior of consumers as

well as creating new products to increase choices for consumers.

The Company is determined to maintain its leading position in the feed business, the

Company’s initial business, and at the same time stride towards being the leader in the meat and protein

foods business in both Thailand and countries where the Company has investments. The Company is

also committed to generating reasonable profits from its operations, adhering to the business policy

of conducting business with environmental friendliness, responsibility to society and good corporate

governance, ultimately leading to a strong business with sustainable growth that is able to compete

internationally.

4. Business Operations1. Operations in Thailand1.1 Raw materials sourcing for feed production

The Company has a team of purchasing experts especially to source raw materials for both

livestock and aquatic feed production, providing the Company with a competitive edge. The large

purchase volume creates bargaining power for the Company as well as helps the Company to save on

transportation and related costs. In 2004, raw material cost accounted for approximately 40% of the

Company’s cost of good sold.

The Company’s procurement policy places great emphasis on obtaining high quality raw

materials that meet the requirements of users. In addition, procurement of raw materials produced in the

country, especially around the area where the feedmill is located, is given first priority in order to support

the country’s farmers. In the case where local procurement is inadequate for production needs, whether

due to insufficient supply or substandard quality, then raw materials are imported from abroad, with 31%

of the raw material procurement imported from abroad. Furthermore, the Company places significant

importance on traceability, ensuring that the source and production processes of the raw materials meet

international quality standards.

As the raw materials are commodity products, their prices fluctuate according to market

demand and supply. Usually, domestic raw material prices are not much different from the price of

imports.

1.2 Livestock business

Operations of the livestock business are fully integrated. The livestock business covers broiler,

layer, swine and duck. The products can be divided into 3 main categories, namely 1) animal feed,

2) animal breeder and 3) meat and food products, with details as follows:

• Animal feed

The Company is the leader and pioneer in the manufacture and distribution of livestock feed.

The Company produces livestock feed in the forms of concentrate, powder and pellets for broilers,

layers, swine and duck. The livestock feed is distributed by more than 600 sales representatives

throughout the country. In addition, a portion of the livestock feed is sold directly to large animal farms in

Thailand. Agricultural products such as corn, soybean meal and broken rice are used in the production

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of livestock feed under fully computerized formulation and production processes to ensure consistent

quality as required. The Company has a system to randomly check the quality of raw materials and

products. Quality control at different stages of production helps raise confidence in the quality of the

Company’s products.

As the leader in the business, the Company’s products are well-known among customers.

Therefore, an important marketing strategy is maintaining high product quality as well as continually

providing excellent customer service. The selling prices of livestock feed fluctuate according to the cost

of raw materials used. In the case where selling prices need to be adjusted, approval must be granted

by the Department of Internal Trade, the Ministry of Commerce.

• Animal breeder

The Company is the leader in the research and development of natural animal breeds. The

goal is to obtain quality breeds that are disease-free and suitable to the breeding environment in Thai-

land. The Company produces parent stock broiler chicks, parent stock layer chicks, parent stock swine,

broiler chicks, layer chicks, ducklings and baby hogs for distribution to animal farms and domestic sales

representatives.

As the Company’s operations are fully integrated, livestock breeding is part of a continuous

production process. Grandparent stock used in livestock breeding are imported from abroad to breed

parent stock which are then raised on the Company’s farms. The Company’s breeding farms, located

in numerous provinces across the country, practice good farm management and use the evaporative

cooling system. The evaporative cooling system applies advanced technology to raise livestock and

has proven to be an effective method to prevent and control disease, yielding quality products that are

sought after in the market. The prices of livestock breeds depend on domestic demand and supply as

well as the quality of the breeds.

• Meat and food products

Products in this category can be further divided according to 2 types of production process,

namely animal farming for commercial purposes and processing and manufacture of cooked food prod-

ucts. Details are as follows:

1) Animal farming for commercial purposes

Products from animal farming for commercial purposes include live chicken, eggs, live ducks

and live swine which are distributed to sales representatives throughout the country. The products are

also distributed in surrounding local areas, to wholesalers and retailers, or to the Company’s processing

plants or other processing plants in Thailand. The selling prices fluctuate according to domestic demand

and supply.

Research and development is applied to continuously improve the farming process, making

it suitable to the conditions in Thailand. The Company’s farm management system also has an

effective system to control and prevent diseases. This results in faster growth in animals, higher yields

and minimizing costs.

In addition, the Company has offices across the country, which acts as centers providing

technical information to farmers on how to properly raise animals to obtain fast growth as well as

assistance with marketing and distribution.

The Company has a support program for the farming of swine and broiler. The Company

selects farmers who have their own farm and farming equipment. Selected farmers receive support in

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the areas of animal breeds, animal feed, medication and farming knowledge from the Company. The

company then undertakes to purchase all yield which meets the CPF standards. Most of the farmers

participating in this program also use the evaporative cooling system.

2) Processing and manufacture of cooked food products

In meat processing, broilers, ducks and swine from the Company’s farms are brought to

processing plants to be cut into meat parts according to customer specifications. The meat parts are

then packaged, frozen and distributed as chilled and frozen meat products to wholesalers, domestic

retailers and importers in various countries. The selling prices fluctuate according to demand and supply

in the country and the world market. The selling prices are also determined by agreement if the products

have been manufactured according to customer specifications.

Furthermore, the Company adds more value to processed meat products to create cooked

food products by flavoring and cooking through the process of boiling, steaming, frying, baking and

grilling according to customer specifications. These products are then packaged, frozen and refriger-

ated, ready for distribution to wholesalers and retailers, fast food restaurants and modern trade outlets

such as discount stores and supermarkets. Export products are distributed through importers in various

countries, mainly countries in the European Union, Japan and Asian countries.

The selling prices of cooked food products distributed in Thailand and exported, for example

frozen karaage chicken, frozen steamed chicken breast, meatballs and sausages, are determined by

agreement with customers during the sale process.

1.3 Aquaculture business

Operations of the aquaculture business are fully integrated. The aquaculture business includes

mainly shrimp and some fish. The products can be classified into 3 main categories, namely 1) animal

feed, 2) animal breeder and 3) meat and food products, with details as follow:

• Animal feed

The Company is the leader and pioneer in the production and distribution of aquatic feed with

the main product being shrimp feed. Aquatic feed is produced in the forms of concentrate, powder and

pellets and distributed through sales representatives that are located in shrimp farming areas throughout

the country. A portion of the feed is distributed directly to large shrimp farms in Thailand. Agricultural

products such as soybean meal, fish meal and wheat flour are used in the production of aquatic feed

under fully computerized formulation and production processes to ensure consistent quality as required.

The Company has a system to randomly check the quality of raw materials and products. Quality control

at different stages of production helps raise confidence in the quality of the Company’s products and

ensure that the aquatic feed is suitable for shrimp and fish farming in Thailand, resulting in good feed

conversion ratio. Farmers using the Company’s aquatic feed produce higher yields than the industry

average.

As the leader in the business, the Company’s products are well-recognized among customers.

Therefore, an important marketing strategy is maintaining high product quality as well as continually

providing excellent customer service. Customer service is enhanced by providing technical knowledge

to sales representatives as well as directly to the farmers by organizing technical seminars, establishing

centers to provide laboratory services and consultations to farmers, and distributing printed materials

on news related to animal breeding. This will enable the aquatic farming industry to sustainability grow.

The selling prices of aquatic feed fluctuate according to the cost of the raw materials used. In the case

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where selling prices need to be adjusted, approval must be granted by the Department of Internal Trade,

the Ministry of Commerce.

• Animal breeder

Aquatic breeds come from culture farms and hatcheries, with details as follows:

Shrimp culture farms and hatcheries

Following the Company’s policy of supporting sustained growth and development in the shrimp

industry, the Company has developed quality shrimp fry to distribute to farmers, which will increase

their opportunity to successfully farm shrimp. In 2004, the Company entered into a joint venture with an

American company with shrimp breeding expertise to develop shrimp fry that are suitable to the farming

conditions in Thailand.

The Company’s culture farms and hatcheries are located in the shrimp farming areas in the

eastern and southern regions of Thailand. The culture farms and hatcheries practice good farm manage-

ment, apply advanced technology to raise shrimp and fish and has an effective system to prevent and

control disease, yielding quality products that are sought after in the market. The prices of shrimp fry

depend on domestic demand and supply as well as the quality of the breeds.

Fish culture farms and hatcheries

The Company continually expends research and development resources to develop and

enhance products that have strong commercial appeal. CPF developed the Tabtim fish fry, which was

developed from Tilapia fish. Special characteristics of Tabtim fish, including high meat content, good

taste that is free of mud odor and high nutritional value, have made it a particularly successful domestic

product that is relatively easy to farm, provides a reliable source of income to farmers, and is commer-

cially viable.

The Company’s fish culture farms and hatcheries, located in the central and northern regions of

Thailand, have good farm management, incorporate modern technology and have an effective system

to prevent and control disease, yielding quality products that are sought after in the market. The prices

of fish fry depend on domestic demand and supply as well as the quality of the breeds.

• Meat and food products

Products in this category can be further divided according to 2 types of production process,

namely shrimp and fish farming for commercial purposes and processing and manufacture of cooked

food products. Details are as follows:

1) Farming for commercial purposes

The Company realizes the importance of traceability which has prompted the Company to

expand its shrimp farming business, resulting in fully integrated operations that produce high quality

shrimp for the Company’s processing plants as well as other processing plants in Thailand.

In the management of the Company’s shrimp farms, research and development and techno-

logy are applied to find ways to prevent the outbreak of disease in shrimp and farming methods, which

are friendly to the environment and do not cause residue build-up. The Company promotes “Probiotic

Farming” which avoids the use of drugs and chemicals.

2) Processing and manufacture of cooked food products

Products derived from processing are one of the important products in the meat and food

products category of the aquaculture business. The main products are processed fresh shrimp and

value-added processed shrimp, most of which are produced for export as chilled and frozen products

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and distributed through importers in various countries. The selling prices fluctuate according to demand

and supply in the country and world market. The selling prices are also determined by agreement if the

products have been manufactured according to customer specifications.

Furthermore, the Company has added value to processed shrimp, producing ready to eat

cooked food products. Research and development in this area focuses on processing fresh shrimp

into semi-cooked and cooked food products by flavoring and cooking through the process of boiling,

steaming, frying, baking and grilling according to the specifications of customers. These products are

then frozen and refrigerated, ready for distribution to wholesalers and retailers and through modern

retail outlets such as hypermarkets and supermarkets. Export products are distributed through import-

ers in various countries, mainly the USA, Japan and countries in the European Union. Besides applying

advanced technology to ensure production meets international standards, the Company also places

great importance on product safety and quality. The selling prices of products under this category are

determined by agreement with customers upon each sale.

1.4 Businesses Related to Domestic Operations

The Company has established sales representative offices and set up distribution arms in many

countries including the USA, Japan, Belgium and the United Kingdom, so as to enable proximity to the

market and customers.

2. Overseas Operations are divided into 2 main businesses, namely the livestock business and the aquaculture business.2.1 Livestock business

Through its subsidiaries, CPF has invested in a number of businesses as follows:

1) The integrated chicken and animal feed business in the Republic of Turkey - CPF indirectly

invested through its subsidiary in C.P. Standard Gida Sanayi ve Ticaret A.S. (“CPS”). The settlement of

acquisition was separated into 2 times. The first time of 83.27% of CPS’s paid-up capital was made in

January 2004. The second time of 1.22% was made in May 2004, resulting in total of 84.49% sharehold-

ing in CPS. (The factor that caused twice settlement was the second lot shares had the share transfer

restrictions imposed by a government entity of the Republic of Turkey, which allowed the transfer after

April 2004.)

CPS was established on April 21, 1988 and is presently one of the leading companies in the

broiler business in the Republic of Turkey. Its operations are spread throughout the country to minimize

transportation costs. CPS manufactures and distributes many types of animal feed, most of which are

chicken and cattle feed. In the chicken business, CPS started with an integrated broiler business and

expanded into the egg business in 2004.

2) Thai restaurant - CPF invested in the Thai restaurant business in the People’s Republic of

China through C.P. Food Product (Shanghai) Co., Ltd, which is an indirectly 100%-owned subsidiary

of CPF. The objective of this business is to introduce Thai fast foods restaurant that applying the

production which yields Thai foods of standard taste. Presently, there are 2 Thai restaurants under the

“Thai Thai” trademark in the People’s Republic of China.

2.2 Aquaculture business

CPF invested in the People’s Republic of China (PRC) through C.P. Aquaculture (Beihai) Co.,

Ltd. and C.P. Aquaculture (Hainan) Co., Ltd. to manufacture and distribute animal feed and operate an

aquatic culture farm in the PRC.

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5. Effects on the EnvironmentThe effects that the Company’s operations have on the environment are as follows:

1 Feedmills and meat processing plants

Dust and odor may emanate from animal feed production causing possible disturbance to

people living in surrounding areas. Realizing this, the Company has installed dust filters and deodorizers

to prevent dust and odor emitted from production processes from spreading outside of the production

area.

Water that is used in production processes at the feed mills and meat processing plants may

cause contamination if released into public water sources. Therefore, the Company has constructed

waste water treatment plants to treat used water before release into public water sources.

2 Animal farms

Animal farms may have odor from animal feces. Therefore, the Company’s animal farms are

situated in the provinces outside of the vicinity of communities and far from densely populated animal

raising areas. The evaporative cooling system is used on the Company’s farms. Rice husks, which are

spread on the floor, not only promote the animals’ growth, but also help combat odor. In addition, the

rice husks can easily be removed and used as fertilizer to improve soil conditions. In the rare instances of

chicken mortality, the Company has a system to hygienically dispose of chicken carcasses. In addition,

golden teak trees have been planted between the chicken houses and other buildings on the farms to

help conserve natural resources while creating an appealing environment.

Furthermore, every stage of the Company’s production process is operated under strict quality

control and continuous improvements are made to meet internationally recognized standards of produc-

tion, namely ISO, HACCP (Hazard Analysis and Critical Control Point) and GMP (Good Manufacturing

Practices).

The Company’s factories in Thailand, operating the livestock business and the aquaculture

business, comply with the Ministerial Regulation No. 2 (B.E. 2535) issued under the Factory Acts (B.E.

2535) by the Department of Industrial Works, the Ministry of Industry, which states that factories must

adopt the standards and methods of controlling the discharge of wastes, pollutants or anything that

affects the environment as a result of the engagement in a factory business. In the past 3 years, the

Company’s factories have adopted strict measures to prevent any environmental impact from its

operations, in compliance with all relevant environmental laws and regulations. In addition, the Company

has applied ISO 14001 which concerns environmental management at its factories.

6. Energy ConservationThe Company is dedicated through research and development to find ways to reduce costs

and promotes energy conservation in the production processes in all its business units. The desired goal

is to reduce energy consumption without adversely affecting business operations.

In animal farms, especially swine farms, the Company has implemented a system to generate

biogas for use at the farms through the fermentation of animal feces to produce methane for electricity

generation, thus providing a substitute to purchasing electricity. In meat processing plants, the Com-

pany has studied Co-Generation projects, producing natural gas as fuel for conversion into electricity

to be used internally. Besides helping to conserve energy, both these projects help eliminate pollutants

and conserve the environment.

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7. Research and DevelopmentContinuous research and development stand behind the Company’s success as the leader in

the agro-industrial and food industry for over 20 years. The Company’s research teams comprise high

caliber professionals who are highly regarded in Thailand’s agriculture industry. They cooperate with

other outside parties, including research institutes both in Thailand and overseas, specialists, customers

and various public agencies, with the mutual objective of sustaining the industry, while having business

adhering to environmental friendliness.

Aside from developments for the sustainability of the overall industry, the Company emphasizes

product development to satisfy consumer requirements. Manufacturing food products to meet the dif-

fering regulations and standards of each customer throughout the world, together with the Company’s

ability to develop products and improve its animal breeding process to meet international standards,

have resulted in customers being confident that the Company’s products are of high quality, nutritious

and safe for consumption. These are important factors for maintaining competitiveness in today’s world

of free trade.

R&D in animal breeds

The Company’s continuous research to improve animal breeds has proven to be a strength in

operating an integrated agriculture business and plays and important part in putting the Company on

the world stage. The Company’s emphasis is on improving and selecting breeds through natural means

to obtain animal breeds that are suitable to the farming environment and in line with consumer needs.

Research in this area also leads to efficiencies in breeding and good feed conversion rates, which en-

hance profitability.

R&D in animal feed production

The Company has a team of researchers who study and develop animal feed production. They

strive to produce quality animal feed with a good feed conversion rate and ultimately reduce production

costs. Presently, the Company has brought in advanced technology, such as computerized control of

the integrated production process, as well as an inventory system for raw materials and a production

method that helps to reduce loss and damage.

R&D in animal farming

The Company has adopted advanced technology and modern farm management systems for

implementation at every step of the farming process, including computerized production controls. Some

examples of the Company’s achievements in animal farming include the following:

• Livestock farms using the Evaporative Cooling System - This system provides a

hygienic environment for raising animals and keeps the farms cool. The system is enhanced with the use

of rice husks on the floor to reduce odor, an automated feeding system, and the use of a control system

to help reduce pollutants which could arise from farming.

• Probiotic Shrimp Farming - Probiotic farming yields chemical-free shrimp which are safe

for consumption by employing natural products, namely the super biotic bacteria instead of chemicals to

combat bad bacteria, which are the cause of various diseases in shrimp. The super biotic bacteria also

prevent harmful viruses from causing disease in shrimp. Probiotic farming incorporates efficient pond

management, which helps to produce healthy shrimp with high survival rate and good immunity against

disease. Production costs are lowered, while yields are higher than through the use of chemicals.

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• Pork free of beta-agronist and antibiotics - The Company raises pigs without the use of

beta-agronist and antibiotics, so that consumers are able to enjoy top quality pork

R&D in food production

The Company places great importance on research and development to add value to the

Company’s meat products as well as create new recipes with meat products to please consumer tastes

around the world. The research team has worked closely with customers to develop a wide variety of

ready-to-eat food products in line with customers’ requirements. In 2004, the Company established a

food product research and development center with a model factory employing many cooking experts.

Through development and experimentation, the company has successfully developed a wide array of

food products to serve the ever-changing preferences of consumers throughout the world.

8. Production StandardsThe Company attaches utmost importance to “product quality” that meets global standards, is

tasty and hygienic and most important is safe for consumption. The Company has a system to randomly

check the quality of raw materials and products at every stage of the production process. Control sys-

tems at every stage of production will help inform management of productivity in each stage and enable

the Company to trace back to the raw materials used in production. Internationally recognized produc-

tion standards awarded to the Company is another factor that guarantees the quality of the Company’s

products and management systems.

The Company is committed to continuous improvements in its production process to meet

internationally recognized standards of production. The Company’s production process has been

certified with the Good Manufacturing Practices (GMP) which is an award for quality approach to

manufacturing, Hazard Analysis and Critical Control Point (HACCP) which is a system that focuses on

preventing food contamination, EST/TH, ISO 9002 which involves operating and production manage-

ment systems that should be traceable with documentation, the British Retail Consortium Standard

which is a standard for the food industry covering process control and personnel management, OHSAS

18000 which is an international occupational health and safety management system specification, ISO

14001 which concerns environmental management and ISO 18001 which involves the safety and welfare

of employees.

In addition, the Company is the first company outside the EU to achieve the Animal Welfare

Standard in chicken production for export which is the most stringent of all current industry standards.

Operators are required to consider the chickens’ “happiness” for the duration of the farming process.

The chickens have to be free from hunger and thirst (by ready access to fresh water and food), free from

discomfort (by providing an appropriate, spacious environment), free from pain, injury and disease (by

prevention and rapid diagnosis and careful handling), free to express normal behavior (by providing suf-

ficient space, proper facilities and company of the animal’s own kind) and free from fear and distress (by

ensuring conditions and care, which avoid mental suffering, such as before entering slaughterhouses).

Aside from focusing on achieving internationally recognized standards of production, the

Company places great importance on the safe working conditions of its employees. Emphasis is given

to accident prevention and reduction in the work place, pollution prevention and control at the plants

as well as maintenance of a safe and hygienic working environment that does not cause any damage

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or harm to the surrounding communities. In 2004, 16 companies under the CPF group received the

Outstanding Place of Business Operation Award in the category of Work Safety, Hygiene and Working

Environment from the Department of Labour Protection and Welfare, the Ministry of Labour and Social

Welfare. This award is given to business operators who are dedicated to and continuously practice

safety management at the work place.

9. Tax PrivilegesThe Company operates businesses which are promoted by the Board of Investment (BOI). The

significant benefits are outlined as follows:

Company / Business Major Privileges Commencing Year

- Expiry Year

Charoen Pokphand Foods Plc.

• Shrimp Feedmill, Baan Phru * 50% Income Tax Exemption 2003-2008

• Broiler Farm 2, Saraburi * Income Tax Exemption 2001-2008

• Shrimp Hatchery, J.R.2 * Income Tax Exemption 2002-2010

• Shrimp Hatchery, Tha Bon * Income Tax Exemption 2002-2010

• Aquaculture Feedmill, Mahachai 2 * Income Tax Exemption 2004-2012

• Grandparent Stock Chicken Breeder Farm, Prajinburi * Income Tax Exemption 2003-2011

• Shrimp Feedmill, Ranod * Income Tax Exemption 2002-2008

* 50% Income Tax Exemption 2008-2013

• Broiler Farm 3, Saraburi * Income Tax Exemption 2003-2011

• Integrated Chicken Business, Nakhon Ratchasima * Income Tax Exemption 2003-2011

• Shrimp Hatchery, J.R.4 * Income Tax Exemption 2004-2012

• Shrimp Hatchery, Pratew * Income Tax Exemption 2004-2012

Charoen Pokphand Northeastern Plc.

• Chicken Breeder Farm, Petchaboon * Income Tax Exemption 1998-2006

* 50% Income Tax Exemption 2006-2011

• Chicken Breeder Farm, Prajinburi * Income Tax Exemption 2003-2011

Bangkok Agro-Industrial Plc.

• Duck Farm, Prajinburi * Income Tax Exemption 2002-2010

• Swine Farm, Karnchanaburi * Income Tax Exemption 2004-2012

• Duck Breeder Farm, Saraburi * Income Tax Exemption 2003-2011

• Duck Farm, Prajinburi * Income Tax Exemption 2003-2011

Bangkok Produce Merchandising Plc.

• Animal Feedmill, Tha Rua * Income Tax Exemption 2001-2009

• Food Product Plant 2, Saraburi * Income Tax Exemption 2002-2010

• Further Processing Plant, Saraburi * Income Tax Exemption 2004-2012

Bangkok Livestock Processing Co., Ltd.

• Broiler Farm, Prajinburi * Income Tax Exemption 2002-2010

• Broiler Farm, Prajinburi * Income Tax Exemption 2003-2011

• Broiler Farm, Chachoengsao * Income Tax Exemption 2003-2011

Pokphand Aquatech Co., Ltd.

• Aquatic Feedmill, Baan Buang * Income Tax Exemption 2002-2010

Thai Prawn Culture Center Co., Ltd.

• Aquaculture Processing Plant, Ranod * Income Tax Exemption 1996-2004

* 50% Income Tax Exemption 2004-2009

International Pet Foods Co., Ltd.

• Pet Food Plant, Saraburi * Income Tax Exemption 2004-2012

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10. Industry Outlook10.1 Thailand’s Broiler Industry (Source - Thai Broiler Processing Exporters Association / For further information, please refer to

www.thaichickenandduck.com)

Production In 2004, Thailand’s ranking in terms of broiler production fell to No. 8 from No. 7 in

2003, while the USA ranked No. 1 as the world’s broiler producer.

Market structure In 2005, 68% of Thailand’s production was for domestic consumption while

32% was for export. There are 25 slaughterhouses with qualified export standards and 66 processing

plants with qualified export standards.

Exports In 2004, Thailand was the world’s No. 5 chicken exporter, exporting 210,000 tons of

chicken worth THB 23.7 billion. Thailand’s major export markets include Japan, which accounts for 52%

of exports, the EU 41% and other countries 7%.

Major competitors Brazil, the USA and the People’s Republic of China

Major obstacles

1) Due to continuous news coverage of the bird flu outbreak, consumers feared consuming

chicken resulting in a decline in domestic consumption and demand, which impacted

domestic prices and volumes negatively.

2) Countries that previously imported frozen fresh chicken from Thailand imposed bans on

Thai chicken imports after the bird flu outbreak in Thailand.

3) Prices of raw materials for animal feed production increased, resulting in higher chicken

production costs in Thailand.

Export target in 2005; 300,000 tons or approximately THB 34 billion.

Thailand’s Broiler Industry 2004-2005

Item 2004 2005

(Estimated)

Live chicken (million chicken) 700 720

Chicken meat production (thousand tons) 928 950

Exports (thousand tons) 219 300

Consumption (thousand tons) 509 650

Consumption per capita (kilograms) 8.0 10.1

Thailand’s Chicken Exports 2003-2004

Product 2003 2004 Change

Tons THB million Tons THB million Tons THB million

Raw chicken 388,913 27,224 26,137 1,725 -93 -93

Cooked chicken 157,074 19,477 193,814 23,258 +23 +19

Total 545,987 46,701 219,951 24,983 -60 -47

10.2 Thailand’s Swine Industry 2004-2005(Source - the Swine Producers and Processors for Exporting Association / For further information, please refer to

www.thaichickenandduck.com)

Production In 2004, Thailand produced 754,730 tons of pork, while the Republic of China was

the No. 1 world producer, followed by the EU.

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Market structure Domestic consumption accounts for 97% of production, imports 1% and

exports 2%. There are 5 slaughterhouses with qualified export standards and 24 processing plants with

qualified export standards.

Exports In 2004, Thailand exported 10,981 tons of pork, or approximately THB 1.67 billion.

Thailand’s major export markets include Hong Kong, which accounts for 52% of exports, Japan 47%

and other countries 1%.

Export products Raw pork accounts for 52% of Thailand’s pork exports, while processed pork

accounts for the remaining 48%.

Major competitors The People’s Republic of China, the USA and Australia

Export target in 2005 Exports are expected to rise 14% from 2004 to 12,500 tons or approxi-

mately THB 1.896 billion.

Thailand’s Swine Industry 2004-2005

Item 2004 2005

(Estimated)

Live swine (million swine) 9.9 12.0

Pork production (thousand tons) 754.7 908.4

Exports (thousand tons) 10.9 12.5

Consumption (thousand tons) 743.7 895.9

Consumption per capita (kilograms) 11.57 13.91

10.3 Thailand’s Shrimp IndustryDuring the beginning of 2004, Thailand was awaiting the results of the anti-dumping duty on

shrimp exports to be imposed by USA, a major importer of Thai shrimp. As farmers and exporters were

uncertain about the impact of the anti-dumping lawsuit, there was a slowdown in shrimp farming.

From the preliminary determinations on the anti-dumping case that were released by USA in

mid-2004, Thailand’s shrimp exports to USA would be subject to an anti-dumping duty of approximately

6%. The announcement, which clarified the situation in the shrimp industry, resulted in substantial

increase in shrimp farming and Thailand’s shrimp exports in the 2nd half 2004.

Thai shrimp exports in 2005 are expected to be higher than that of 2004 due to clarity on

anti-dumping duty to be imposed on US exports. However, if the EU reinstates GSP privileges for

Thailand and USA postpones imposing anti-dumping duty on Thai shrimp exports, the Thai shrimp

industry expects exports will increase by more than 30% from 2004.

Thailand’s Shrimp Exports 2003-2004

Country 2003 2004 Change

Tons THB million Tons THB million Tons THB million

Asia 70,840 22,910 74,477 22,598 5.13 -1.36

• China 2,794 693 2,844 640 1.79 -7.65

• Japan 45,845 16,692 46,264 16,261 0.91 -2.58

• Others 22,201 5,525 25,369 5,697 14.27 3.11

USA 132,394 40,577 131,691 35,794 -0.53 -11.79

EU 4,874 1,278 8,001 2,130 64.16 66.67

Australia 7,866 1,970 8,604 2,075 5.33

Others 18,303 5,112 18,068 4,692 -1.28 -8.22

Total 234,277 71,847 240,841 67,289 2.80 -6.34

Source : Customs Department, the Ministry of Commerce

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Risk Factors

Investors in CPF’s shares and persons with vested interests in the Company should carefully

consider the risk factors that may affect the Company. These risk factors may affect the

operations and/or the financial status of the Company leading to different consequences than

those occurring under normal circumstances and/or may affect the Company’s ability to achieve

its objectives and goals.

Besides the risk factors mentioned in this report, there may be other risk factors unknown to

the Company at this time or risk factors that the Company deems as having no material impact on the

Company’s operations. Major risk factors directly related and known to the Company that may affect

the Company include the following:

1. Disease outbreaks in farms In animal farming, there is the possibility of disease outbreaks caused from both external

factors which are uncontrollable and internal factors. To minimize the risk, operators should follow the

best practices of farm management and have measures to monitor for ensuring the procedures are

strictly followed. Eventhough the operators shall reduce direct impacts, they may face unexpected

indirect impacts which in the first place affect the industry and then cause domino effects to the ability

of enterprises to generate revenue and profit at the end.

For example, the bird flu outbreak in Thailand in 2004, especially the first outbreak in January

2004, resulted in importing countries banning the import of chilled and frozen fresh chicken meat from

every producer in Thailand. The domestic consumption of chicken, eggs and other related chicken

products also declined, since consumers were not confident whether those products were safety for

consumed. This incident also affected the Company’s sales of poultry products in 2004, dropping 12%

from 2003.

Risk management The Company has established rules and regulations for its employees to

strictly follow and provide training on disease outbreak prevention. The Company has set up a system

to prevent disease outbreaks, a system for good hygiene, an internal control system monitoring quality

at every step of animal farming as well as strict conditions imposed on visitors to the Company’s

operations. In addition, the Company has invested in research and development of animal farming

under the closed system and increased use of technology in animal farming to reduce animal exposure

to carriers of various diseases. Furthermore, the Company has employed veterinarians to study various

diseases with the objective of laying down foundations to prevent disease outbreaks in the Company’s

farms.

With regard to the bird flu outbreak in Thailand in 2004, the Company managed risks to

lessen the impact on the Company’s operations by enforcing stricter disease prevention standards at

the Company’s farms and educating contract farmers on disease prevention. In addition, the company

expanded capacity for the production of cooked chicken products to cater to both local and

international markets, decreasing reliance on raw chicken sales and exports. Consequent to outbreak,

consumers placed greater importance on carefully choosing safe and hygienic products for

consumption. Through public relations via different media and marketing strategies, the Company

communicated and emphasized to consumers product quality and safety under the CPF trademark.

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2. Volatility of raw material prices The Company is engaged in integrated agribusiness with the main production cost being raw

materials used in animal feed production, such as corn, fish meal and soybean meal, accounting for

approximately 40 percent of the Company’s cost of sales. The prices of these raw materials fluctuate

each year depending on the demand and supply for each type of raw material in the world market.

Therefore, if the prices of raw materials increase and the Company is unable to increase the prices of

animal feed or meat products to compensate for the rise in production costs, the increase in raw

material prices may cause the Company’s profits to decline.

Risk management The Company gives much consideration to this risk and has a team of

raw material sourcing experts to closely follow price trends. In addition, the Company has large silos

with efficient management systems to stock up on raw materials for sufficient use when raw material

prices are forecast to rise in the future. This has enabled the Company to manage costs with minimum

fluctuations. However, this does not guarantee that the cost of raw materials of the Company at one

point of time shall below the market price at that time as it is not possible to accurately forecast when

entering into raw material purchase contracts. Therefore, the Company has studied, researched and

developed methods to use raw materials efficiently and reduce raw material loss during production,

providing another important means to effective cost management.

3. Volatility of meat prices Sales from the Company’s meat products, which comprise live animals, fresh meat, and

chilled and frozen fresh meat which are both sold locally and exported overseas, account for 29% of

total sales in 2004. Meat prices fluctuate according to demand and supply in the market. Therefore, if

meat prices decline due to oversupply in the market and/or decrease of consumer confidence, this

may cause the Company’s profits to decline.

Risk management The Company has adopted a strategy to manage the risk from the

volatility of meat prices by diversifying into different product categories such as chicken, eggs, swine,

shrimp, fish and duck. Product diversification will lower the impact from the price decline of a

particular product. For instance, the bird flu outbreak in Thailand in 2004 brought about lower

consumer confidence in chicken consumption. Consequently, consumers switched to consuming

pork, causing the price of pork to rise substantially. Increased profits from the swine business helped

to partially offset the Company’s losses from the chicken business.

In addition, the Company has adjusted its production and marketing plans to produce and

distribute products which are less susceptible to price volatility and/or products whose prices can be

adjusted to reflect production costs, such as value-added meat products (eggs boiled in herbs, grilled

chicken, sauced duck, grilled duck) and cooked meat products for export (frozen boiled chicken,

frozen roasted chicken, frozen karake chicken, frozen boiled shrimp, frozen breaded shrimp). The

Company has also developed ready meals such as chilled rice with spicy-fried meat with basil and

chilled spicy shrimp soup which tend to be less price sensitive.

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4. Reduced consumer and customer confidence Consumer and customer confidence in a particular product may decline due to disease

outbreak in the farming of a particular animal, the discovery of chemical residue or contamination in a

product that is harmful to consumers, substandard quality products or untimely delivery of products.

This may cause the Company’s sales of the particular product to fall.

Risk management The Company has built brand awareness and recognition with marketing

strategies and public relations through various channels to create consumer and customer confidence

in the quality of the Company’s products as well as awareness of the attention paid to production

processes which have strict quality control at every stage of production.

5. Trade barriers in the world market The Company exports meat products to many countries worldwide. While tariff barriers are

playing a lesser role under the global policy of free trade, still, new forms of barriers have been devised

to undermine the opportunity for the import and export of meat products. This may cause the

Company’s meat export sales to decline or indirectly affect other areas of the Company’s revenue. For

example, during the second half of 2002, countries in the European Union enforced strict testing of

residue in meat imports. Many chicken exporters that failed to pass the test sent their products back

to sell in Thailand. As a result, domestic prices of chicken meat dropped dramatically due to excess

supply at that time. From this incident, the Company was directly affected by the stringent testing

measures, experiencing delays in export process for each shipment. Furthermore, the Company was

indirectly affected by the fall in domestic prices of chicken meat, which caused profits from domestic

sales of chicken meat to decline.

Risk management Although it is not possible to predict when this type of risk will occur, the

Company has always placed great emphasis on research and development on all aspects of

production to achieve world-class production standards and develop high quality food products to

satisfy consumers, gaining customer acceptance worldwide. Moreover, the Company continues to

place great importance on studying the developments in international trade rules and regulations. With

updated information on this matter, the Company can develop its business strategy in line with the

new rules and regulations.

In addition, the Company continues to expanded its export customer base to diversify risk

and has established sales representative offices in numerous countries throughout the world to be

closer to country-specific news and information. The Company has also increased investments in

various countries to minimize the impact of trade barriers on its operations.

6. Foreign exchange risk The Company imports raw materials for production which account for 11% of cost of goods

sold. Therefore, if the Baht depreciates against the currency used to purchase the raw material, this

may cause the Company’s animal feed production costs and animal farming cost to rise. In addition,

the Company earns revenue from exports which accounts for approximately 15% of total sales in

2004. Therefore, if the Baht appreciates against the currency used in the sale, this may cause revenue

to decline when converted into Thai Baht. If both these cases occur, this may cause the Company’s

profits to decline.

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Risk management The Company has a policy to enter into forward exchange contracts to

protect against currency fluctuations. In addition, this allows the Company to know costs and selling

prices in definite Baht terms. For some product types that the power for determining prices belongs to

a seller, an accuracy of costing shall result in an effiiency of pricing, guaranteeing that the company

can manage foreign exchange at better rates than the market rate since it is not possible to accurately

forecast foreign exchange rates when entering into the contract.

7. Risk from investment in other countries The Company has investments and joint-ventures in agro-industrial businesses in many

foreign countries that have potential for business expansion, namely the Republic of Turkey, Malaysia,

India, the People’s Republic of China, the United Kingdom and Vietnam. Each country has risks which

may arise from changes in political, regulatory or economic conditions. Any changes, if significant, may

affect the business operations in these countries as well as the revenue and profit earned from these

overseas businesses.

Risk management The Company recognizes this risk and has established a policy and

system to closely monitor and control the performance of overseas operations. Furthermore, the

Company posts experienced managers, including controllers, to oversee these foreign operations and

present the performance of their operations in Thailand at least once every quarter in Thailand.

8. Risk from dependency on specialists The Company’s business relies on knowledgeable employees and specialists who have

accumulated knowledge and real working experience. Therefore, if the Company loses these

experienced personnel, this may affect the Company’s operating performance.

Risk management The Company has adopted measures to reduce the risk of losing

valuable personnel by establishing a company to provide continuous business training and knowledge

to management and employees; a successor program; and a program to attract long-term

employment with the Company, such as providing opportunities for advancement to management

positions as the company is continually expanding.

9. Risk from management of information technology The company has implemented information technology system in many areas of its

operations, such as the production control system, accounting system and human resource

management system. In addition, the Company has adopted information technology system in

everyday operations to improve work efficiency as well as reduce time and costs in communication

and sending documents. Therefore, if there is any significant failure in the system, such as the spread

of a computer virus in the system causing loss of data, this may affect the Company’s operations and

its ability to achieve its objectives.

Risk management The Company has a subsidiary which especially provides information

technology services. The subsidiary studies, develops and oversees the Company’s IT system,

ensuring efficiency and suitability to the Company’s business operations. Employees are continuously

trained to effectively use the IT system. In addition, there is a sufficient and effective back-up system.

The Company has also restricted access to send and retrieve certain information which may harm or

damage the system.

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Management Discussion and Analysis on Results and Financial Status

1. Summary of Consolidated Financial Statements and Key Financial Ratios

a) CPF’s Consolidated Balance Sheet as of 31 December

Unit: THB million

2002 2003 2004

Current assets 25,085 29,607 30,035

Non-current assets 32,197 35,114 42,183

Total assets 57,282 64,721 72,218

Current liabilities 16,625 25,375 24,039

Non-current liabilities 13,904 8,842 16,550

Total liabilities 30,529 34,217 40,589

Shareholders’ equity 26,753 30,504 31,629

b) CPF’s Consolidated Income Statement for the years ended 31 December

Unit: THB million

2002 2003 2004

Net sales 75,147 83,109 91,790

Equity in net profit of associated 526 511 721

Other income 1,027 1,646 1,029

Total income 76,700 85,266 93,540

Cost of sales 65,577 73,534 81,388

Selling and administration expenses`6,332 7,719 9,161

Equity in net loss of associated 22 244 3

Loss from impairment of assets - 938 -

Others 64 35 376

Total expenses 71,995 82,470 90,928

Profit before interest and income tax 4,705 2,796 2,612

Interest expenses 1,223 1,004 910

Income tax 909 (464) 436

Gain on net monetary position - - (15)

Net profit after income tax 2,573 2,256 1,281

Add (profit) loss minority interests 36 (14) (45)

Net profit from normal operations 2,609 2,242 1,236

Extraordinary items

Loss arising from Tsunami - net of income tax - - (52)

Insurance recovery - net of income tax - - 53

Net profit 2,609 2,242 1,236

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c) Key Financial Ratios

2002 2003 2004

Liquidity Ratios

Current ratio (times) 1.51 1.17 1.25

Quick ratio (times) 0.61 0.37 0.45

Cash flow liquidity ratio (times) 0.26 (0.01) 0.18

Accounts receivable turnover (times) 9.36 10.15 10.61

Collection period (days) 38 35 34

Inventory turnover (times) 14.56 18.76 17.96

Inventory turnover (days) 25 19 20

Accounts payable turnover (times) 20.14 17.70 17.82

Payables period (days) 18 20 20

Cash Cycle (days) 45 34 34

Profitability Ratios

Gross profit margin (%) 12.73 11.52 11.33

Operating profit margin (%) 4.27 2.19 1.32

Net profit margin (%) 3.40 2.63 1.32

Return on equity (%) 10.59 7.83 3.98

Operating Efficiency Ratios

Return on fixed assets (%) 21.25 19.78 14.54

Asset turnover (times) 1.40 1.40 1.37

Leverage Ratios

Debt to equity (times) 1.14 1.12 1.28

Interest coverage 4.71 0.41 6.25

Dividend payout (%) 57.98 58.66 50.95

2. Explanation and Analysis of Financial Position and Operating Results

The following analysis of financial position and operating results is the analysis of financial

information from CPF’s consolidated financial statements for the year 2004 which include the financial

statements of Charoen Pokphand Foods Public Company Limited and its 38 subsidiaries, 26 of which

are registered in Thailand and 12 of which are registered abroad. In 2004, 3 new subsidiaries were

included as follows:

1. C.P. Standart Gida Sanayi ve Ticaret A.S. (“CPS”) is a company which has been

operating an integrated chicken business in the Republic of Turkey since 1988. The

Company’s subsidiary acquired the common shares of CPS from former shareholders in

2004 and now has 84.49% shareholding in CPS.

2. CPF Tokyo Co., Ltd. (“CPF TK”) is a new company established in Japan to import and

distribute processed meat products and ready-to-eat food products.

3. Shrimp Improvement Systems (Thailand) Co., Ltd. (“SIST”) is a new company established

in Thailand to breed shrimp fry.

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2.1 Operating Results1) General Overview of Operating Results

The Company’s total revenues in 2004 amounted to THB 91.790 billion, increasing 10.4% from

2003. The increase resulted from the 112% sales growth from overseas operations, mainly from the

sales of CPS which became the Company’s subsidiary on January 29, 2004. Sales from operations in

Thailand grew only 1.6% due to the following major factors:

1. The bird flu outbreak, officially announced by the Thai government during the end

of January 2004, and the outbreak in July 2004 had a significant impact on the Thai

broiler industry and chicken exports as the demand for chicken consumption dropped

dramatically. Due to the bird flu outbreak, domestic consumers switched to consuming

pork, causing the prices and volume of pork to increase notably in 2004. This helped to

partially offset the sales decline of chicken and eggs.

2. Due to the uncertainty arising from the US anti-dumping lawsuit against 6 major shrimp

exporting countries, namely Thailand, the People’s Republic of China, India, Vietnam,

Brazil and Ecuador, during the first half of 2004, shrimp farming in Thailand and

Thai shrimp exports slowed down during that period. Consequently, demand for the

Company’s shrimp products declined. However, in July 2004, the USA announced the

preliminary dumping margin on shrimp imported from each country in the lawsuit. The

preliminary dumping margin assigned to Thailand was the lowest rate among the countries

targeted in the case. This rate was applied on Thai shrimp exports to the USA until the

final dumping margin was announced in January 2005. The final dumping margin assigned

to Thailand was lower than those of other countries in the lawsuit except Ecuador. The

preliminary determination cleared the situation and boosted shrimp farming in Thailand

and Thai shrimp exports in the later half of the year. As a result of the improved situation,

the Company’s sales from shrimp breeder and shrimp exports increased in the second half

of 2004 compared to the first half. However, total shrimp export sales in 2004 were lower

than that of the previous year.

The cost of sales in 2004 totaled THB 81.388 billion, jumping 10.7% from the year before. This

percentage increase was approximately the same as the percentage increase in sales. Gross profit

margin in 2004 fell slightly to 11.3% from 11.5% in 2003, partly due to higher average prices of raw

materials used in animal feed production, which caused the cost of animal farming in 2004 to be higher

than that of 2003.

Selling and administration expenses in 2004 rose 18.7% to THB 9.201 billion, mainly from the

expenses of CPS which were consolidated into the Company’s financial statements in 2004. In addition,

the Company incurred higher marketing and public relations expenses in 2004 to increase consumers’

awareness of the quality and safety of products under the Company’s trademark.

From the increase in both sales and cost of sales mentioned above as well as the loss from

foreign exchange in 2004, earnings before interest and taxes in 2004 amounted to THB 2.611 billion,

falling 6.6% from 2003. Net profit in 2004 was THB 1.237 billion, also down from the previous year by

44.9%, as a consequence of the factors mentioned above and recognition of the deferred tax asset

arising from temporary differences in the investment in CP USA in 2003.

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During 2004, CPF made 2 interim dividend payments totaling THB 0.11 per share, equivalent

to THB 630 million or 50.9% of net profit in 2004. The dividend payout was in line with the Company’s

dividend policy which stipulates that total dividends paid each year shall approximately be 50% of net

income after income taxes and legal reserve. In addition, the dividend payout was in compliance with

the terms and conditions of CPF’s 4 issues of amortized debentures which state that the Company is

not permitted to pay cash dividends to shareholders in the amount exceeding 60% of net profit of each

fiscal year for the duration of the term of the debentures.

2) Operating Results of Each Business

Sales structure of CPF and its subsidiaries for the years ended December 31, 2002, 2003

and 2004

2002 2003 2004 Change from

THB million % of Sales THB million % of Sales THB million % of Sales previous year

1. Operations in Thailand 70,738 94% 76,466 92% 77,680 85% 2%

1.1 Livestock Business 49,349 66% 55,744 67% 57,040 62% 2%

• Feed 16,958 23% 18,059 22% 16,295 18% -10%

• Breeder 2,250 3% 2,013 2% 2,026 2% 1%

• Meat & Foods - Domestic Sales 19,466 26% 21,760 26% 27,071 29% 24%

• Meat & Foods - Export Sales 9,688 13% 12,419 15% 9,923 11% -20%

• Others 987 1% 1,493 2% 1,725 2% 16%

1.2 Aquaculture Business 21,389 28% 20,722 25% 20,640 23% 0%

• Feed 12,403 17% 12,636 15% 12,775 14% 1%

• Breeder 416 1% 1,128 2% 1,184 1% 5%

• Meat & Foods - Domestic Sales 916 1% 1,906 2% 2,474 3% 30%

• Meat & Foods - Export Sales 6,714 9% 4,158 5% 3,697 4% -11%

• Others 940 1% 894 1% 510 1% -43%

2. Overseas Operations 6% 6,643 8% 14,110 15% 112%

Net Sales 75,147 100% 83,109 100% 91,790 100% 10%

Details of operating results according to business location and business line are as follows:

A) Operations in Thailand

• Livestock Business

Sales from the livestock business in Thailand in 2004 were THB 57.040 billion, rising 2% from

the prior year. Sales from the livestock business accounted for the majority of the Company’s sales, or

approximately 62% of net sales. The proportion of domestic sales to export sales was 83:17. Export

sales fell 20% from the prior year as a result of the bird flu outbreak in Thailand which was mentioned

previously. This had a great impact on the chicken industry and broiler exports as importing countries

banned raw chicken exports from Thailand. Apart from causing a sudden halt of broiler exports in the

whole industry, domestic broiler prices were also affected. Consequently, the Company’s sales of broiler

fell significantly in 2004.

In 2004, gross profit margin of the livestock business in Thailand was 8.8% of net sales of the

livestock business in Thailand, lower than the previous year’s gross profit margin of 9.6%, as a result of

higher average prices of raw materials in 2004 compared to 2003.

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• Aquaculture Business

Sales from the aquaculture business in Thailand in 2004 totaled THB 20.640 billion, down

slightly from THB 20.722 billion in 2003. Sales from aquatic feed which accounted for the majority of

sales from the aquaculture business in Thailand increased 1% from 2003. Sales from aquatic feed were

affected by the lawsuit filed by the USA charging 6 countries for dumping shrimp into the US market.

Shrimp farming for export to the USA which is a major market slowed down in the first half of 2004 as

farmers awaited the results of the case. After the USA announced the preliminary determination and

Thailand was at an advantage compared to competing countries, shrimp farming in the country returned

to normal. Hence, sales of shrimp feed increased in the second half of 2004. Domestic sales from meat

and foods surged 30% in contrast to 2003 as a result of the Company’s effective strategy of increasing

distribution channels and focusing on domestic sales expansion.

Gross profit margin of the aquaculture business decreased from18.6% in 2003 to 17.7% in

2004 due to higher cost of aquatic feed production in line with higher raw material prices and the decline

in average selling prices of aquatic animals sold in the country.

B) Overseas Operations

Sales from overseas operations in 2004 amounted to THB 14.110 billion, soaring 112% from

the year earlier, attributable to the 84.49 investment in CPS which operates an integrated chicken

business in the Republic of Turkey. CPS’s sales since it became the Company’s subsidiary in January

29, 2004 to December 31, 2004 totaled THB 9.867 billion, or approximately 11% of the Company’s net

sales in 2004. Since CPS’s operations are not located in bird flu outbreak areas and its sales are mostly

in the Republic of Turkey, the bird flu outbreak had no effect on CPS’s operations.

The integrated chicken business in the USA under Charoen Pokphand (USA), Inc. (“CP USA”),

a subsidiary in which CPF has 99.95% shareholding, ceased operations in March 2004 after CP USA

sold its assets. Impairment loss on the assets sold was recorded in 2003.

Gross profit margin of overseas operations rose from 5.3% in 2003 to 12.1% in 2004. This

difference can be attributable to comparing businesses in different geographic locations. In 2003, most

of the overseas business activity was in the USA. However, in 2004, most of the overseas business

activity was in the Republic of Turkey.

2.2 Financial Position1) Assets

As of December 31, 2004, the Company’s total assets amounted to THB 72.218 billion,

comprising of THB 30.035 billion in current assets, THB 31.078 billion in property, plant and equipment

and THB 11.105 billion in long-term investments and others.

Assets in 2004 increased 12% from the year earlier from both operations in Thailand and

overseas operations. With regards to operations in Thailand, assets increased 9%, mainly due to an

increase in fixed assets from business expansion, particularly investment in an integrated chicken

business in Nakorn Ratchasima Province, a shrimp fry breeding business and a shrimp processing

business. With regards to overseas operations, assets increased 5% from the consolidation of CPS

assets in 2004 and decreased 2% from the sale of CP USA assets.

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As of December 31, 2004, the Company had inventories of THB 18.307 billion, decreasing

slightly from the year before. Inventories consisted of THB 4.679 billion in finished products, THB

1.542 billion in parent stock (net of breeder depreciation), THB 5.138 billion in work-in-progress, THB

5.463 billion in raw materials, THB 1.006 billion in goods in transition, THB 507 million in chemicals and

supplies and THB 28 million in allowance for diminution in value of inventories.

2) Liquidity

In 2004, the Company had net cash from operating activities and financing activities of THB

4.342 billion and THB 3.602 billion, respectively and net cash used in investing activities of THB 7.482

billion. As of December 31, 2004, cash and cash equivalents was THB 1.708 billion compared to

THB 1.675 billion on December 31, 2003. The Company is obligated to make payments on loans and

debentures during 2005-2007 in the amounts of THB 4.595 billion, THB 5.671 billion and THB 4.560

billion, respectively.

The current ratio as of December 31, 2004 was 1.25 times, improving from 1.17 times in 2003.

This was mainly due to the decrease in interest-bearing debt, both short-term loans and the current

portion of long-term liabilities. The reduction in short-term loans was a result of using funds obtained

from the issue of debentures in November 2005 for repayment. As of December 31, 2004, the

Company’s outstanding debentures totaled THB 10.970 billion. THB 4.970 billion worth of debentures

have an interest rate of 4.00% per year. Another debenture issue worth THB 6.000 billion was issued

on November 17, 2004, divided into 2 allotments. The first debenture allotment worth THB 2.500 billion

has a maturity of 3 years and fixed interest rate of 4.25% per year. The second debenture allotment

worth THB 3.500 billion has a maturity of 5 years and a fixed interest rate of 5.50% per year. The interest

coverage ratio was 6.25 times in 2004, increasing from 0.41 times in 2003.

3) Source of Funds

The debt to equity ratio as of December 31, 2004 was 1.28 times. Total liabilities of THB

40.589 billion comprised of THB 24.039 billion in current liabilities and THB 16.55 billion in long-term

liabilities, or in the proportion of 59:41, in comparison to 74:26 in 2003. The decrease in the proportion

of short-term to long-term liabilities in 2004 mainly resulted from the issue of debentures with maturities

of 3 and 5 years in 2004.

As of December 31, 2004, shareholders equity was THB 31.628 billion. Major changes in

shareholders’ equity during 2004 include:

a) An increase in retained earnings resulting from 2004 net profit of THB 1.237 billion and

a decrease from dividend payments of THB 810 million.

b) An increase in the difference from reclassification of items in the financial statements equal

to THB 229 million.

c) An increase in surplus on revaluation of available-for-sale investment (net of deferred tax

liabilities) equal to THB 102 million from the rise in market value of TRUE and MAKRO.

4) Investments in 2005

In 2005, CPF and its subsidiaries plan to invest THB 2.562 billion in accordance with the plans

approved by the Company’s Board of Directors. THB 1.037 billion will be invested in the livestock

business, while THB 1.525 billion will be invested in the aquaculture business. Investment plans may

change according to changes in the business environment.

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Management

1. Management Structure as of December 31, 2004

2. Board of Directors As of December 31, 2004, CPF’s Board of Directors consists 15 members as follows:

First name Last name Position Board of Directors’ Meeting

Attendance out of a total of

14 meetings in 2004

1. Pol. Gen. Pow Sarasin Honorary Chairman & Independent Director (1) 13

2. Mr. Dhanin Chearavanont Chairman (3) 8

3. Mr. Prasert Poongkumarn Vice Chairman (3) 9

4. Mr. Min Tieanworn Vice Chairman (3) 11

5. Mr. Chingchai Lohawatanakul Vice Chairman (2) (3) 13

6. Mr. Arsa Sarasin Independent Director (1) 10

7. Professor Dr. Athasit Vejjajiva Independent Director (1) 13

8. Mr. Thanong Termpangpun Independent Director (1) 14

9. Mr. Phongthep Chiaravanont Director (2) (3) 9

10. Dr. Veeravat Kanchanadul Director (3) 13

11. Mr. Adirek Sripatak Director (2) (3) 14

12. Mr. Thong Chotirat Director (2) (3) 2

13. Mr. Pong Visedpaitoon Director (2) (3) 11

14. Mr. Sunthorn Arunanondchai Director (3) 13

15. Mrs. Arunee Watcharananan Director (2) (3) 13

Note : 1. The Directors No. 1 and 6-8 are Independent Directors

2. The Directors No. 5, 9, 11, 12, 13 and 15 are Executive Directors

3. The Directors No. 2-5 and 9-15 are authorized directors whereby any two of the authorized directors shall sign on behalf

of the Company with the Company’s seal affixed.

Board of Directors

Executive Board

Internal Audit Office

Audit CommitteeCorporate SecretaryOffice

Livestock Information Technology& Application

General Administration

Chief Financial OfficerAquaculture

President & CEO

Chief Operating Officer

Livestock Feed

Regional Integrated

Integrated Food Processing

Accounting

Finance

Livestock Feed

Aquatic Food Processing

Aquatic Research & Development

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Composition of the Board of Directors The Company’s Board of Directors must consist of at least 5 directors and at least half of the

directors must have residence within Thailand.

As of December 31, 2004, the Company’s Board of Directors comprised 4 Independent

Directors, 6 Executive Directors and 5 Non-executive Directors. The Board of Directors appoints the

Honorary Chairman, the Chairman and the Vice Chairman who may hold an Executive Director position

or a Non-Executive Director position. In case of lack of independence of the Chairman or a transaction

in which the Chairman has a conflict of interest, the Honorary Chairman or an Independent Director

shall preside as Chairman of the meeting in considering the matter.

Every member of the Company’s Board of Directors has residence in Thailand, possesses

business and industry-related experience, understands the business obstacles, performs work

effectively, can create competitive advantage in the industry and can provide beneficial views on

important risks. Furthermore, every member of the Board of Directors is a qualified person and does

not have the qualifications which are prohibited under the Public Limited Company Act and the

Notification of the Securities and Exchange Commission.

The Independent Directors possess the qualifications in accordance with the Notification of

the Securities and Exchange Commission No. Kor Jor. 12/2543; Re: Application for permission and

granting of permission to offer for sale new shares issued. Briefly stated, the Independent Director

does not hold more than 5% of the voting shares of the Company, its subsidiaries, or others of the

Company’s connected persons, do not have any involvement with the Company in terms of

management and/or provide professional services, do not have any business involvement with the

Company, do not have any personal, business or other relationship with the Company or its

management, do not represent any specific shareholder group, and do not have any financial or

personal involvement with the Company, thus allowing independent judgment and ensuring that the

interests of all shareholders are equally protected.

Appointment and selection Each director, including the independent director, has a 3-year term post, excluding the case

of being the replaced director for the available position caused by other factors rather than by rotation.

At every annual general meeting, one-third of the directors shall retire from office. If the number of

directors is not a multiple of three, then the number nearest to one-third shall retire from office. The

directors serving the longest shall retire. The departing directors may be re-elected if approved by the

shareholders. In case of appointment of a new director, the Board of Directors must select a person

with the qualifications, knowledge and expertise appropriate for the position.

In case of a vacancy in the Director position, for reasons other than the completion of the

term and the remaining term is at least two months, the Board of Directors shall appoint a director with

the required qualifications and without any characteristics prohibited by law to serve as Director in the

next Board of Directors’ Meeting. The resolution must be passed by at least three-fourths of the

remaining number of directors. The newly appointed director shall assume the position for the

remaining term of the previous director.

In assuming the position of Director, each director will receive important company

information, the code of conduct of the Board of Directors that clearly prescribes the roles and

responsibilities of directors, advice concerning the legal obligations, rules and regulations and

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conditions of being a Director of a listed company in the Stock Exchange of Thailand as well as an

orientation of the Company’s business.

Shareholders have the right to appoint the Board of Directors under the following criteria:

1. Each shareholder shall have a number of vote equal to one share per one vote.

2. Each shareholder must exercise all the votes he has in order to appoint an individual or

several persons to be the director(s) but a shareholder shall not split his votes among any

person or group of persons.

3. The persons receiving the highest number of votes in descending order shall be

appointed as directors depending on the requirement of directors set at such time. In the

event that a number of persons receive an equal number of votes for the last directorship

rendering the number of directors more than which is required at such time, the chairman

of the meeting shall have a casting vote.

4. At shareholders’ meeting any director may be dismissed before retirement by rotation by

the resolution of not less than three-fourths of the number of shareholders who attend

the meeting and have the right to vote and collectively hold not less than half of the

number of shares of the shareholders who attend the meeting and have the right to vote.

Roles and responsibilities of the Board of Directors The Board of Directors are appointed by the Company’s shareholders who have considered

the personal qualifications, knowledge, competency and ability of the person to devote his/her time to

perform duties for the Company to ensure that the director has the experience and knowledge to

operate the business to maximize the benefits of all the stakeholders.

The Board of Directors have been entrusted by the shareholders to honestly and fairly

manage the Company’s business as indicated in the Memorandum of Association and in compliance

with the Articles of Association of the Company, the resolutions of the shareholders’ meetings and

related regulations. The Board of Directors, under their authority, may assign one or several directors

or any other person to perform any act on its behalf with clear indication of roles and responsibilities to

the assignee.

The Board of Directors regulates the policy and sets direction of the Company as well as

oversee the duty performed by the management to ensure that it is still in line with the policy. The

Board of Directors delegates authority and responsibility of day-to-day management to the President

and top management respectively as well as appoints various committees to assist with specific

operations. The duties of the Chairman of the Board and the President do not overlap. In assigning

duties and responsibilities to manage the Company’s operations to top management, the President is

responsible to the Board of Directors.

In addition, the Board of Directors appoints the Corporate Secretary Office to provide counsel

and assist the Board of Directors in the areas of legal and corporate compliance. The Corporate

Secretary Office also coordinates with and takes care of the Company’s shareholders to ensure that

they receive appropriate treatment.

The Board of Directors’ roles and responsibilities in managing the Company’s business

include:

1. Determining the Company’s overall business policy, financial policy, funding policy and

risk management policy

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2. Approving the Company’s budget and investment plans and overseeing the development

of the plans

3. Overseeing the Company’s business according to set goals and determining ways to

overcome obstacles

4. Arranging for the Company’s general and financial information to be reported to

shareholders and stakeholders in an accurate and timely manner according to the law

5. Acknowledging the audit report on material issues and determining ways to remedy in

case there is any deficiency

6. Reviewing the adequacy and appropriateness of the Company’s internal control systems

and risk management

7. Arranging for the Company’s Succession Plan

3. Audit Committee CPF’s Audit Committee was appointed by the Board of Directors to assist the Board of

Directors with overseeing the efficiency and effectiveness of financial reporting, internal control and

risk management, internal audit and compliance to related rules and regulations and business ethics.

The Audit Committee was appointed by the Board of Directors on December 18, 2002 for a

term of 3 years. The Audit Committee comprises 4 independent directors who have no management

duties as follows:

1. Pol. Gen. Pow Sarasin Chairman of the Audit Committee

2. Mr. Arsa Sarasin Member

3. Professor Dr. Athasit Vejjajiva Member

4. Mr. Thanong Termpangpun Member

Mr. Voravit Janthanakul carries out duties as Secretary of the Audit Committee.

The Board of Directors appoints the Chairman and Secretary of the Audit Committee. The

Secretary of the Audit Committee has no voting right. At least one committee member must have

knowledge, understanding and experience in accounting and finance and be consistently

knowledgeable of events affecting the changes in financial reporting progress. The Audit Committee

can seek advice from an independent specialist.

The term of service of committee members is 3 years to ensure continuity of the performance

of the work of the Audit Committee. A departing committee member may be re-appointed for another

term. In case of resignation of a committee member, a new committee member must be immediately

appointed after the vacancy. In case that any committee member wishes to resign before the

expiration of his term of service, he should give a written notice 1 month in advance. A new committee

member who replaces a resigning committee member assumes the remaining term of service of the

departing committee member.

In each Audit Committee meeting, the Audit Committee is empowered to invite the President,

Chief Operating Officer, Chief Financial Officer, management, Auditor and Head of the Internal Audit

Office to attend the meeting for clarification purposes. In necessary cases, the Audit Committee may

also meet with the Internal Audit Office and the Company’s Auditor without management on an ad hoc

basis.

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Roles and responsibilities of the Audit Committee

The Audit Committee’s roles and responsibilities for the Board of Directors are as follows:

1. Reviewing the effectiveness of the internal control and auditing

2. Reviewing compliance to related rules and regulations

3. Reviewing the Company’s information disclosure related to connected transactions and/

or possible conflicts of interest

4. Reviewing financial statements and financial reports

5. Considering the selection and appointment of the auditor and the annual audit fee

6. Carrying out other duties assigned by the Board of Directors

4. Executive Board The Board of Directors appoints the Executive Board by considering persons with

qualifications, knowledge, competency and experience related to the Company’s business to assist

with efficient and effective management of operations according to the Company’s policies and

objectives laid down by the Board of Directors.

As of December 31, 2004, CPF’s Executive Board consists of the following members:

1. Mr. Chingchai Lohawatanakul Chairman of the Executive Board

2. Mr. Adirek Sripratak President and Chief Executive Officer (CEO)

3. Mr. Pong Visedpaitoon Chief Operating Officer (COO)

4. Mr. Phongthep Chiaravanont Executive Director

5. Mr. Thong Chotirat Executive Director

6. Mrs. Arunee Watcharananan Executive Director

7. Mr. Voravit Janthanakul Executive Director

8. Mr. Teerasak Urunanont Executive Director

9. Mr. Vitit Phutanasap Executive Director

10. Ms. Patchara Chartbunchachai Executive Director

11. Mr. Paisan Chirakitcharern Chief Financial Officer (CFO) and Secretary

The Board of Directors appoints the Chairman of the Executive Board and the Secretary of

the Executive Board. In the case that the Chairman of the Executive Board is unable to attend the

Executive Board meeting, he will assign the President or the Chief Operating Officer to act as

Chairman of the meeting. In each meeting, the Executive Board may invite other persons such as

management representatives and/or external advisors to attend the meeting if deemed necessary.

The primary responsibilities of the Executive Board include the following:

1. Determine the goals and strategies of each business as well as set up policies on human

resources performance appraisals and remuneration

2. Scrutinize budgets and investment decisions of each business before submitting to the

Board of Directors for approval and subsequently adjust the approved budgets to be

suitable for the changing situation if there is any

3. Follow-up on the operating performance and the progress of investment projects in each

business as well as performance report, problems and obstacles encountered and

possible solutions to the Board of Directors

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4. Follow and monitor developments in management and risk management system of each

business

5. Follow and monitor human resource development, management promotion and rotation

in each business according to the Company’s plans

6. Evaluate alternative sources of funding necessary for various investment projects to be

approved by the Board of Directors

7. Follow and monitor uses of funds, fund management and financial status of each

business

5. Management As of December 31, 2004, CPF management comprises the following:

1. Mr. Adirek Sripratak President and Chief Executive Officer

2. Mr. Pong Visedpaitoon Chief Operating Officer

3. Mr. Teerasak Urunanont Executive Vice President, Integrated Food Processing Unit

4. Mr. Veerachai Ratanabanchuen Executive Vice President, Livestock Feed Unit

5. Mr. Anek Boonnoon Executive Vice President, Regional Integration Unit

6. Mr. Vitit Pootanasap Executive Vice President, Aquatic Feed Unit

7. DVM. Sujint Thammasart Executive Vice President, Aquatic Research

& Development Unit

8. Mr. Voravit Janthanakul Executive Vice President, General Administration Unit

9. Mr. Praderm Chotsuparaj Executive Vice President, Information Technology

& Application Unit

10. Mr. Paisan Chirakitcharern Chief Financial Officer

Roles and responsibilities of the President

The President, who has the highest management position in the Company, is appointed by

the Board of Directors to manage the operations of the Company in order to achieve the Company’s

objectives and goals set by the Board of Directors, be responsible for the governance of the Company

to create maximum benefits for all stakeholders with appropriateness and fairness, and oversee the

disclosure of the Company’s general and financial information according to best practices. In addition,

the President has authority in carrying out duties according to the Company’s policies and scope of

authority, except authority in the following matters which must be approved by the Board of Directors:

1. Accepting credit line or borrowing money from financial institutions

2. Lending money or providing financial assistance to other parties except for short-term

loans to subsidiaries in which the Company directly or indirectly holds shares in excess

of 90 percent

3. Investing in or divesting from other companies

4. Approving new investment projects except for projects that have been approved in the

shareholders’ meeting or Board of Directors’ meeting

5. Entering into connected transactions according to the rules and regulations of the Stock

Exchange of Thailand

6. Entering into the acquisition or disposition of substantial assets that must be processed

according to the rules and regulations of the Stock Exchange of Thailand

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7. Matters in which the President or connected persons to the President may have a conflict

of interest with CPF or its subsidiaries

8. Other matters that as prescribed by the laws must be approved by the Board of Directors

or the shareholders’ meeting

6. Selection of Directors and Management CPF is in the process of selecting qualified persons to assume positions in the Nominating

and Remuneration Committee to assist in the selection and appointment of persons with knowledge,

competency and experience to assume the positions of Director, President and top management of

the Company, propose remuneration policies as well as determine the Company’s succession policy.

The Board of Directors is responsible for the selection of directors by considering various

major qualifications such as knowledge, competency and related business experience. In addition, the

candidate must have required qualifications and must not have characteristics which are prohibited

under the Public Limited Company Act and the Notification of the Securities and Exchange

Commission. In case of a Directorship vacancy, the Board of Directors will search, select and propose

a nominee to be approved by the shareholders. In the case of a vacancy in a top management

position, the Board of Directors has assigned the Executive Board to be responsible for the search and

selection of a replacement.

7. Remuneration of Directors and Management CPF is in the process of selecting qualified persons to assume positions in the Nominating

and Remuneration Committee. As of present, the Board of Directors determines and reviews the

compensation policy framework, guidelines and appropriate remuneration for the Company’s

directors. The Executive Board has been assigned to consider and determine remuneration for the

President and top management in accordance with their responsibilities and performance results in

relation to the Company’s operating performance and the performance of each director and executive

as well as in comparison to the industry average. Any change in the remuneration of the Board of

Directors must be approved by the shareholders.

Remuneration for the Board of Directors

Cash remuneration In 2004, the total remuneration for 15 members of the Board of Directors

was THB 26.6 million in accordance with the approval of the shareholders at the Annual General

Meeting of Shareholders No. 1/2543 held on March 29, 2000, with details as follows:

Firstname Lastname Remuneration in 2004 (THB)

1. Pol. Gen. Pow Sarasin 3,500,000

2. Mr. Dhanin Chearavanont 2,800,000

3. Mr. Prasert Poongkumarn 2,100,000

4. Mr. Min Tieanworn 2,100,000

5. Mr. Chingchai Lohawatanakul 2,100,000

6. Mr. Arsa Sarasin 1,400,000

7. Professor Dr. Athasit Vejjajiva 1,400,000

8. Mr. Thanong Termpangpun 1,400,000

9. Mr. Phongthep Chiaravanont 1,400,000

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10. Dr. Veeravat Kanchanadul 1,400,000

11. Mr. Adirek Sripatak 1,400,000

12. Mr. Thong Chotirat 1,400,000

13. Mr. Pong Visedpaitoon 1,400,000

14. Mr. Sunthorn Arunanondchai 1,400,000

15. Mrs. Arunee Watcharananan 1,400,000

Other remuneration None

Remuneration for the Audit Committee

Cash remuneration In 2004, the total remuneration for 4 members of the Audit Committee

was THB 7.7 million, with details as follows:

Position Remuneration in 2004 (THB)

Chairman of the Audit Committee 3,500,000

Member 1,400,000

Other remuneration None

Remuneration for the Executive Board and Management

Cash remuneration In 2004, the total remuneration, including monthly salary and bonus, for

14 members of the Executive Board and the management of CPF amounted to THB 187 million.

Other remuneration None

8. Brief profile of Directors and Management

Pol.Gen. Pow Sarasin - 76 years of age Honorary Chairman, Independent Director and

Chairman of the Audit Committee

Education

• Bachelor of Criminology from University of California, USA

• Bachelor of Science in Chemistry from Johns Hopkins

University, USA

• Honorary Doctorate in Public Administration from

Ramkamhaeng University

• Commercial Defense College, Thailand

• Enrollment in Directors Accreditation Program No. 5/2003,

the Thai Institute of Directors

% shareholding in the Company as of December 31, 2004

• 880,000 shares, equivalent to 0.015%

Family relations with other executives

• Elder brother of Mr. Arsa Sarasin

Attendance at Board of Directors’ Meetings during 2004

• 13 times out of 14 meetings

Work Experience for the past 5 years

• Vice Chairman, Kasikornbank Plc.

• Director, Quality House Plc.

• Director, Siam Food Products Plc.

Mr. Dhanin Chearavanont - 66 years of age Chairman of the Board of Directors

Education

• National Defense College

• Commercial School, Hong Kong

Family relations with other executives

• Cousin of Mr. Phongthep Chiaravanont

Attendance at Board of Directors’ Meetings during 2004

• 8 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, BKP Holdings Limited

Work Experience for the past 5 years

• Chairman, Charoen Pokphand Group Co., Ltd.

• Chairman, True Corporation Plc.

• Chairman, C.P. Seven Eleven Plc.

• Honorary Chairman, Siam Makro Plc.

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Mr. Prasert Poongkumarn - 69 years of age Vice Chairman

Education

• Honorary Doctorate in Social Development from Prince of

Songkla University

• Honorary Doctorate in Agriculture from Jejiang University,

Chengchou province, the People’s Republic of China

% shareholding in the Company as of December 31, 2004

• 1,690,633 shares, equivalent to 0.030%

Attendance at Board of Directors’ Meetings during 2004

• 9 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, C.P. Merchandising Co., Ltd.

• Director, C.P. Food Product (Shanghai) Co., Ltd.

Work Experience for the past 5 years

• Vice Chairman, Charoen Pokphand Group Co., Ltd.

• Director, Vinythai Plc.

• Director, CPPC Plc.

• Director, C.P. Intertrade Co., Ltd.

Mr. Min Tieanworn - 69 years of age Vice Chairman

Education

• Honorary Doctorate in Sociology and Anthropology from

Ramkamhaeng University

• Honorary Professor in Economics from Jiangjing Agricultural

College, Chengchou province, the Peoples Republic of China

Attendance at Board of Directors’ Meetings during 2004

• 11 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, CPF Investment Limited

• Director, BKP Holdings Limited

Work Experience for the past 5 years

• Director, Charoen Pokphand Group Co., Ltd.

Mr. Chingchai Lohawatanakul - 66 years of age Vice Chairman and Chairman of the Executive Board

Education

• Master of Science from Arizona State University, USA

• Enrollment in Directors Certification Program No. 5/2001,

the Thai Institute of Directors

% shareholding in the Company as of December 31, 2004

• 254, 690 shares, equivalent to 0.004%

Attendance at Board of Directors’ Meetings during 2004

• 13 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, Aqua-Agri Foods International, Inc.

• Director, CPF Investment Limited

• Director, C.P. Merchandising Co., Ltd.

Work Experience for the past 5 years

• Director, Charoen Pokphand Group Co., Ltd.

Mr. Arsa Sarasin - 69 years of age Independent Director and a member of the Audit Committee

Education

• Bachelor degree in Business Administration from Boston

University, USA

• Enrollment in Directors Accreditation Program No. 5/2003,

the Thai Institute of Directors

% shareholding in the Company as of December 31, 2004

• 1,600,000 shares, equivalent to 0.028%

Family relations with other executives

• Younger brother of Pol. Gen. Pow Sarasin

Attendance at Board of Directors’ Meetings during 2004

• 10 times out of 14 meetings

Work Experience for the past 5 years

• Principal Private Secretary to His Majesty the King of

Thailand

• Chairman, Siam Makro Plc.

• Chairman, Padaeng Industrial Plc.

• Director, Siam Cement Plc.

• Director, Thai Pure Drinks Co, Ltd.

Professor Dr. Athasit Vejjajiva - 69 years of age Independent Director and a member of the Audit Committee

Education

• FRCP from the Physician’s College of London, UK

• Honorary Doctorate in Internal Medical from Mahidol

University

• Honorary Doctorate in Clinical Science from Mahidol

University

Attendance at Board of Directors’ Meetings during 2004

• 13 times out of 14 meetings

Work Experience for the past 5 years

• Chairman of the Royal Institute of Thailand

Mr. Thanong Termpangpun - 69 years of age Independent Director and a member of the Audit Committee

Education

• Master of Business Administration from the American

University, USA

• Bachelor Degree in Accounting and in Commerce,

Thammasart University

• Enrollment in Directors Certification Program No. 9/2001,

the Thai Institute of Directors

Attendance at Board of Directors’ Meetings during 2004

• 14 times out of 14 meetings

Work Experience for the past 5 years

• Advisor, Worachak International Co., Ltd.

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Mr. Phongthep Chiaravanont - 54 years of age Director and Executive Director

Education

• Master Degree in Avian Sciences from University of California

at Davis, USA

% shareholding in the Company as of December 31, 2004

• 9,676,000 shares, equivalent to 0.169%

Family relations with other executives

• Cousin of Mr. Dhanin Chearavanont

Attendance at Board of Directors’ Meetings during 2004

• 9 times out of 14 meetings

Positions in the Company’s subsidiaries

• Chief Executive Officer, Charoen Pokphand (USA), Inc.

• Director, Aqua-Agri Foods International, Inc.

• Director, C.P. Merchandising Co., Ltd.

Work Experience for the past 5 years

• Director, Charoen Pokphand Group Co., Ltd.

Dr. Veeravat Kanchanadul - 67 years of age Director

Education

• Doctorate in Business Administration from University of

Illinois, USA

% shareholding in the Company as of December 31, 2004

• 15,650,450 shares, equivalent to 0.273%

Attendance at Board of Directors’ Meetings during 2004

• 13 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, CPF Investment Limited

• Director, BKP Holdings Limited

Work Experience for the past 5 years

• Honorary President, Association of Listed Companies

• Senior Director, National Institute of Development

Administration, Thailand

• Director, Program for Joint Doctorate in Business

Administration

Mr. Adirek Sripratak - 59 years of age President and Chief Executive Officer

Education

• Honorary Doctorate in Science from Maejo University

• Enrollment in Directors Certification Program No. 5/2001,

the Thai Institute of Directors

% shareholding in the Company as of December 31, 2004

• 100,000 shares, equivalent to 0.002%

Family relations with other executives

• Elder brother of Mrs. Arunee Watcharananan

Attendance at Board of Directors’ Meetings during 2004

• 14 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, Bangkok Agricultural Products Plc.

• Director, Charoen Pokphand Northeastern Plc.

• Director, Bangkok Produce Merchandising Plc.

• Director, Bangkok Feedmill Co., Ltd.

• Director, Bangkok Livestock Processing Co., Ltd.

• Director, CPF IT Center Co., Ltd.

• Director, CPF Training Center Co., Ltd.

• Director, C.P. Merchandising Co., Ltd.

• Director, CPF Europe S.A.

Work Experience for the past 5 years

• Honorary Chairman of the Thai Broiler Export Association

Mr. Thong Chotirat- 53 years of age Director and Executive Director

Education

• Professional Diploma from Rajamangala Institute of

Technology, Bangkok Commerce Campus

• Honorary Bachelor in Science, Economics and Agricultural

Administration from Rajamangala Institute of Technology,

Bangpra

% shareholding in the Company as of December 31, 2004

• 1,000,000 shares, equivalent to 0.017%

Attendance at Board of Directors’ Meetings during 2004

• 2 times out of 14 meetings

Mr. Pong Visedpaitoon - 60 years of age Director, Executive Director and Chief Operating Officer

Education

• Honorary Doctorate in Fisheries from Maejo University

Attendance at Board of Directors’ Meetings during 2004

• 11 times out of 14 meetings

Positions in the Company’s subsidiaries

• Director, Seafoods Enterprise Co., Ltd.

• Director, Pokphand Aquatech Co., Ltd.

• Director, C.P. Merchandising Co., Ltd.

Mr. Sunthorn Arunanondchai - 63 years of age Director

Education

• Master of Business Administration from University of

Arkansas, USA

% shareholding in the Company as of December 31, 2004

• 13,680,199 shares, equivalent to 0.239%

Attendance at Board of Directors’ Meetings during 2004

• 13 times out of 14 meetings

Work Experience for the past 5 years

• President of C.P. Land Co., Ltd

• Chairman, Ek-Chai Distribution System Co., Ltd.

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Mrs. Arunee Watcharananan - 57 years of age Director and Executive Director

Education

• Bachelor degree in Economics from Thammasat University

% shareholding in the Company as of December 31, 2004

• 5,139,999 shares, equivalent to 0.090%

Family relations with other executives

• Younger sister of Mr. Adirek Sripratak

Attendance at Board of Directors’ Meetings during 2004

• 13 times out of 14 meetings

Work Experience for the past 5 years

• Vice Chairman - Finance, C.P. Group

Positions in the Company’s subsidiaries

• Director, Bangkok Agricultural Products Plc.

• Director, Charoen Pokphand Northeastern Plc.

• Director, Seafoods Enterprise Co., Ltd.

• Director, Thai Prawn Culture Center Co., Ltd.

• Director, Klang Co., Ltd.

• Director, Pokphand Aquatech Co., Ltd.

• Director, C.P. Merchandising Co., Ltd.

Mr. Voravit Janthanakul - 58 years of age Executive Director and Executive Vice-President,

General Administrative

Education

• Master of Business Administration from Thammasart

University

Positions in the Company’s subsidiaries

• Director, Bangkok Agricultural Products Plc.

• Director, Charoen Pokphand Northeastern Plc.

• Director, Bangkok Produce Merchandising Plc.

• Director, Bangkok Feedmill Co., Ltd.

• Director, Charoen Pokphand Industry Co., Ltd.

• Director, B.P. Feedmill Co., Ltd.

• Director, Rajburi Feedmill Co., Ltd.

• Director, C.P. Agro-Industry Co., Ltd.

• Director, Bangkok Livestock Processing Co., Ltd.

• Director, Bangkok Farm Co., Ltd.

• Director, C.P. Food Products, Co., Ltd.

• Director, C.P. Food Industry Export Co., Ltd.

• Director, Vee Food Products Co., Ltd.

• Director, Universal Foods and Marketing Co., Ltd.

• Director, International Pet Foods Co., Ltd.

• Director, Trad Prawn Culture Center Co., Ltd.

• Director, Savee Farming Co., Ltd.

• Director, Pokphand Aquatech Co., Ltd.

• Director, CPF IT Center Co., Ltd.

• Director CPF Training Center Co., Ltd.

• Director, Chanthaburi Aquaculture Farm Co., Ltd.

Mr. Teerasak Urunanont - 56 years of age Executive Director and Executive Vice-President,

Food Integrated Business Unit

Education

• Professional Diploma from Thonburi Commercial College

% shareholding in the Company as of December 31, 2004

• 1,000 shares, equivalent to 0.000%

Positions in the Company’s subsidiaries

• Director, Bangkok Produce Merchandising Plc.

• Director, Bangkok Livestock Processing Co., Ltd.

• Director, Bangkok Farm Co., Ltd.

• Director, C.P. Food Products, Co., Ltd.

• Director, C.P. Food Industry Export Co., Ltd.

Work Experience for the past 5 years

• Executive Director of the Thai Feedmill Association

Mr. Veerachai Ratanabanchuen - 56 years of age Executive Director and Executive Vice-President,

Livestock Feed Unit

Education

• Bachelor degree in Accounting from Thammasart University

% shareholding in the Company as of December 31, 2004

• 230 shares, equivalent to 0.000%

Positions in the Company’s subsidiaries

• Director, Bangkok Agricultural Products Plc.

• Director, Charoen Pokphand Northeastern Plc.

• Director, Bangkok Feedmill Co., Ltd.

• Director, Charoen Pokphand Industry Co., Ltd.

• Director, B.P. Feedmill Co., Ltd.

• Director, Rajburi Feedmill Co., Ltd.

• Director, Vee Food Products Co., Ltd.

Work Experience for the past 5 years

• President, Thai Feedmill Association

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Mr. Anek Boonnoon - 52 years of age Executive Vice-President, Regional Integration Unit

Education

• Bachelor degree in agriculture, major in Veterinary Sciences,

Kasetsart University

% shareholding in the Company as of December 31, 2004

• 10,000 shares, equivalent to 0.000%

Positions in the Company’s subsidiaries

• Director, Bangkok Agricultural Products Plc.

• Director, Charoen Pokphand Northeastern Plc.

• Director, Bangkok Feedmill Co., Ltd.

• Director, Charoen Pokphand Industry Co., Ltd.

• Director, Rajburi Feedmill Co., Ltd.

• Director, C.P. Agro-industry Co., Ltd.

DVM. Sujint Thammasart - 52 years of age Executive Director, Executive Vice-President,

Aquatic Research & Development Unit

Education

• Bachelor degree in Veterinary Medicine, Kasetsart University

% shareholding in the Company as of December 31, 2004

• 800,000 shares, equivalent to 0.014%

Positions in the Company’s subsidiaries

• Director, Seafoods Enterprise Co., Ltd.

• Director, Pokphand Aquatech Co., Ltd.

• Director, Shrimp Improvement Systems (Thailand) Co., Ltd.

Mr. Vitit Pootanasap - 51 years of age Executive Director and Executive Vice President-

Aquatic Feed Unit

Education

• Bachelor degree in Business Administration, Ramkamhaeng

University

% shareholding in the Company as of December 31, 2004

• 12,100 shares, equivalent to 0.000%

Positions in the Company’s subsidiaries

• Director, Seafoods Enterprise Co., Ltd.

• Director, Pokphand Aquatech Co., Ltd.

Mr. Praderm Chotsuparaj - 56 years of age Executive Vice President-Information Technology

and Application

Education

• Master in Statistics, Chulalongkorn University

Positions in the Company’s subsidiaries

• Director, CPF IT Center Co., Ltd.

Mr. Paisan Chirakitcharern - 46 years of age Executive Director and Chief Financial Officer

Education

• Master of Business Administration from National Institute of

Development Administration

Positions in the Company’s subsidiaries

• Director, Bangkok Agricultural Products Plc.

• Director, Charoen Pokphand Northeastern Plc.

• Director, Bangkok Feedmill Co., Ltd.

• Director, Charoen Pokphand Industry Co., Ltd.

• Director, B.P. Feedmill Co., Ltd.

• Director, Rajburi Feedmill Co., Ltd.

• Director, C.P. Agro-industry Co., Ltd.

• Director, CPF IT Center Co., Ltd.

• Director CPF Training Center Co., Ltd.

• Director, C.P. Merchandising Co., Ltd.

• Director, CPF Europe S.A.

• Director, Fusion Foods Limited

Miss Patchara Chartbunchachai - 47 years of age Executive Director

Education

• Bachelor Degree in Accounting from Thammasart University

% shareholding in the Company as of December 31, 2004

• 461,000 shares, equivalent to 0.008%

Positions in the Company’s subsidiaries

• Director, C.P. Agro-industry Co., Ltd.

• Director, Seafoods Enterprise Co., Ltd.

• Director, Thai Prawn Culture Center Co., Ltd.

• Director, Klang Co., Ltd.

• Director, CPF IT Center Co., Ltd.

• Director CPF Training Center Co., Ltd.

• Director, C.P. Merchandising Co., Ltd.

• Director, Chanthaburi Aquaculture Farm Co., Ltd.

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9. Personnel As of December 31, 2004, CPF had a total of 11,033 employees and labors, classified according

to business units as follows:

Business Unit Persons

1. Livestock Business 5,703

2. Aquaculture Business 4,732

3. Supporting Offices 598

Total 11,033

CPF remunerated to its employees in 2004 at a total of THB 2,047 million including salary,

wage, bonus, welfare, training and employee’s insurance fees.

Human resource development policy

The Company has a policy to develop employees’ professionalism, enabling them to

effectively perform their jobs, prepare them for the Company’s business growth and enabling them to

adapt to new ever-changing technology. The Company is committed to being a learning organization

to support continuous business growth, providing on-the-job training, overseas business study trips

and external training both locally and abroad. In addition, CPF Training Center Co., Ltd. was

established to provide training and seminars to develop employees’ knowledge and understanding of

various updated topics that will be useful to their work as well as provide training for management.

Aside from developing employees’ knowledge and competency, the Company has a policy to

encourage employees be good social citizens. In addition to fostering concern and care among

co-workers, the Company has arranged various activities for employees to contribute back to society,

such as blood donations to the Thai Red Cross Society, the Employee Donation Project to build

houses for tsunami victims, Employee Bird-folding Project to provide encouragement to the people in

the 3 southern provinces, merit-making on special occasions of different religions, and clothing and

goods donations to needy provinces.

Employee treatment

The Company provides equal opportunities to employees at every level. Fair treatment to

employees is applied in management to foster enthusiasm for productive work. All employees are

required to follow the Company’s rules and regulations, especially those related to conflicts of interest

and information disclosure.

10. Supervision of Use of Inside Information The Company has regulations concerning the trading of the Company’s shares which sets

forth procedures and time restrictions for buying and selling of the Company’s shares for directors and

management to follow. The enforced regulations create transparency, prevent the use of inside

information that has not yet been disclosed to the public for personal gain by directors and

management, and to prevent accusations of inappropriate trading of shares by inside personnel. The

regulations stipulate the preparation of a Shareholding Report of the Company’s Shares held by

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directors, management and related persons, clearly state the time that directors, management and

related persons should not engage in trading of the Company’s shares. The Company’s directors and

managements who are obliged to report shareholding of the Company’s shares to the office of

Securities and Exchange Commission have signed documents to acknowledge their duties and

responsibilities and the penalties on this matter prescribed by the law.

11. Corporate Governance The Company is well aware of the importance of good corporate governance and has

unanimous view that good corporate governance will enhance competitiveness and operating

efficiency, thus adding value to the Company and increasing stakeholders’ wealth in the long run.

Good corporate governance is implemented in line with best international practices which cover

honesty, transparency, independence, duties and responsibilities, fairness and social responsibility to

create confidence that the Company operates it business responsibly and treats all stakeholders

equitably.

11.1 Corporate Governance Policy The Company has a framework for good corporate governance to guide the Board of

Directors to conduct business according to related rules and regulations and business ethics. This

framework also covers the code of best practices for directors; composition, roles and responsibilities,

and independence of the Board of Directors; rights and equal treatment of shareholders and

stakeholders; relations with stakeholders; information disclosure and transparency; supervision of use

of internal information; and internal control and risk management.

The Company is in the process of developing a formal corporate governance policy, which,

posted approved by the Board of Directors, will then be disseminated to directors, management and

employees at all levels as guidelines for conduct, leading to good corporate governance. Furthermore,

the Company is in the process of developing a Code of Conduct for employees to provide guidance in

conducting business in various areas, stressing honesty, fairness and righteousness, adherence to

rules and regulations, transparency and responsibility to society, communities, environment and

stakeholders.

11.2 Rights of Shareholders The shareholders of CPF play a vital role in good corporate governance of the Company by

appointing a Board of Directors to monitor the Company’s business operations to maximize the

benefits of shareholders. Therefore, the shareholders must have regular access to accurate and timely

information that is necessary for effective assessment, decision-making and voting on matters

presented by the Board of Directors for approval at the shareholders’ meeting.

The Company adheres to the information disclosure requirements of the Stock Exchange of

Thailand which stipulate that listed companies must disclose information that influences share price to

the market. The Investor Relations Office has been established to disseminate information to

shareholders, analysts and investors through various communication channels and activities for

shareholders. Financial reports which reveal the Company’s financial status and operating

performance are relayed to investors through the Stock Exchange of Thailand and the Company’s

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website (www.cpfoods.net). Members of the management also meet with investors and securities

analysts to discuss operating results. Other investor-related activities include monthly newsletters,

shareholder visits to operating facilities, and reports to the SET and SEC including annual reports,

year-end financial statements, interim financial statements and related announcements. This ensures

that all interested groups, be it major shareholders, minor shareholders, individuals, juristic persons,

individuals or institutional investors, and other stakeholders shall receive important information that is

timely and adequate to correctly understand the Company.

The Board of Directors arranges for the annual general meeting of shareholders to be held

within 4 months after the end of the financial year. Shareholders are informed of the meeting agenda

through the Stock Exchange of Thailand’s communication channels at least 1 month in advance.

Notice of the General Meeting of Shareholders, a complete agenda and all relevant information are

sent to shareholders at least 7 days before the scheduled date of meeting to provide shareholders

sufficient time for effective consideration and decision-making on how to vote on the matters

proposed by the Board of Directors for approval at the meeting.

Moreover, the Company facilitates shareholders who are unable to attend the meeting in

person by giving them the option to appoint an Independent Director, a Corporate Secretary Officer or

other person to act as a proxy.

11.3 Rights of Various Groups of Stakeholders The Company has a policy to protect the rights and benefits of all stakeholder groups, aside

from shareholders, include investors, employees, business partners, external auditors, presses,

securities analysts, related government organizations and communities where the Company operates

its business. The Board of Directors thoroughly considers the legal rights of each group and ensures

that their rights are carefully protected and enforced. In addition, the Company has a policy to promote

cooperation with stakeholders to foster strong ties and maintain business stability.

In operating its business, the Company’s policy is to treat customers with responsibility,

honesty, fairness and transparency, understanding that the customers require products and services

of good quality and appropriate prices. In conduct with suppliers, the Company considers them

business partners, and business decisions are based on product quality, price, timeliness in product

delivery and trust. Moreover, to maintain equality and fairness in conducting business, the Company

does not reveal confidential information of business partners to other parties.

11.4 Shareholders’ Meeting At the shareholders’ meeting, the Company has a policy and guideline in organizing

shareholders’ meetings to ensure fair treatment of all shareholders at the meeting, convenience in

attending the meeting and opportunities for shareholders to raise questions and express their opinions

on the subject of discussion on the agenda.

In organizing shareholders’ meetings, the Company ensures that the meeting procedures

comply with the laws, from closing of the shareholders’ registrar, notifying the date of the shareholders

’ meeting, sending documents and the agenda, preparing complete documents for the meeting to

support the shareholders’ decision-making, to preparing minutes of the meeting that are fully noted,

including all significant questions and opinions. At the 2004 Annual General Meeting of Shareholders,

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the Company’s Chairman, Vice Chairman, Chairman of the Audit Committee, Audit Committee

Members, President, Chairman of the Executive Board, Chief Operating Officer and Chief Financial

Officer were all present.

11.5 Leadership and Vision The Board of Directors is responsible for the Company’s business plans and operating

performance by monitoring that the Company achieves its business goals through set short-term and

long-term strategies. The Company’s Board of Directors and Executive Board are composed of highly

qualified persons with knowledge and related expertise to support the Company’s operations, achieve

determined goals and maximize shareholders’ benefits.

With extensive experience in the agro-industrial and food industry, the Company’s Chairman

has a vision to develop sustained growth for Thailand’s agro-industrial and food industry as well as

continuously improve the organization to be able to compete on an international level.

The Board of Directors is responsible for ensuring that the Company formulates a long-term

business strategy which reflects business trends, vision, short-term business plans and measurable

goals. The Board of Directors approves policies and important business plans which are presented by

the management, ensures clear communication so that the plans are effectively carried out, and

regularly reviews policies, operating performance and internal control.

In the past year, the Board of Directors has performed their duties to the best of their abilities

for the growth and stability of the Company. The Board of Directors has monitored transactions which

may cause conflict of interest with caution and good faith to maximize the benefits of the Company,

shareholders and stakeholders. The Board of Directors considers various matters at the monthly Board

of Directors’ Meeting, and in the case where a resolution must be made concerning a transaction with

potential conflict of interest, the Director with vested interest shall not attend the meeting and vote on

the matter.

The Board of Directors has set a policy to invest only in the Company’s core business or

businesses related to the core business. Representatives are appointed to assume executive

directorship positions in the subsidiaries to monitor the subsidiaries’ management, ensuring that it is in

line with the Company’s policy. At the monthly meetings held with its subsidiaries, the Company

reviews the operating performance of its various subsidiaries as well as collectively develops business

plans and goals for the following month.

In 2004, the Company faced many obstacles in the industry. The Executive Board including

the President, Chief Operating Officer, Chief Financial Officer and top management dedicated their

time and effort to develop strategies and execute plans in order for the Company to turn the crisis into

an opportunity, ensuring that the Company maintains its competitive edge in the industry and

successfully weathered the crisis.

11.6 Conflicts of Interest To prevent conflicts of interest, the Board of Directors has taken into consideration the

structure and composition of the Board of Directors and various sub-committees in accordance with

principles of good corporate governance as well as encouraged employees at all levels to conduct

business with honesty and high ethical standards.

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The Company has guidelines for employees to perform their duties with honesty and fairness

in adherence to various laws. Employees should not allow personal gain to surpass their obligation to

the Company, including using inside information for personal gain.

In the case of transactions with potential conflict of interest, the Company and its subsidiaries

apply the same procedures as entering into transactions with outside parties, disclosing information

about the related transaction to ensure transparency. In approval of the related transaction, the person

with vested interest in the transaction has no voting right.

11.7 Business Ethics The Company is in the process of developing a Code of Conduct as a guideline for

management and employees at all levels to perform their duties according to the Company’s business

plans with honesty, responsibility, discipline and fairness to the Company, all stakeholder groups and

the general public. Employees are required to adhere to the Code of Conduct as well as the Company’

s rules and regulations.

The Company’s directors have performed their duties with care and honesty. The directors

must monitor the operations of the Company with sufficient knowledge and understanding of the

business. In performing their duties in good faith, the directors must protect the Company’s interests

and comply with the Company’s rules and regulations and related laws.

Directors and management have followed high ethical standards and have used careful

discretion in conducting business with concern for consumers’ safety and health, environmental

conservation for the benefit of society as a whole and development of new products and services with

high quality standards through the use of advanced technology which will ultimately benefit business

partners and consumers. Management and employees also realize the importance of creating an

organization with vision and strategy to ensure that the organization swiftly adapts to changes and

maintains sustainable growth, yielding the highest benefits to customers, shareholders, employees and

various stakeholders.

Furthermore, the Company realizes that the country and society have provided business

opportunities for the Company, therefore the Company holds it a duty to support activities that are

beneficial to society, including professional training, education, arts and religion, public welfare and the

environment. The Company’s highest respects are to the monarchy. The Company’s social

contributions comprise mainly of education projects and religious projects. Various activities in 2004

include the following:

• Supporting Children’s Day activities organized by various organizations such as the

National Committee on Combating Trafficking in Women and Children and the

Sommanas Temple Youth Center by donating the Company’s products

• Donating funds to students in various universities to support the “Reviving Mangrove

Forests” Project to develop and conserve Thailand’s environment

• Supporting the “Information Technology for Water Resources and Agricultural

Development” international conference and veterinarian and animal farming technical

conferences

• Giving cash to support 23 Bangkok athletes who participated in the 2004 Olympics

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• Donating the Company’s products to students of various institutions for their meals at

summer volunteer camps

• Supporting Thai heritage activities at the Loy Kratong Festival in Sukhothai province

• Donating funds and the Company’s products to the Amateur Athletic Association of

Thailand

• Distributing the Company’s ready-to-eat cooked food products to the tsunami victims

and volunteers in the southern part of Thailand

11.8 Balance Provided by Non-executive Directors The Board of Directors’ role in monitoring the Company’s operations includes establishing a

management structure that is trustworthy and transparent. The structure of the Board of Directors

clearly states roles and responsibilities and prevents any single person or group of persons from

having unlimited authority. To provide balance of power, the Board of Directors which comprise 15

persons includes 4 Independent Directors, 5 Non-executive Directors and 6 Executive Directors. All

Independent Directors have the qualifications stipulated by the Stock Exchange of Thailand.

Independent Directors must be able to express independent opinion at the Board of Directors’ Meeting

to prevent conflict of interest.

11.9 Aggregation or Segregation of Power In order to segregation of governance and responsibilities, the Board of Directors has clearly

defined its roles and responsibilities as well as the roles and responsibilities of the Audit Committee,

Executive Board and top management. Aside from stipulating that the position of Chairman of the

Board of Directors shall not be assumed by an Executive Director, the Company has appointed the

President and Executive Board, who both are not the Chairman of the company, to manage the

organization under the power assigned from the Board of Directors.

11.10 Remuneration of Directors and Management The level and composition of directors and management’s remuneration is reasonable and

sufficient to attract and retain qualified directors and management. Their remuneration is comparable

to similar positions in the same industry with consideration to experience, expertise, work dedication

and contribution to the Company. In case of there shall be any change of Directors’ remuneration, it

has to be approved in the shareholders’ meeting.

11.11 Board of Directors’ Meetings The Company schedules Board of Directors’ Meetings in advance. In 2004, 12 Board of

Directors’ Meetings were scheduled. In every Board of Directors’ Meeting, the Chairman advocates

consideration of presented matters with transparency and allots sufficient time for management to

propose issues and the Board of Directors to thoroughly consider and provide opinions on those

issues.

The Company’s regulations stipulates that a Board of Directors’ Meeting be held at least once

every 3 months, except where there is a special agenda, additional meetings may be held as

appropriate. Advance notice of the meeting is sent to the Board of Directors at least 7 days prior to the

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meeting date. Written minutes of the meeting, with all relevant matters and opinions, are prepared and

properly kept at the head office of the Company.

11.12 Committees / Sub-committees To achieve efficient management of the Company’s operations in line with the Company’s

policy and the highest objective of monitoring operations, the Company has instituted committees to

assist with the monitoring of various matters and help alleviate the obligations of the Board of Directors

in reviewing or considering the details of various important matters to the Company. The committees

may propose opinions and suggestions to the Board of Directors for approval, or may have decision-

making authority on behalf of the Board of Directors only on the boundaries set by the Board of

Directors. Committees that have been established by the Company include the Audit Committee,

Executive Board, Accounting Policy Sub-Committee and Corporate Governance Sub-Committee. In

addition, the Company is in the process of setting up the Nominating and Remuneration Committee.

11.13 Internal Audit and Internal Control System The Board of Directors has assigned the duty of conducting business to the Executive Board

and top management under the proper and sufficient internal control environment established by the

Company. A part of the internal audit’s plan covers the assessment of the sufficient and efficient of the

internal control system that has to be systematically and regularly performed. The Head of the Internal

Audit office has to report to the Audit Committee the audit results every 6 months. The Board of

Directors shall annually assess the sufficient and appropriate of the overall internal control.

11.14 Report from the Board of Directors on the Preparation of Financial Statements The Board of Directors has prepared and disclosed financial statements in conformity with

accepted accounting principles and rules and regulations set forth by the Securities and Exchange

Commission, to which the Company has consistently applied in presenting operating and financial

information to shareholders and investors. The Board of Directors has established an effective system

of internal control and internal audit to ensure that financial recording is complete and accurate. In

addition, the system of internal control and internal audit will reduce business risk by preventing loss

and damage to the Company’s assets caused by fraud as well as ensuring the correctness and

reliability of the financial reports.

11.15 Investor Relations CPF established the Investor Relations Office in 1995 to foster relations between the

Company and investors, securities analysts and related government organizations. Its objective is to

ensure that stakeholders have good understanding of the Company and receive information and news

that is accurate, complete, timely and in compliance with related rules and regulations.

Activities of the Investor Relations Office include meetings with securities analysts and

investors in person or communication via phone, mail, fax and email; analyst and shareholder visits to

operating facilities; information disclosure through various communication channels including the

Company’s website; participation in various activities with the objective of disclosing information to

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investors that are arranged by various securities companies and the Stock Exchange of Thailand both

locally and abroad; and meetings with securities analysts, media and investors to discuss operating

results. The Company’s top management including the President and Chief Operating Officer give

importance to the activities and participate if they don’t have prior important obligations.

In 2004, besides preparing information to be distributed to concerned parties and acting as

an information center for shareholders, investors and securities analysts, the Investor Relations Office

organized the following activities:

• Organized plant visits for shareholders and investors to increase their understanding of

the Company’s integrated chicken business. Explanations were provided by the

President and/or top management.

• Organized analyst meetings which included visits to operating facilities to discuss

operating results and industry trends. The President and top management provided

information and answered questions.

• Coordinated with the Public Relations Department which is responsible for

communicating with the media to organize meetings with both local and international

media to discuss the Company’s operating results and answer questions. Top

managements were present to answer questions. In addition, plant visits were organized

for the media to increase their understanding of the Company’s operations.

• Participated in the Stock Exchange of Thailand’s Provincial Tour to provide company

information to investors in the provinces.

• Participated in activities arranged overseas by securities companies to provide company

information to international investors.

12. Investment and Management Policy After amalgamating the agro-industrial businesses under the Charoen Pokphand Group with

the Company in 1999, CPF managed its business according to business lines and stipulated a policy

to invest only in its core business or businesses related to the core business. Representatives are

appointed to assume executive directorship positions in the subsidiaries to monitor the subsidiaries’

management, ensuring that it is in line with the Company’s policy. At the monthly meetings held with

its subsidiaries, the Company reviews the operating performance of its various subsidiaries as well as

collectively develops business plans and goals for the following month.

13. Report of the Audit Committee The Audit Committee had been appointed by the Board of Directors of CPF on December 18,

2002. There comprise 4 independent directors, with Pol Gen. Pow Sarasin as Chairman of the Audit

Committee. The other 3 members are Mr. Arsa Sarasin, Prof. Dr. Athasit Vejjajiva and Mr. Thanong

Termpangpun. Their 3-year term commenced on December 24, 2002.

During the year 2004, significant activities that the Audit Committee had done under the

power and responsibilities assigned by the Board of Directors as follows:

1. Review quarterly and year-end financial statements, which include assessing compliance

to the accounting principles used, the accounting policies adopted, as well as the

information disclosed in the financial statements.

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2. Review transactions and disclosure of information during the year on connected

transactions, as well as those transactions which may cause conflicts of interest.

3. Review the report on internal audit results, by which the internal auditors reported during

the year as well as review the sufficiency and suitability of the internal control system.

4. Meet with the external auditor to discuss their independence, issues or concerns found

from their audit, including the opinions on the Company’s internal control.

5. Review the Company’s compliance with the law and other related regulations.

6. Consider the proposal of appointing the auditors and their remuneration for the year

2005. The Audit Committee has proposed to the Board of Directors to appoint

Mrs.Sudchit Boonprakob, Ms.Kalyarat Chaivaropongsa, and Ms.Nittaya Chetdhotiros of

KPMG Phoomchai Audit Limited to be the Auditors of the Company for the year 2005,

with remuneration of THB 2,630,000.

The meetings of Audit Committee have been constituted 11 times to perform their duties

mentioned above. Their reports have already been submitted to the Board of Directors for

considerations.

For and on behalf of the Audit Committee

Pol.Gen. Pow Sarasin

Chairman of the Audit Committee

March 1, 2005

14. Transactions with Related Companies During the year 2004 the Company entered into transactions with related persons, as

disclosed in Note 5 of the notes to financial statements as of December 31, 2004. These transactions

follow normal trading practices, in accordance with general market price. In the case there is no

market price, the transactions follow contracts which have been agreed upon. The audit committee is

of the opinion that these related transactions are reasonable. Related transactions during the year

2004 between the Company and parties which may have conflicts of interest can be summarized as

follows:

Accounts Receivable

As of December 31, 2004, the Company had accounts receivable arising from transactions

with associated and related companies worth THB 1,275 million, or 14% of total accounts receivable.

Accounts Payable

As of December 31, 2004, the Company had accounts payable arising from transaction with

associated and related companies worth THB 546 million, or 11% of total accounts payable.

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Sales

During 2004, the Company sold products to associated and related companies based on the

price list. The value of these transactions ending December 31, 2004 was THB 3,987 million, or 4% of

total sales.

Purchase of Raw Materials

During 2004, the Company purchased raw material from associated and related companies

based on the price list. The value of these transactions ending December 31, 2004 was THB 12,268

million, or 15% of total cost of sales.

Other Income

In 2004, the Company received other income from dividend, sales of fixed assets, training and

seminar fees, as well as from leasing land and property to associated and related companies, in the

amount of THB 72 million, or 0.08% of total revenues.

Rental and Service Charges

The Company rented assets from associated and related companies according to the rates

set by the owner. The value of these transactions ending December 31, 2004 was THB 509 million, or

6% of total selling and administrative expenses.

Technical Service Fee

In 2004, the Company paid Charoen Pokphand Group Co., Ltd. for technical service

concerning animal feed ingredients worth THB 179 million, or 0.2% of total cost of sales.

Insurance Premium

The Company paid insurance premiums to Allianz C.P. Insurance Company Limited and

Allianz C.P. Life Insurance Company Limited, which are CPF’s associated company and related

company consecutively, worth THB 174 million. The sum was 2% of the Company’s total selling and

administrative expenses. The insurance premium rates were standards set by the insurers.

Other Expenses

In 2004, the Company had other expenses, which was the software application service fee, to

related companies of THB 14 million.

Other

In January 2004, a subsidiary purchased the common shares of C.P. Standart Gida Sanayi ve

Ticaret A.S. from Charoen Pokphand Development (Turkey) Limited (CPD), a related company,

comprising 16,898,568,000 shares with a total value of USD 22 million (84.49% of shareholding). The

subsidiary has already paid CPD for the share purchase in 2004.

In September 2004, the Board of Directors of Bangkok Livestock Processing Company

Limited (BLP) and CPF resolved to approve BLP entering into an agreement with Star Marketing

Company Limited (STAR) (a subsidiary of Charoen Pokphand Group Company Limited). Under the

agreement, BLP shall pay STAR approximately THB 40 million for the purchase of machines,

equipment, vehicles and others and the annual fee at 2% of total sales deriving from this business in

exchange for the right to use all current trademarks of STAR and product research and development

services for the period of 3 years. The acquisition is completed in January 2005.

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15. Measures to Govern Related Transactions For transactions that occur on the normal course of business, the Company applies the same

approval procedure for both related parties and outsider. In the case of other related transactions, the

Audit Committee is assigned to review whether they are conducted on arm’s length basis. In this

regard, the Audit Committee may seek an opinion from an independent appraiser prior to making

recommendation to the Board for consideration and approval.

16. The Auditors’ Remunerations Mrs.Sudchit Boonprakob - C.P.A. (Thailand) Registration No. 2991, Ms.Kalyarat Chaivaropongsa

- C.P.A. (Thailand) Registration No. 3460, and Ms.Nittaya Chetdhotiros - C.P.A. (Thailand) Registration

No. 4439 of KPMG Phoomchai Audit Limited was CPF’s Auditors for the year 2004. The service fees

charged to CPF and subsidiaries in 2004 were as follows:

CPF Subsidiaries

16.1 The audit fees on company’s accounts THB 2,430,000 THB 14,727,359

16.2 Others audit fee on special projects THB 560,000 THB 450,000

Note : The above fee excluded out-of-pocket expenses to be reimbursed by the Company.

17. Litigation

The Company is involved only with routine litigation arising from normal business practices.

The Company is not party of legal cases, which the Company is a defendant in lawsuits amounting to

more than 5% of shareholders’ equity as of December 31, 2004, which affect business operations of

the Company but the amount of the loss cannot reasonably be determined, and that not arising from

normal business practices of the Company.

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cpfe1.doc 0

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Financial Statements

For the years ended December 31, 2004 and 2003 and

Report of Certified Public Accountant

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REPORT OF CERTIFIED PUBLIC ACCOUNTANT To The Shareholders of Charoen Pokphand Foods Public Company Limited I have audited the accompanying consolidated balance sheets of Charoen Pokphand Foods Public Company Limited and its subsidiaries as at December 31, 2004 and 2003, and the related consolidated statements of income, changes in shareholders’ equity and, cash flows for the years then ended. I have also audited the balance sheets of Charoen Pokphand Foods Public Company Limited as at December 31, 2004 and 2003, and the related statements of income, changes in shareholders’ equity and cash flows for the years then ended. The management of Charoen Pokphand Foods Public Company Limited is responsible for the correctness and completeness of information presented in these financial statements. My responsibility is to express an opinion on these financial statements based on my audits. As described in Note 2 to the financial statements, I have not audited the financial statements of foreign subsidiaries included in the preparation of consolidated financial statements. The financial statements of the foreign subsidiaries and associated companies used as the basis for consolidating those subsidiaries and recording the investment in those associated companies by the equity method as at December 31, 2004 and 2003 and for the years then ended reflect the total of the subsidiaries’ assets and the investment in associated companies by the equity method of Baht 8,981 million and Baht 5,769 million, respectively; the subsidiaries’ total revenues of Baht 14,057 million and Baht 6,145 million, respectively; and the equity share in the associated companies profit/(loss) of Baht 332 million and Baht (76) million, respectively. The Company’s financial statements reflect the investment in subsidiaries and associated companies as at December 31, 2004 and 2003 recorded by the equity method of Baht 5,707 million and Baht 3,306 million, respectively and the equity in net profit/(loss) of the subsidiaries and associated companies for the years then ended of Baht 337 million and Baht (148) million, respectively. The financial statements of foreign subsidiaries and associated companies have been audited by other auditors whose reports have been provided to me, and my report, insofar as it relates to these amounts included in the consolidated financial statements and the Company’s financial statements, is based solely on these reports of the other auditors. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits and the reports of the other auditors as described in the first paragraph provide a reasonable basis for my opinion.

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In my opinion, based on my audits and the reports of other auditors as described in the first paragraph, the financial statements referred to above present fairly, in all material respects, the financial positions of Charoen Pokphand Foods Public Company Limited and subsidiaries and of Charoen Pokphand Foods Public Company Limited as at December 31, 2004 and 2003, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. (Sudchit Boonprakob) Certified Public Accountant Registration No. 2991 KPMG Phoomchai Audit Ltd. Bangkok February 28, 2005

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Page 70: Annual Report'04 CPF (English)Annual Report CP

AND SUBSIDIARIES

Revaluation

Increase (Decrease)

Revaluation Changes in Changes on

Share Capital Cash Receipt Premium Revaluation from Equity Available-for- Translation of Share Capital

issued and from Share on Share Increment in Associated sale Investment Financial Held in Retained Minority

paid-up Subscriptions Warrants Capital in Land Company Valuation Statements Treasury Earnings Interest Total

Balance as at January 1, 2004 5,718,533 36,056 - 10,985,674 1,290,834 153,880 567,183 186,524 (720,700) 12,243,042 42,940 30,503,966

Additional paid-in capital (Note 9) - - - - (13,351) - 101,526 - - 1,451 (25) 89,601

Change on translation of

financial statements - - - - - - - 228,993 - - 12,535 241,528

Net profit - - - - - - - - - 1,236,519 44,720 1,281,239

Cash dividend - net of dividend paid

to subsidiaries (for shares

held in treasury) (Note 19) - - - - - - - - - (809,810) (990) (810,800)

Issue of common shares 9,029 (36,056) - 27,078 - - - - - - - 51

Cash receipt from share

subscription (Note 18) - 1,160 - - - - - - - - - 1,160

Warrants (Note 18) - - - - - - - - - - - -

Minority interest in subsidiaries - - - - - - - - - - 322,041 322,041

Minority interest in subsidiary acquired

by Company - - - - - - - - - - (368) (368)

Balance as at December 31, 2004 5,727,562 1,160 - 11,012,752 1,277,483 153,880 668,709 415,517 (720,700) 12,671,202 420,853 31,628,418

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED

In Thousand Baht

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY – CONSOLIDATED

FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

The accompanying notes are an integral part of these financial statements.9

Page 71: Annual Report'04 CPF (English)Annual Report CP

AND SUBSIDIARIES

Revaluation

Increase (Decrease)

Revaluation from Changes in Changes on

Share Capital Cash Receipt Premium Revaluation from Equity Available-for- Translation of Share Capital

issued and from Share on Share Increment in Associated sale Investment Financial Held in Retained Minority

paid-up Subscriptions Warrants Capital in Land Company Valuation Statements Treasury Earnings Interest Total

Balance as at January 1, 2003 4,849,591 24,381 610,000 8,739,228 1,291,210 - (55,885) 814,547 (720,700) 11,185,269 14,542 26,752,183

Additional paid-in capital (Note 9) - - - - (376) 153,880 623,068 - - 536 240 777,348

Change on translation of

financial statements - - - - - - - (628,023) - - (2,801) (630,824)

Net profit - - - - - - - - - 2,242,439 13,662 2,256,101

Adjustment from change in equity

of subsidiary - - - - - - - - - - 19,452 19,452

Cash dividend - net of dividend paid

to subsidiaries (for shares

held in treasury) (Note 19) - - - - - - - - - (1,185,202) (1,784) (1,186,986)

Issue of common shares 868,942 (24,381) - 1,636,446 - - - - - - - 2,481,007

Cash receipt from share

subscription (Note 18) - 36,056 - - - - - - - - - 36,056

Warrants (Note 18) - - (610,000) 610,000 - - - - - - - -

Minority interest in subsidiary acquired

by Company - - - - - - - - - - (371) (371)

Balance as at December 31, 2003 5,718,533 36,056 - 10,985,674 1,290,834 153,880 567,183 186,524 (720,700) 12,243,042 42,940 30,503,966

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED

FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

In Thousand Baht

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY – CONSOLIDATED (Continued)

The accompanying notes are an integral part of these financial statements.10

Page 72: Annual Report'04 CPF (English)Annual Report CP

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Page 74: Annual Report'04 CPF (English)Annual Report CP

18

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements December 31, 2004 and 2003 1. GENERAL Charoen Pokphand Foods Public Company Limited, the (“Company”), is registered in Thailand and listed on the Stock Exchange of Thailand. The registered office of the Company is at 313 C.P.Tower Silom Road Bangrak Bangkok 10500. The principal activities of the Company and subsidiaries are operating an agro-industrial and food business. The Company’s business operations are located throughout Thailand and certain overseas locations. The business is divided into 2 main business segments. The livestock business comprises chicken, duck and pigs, while the aquaculture business consists of shrimp and fish. The two businesses are each vertically integrated, sourcing raw materials for animal feed production, manufacturing animal feed, breeding animals, farming animals for commercial purposes, processing meat, producing ready-to-eat food products, to domestic distribution and exporting of the products. The Company’s products can be divided into 4 main categories, namely 1) animal feed, 2) animal breeder, 3) meat and foods sold in the domestic market and 4) meat and foods sold in overseas markets. 2. BASIS FOR PREPARATION OF FINANCIAL STATEMENTS AND CONSOLIDATED FINANCIAL STATEMENTS The financial statements are presented in Thai Baht, in the Thai language, and in conformity with generally accepted accounting standards in Thailand. Accordingly, the financial statements are intended solely to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in Thailand. The financial statements are prepared under the historical cost convention except as disclosed in the accounting policies. The financial statements in English have been prepared by translating from the Thai language financial statements, which are issued for domestic reporting purposes, for the convenience of the readers. The consolidated financial statements include the accounts of the Company and the following subsidiaries, of which more than 50% of capital shares are owned directly and indirectly by the Company:

Page 75: Annual Report'04 CPF (English)Annual Report CP

19

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Percentage of Direct and Indirect Holdings as Compared to Registered Share Capital Type of Business 2004 2003 Livestock Business 1. Bangkok Livestock Processing Company Limited (BLP) Broiler Integration 99.99 99.99 2. Bangkok Produce Merchandising Public Animal Feed Raw Material Company Limited (BKP) Distribution and Broiler Integration 99.44 99.44 3. Bangkok Agro-Industrial Products Public Company Limited (BAP) Animal Feedmill and Livestock Farming 99.90 99.89 4. Bangkok Feedmill Company Limited (BFM) Animal Feedmill and Livestock Farming 99.99 99.99 5. Charoen Pokphand Northeastern Public Company Limited (CPNE) Animal Feedmill and Livestock Farming 99.61 99.61 6. Charoen Pokphand Industry Company Limited (CPIN) Animal Feedmill and Livestock Farming 99.99 99.99 7. C.P. Agro – Industry Company Limited (CPAI) Livestock Farming 99.99 99.99 8. C.P. Food Products Company Limited (CP FOOD) Food Processing Plant 99.99 99.99 9. C.P. Merchandising Company Limited (CPM) Investment and International Trading 99.99 99.99 10. C.P. Food Industry Export Company Limited (CPEX) Food Processing Plant 99.99 99.98 11. B.P. Feedmill Company Limited (BPF) Animal Feedmill and Livestock Farming 99.99 99.99 12. Bangkok Farm Company Limited (BKF) Livestock Farming and Processing Plant 99.99 99.99 13. Universal Food and Marketing Company Limited Wholesale and Retail Food Products (UF&M) and Fast Food Outlets 99.99 99.99 14. Rajburi Feedmill Company Limited (RBF) Animal Feedmill and Livestock Farming 99.99 99.99 15. Vee Food Products Company Limited (VFP) Food Processing Plant and Distribution 99.99 99.99 16. International Pet Food Company Limited (IPF) Pet Food Production and Distribution 99.99 99.99 17. C.P. Food Product (Shanghai) Co., Ltd. (CPF SH) Thai Food Restaurant 100.00 100.00 18. C.P. Standart Gida Sanayi ve Ticaret A.S.(CPS) Chicken Integration 84.49 - 19. Charoen Pokphand (USA), Inc. (CP USA) Broiler Integration (Operations wound up in March 2004) 99.95 98.89 20. CPF Europe S.A. (CPF EU) Importer and Distributor of Processed Meat and Food Product 99.99 99.99 21. CPF Tokyo Co., Ltd. (CPF TK ) Importer and Distributor of Processed Meat and Food Product 99.99 - 22. Fusion Foods Limited (FF) Importer and Distributor of Processed Meat and Food Product 52.00 52.00 Aquaculture Business 23 Thai Prawn Culture Center Company Limited Shrimp Farming and Shrimp (TPCC) Processing Plant 99.89 99.89 24. Klang Company Limited (KLANG) Shrimp Processing Plant 99.99 99.98 25. Chanthaburi Aquaculture Farm Company Limited (CAF) Shrimp Farming 99.99 99.99 26. Seafoods Enterprise Company Limited (SFE) Shrimp Processing Plant 99.99 99.99 27. Trad Prawn Culture Company Limited (TRAD) Shrimp Farming 99.91 99.91

Page 76: Annual Report'04 CPF (English)Annual Report CP

20

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Percentage of Direct and Indirect Holdings as Compared to Registered Share Capital Type of Business 2004 2003 28. Shrimp Improvement System (Thailand) Company Limited (SIST) Shrimp Hatchery Business 51.00 - 29. Pokphand Aquatech Company Limited (PAT) Aquatic Feed Production and Distribution 99.99 99.99 30. Savee Farming Company Limited (SAVEE) Shrimp Farming 99.84 99.84 31. Aqua – Agri Foods International, Inc. (AAFI) Importer and Distributor of Food Product 99.99 99.99 32. Aqua Beauty, Inc. (AQB) Importer and Distributor of Seafood Products 99.99 99.99 33. C.P. Aquaculture (Beihai) Co., Ltd. (CPB) Aquatic Feed Production and Distribution and Aquaculture Farming 100.00 100.00 34. C.P. Aquaculture (Hainan) Co., Ltd. (CPH) Aquatic Feed Production and Distribution and Aquaculture Farming 100.00 100.00 Other Business 35. CPF Training Center Company Limited (CPF TN) Training Center Service Provider 99.99 99.99 36. CPF IT Center Company Limited (CPF IT) Information Technology Service Provider 99.99 99.99 37. BKP Holdings Limited (BKPH) Investment 99.44 99.44 38. CPF Investment Limited (CPFI) Investment 100.00 100.00 During the year, 2003, the Company and subsidiaries invested in share capital of subsidiaries as follows:

Equivalent to Million Baht Share Capital / Increase Share Investment/ Capital/Increase during the Paid-up year as called

Name of Subsidiaries Invested in Countries Share Capital up/acquired Newly incorporated Aqua-Agri Foods International, Inc. (AAFI) United States of America 130 63 Universal Food and Marketing Company Limited (UF&M) Thailand 80 40 International Pet Food Company Limited (IPF) Thailand 10 2 C.P. Aquaculture (Hainan) Co., Ltd. (CPH) People’s Republic of China 125 125 Increase in share capital/ Increase paid-up share capital C.P. Aquaculture (Beihai) Co., Ltd. (CPB) People’s Republic of China 105 105 C.P. Food Product (Shanghai) Co., Ltd. (CPF SH) People’s Republic of China 21 21 CPF IT Center Company Limited (CPF IT) Thailand 150 90 CPF Training Center Company Limited (CPF TN) Thailand 10 5 Chareon Pokphand (USA), Inc. (CP USA) United States of America 879 724 Newly acquired common shares Chanthaburi Aquaculture Farm Company Limited (CAF) Thailand 40 56

Page 77: Annual Report'04 CPF (English)Annual Report CP

21

CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 During the year, 2004, the Company and subsidiaries invested in share capital of subsidiaries as follows:

Equivalent to Million Baht Share Capital / Increase Share Investment/ Capital/Increase during the Paid-up year as called

Name of Subsidiaries Invested in Countries Share Capital up/acquired Newly incorporated CPF Tokyo Co., Ltd. (CPF TK) Japan 37 37 Shrimp Improvement System (Thailand) Company Limited (SIST) Thailand 8 2 Increase in share capital C.P. Food Product (Shanghai) Co., Ltd. (CPF SH) People’s Republic of China 40 40 CPF Investment Limited (CPFI) British Virgin Islands 397 397 Vee Food Products Company Limited (VFP) Thailand 250 250 International Pet Food Company Limited (IPF) Thailand 57 57 Klang Company Limited (KLANG) Thailand 150 150 Seafoods Enterprise Company Limited (SFE) Thailand 100 100 Newly acquired common shares C.P. Standart Gida Sanayi ve Ticaret A.S. (CPS) Turkey 1,091 869 During the fourth quarter of 2003, CP USA planned to sell the majority of its fixed assets and, therefore, reduced the carrying value of the fixed assets to their net realizable value of Baht 1,235 million and presented the assets as “Assets held for sale” under “Other current assets” in the balance sheet as at December 31, 2003. On March 12, 2004, CP USA sold the above fixed assets and a substantial portion of inventories to Equity Group Eufaula Division, LLC., a company incorporated in United States of America which is a non-related party, for approximately USD 41 million (equivalent to Baht 1,621 million). With this CP USA received cash of approximately USD 37 million (equivalent to Baht 1,451 million) from the purchaser who then assumed liabilities under finance leases equivalent to USD 4 million (equivalent to Baht 169 million). The proceeds of the sale were used to reduce the outstanding debts payable to another subsidiary (CPFI). In addition, CP USA and CPFI plan to repay their long-term loans to the Company amounting to approximately USD 23.5 million (equivalent to Baht 957 million). The Company, therefore, classified the portion of long-term loans to be repaid by CP USA and CPFI as “Current portion of long-term loans to subsidiaries” under “Current assets” in the Company’s balance sheet. During the current year, the Company received repayment of USD 18.5 million (equivalent to Baht 758 million) from the subsidiaries and the remaining current portion as at December 31, 2004 amounted to USD 5 million (equivalent to Baht 195 million).

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 A summary of CP USA’s financial statements as of December 31, 2004 and 2003 and for the year ended December 31, 2004 and 2003 is as follows: In Million Baht 2004 2003 Total assets 298 2,144 Total liabilities 595 2,502 Shareholders’ equity ( 297) ( 358)Sales 1,582 4,537 Other incomes 46 146 Cost of sales 1,307 4,338 Selling and administrative expenses 209 402 Loss on impairment in fixed assets - 938 Interest expenses 58 163 Net profit (loss) 54 (1,158) On November 12, 2003, the Board of Directors of a subsidiary (CPFI) resolved to purchase the common shares of C.P. Standart Gida Sanayi ve Ticaret A.S. (CPS) from Charoen Pokphand Development (Turkey) Limited (CPD), comprising 16,898,568,000 shares with a total value of USD 22 million (84.49% of shareholding). The subsidiary paid CPD for an initial share purchase of 16,654,221,669 shares with a total value of USD 21,681,900 (equivalent to Baht 856 million) on January 29, 2004 (acquisition date) and the remaining 244,346,331 shares (1.22%) with a total value of USD 318,100 (equivalent to Baht 13 million) in May 2004. Consequently, CPFI has an 84.49% shareholding in CPS. The Company recognized investments in CPS of a subsidiary in the Company’s financial statements by the equity method and the financial statements of CPS are used in preparation of consolidated financial statements for the year ended December 31, 2004 using the purchase method since acquisition date. As the consequence of acquiring the new subsidiary, the balances of the consolidated balance sheet and statement of income for the year ended December 31, 2004 have significantly increased from those of the comparative consolidated statement of income for the year ended December 31, 2003, as follows: In Million Baht Sales 9,867 Other income 53 Cost of sales 8,693 Selling and administrative expenses 1,088 Interest expenses 35 Gain on net monetary position 15 Income tax credit 10 Net profit of minority interest in subsidiary (16) Net profit 87 Amortization of negative goodwill 65

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 During 2004, the Board of Directors of the Company and subsidiaries resolved to invest in the following newly incorporated companies: 1) Calibre Nature (M) Sdn. Bhd. was established during December 2004 in Malaysia to engage in aquaculture business. The share capital of the new company will be MYR 5 million, equivalent to Baht 55 million, which will be wholly held by the Company. As at the balance sheet date the share capital has not been called up. 2) CP-Yonekyu Company Limited to be established in Thailand to engage in processing meat business utilizing Yonekyu’s technology production, research and development process. The share capital of the new company will be Baht 200 million, of which 80.5% will be held by the Company and 19.5% will be held by Yonekyu Corporation, a company listed on the Stock Exchange of Tokyo. The registration of incorporation is completed in January 2005. 3) Charoen Pokphand Foods (UK) Limited to be established in United Kingdom to engage in cold storage business for producing ready-to-eat chilled products. The share capital of the new company will be Pounds Sterling 1 million, equivalent to Baht 75 million, of which 100% will be wholly held by a foreign subsidiary (CPF EU). The registration is expected to be completed in March, 2005. Significant transactions between the Company and its subsidiaries have been eliminated in the consolidated interim financial statements. The Company’s financial statements represent only the accounts of Charoen Pokphand Foods Public Company Limited. The Company has recorded investments in subsidiaries and associated companies by the equity method. The Company and the subsidiaries also recorded investments in associated companies in the consolidated financial statements by the equity method. The financial statements of subsidiaries and associated companies, which are included and used as the basis in preparation of the consolidated financial statements and recording the investments by the equity method in the consolidated financial statements and the Company’s financial statements, have been audited by the Company’s auditor except as follows: 1) The consolidated financial statements for the year 2004 include the financial statements of eight foreign subsidiaries and the investment in four foreign associated companies which have been audited by other auditors. The total of the subsidiaries’ assets and the investment in associated companies recorded by the equity method amounted to Baht 8,981 million as of December 31, 2004 and the subsidiaries’ total revenues for the year ended December 31, 2004 amounted to Baht 14,057 million and the equity in net profit for the year then ended of the associated companies amounted to Baht 332 million. The consolidated financial statements for the year 2003 presented herein for comparative purpose include the financial statement of six foreign subsidiaries and the investment in four foreign associated companies which have been audited by other auditors. The total of these subsidiaries’ assets and the investment in these associated companies recorded by the equity methods amounted to Baht 5,769 million as of December 31, 2003 and the subsidiaries’ total revenues and the equity in net profit/(loss) for the year then ended of the associated companies amounted to Baht 6,145 million and Baht (76) million. 2) The Company’s financial statements recorded the investment in the above subsidiaries and the associated companies by the equity method amounting to Baht 5,707 million and Baht 3,306 million as of December 31, 2004 and 2003, respectively. The equity in net profit/(loss) of the subsidiaries and associated companies for the years then ended amounted to Baht 337 million and Baht (148) million, respectively.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 3. THE COMPANY AND SUBSIDIARIES’S RESULTS OF OPERATIONS Before and subsequent to the 2003 financial year, the poultry industry has been effected by the outbreak of Avian Influenza (“Bird flu”). However, during 2004 the Bird flu situation has been mitigated and is now nearly back to normal with the relevant authorities closely monitoring for recurrence of the outbreak. The financial statements reflect the management’s current assessment of the impact of this situations on the Company’s financial statements and the consolidated financial statements for the years ended December 31, 2004 and 2003. Actual results could differ from management’s current assessments and such differences could be material. 4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Basis of consolidation The consolidated financial statements of the Company comprise the Company and its subsidiaries and the Company and subsidiaries’ interest in associated companies. Subsidiaries Subsidiaries are those entities controlled by the Company. Control exists when the Company has the power, directly or indirectly through other subsidiaries, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates Associates are those entities in which the Company has, directly or indirectly through subsidiaries, significant influence, but not control, over the financial and operating policies. The consolidated financial statements include the share of the total recognized gains and losses of associates on an equity accounted basis, from the date that significant influence commences until the date that significant influence ceases. When the Company’s and subsidiaries’ share of losses is either equivalent to or exceeds their interest in an associate, the recognition of losses is accounted for only equivalent to the carrying amount of the investment. Further recognition of losses is discontinued except to the extent that the Company and/or subsidiaries have incurred legal or constructive obligations or made payments on behalf of an associate. 4.2 Use of estimates In order to prepare financial statements in conformity with generally accepted accounting standards in Thailand, management requires to make estimates and set assumptions on the reported amounts of assets, liabilities and the disclosure of contingent liabilities. These estimates may impact revenues, expenses, assets and liabilities. Actual outcomes may, therefore, differ from the estimates used.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 The estimates and underlying assumptions used in the preparation of these financial statements are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. 4.3 Foreign currencies Foreign currency transactions Transactions in foreign currencies are translated at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported using the exchange rates ruling at that balance sheet date. Foreign exchange differences arising on translation are recognized in the statement of income. Non-monetary assets and liabilities denominated in foreign currencies that are stated at historical cost are reported using the exchange rates ruling at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are reported using the exchange rates ruling at the date that fair value was determined. Foreign entities The assets and liabilities of foreign entities, except for foreign entities in hyperinflationary economies, are translated to Thai Baht at the exchange rates ruling at the balance sheet date. The revenues and expenses of these foreign entities are translated to Thai Baht at rates approximating the exchange rates ruling at the dates of transactions. For foreign entities in hyperinflationary economies, prior to translating the financial statements of these foreign entities the financial statements, including comparatives, are restated based on relevant price indices at the balance sheet date to account for changes in the general purchasing power of the local currency. Then their restated financial statements are translated to Thai Baht at the exchange rates ruling at the balance sheet date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are stated at exchange rates ruling on transaction dates. Foreign exchange differences arising on translation of foreign entities are recognized in a separate component of equity until disposal of the investments. Where monetary items, in substance, form part of the Company’s net investment in a foreign entity, and settlement of which is neither planned nor likely to occur in the foreseeable future, foreign exchange differences arising on such monetary items and related hedges are recognized directly in a separate component of equity until disposal of the investment.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 4.4 Cash and Cash Equivalents Cash and cash equivalents includes cash on hand and cash balances, call deposits and highly liquid short-term investments including bank overdrafts which are repayable on demand and form part of cash management . Cash restricted in use is shown as other non-current assets. 4.5 Trade and Other Receivable Trade and other receivable (including balances with related parties) are stated at their invoice value including debit and credit note amount less allowance for doubtful accounts. The allowance for doubtful accounts is assessed primarily on analysis of payment histories and future expectations of customer payments. Bad debts are written off after performing procedures prescribed in the Revenue Codes. 4.6 Inventories Finished goods, pigs, poultry and ducks for sale and raw materials are valued principally at the lower of average cost and net realizable value. Work in process is valued principally at the lower of cost and net realizable value. Breeding pigs, poultry, duck and others and milking cows are valued at cost less amortization. Chemicals, medicals and factory supplies are valued principally at the lower of average cost and net realizable value. 4.7 Investments Investments in associated companies presented separately in the consolidated balance sheet, and investments in subsidiaries and associated companies presented separately in the Company’s balance sheet, are valued by the equity method. Investments in marketable securities of non-subsidiaries and/or non-associated companies, held as available-for-sale securities, are valued at fair value. Unrealized holding gain or loss, net of deferred tax, is recorded as part of “Shareholders’ Equity” in the balance sheet and is reversed with relevant accounts upon disposal and the gain or loss is recognized in the statement of income. Investments in non-marketable securities of related companies and other companies that are non-subsidiaries and/or non-associated companies, held as “General investments” are valued at cost less any impairment loss. Cost of investments sold during the years is calculated by the weighted-average method.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 4.8 Property, Plant and Equipment Owned assets Land used in operations and land held for future projects which were acquired before 1999 are stated at revalued amount. The revaluation increment in land is shown net of deferred tax under “Shareholders’ Equity” in the balance sheet. The losses on land devaluation are recorded as expenses in the statement of income. Land acquired since the year 1999 is stated at cost. However, land of certain subsidiaries acquired before the year 1999 is stated at cost totalling Baht 185 million. The subsidiaries did not revalue this land because the subsidiaries considered that the difference between revaluation and cost is not significant to the overall financial statements. Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Assets held for sale are presented separately in the balance sheet at net realizable value. Leased assets Leases in terms of which the Company and subsidiaries substantially assume all or almost of the risk and rewards of ownership from the lessor are classified as finance leases. Property, plant and equipment acquired by way of finance leases is capitalized at the lower of its fair value at the inception of the lease and the present value of the minimum lease payments , less accumulated depreciation and impairment losses. Lease payments are apportioned between reduction of the lease liability and the finance charges, which are allocated to periods during lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Finance charges are charged directly to the statement of income. Revalued assets Any increase in the value of assets, on revaluation, is credited net of deferred tax to the revaluation reserve unless it offsets a previous decrease in value recognized in the statement of income. A decrease in value is recognized in the statement of income to the extent it exceeds an increase in value previously recognized, if any, in the revaluation reserve in respect of the same assets. Upon disposal any related revaluation surplus is transferred directly from the revaluation reserve to retained earnings. Depreciation The Company and subsidiaries depreciate their property, plant and equipment by the straight-line method over the estimated useful lives of the assets as follows: Years Utilities system 5 - 40 Buildings and construction 20 - 50 Building improvements and leasehold improvements 1 - 20 Water and electricity system 5 - 10 Machinery and equipment 4 - 15 Furniture, fixtures and office equipment 3 - 15 Vehicles 2 - 10 No depreciation is provided on freehold land. An asset under construction is depreciated when the asset is ready for its intended use.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 4.9 Impairment of Assets The carrying amounts of the Company’s and subsidiaries’ assets, other than inventories and deferred tax assets subject specific guidance, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. Whenever the carrying amount of an asset exceeds its recoverable amount, its carrying amount is reduced to the recoverable amount. Such reduction is recognized as an impairment loss in the statement of income. When a decline in the fair value of an available-for-sale financial asset has been recognized directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognized directly in equity is removed from equity and the impairment loss on that asset is recognized in the statement of income. The amount of the impairment loss is the difference between the acquisition cost and recoverable amount of that financial asset. Calculation of recoverable amount The recoverable amount is the higher of the asset’s net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows independently from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Reversals of impairment An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount to reflect an increase in the estimated service potential of an asset. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. All reversals of impairment losses are recognized in the statement of income. 4.10 Intangible Assets Goodwill and Negative Goodwill The excess of cost over equity in net assets of subsidiaries on the business acquisition date is recognized as “Goodwill” which is stated at cost less accumulated amortization. Goodwill is amortized as expense by the straight-line method over a period of twenty (20) years. The excess of equity in net assets of subsidiaries over cost is recognized as “Negative Goodwill” which is stated at cost less accumulated amortization. Negative Goodwill is amortized as income over the weighted-average of the remaining useful lives of building and equipment of each subsidiary. Goodwill and negative goodwill, net of accumulated amortization, are presented as “Negative Goodwill - net” as a reduction from assets in the consolidated balance sheet. Amortization of goodwill as expense and of negative goodwill as income are recorded as part of “Other income” in the statement of income. Development Cost of Software Application Development cost of software application is capitalized and treated as an intangible asset if the cost is not an integral part of the related tangible asset. The cost is recognized when it is identifiable and can be measurable reliably and it is probable that the future economic benefits that are attributable to the asset will flow to the Company for more than one year. The cost is amortized on a straight-line basis over the estimated useful life of ten (10) years.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Expenditure that enhances or extends the performance of a development application beyond its original specifications is recognized as an intangible asset and is amortized using straight-line basis over its estimated useful life. Software License Software license is recorded as intangible assets and amortized by using the straight-line method over the estimated useful life of ten (10) years. Research and Development Cost The cost of research and development is recorded in the statement of income as incurred. Intangible assets are recognized in the balance sheet if it is probable that the future economic benefits that are attributable to the asset will flow to the Company or subsidiaries over more than one year. 4.11 Trade and Other Payables Trade and other payables (including balances with related parties) are stated at cost. 4.12 Interest-Bearing Borrowings Interest-bearing borrowings are recognized at face value. The difference between proceeds and redemption value is deferred and recognized in the statement of income over the period of the borrowing. Attributable transaction charges are recognized as expenses in the period incurred. 4.13 Provisions A provision is recognized in the balance sheet when the Company and subsidiaries have a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the effect of the time value of money is material, provisions are determined by using the present value of the expenditure expected to be required to settle the obligation. 4.14 Revenue Revenue, excluding value added taxes or other additional taxes charged to the selling price, is arrived after deduction of trade discounts. Sale of goods and services rendered Revenue from the sale of goods is recognized in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer with the condition that the amount of revenue and costs can be measured reliably and the economic benefits associated with the transaction will probably flow to the Company and subsidiaries. Revenue from services rendered is recognized when the amount of revenue reference to the stage of completion of the transaction at the balance sheet date can be measured reliably. When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue is recognized only to the extent of the expenses recognized that are recoverable. Rental income Rental income is recognized in the statement of income on a straight-line basis over the term of the lease.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 4.15 Expenses Operating leases Payments made under operating leases are recognized in the statement of income on a straight line basis over the term of the lease. Finance lease payments Minimum lease payments are apportioned between the reduction of the outstanding liability and the finance charge. The finance charge is allocated and charged to the statement of income for each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Other income and expenses Interest income is recognized in the statement of income on the accrual basis. Dividend income is recognized in the statement of income when the shareholder’s right to receive payment is established. Interest expenses and similar costs are charged to the statement of income on the accrual basis. 4.16 Income Taxes Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the statement of income except to the extent that it relates to items recognized directly in equity. Current tax Current tax is the expected tax payable on the taxable income for the year in accordance to the Revenue Codes, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax Deferred tax account comprises deferred tax liabilities and deferred tax assets. Deferred tax liabilities are the amounts of income taxes payable in the future periods in respect of taxable temporary differences, which are differences between the carrying amounts of assets and liabilities in the balance sheet and their tax bases. To this extent, a goodwill amortization which is not deductible for tax purpose, the initial recognition of an asset or liability which is not arising from business acquisition and affects neither accounting nor taxable profit, and interests in investment in subsidiaries to the extent that they will probably not reverse in the foreseeable future are not accounted for temporary differences. Deferred tax assets are the amounts of income taxes recoverable in the future periods in respect of deductible temporary differences, which are differences between the carrying amounts of assets and liabilities in the balance sheet and their tax bases. The deferred tax assets are recognized only to the extent the future taxable profit will probably be available against the deductible temporary differences can be utilized. Deferred taxes are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled, based on tax rates that have been enacted or substantively enacted by the balance sheet date.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 4.17 Financial Instruments, Derivatives and Hedging Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalents, investment in equity securities, trade receivable and payable, other accounts receivable and payable, short-term loan, short-term borrowing and debentures. The accounting policies on recognition and measurement of these items are disclosed in the respective accounting policies. The Company and subsidiaries are exposed to market risks from changes in foreign exchange rates, interest rates and credit. The Company and subsidiaries use derivative financial instruments to mitigate those risks, but have no policy to speculate in or engage in the trading of any derivatives. Hedge of future foreign currency transactions The Company and subsidiaries have a policy to mitigate the foreign exchange risk by entering into forward exchange contracts covering foreign currency monetary transactions. In this regard, all monetary transactions are translated into Thai Baht at the rates prevailing at balance sheet date, adjusted by net receivables/payables arising from the related forward exchange contracts and the remaining deferred forward premium/discount. The related forward premium/discount is recorded as income/expense over the forward contract term. The amortized forward premium/discount and gains /losses on the forward exchange contracts covering foreign currency monetary transactions are offset against the related exchange losses or gains on the foreign currency monetary transactions being hedged. For the hedges of anticipated future transactions, the Company and subsidiaries recognize gains and losses on forward exchange contracts and the related forward premium/discount as expenses or income in the statements of income only when such transactions are completed. Hedge of interest rates Interest differentials under swap arrangements are accrued in proportion to the interval of time and relevant underlying notional principal and recorded in the statement of income as adjustments to the interest expense relating to the hedged loans. 4.18 Segment reporting Segment information is presented in respect of both business and geographical segments. The primary format, business segments, is based on the management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly income-earning assets and revenue, interest-bearing loan and expenses, share of profits or losses of associated companies accounted for by the equity method and corporate assets, expenses and income tax. Segment capital expenditure represents the segment operating assets, while other assets comprise cash and bank deposits, short-term investments, accounts receivable, inventories, long-term investments and others.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Business segments The Company and subsidiaries, operations are divided into two business segments: 1. Aquaculture Business - involves aquaculture feed production, farming and food processing, of which the products are for sale both domestically and overseas 2. Livestock Business - involves livestock feed production, farming, and food processing, of which the products are for sale both domestically and overseas. Geographical segments Operating units of the Company and subsidiaries are mainly located in Thailand. Portions of products produced from these units are exported directly or indirectly through foreign subsidiaries to external customers mainly located in Europe, Asia and America. Certain operating units of subsidiaries are located in foreign countries e.g. People’s Republic of China and Turkey. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets. 4.19 Earnings per Share Basic earnings per share is determined based on the net profit for the year divided by the weighted-average number of shares outstanding during the year, net of shares held in treasury. The shares held in treasury are common shares of the Company which are held by subsidiaries and almost of them were acquired before the Company had control over these subsidiaries. Subsequent acquisitions were only from the exercise of rights, which the subsidiaries received being shareholders. Diluted earnings per share is determined based on the net profit for the year divided by the above basic number of shares plus the additional weighted-average number of common shares which would be issued during the year to the holders of common share equivalents. Common share equivalents are warrants which offer the right to purchase the common shares of the Company at a price lower than the fair value for each presented year. In this computation, the Company assumes that the exercise of the potentially dilutive common shares had occurred at the later of the beginning of the year or the date the warrant was issued. 5. TRANSACTIONS WITH RELATED COMPANIES The Company has Charoen Pokphand Group Company Limited as a controlling shareholder and has subsidiaries and associated companies as disclosed in Note 9. A portion of sales, other income, purchases, selling and administrative expenses and interest expense arose from transactions with subsidiaries, associated and certain related companies. These companies are related through major common shareholdings and/or directorships with controlling or significant influence in making financial and operating decisions. The price and benefit of the significant transactions with such companies are based on general market prices or based on the price indicated in the agreements as summarized below;

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003

Type of Transaction Pricing Policy Sales of goods The price list of the Company Purchases of goods The price list of the suppliers Fixed assets Fair value Investment Fair value Interest Income Source of fund cost plus administrative expenses Rent and service fee Standard rates as specified by the lessors Technical service fee Rate per quantity of feed production Insurance premium Standard rates as specified by the insurers Account balances of assets and liabilities as at December 31, 2004 and 2003, arising from trade, long-term investments and other transactions with the subsidiaries, associated and related companies are shown separately in the balance sheets. The components of loans and long-term investments are detailed separately in Notes 7 and 9. The balances of receivable and payable to subsidiaries, associated and related companies as at December 31, 2004 and 2003 are as follows: In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Accounts Receivable Subsidiaries - Bangkok Produce Merchandising Public Company Limited (BKP) - - 335 160 - Bangkok Livestock Processing Company Limited (BLP) - - 166 21 - Seafoods Enterprise Company Limited (SFE) - - 131 56 - Thai Prawn Culture Center Company Limited (TPCC) - - 87 11 - Vee Food Products Company Limited (VFP) - - 82 - - B.P. Feedmill Company Limited (BPF) - - 61 73 - Bangkok Agro-Industrial Products Public Company Limited (BAP) - - 55 37 - Klang Company Limited (KLANG) - - 44 5 - Charoen Pokphand Northeastern Public Company Limited (CPNE) - - 36 87 - Bangkok Feedmill Company Limited (BFM) - - 36 54 - C.P. Agro - Industry Company Limited (CPAI) - - 27 37 - Pokphand Aquatech Company Limited (PAT) - - 12 53 - Rajburi Feedmill Company Limited (RBF) - - 11 36 - Others - - 6 13 Total - - 1,089 643

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Associated and related companies - S.W.T. Company Limited 268 244 95 89 - C.P. Intertrade (Korea) Co., Ltd. 179 180 - - - Sea Farm Company Limited 118 80 30 53 - Ek-Chai Distribution System Company Limited 93 61 1 - - Bangkok Aquaculture Farm Company Limited 85 141 62 92 - Allianz C.P. General Insurance Company Limited 80 1 70 - - Charoen Pokphand Intertrade Singapore (Pte) Ltd. 77 120 - - - C.P. Interfood (Thailand) Company Limited 67 184 17 1 - Star Marketing Company Limited 59 16 - - - Chester’s Food Company Limited 37 63 - - - Siam Makro Public Company Limited 36 16 - - - Nakhon Aquaculture Farm Company Limited 31 20 31 13 - C.P. Cambodia Co., Ltd. 18 35 - - - Charoen Pokphand Intertrade South Africa (Pty) Ltd. 14 164 - - - Others 113 148 24 20 Total 1,275 1,473 330 268

Accounts Payable Subsidiaries - Bangkok Produce Merchandising Public Company Limited (BKP) - - 63 424 - Pokphand Aquatech Cmpany Limited (PAT) - - 36 26 - Bangkok Feedmill Company Limited (BFM) - - 35 45 - Charoen Pokphand Northeastern Public Company Limited (CPNE) - - 23 26 - Bangkok Livestock Processing Company Limted (BLP) - - 5 52 - Rajburi Feedmill Company Limited (RBF) - - 4 44 - Others - - 32 56 Total - - 198 673

Associated and related companies - Charoen Pokphand Group Company Limited 84 314 36 109 - C.P. Interfood (Thailand) Company Limited 62 28 - - - C.P. Poly - Industrial Company Limited 52 51 17 14 - K.S.P. Equipments Company Limited 41 15 16 3 - PT Centralpertiwi Bahari 35 39 - - - C.P. Intertrade Company Limited 34 26 4 4 - Bangkok Aquaculture Farm Company Limited 32 58 19 32 - Sea Farm Company Limited 31 17 - 2 - True Fleet Management Company Limited (Formerly W 7 Rental Services Company Limited) 31 18 17 8 - Kasetphand Industry Company Limited 30 61 16 14 - Arbor Acres Thailand Company Limited 9 25 4 16 - C.P. Vietnam Livestock Co., Ltd. 6 118 - - - Bangkok Vet Drug Company Limited - 33 - 6 - Others 99 78 31 34 Total 546 881 160 242

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Sales and purchases, other income and expenses arose from transactions with subsidiaries, associated and related companies for the years ended December 31, 2004 and 2003 are summarized as follows: In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Sales Subsidiaries - Bangkok Produce Merchandising Public Company Limited (BKP) - - 3,604 4,321 - Pokphand Aquatech Company Limited (PAT) - - 959 1,469 - B.P. Feedmill Company Limited (BPF) - - 951 938 - Charoen Pokphand Northeastern Public Company Limited (CPNE) - - 646 511 - Bangkok Livestock Processing Company Limted (BLP) - - 607 137 - C.P. Agro-Industry Company Limited (CPAI) - - 542 415 - Seafoods Enterprise Company Limited (SFE) - - 536 2,283 - Bangkok Agro-Industrial Products Public Company Limited (BAP) - - 408 343 - Thai Prawn Culture Center Company Limited (TPCC) - - 371 3,480 - Klang Company Limited (KLANG) - - 239 790 - Others - - 803 588 Associated and related companies - Ek-Chai Distribution System Company Limited 561 418 5 1 - C.P. Interfood (Thailand) Company Limited 488 577 23 - - C.P. Intertrade Company Limited 371 83 2 8 - Star Marketing Company Limited 329 162 - - - Charoen Pokphand Intertrade Singapore (Pte) Ltd. 293 472 - - - S.W.T. Company Limited 288 127 133 15 - Charoen Pokphand Intertrade South Africa (Pty) Ltd. 248 414 - - - C.P. Intertrade (Korea) Co., Ltd. 205 318 - - - Siam Makro Public Company Limited 164 143 - - - Sea Farm Company Limited 134 111 33 68 - Charoen Pokphand Group Company Limited 127 143 - - - Chester’s Food Company Limited 102 121 - - - Bangkok Aquaculture Farm Company Limited 62 270 37 128 - CP-Meiji Company Limited 60 56 49 49 - Others 555 602 171 105 Total 3,987 4,017 10,119 15,649

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Purchases of raw materials Subsidiaries - Bangkok Produce Merchandising Public Company Limited (BKP) - - 4,253 3,419 - Pokphand Aquatech Company Limited (PAT) - - 957 623 - Bangkok Feedmill Company Limited (BFM) - - 527 515 - Charoen Pokphand Northeastern Public Company Limited (CPNE) - - 375 333 - Rajburi Feedmill Company Limited (RBF) - - 288 167 - Others - - 492 377 Associated and related Companies - C.P. Trading Co., Ltd 5,142 3,057 299 196 - Charoen Pokphand Group Company Limited 4,269 5,419 1,746 2,474 - C.P. Poly-Industrial Company Limited 470 - 163 - - C.P. Interfood (Thailand) Company Limited 458 347 - - - PT Centralpertiwi Bahari 398 232 - - - C.P. Retailing and Marketing Company Limited 224 93 - - - Sea Farm Company Limited 193 183 4 20 - Bangkok Aquaculture Farm Company Limited 179 339 110 97 - C.P. Vietnam Livestock Co., Ltd 119 163 - - - C.P. Intertrade Company Limited 114 65 10 - - Nakhon Aquaculture Farm Company Limited 93 79 6 - - S.W.T. Company Limited 81 11 80 7 - Arbor Acres Thailand Company Limited 65 152 13 58 - Bangkok Fisheries Company Limited 56 87 22 29 - C.P. Packaging Industry Company Limited 54 - 1 - - Others 353 354 35 17 Total 12,268 10,581 9,381 8,332 Other income Dividend income 52 80 665 478 Gain on disposal of fixed assets 3 5 2 2 Training and seminar service income 4 3 - - Interest income on loans (See Note 7) - - 224 419 Rental income 13 10 5 4 Total Other Income 72 98 896 903

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Expenses Technical services fees - Charoen Pokphand Group Company Limited 179 195 64 60 Insurance expenses - Allianz C.P. General Insurance Company Limited and Ayudhya Allianz C.P. Life Public Company Limited 174 155 56 40 Software application service fee 14 4 45 27 Rental and service charges 509 506 207 254 Total Expenses 876 860 372 381

Equity in net profit of investment in subsidiaries and associated companies 721 511 2,530 2,286

Equity in net loss of investment in subsidiaries and associated companies 3 244 822 1,426 Others During January 2003, a foreign subsidiary (CP USA) announced that it would be shutting down the operations of its processing plant. Following to this decision, CP USA sold the majority of equipment of the discontinued operation to another subsidiary (CP FOOD) for a sale price of USD 4 million and there was not material gain or loss to CP USA. During 2000, three subsidiaries sold their investments in marketable securities of a related company to the Company at the closing price of the Stock Exchange of Thailand on the day before the date of Share Purchase and Sale Agreement, totalling Baht 1,199 million. The three subsidiaries have a recorded gain on sale of investments totalling Baht 902 million which was eliminated in the consolidated financial statements and the Company’s financial statements. On the same date, the Company assigned the acquired marketable securities to another subsidiary as a payment in lieu of cash for the newly issued shares of such foreign subsidiary at the same value of the acquisition price of those marketable securities. The foreign subsidiary, sold a part of such investments to unrelated buyers with a cumulative gain on sale to December 31, 2004 and 2003 of approximately Baht 487 million and 449 million, respectively, which are presented in the consolidated statements of income for the years ended 2004 and 2003 amounting to Baht 37 million and Baht 27 million, respectively. In August 2003, a subsidiary (CPF IT) entered into an agreement with Infotech Vision Co., Ltd. (IFT), which is a related company, relating to the services and the implementation of a human resource management application. The fee for using this software application is divided into 2 parts. The first part is a one time charge for the first implementation of the application amounting to approximately Baht 39 million. The second part is an annual charge at the rate of Baht 2,400 per employee totalling approximately Baht 19 million per annum. The term of the agreement is for three (3) years, which is automatically renewed if the subsidiary does not cancel the agreement. As at December 31, 2003, the subsidiary has paid the entire software application fee and presented this as part of “Intangible Assets”. In the same month, another subsidiary (CPH) entered into an agreement to lease a feedmill factory including various machinery and equipment of Hainan Chia Tai Animal Husbandry Co., Ltd., which is a related company, at the annual lease of RMB 5.06 million (equivalent to Baht 24.2 million). The term of the agreement is for five (5) years and the lessee has an option to renew the lease at the end of the lease period.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In October 2003, the Company acquired the common shares of Chanthaburi Aquaculture Farm Company Limited (CAF) from its 2 preceding shareholders (also related companies) C.P. Intertrade Company Limited and Sea Farm Company Limited for 3,069,994 shares at Baht 17 each totaling Baht 52.2 million.

In November 2003, the Company acquired the investment in shares of CP USA from BKP, a subsidiary, for 134.5 million shares at Baht 0.114 each totalling Baht 15.3 million. The intercompany gain/loss on sales of investment has been eliminated from the consolidation preparation.

As described in Note 2 to financial statements in January 2004 a subsidiary (CPFI) purchased the common shares of C.P. Standart Gida Sanayi ve Ticaret A.S. (CPS) from Charoen Pokphand Development (Turkey) Limited (CPD), a related company, comprising 16,898,568,000 shares with a total value of USD 22 million (84.49% of shareholding). The subsidiary has already paid CPD for the share purchase in 2004.

On September 23, 2004, the Board of Directors of Bangkok Livestock Processing Company Limited (BLP) and the Company resolved to approve BLP entering into an agreement with Star Marketing Company Limited (STAR) (a subsidiary of Chareon Pokphand Group Company Limited). Under the agreement, BLP shall pay STAR approximately Baht 40 million for the purchase of machines, equipment, vehicles and others and the annual fee at 2% of total sales deriving from this business in exchange for the right to use all current trademarks of STAR and product research and development services for the period of 3 years. The acquisition is completed in January 2005.

On November, 2004, the Board of Directors of the Company resolved the Company to invest directly in shares of two subsidiaries (KLANG and TPCC), comprising 7.35 million shares at Baht 14 each amounting to Baht 102.9 million and 557,993 shares at Baht 220 each amounting to Baht 122.8 million, respectively from BLP and BKP which are subsidiaries. The gains on sale of investment between the Company and its subsidiaries have been eliminated in the consolidated financial statements. Expenses in the consolidated and the Company financial statements derived from the following agreements:

Technical Service Agreement

The Company and certain subsidiaries hired a related company, Charoen Pokphand Group Company Limited (CPG), to research and develop the raw material ingredients for animal feed manufacturing. The agreements stipulated a service fee which was calculated from the production quantity of the Company and subsidiaries, dependent upon the type of feed. The minimum fee ranges from Baht 100,000 to 1,200,000 per month. The term of the agreements are for a period of three (3) years.

Rental and Service Agreements

The Company and certain subsidiaries have long-term lease agreements covering office premises, facilities and service with related companies, C.P. Land Company Limited and C.P. Plaza Company Limited and also covering vehicles with certain related companies for a period of 3 years expiring in 2005 to 2007. The annual rental and service charges approximate Baht 469 million. The rental and service charge rates are not different from the rates charged to non-related companies with a similar rental and service profile. Under the terms of the lease agreements, the Company and subsidiaries have an option to renew the lease term of office premises by giving the lessors a prior written notice at least four months before the expiration of lease agreements. In addition, the Company has three lease agreements covering the farms with two subsidiaries for a period of 1-3 years. Under the term of the lease agreements, the Company has an option to renew the lease term automatically without giving notice in advance. The annual rental charge amounted to approximately Baht 21 million.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Hire-of-work Agreements The Company and certain subsidiaries have several hire-of-work agreements to construct/install buildings, structures and others with certain related companies with a total contract price of approximately Baht 304 million. During 2004, the Company and subsidiaries have paid Baht 256 million in accordance with the agreements. 6. TRADE ACCOUNTS RECEIVABLE As at December 31, 2004 and 2003, the problem accounts receivable classified by aging are shown below: In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Periods over credit-term: Over 3 months - 6 months 21 34 1 9 Over 6 months - 12 months 19 31 2 8 Over 12 months 199 145 14 4 Total 239 210 17 21 Allowance for doubtful accounts 252 221 15 21 The management of the Company and subsidiaries believe that the allowance for doubtful accounts is adequate to cover possible losses which may arise from non-collectable receivables. 7. LOANS TO SUBSIDIARIES In Million Baht The Company Only 2004 2003 Accrued Interest Income Bangkok Livestock Processing Company Limited (BLP) 4 4 Bangkok Produce Merchandising Public Company Limited (BKP) - 12 Bangkok Agro-Industrial Products Public Company Limited (BAP) 9 9 Bangkok Feedmill Company Limited (BFM) 5 13 Klang Company Limited (KLANG) - 6 Charoen Pokphand Northeastern Public Company Limited (CPNE) 1 6 Seafoods Enterprise Company Limited (SFE) 2 3 Rajburi Feedmill Company Limited (RBF) - 5 CPF Investment Limited (CPFI) 7 10 Charoen Pokphand (USA), Inc. (CP USA) 6 8 Total accrued interest income 34 76

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht The Company Only Average Outstanding 2004 2003 Balance Long-Term Loans to Subsidiaries Bangkok Agro - Industrial Products Public Company Limited (BAP) 1,218 623 813 Bangkok Livestock Processing Company Limited (BLP) 800 450 458 Bangkok Feedmill Company Limited (BFM) 710 850 652 Seafoods Enterprise Company Limited (SFE) 400 500 425 Charoen Pokphand Northeastern Public Company Limited (CPNE) 300 380 228 C.P. Food Products Company Limited (CP FOOD) 100 - 8 Vee Food Products Compan Limited (VFP) 100 - 8 Bangkok Produce Merchandising Public Company Limited (BKP) - 650 158 Klang Company Limited (KLANG) - 375 96 Rajburi Feedmill Company Limited (RBF) - 310 148 Charoen Pokphand Industry Company Limited (CPIN) - - 25 C.P. Aquaculture (Beihai) Co., Ltd. (CPB) 78 79 80 Charoen Pokphand (USA), Inc. (CP USA) 533 1,073 762 CPF Investment Limited (CPFI) 545 749 713 Total long-term loans to subsidiaries 4,784 6,039 4,574 Less current portion (1,511) (1,725) Long-term loans to subsidiaries - net 3,273 4,314 The Company computes the average movement from the outstanding balance excluding accrued interest income at the end of each month. The long-term loans to foreign subsidiaries (CP USA and CPFI) bear interest at the lower of the MOR rate of a local bank or the maximum legal interest rate. During the year 2001, the Company received the cash from issuing the new debentures amounting to Baht 7 billion as mentioned in Note 15. The Company, therefore, restructured the finances of the Company and subsidiaries by granting long-term loans to certain subsidiaries in the same period totalling Baht 6.1 billion. The long-term loans are repayable in installments. The first installment at the rate of 15% of the loan principal will be within the thirtieth month from the loan drawdown date and subsequently in 5 semi-annual installments at the rate of 17% of the loan principal. The loans bear interest at the rates mentioned in the agreements. However, certain subsidiaries made early partial repayments of the loans totalling Baht 1,100 million in 2003 and Baht 619 million in 2004. In 2002, the Company granted long-term loans to 3 subsidiaries (SFE, BKP and BLP) totalling Baht 1,200 million. These long-term loans are repayable in 5 equal installments of loan principal payable semi-annually. The first installment will be payable by October 2005 with subsequent installments payable semi-annually. The loans bear interest at an average of minimum - maximum interest rate of 6-month fixed deposit of Thai Banks plus 1% p.a. However, certain subsidiaries made partial repayment of the loan before their due date totalling Baht 150 million in 2003, and Baht 500 million in 2004.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In addition, in 2002, the Company granted long-term loans to a foreign subsidiary (CPB) of USD 2 million. The long-term loan is repayable in semi-annual installments of USD 200,000 each. The first installment will be in May 2005 with subsequent installments payable semi-annual. The loan bears interest at an average of minimum-maximum interest rate of 6-month fixed deposit of Thai Banks plus 3% p.a.. In 2003, the Company granted long-term loans to 2 subsidiaries (BAP and BLP) totalling Baht 400 million. Each loan is repayable in semi-annual installments of 25% of the loan principal. The first installments were payable in September 2004. Interest is payable semi-annual from March 2004 and the interest rates are at 6.25% p.a. for the first repayment and at the interest rate of 6-month fixed deposit for natural person of a certain bank plus 3.5% p.a. for the subsequent repayments. During the first quarter of 2004, the Company granted long-term loans to 2 subsidiaries (BAP and CPIN) totalling Baht 500 million. The long-term loans are repayable in semi-annual installments of 20% of the loan principal. The first installments will be payable in March 2006. Interest is payable in semi-annual installments from September 2004 and the interest rate is at 4.25% p.a. During the second quarter of 2004, a subsidiary company (CPIN) made a prepayment in full totalling Baht 100 million and during the fourth quarter of 2004, another subsidiary (BAP) made a prepayment in partially long term loan before due payment totalling Baht 15 million. During the fourth quarter of 2004, the Company received the cash from issuing new debentures amounting to Baht 6 billion as mentioned in Note 15. The Company allocated Baht 1,950 million by granting long-term loans to six subsidiaries. These long-term loans are repayable in semi-annual installments of 25% of the loan principal. The first installment will be payable in December 2005. Interest is payable in semi-annual installments from June 2005. The interest fixed rate is at 4.5% p.a. throughout the term of the agreements. 8. INVENTORIES In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Finished goods 4,679 4,385 408 180 Work in process 5,138 4,555 1,233 955 Breeding pigs, poultry, duck and others and milking cows – net 1,542 1,503 269 316 Raw materials 5,463 6,694 1,730 1,854 Chemicals and supplies 507 463 119 110 Inventories in transit 1,006 811 2 67 Total 18,335 18,411 3,761 3,482 Less allowance for decline in value of inventories ( 28) ( 87) ( 66) ( 9)Inventories - Net 18,307 18,324 3,695 3,473

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 9. LONG-TERM INVESTMENTS 9.1 Investment in Associated Companies

Percentage of Holdings In Million Baht

(both direct and Consolidated

indirect holdings) Cost method Equity method 2004 2003 2004 2003 2004 2003

1. C.P. Seven Eleven Public Company Limited 21.32 20.43 666 450 1,818 1,427 2. Nava 84 Company Limited 25.00 25.00 301 301 293 293 3. Ross Breeders Siam Company Limited 49.99 49.99 35 35 32 35 4. Allianz C.P. General Insurance Company Limited 24.46 24.46 74 74 91 75 5. Arbor Acres Thailand Company Limited 49.99 49.99 2 2 60 46 6. C.P. Aquaculture (India) Private Limited 31.70 31.70 175 175 388 284 7. C.P. Vietnam Livestock Co., Ltd. 40.00 40.00 291 291 698 597 8. Charoen Pokphand Holdings (Malaysia) SDN. BHD. 49.64 49.64 176 176 769 732 9. Kinghill Limited 20.84 20.84 767 775 767 775 10. LOTUS - CPF (PRC) Investment Co., Ltd. (formerly SHV-CPF (PRC) Investment Co., Ltd.) 40.00 40.00 1,009 1,009 1,311 1,236 Less allowance for loss on impairment in value ( 244) ( 244) ( 244) ( 244)

Investments in Associated Companies - Net 3,252 3,044 5,983 5,256

9.2 Investment in Subsidiaries and Associated Companies

Percentage of Holdings In Million Baht (both direct and The Company Only indirect holdings) Cost method Equity method

2004 2003 2004 2003 2004 2003

Investments in Subsidiaries 1. Bangkok Livestock Processing Company Limited (BLP) 99.99 99.99 1,664 1,664 1,717 2,167 2. Bangkok Produce Merchandising Public Company Limited (BKP) 99.44 99.44 1,230 1,230 1,893 1,792 3. Bangkok Agro-Industrial Products Public Company Limited (BAP) 99.90 99.89 1,781 1,781 3,019 2,959 4. Thai Prawn Culture Center Company Limited (TPCC) 99.89 99.89 137 14 201 35 5. Bangkok Feedmill Company Limited (BFM) 99.99 99.99 1,174 1,174 3,140 2,662 6. Klang Company Limited (KLANG) 99.99 99.98 298 45 351 62 7. Chanthaburi Aquaculture Farm Company Limited (CAF) 99.99 99.99 63 63 65 55 8. Charoen Pokphand Northeastern Public Company Limited (CPNE) 99.61 99.61 1,282 1,282 2,230 2,039 9. Charoen Pokphand Industry Company Limited (CPIN) 99.99 99.99 709 709 1,264 1,291 10. C.P. Agro-Industry Company Limited (CPAI) 99.99 99.99 180 180 425 386 11. C.P. Food Products Company Limited (CP FOOD) 99.99 99.99 - - - - 12. C.P. Merchandising Company Limited (CPM) 99.99 99.99 1,850 1,850 3,626 3,571

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003

Percentage of Holdings In Million Baht (both direct and The Company Only indirect holdings) Cost method Equity method

2004 2003 2004 2003 2004 2003 13. C.P. Food Industry Export Company Limited (CPEX) 99.99 99.98 - - - - 14. CPF Training Center Company Limited (CPF TN) 99.99 99.99 15 15 20 16 15. CPF IT Center Company Limited (CPF IT) 99.99 99.99 190 190 211 190 16. Seafoods Enterprise Company Limited (SFE) 99.99 99.99 425 325 406 303 17. Trad Prawn Culture Company Limited (TRAD) 99.91 99.91 18 18 22 20 18. B.P. Feedmill Company Limited (BPF) 99.99 99.99 290 290 1,101 1,099 19. Shrimp Improvement Systems (Thailand) Company Limited (SIST) 51.00 - 2 - 2 - 20. Bangkok Farm Company Limited (BKF) 99.99 99.99 469 469 410 744 21. Pokphand Aquatech Company Limited (PAT) 99.99 99.99 400 400 1,880 1,384 22. Universal Food and Marketing Company Limited (UF&M) 99.99 99.99 40 40 41 39 23. Rajburi Feedmill Company Limited (RBF) 99.99 99.99 120 120 261 226 24. Vee Food Products Company Limited (VFP) 99.99 99.99 330 80 211 - 25. Savee Farming Company Limited (SAVEE) 99.84 99.84 24 24 44 41 26. International Pet Food Company Limited (IPF) 99.99 99.99 60 2 57 2 27. Aqua-Agri Foods International, Inc. (AAFI) 99.99 99.99 - - - - 28. Aqua Beauty, Inc. (AQB) 99.99 99.99 - - - - 29. BKP Holdings Limited (BKPH) 99.44 99.44 - - - - 30. C.P. Aquaculture (Beihai) Co., Ltd. (CPB) 100.00 100.00 236 236 123 158 31. C.P. Aquaculture (Hainan) Co., Ltd. (CPH) 100.00 100.00 126 126 126 126 32. C.P. Food Products (Shanghai) Co., Ltd. (CPF SH) 100.00 100.00 - - - - 33. C.P.Standart Gida Sanayi ve Ticaret A.S. (CPS) 84.49 - - - - - 34. Charoen Pokphand (USA), Inc. (CP USA) 99.95 98.89 - - - - 35. CPF Europe S.A. (CPF EU) 99.99 99.99 - - - - 36. CPF Investment Limited (CPFI) 100.00 100.00 1,724 1,327 2,785 2,047 37. CPF Tokyo Co., Ltd. (CPF TK) 99.99 - - - - - 38. Fusion Foods Limited (FF) 52.00 52.00 - - - -

Total Investments in Subsidiaries 14,837 13,654 25,631 23,414

Investments in Associated Companies 1. Allianz C.P. General Insurance Company Limited 24.46 24.46 54 54 67 55 2. C.P. Aquaculture (India) Private Limited 31.70 31.70 176 176 388 284 3. Charoen Pokphand Holdings (Malaysia) SDN. BHD. 49.64 49.64 60 60 263 250 4. Kinghill Limited 20.84 20.84 244 244 244 244 Less allowance for loss on impairment in value ( 244) ( 244) ( 244) ( 244)

Investments in Associated Companies - Net 290 290 718 589

Investments in Subsidiaries and

Associated Companies - Net 15,127 13,944 26,349 24,003

Excess of net loss over investment in subsidiaries 1. Vee Food Products Company Limited (VFP) 99.99 99.99 - - - 66 2. Charoen Pokphand (USA), Inc. (CP USA) 99.95 98.89 2,686 2,686 238 356 Total 2,686 2,686 238 422

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 9.3 Investments in Related Companies and Others Percentage of Holdings (both direct and In Million Baht indirect holdings) Consolidated The Company Only

2004 2003 2004 2003 2004 2003 Marketable securities – Equity Securities- Available- for- sale - at fair value 1. True Corporation Public Company Limited ( formerly Telecom Asia Corporation Public Company Limited ) 3.33 3.70 1,287 1,287 881 881 2. Siam Makro Public Company Limited 9.13 9.54 236 257 - - Total 1,523 1,544 881 881 Less unrealized holding loss 638 506 ( 130) ( 200) Total 2,161 2,050 751 681 Non-marketable securities - General investments - at cost 3. CPPC Public Company Limited (formerly Charoen Pokphand Petrochemical Company Limited) 12.48 12.48 110 110 55 55 4. C.G. Petrochemical Company Limited - 8.55 - 40 - 40 5. C.P. Land Company Limited 6.49 6.49 143 143 - - 6. Vee Rum Choke Company Limited 9.00 9.00 9 9 - - 7. Ayudhya Allianz C.P. Life Public Company Limited 3.47 3.47 115 77 88 60 8. ACME ECI Investment Company Limited 17.95 17.95 21 21 - - 9. Charoen Pokphand (India) Private Limited 19.00 19.00 36 36 - - 10. Chia Tai (Jilin) Company Limited 9.99 9.99 5 5 - - 11. Trillion Brewery Company Limited 17.95 17.95 237 237 - - Total 676 678 143 155 Less allowance for loss on impairment in value ( 406) ( 446) ( 26) ( 66) Net 270 232 117 89 Investment in Related Companies - Net 2,431 2,282 868 770 Investment in Other Companies 7 7 7 7 Less allowance for loss on impairment in value ( 7) ( 7) ( 7) ( 7) Investment in Other Companies – net - - - - As at December 31, 2004 and 2003, the investments referred to above include the foreign currency investments in foreign countries at cost or at equity (in case of investments in subsidiaries and associated companies) as follows: Consolidated Amount of Investment (In Million)

Amount in Foreign Currency Equivalent to Baht Invested Foreign Countries Foreign Currency 2004 2003 2004 2003

British Virgin Islands USD 34 31 1,311 1,236 Cayman Islands USD 45 45 1,026 1,033 India INR 476 371 424 320 Malaysia MYR 75 70 768 732 Vietnam DONG 279,193 239,054 698 597 Hong Kong USD - - 5 5 Total 4,232 3,923

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 The Company Only Amount of Investment (In Million)

Amount in Foreign Currency Equivalent to Baht Invested Foreign Countries Foreign Currency 2004 2003 2004 2003

China RMB 53 59 248 285 America USD ( 6) ( 9) ( 238) ( 356) British Virgin Islands USD 71 52 2,785 2,047 Cayman Islands USD 22 22 244 244 India INR 434 329 388 284 Malaysia MYR 26 24 263 250 Total 3,690 2,754 The investment in common shares of C.P. Seven Eleven Public Company Limited, which is the listed company on the Stock Exchange of Thailand, is presented in the financial statements by the equity method. As at December 31, 2004, the fair value of the investment was Baht 5,305 million. As at December 31, 2004 and 2003, the Company and subsidiaries had a provision for losses on impairment of investments in shares of associated, related and other companies totalling approximately Baht 657 million and Baht 697 million, respectively. The management believes that the allowance for loss on impairment of investments as referred to above adequately provides for possible losses on all investments. During the second quarter of 2003, the Company purchased the 3,125,000 shares in C.P. Aquaculture (India) Private Limited (CP Aqua (India)) from a preceding shareholder with the value totalling INR 145.5 million (equivalent to Baht 138 million). The Company’s percentage shareholding, following to the additional investment, increased from 19.20% to 31.70%. As a consequence, CP Aqua (India) became an associated company from the second quarter of 2003. In October 2003, a subsidiary (BKP) sold its investment in common shares of C.P. Seven Eleven Public Company Limited (CP 7-11), an associated company, totalling 10 million shares at Baht 42 each at the same time as making initial public offering of new common shares in CP 7-11. As a result, there was a gain on sale of the investment of approximately Baht 278.2 million (based on the equity method), which was recorded as income in the consolidated statement of income for the year. Subsequent to the sale of common shares of CP 7-11 by the subsidiary and the issuance of new shares by CP 7-11, the indirect percentage of shareholding in CP7-11 was decreased from 24.97% to 20.43%. Because the stock’s initial offering price was higher than the net book value, the Company’s equity in the associated company increased by approximately Baht 154 million. The Company recorded the increase in equity as “Paid-in capital from the associated company’s equity” under shareholders’ equity. As a consequence of CP7-11 having listed all of its common shares in Stock Exchange of Thailand, the subsidiaries, as shareholders of CP 7-11, have to comply with the announcement of Stock Exchange Commission of Thailand in prohibiting shareholders to sell any listed securities belonging to them prior to initial offering of those securities during a silent period. As at December 31, 2004 and 2003, there were 38 million shares and 76 million shares, respectively, within the silent period.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In December 2003, the Company and a subsidiary (BKP) sold their investments in the share capital of Allianz C.P. Life Assurance Company Limited (AZCPL), their associated company, totalling 11.75 million shares (23.5% of issued and paid-up share capital) to Ayudhya Allianz C.P. Life Public Company Limited (AACP) for a total consideration of Baht 78 million. The Company and the subsidiary had gains on sale (based on the equity method) of Baht 1.8 million. In addition, the Company and the subsidiary also acquired an investment in the common shares of AACP totalling 5,953,095 shares and 1,819,002 million shares, respectively at Baht 10 each with a total value of Baht 59.5 million and 18.2 million, respectively (2.66% and 0.81% of the issued and paid-up share capital). The acquisition and disposal transactions were in accordance with the integration plan of the life assurance business between CP Group, Allianz Group and Bank of Ayudhya Group. In December 2003, a subsidiary (CPIN) invested in a new joint venture company with Aviagen, Inc. namely Ross Breeders Siam Company Limited with the authorized share capital of Baht 70 million divided into 700,000 shares at Baht 100 par value. In this regard, CPIN subscribed for common shares in Ross Breeders Siam Company Limited for 349,996 shares at Baht 100 each with the total value of Baht 35 million (49.99% shareholding). The newly established company became a new associated company since the date of incorporation, December 26, 2003. In the second quarter of 2004, the Company sold its investment in common shares of C.G. Petrochemical Company Limited, a related company totalling 6.6 million shares at Baht 0.02 each to an unrelated buyer. As a result, there was a gain on sale of the investment of approximately Baht 66,698 net of selling expense, which was recorded as income in the consolidated statement of income for the year. The Company had previously made full allowance for impairment losses in respect of this investment and the related deferred tax asset had been recorded. This deferred tax asset was reversed to the statement of income upon disposal of the investment. In the fourth quarter of 2004, two subsidiaries (CPM and CPFI) purchased 4.3 million shares of CP 7-11 totalling approximately Baht 224.5 million of which 0.4 million shares were sold in the same quarter by CPM. There was a gain on sale of investment by equity method totalling Baht 15.3 million. All of these transactions were made through the main board of the Stock Exchange of Thailand. As a result, the Company’s percentage of shareholding, subsequent to the transactions increased from 20.43% to 21.32%. 10. LAND REVALUATION During the year 1998, the Company and the subsidiaries recorded their land used in operations and land held for future projects at the revalued amount and which was based on the fair market value as shown in the reports of American Appraisal (Thailand) Limited, an independent valuer and partially based on the information guidelines provided by the Land Department. Newly acquired land since 1999 is stated at cost. The revaluation increment in land of the Company and of the subsidiaries is not available for dividend distributions.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 11. PROPERTY, PLANT AND EQUIPMENT In Million Baht

Consolidated

Addition from

Balance as at the acquisition Balance as at

January 1, of the new Movements during the year December 31,

Note 2004 Subsidiary (Note2) Additions Disposals Transfers 31, 2004

Land used in operation

At Appraisal 6,801 - - ( 3) - 6,798

At Cost 1,050 1 1,012 - - 2,063

Total 7,851 1 1,012 ( 3) - 8,861

Building and Equipment

At Cost Buildings, building improvements and leasehold improvements 11,170 769 158 ( 80) 1,982 13,999 Machinery and equipment 13,453 1,560 1,087 ( 262) 2,482 18,320 Water and electricity System 2,597 - 47 ( 32) 239 2,851 Furniture, fixtures and office equipment 1,201 76 166 ( 105) 28 1,366 Vehicles 16 919 148 78 ( 44) 23 1,124 Utilities system 16 1,578 8 35 ( 11) 233 1,843 Construction in progress and machinery under installation 2,527 79 5,706 - ( 4,987) 3,325

Total 33,445 2,640 7,277 ( 534) - 42,828

Accumulated

Depreciation Buildings, building improvements and leasehold improvements 4,556 294 759 ( 31) - 5,578 Machinery and equipment 7,589 995 1,557 ( 227) - 9,914 Water and electricity system 1,852 - 227 ( 28) - 2,051 Furniture, fixtures and office equipment 806 56 184 ( 103) - 943 Vehicles 626 125 113 ( 41) - 823 Utilities system 1,183 - 124 ( 5) - 1,302

Total 16,612 1,470 2,964 ( 435) - 20,611

Buildings and

Equipment - Net 16,833 1,170 4,313 ( 99) - 22,217

Property, Plant and

Equipment -Net 24,684 1,171 5,325 ( 102) - 31,078

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht The Company Only Balance as at Balance as at January 1, Movements during the year December 31, 2004 Additions Disposals Transfers 2004 Land used in operation At Appraisal 1,263 - ( 3) - 1,260 At Cost 508 1,003 - - 1,511 Total 1,771 1,003 ( 3) - 2,771

Building and Equipment At Cost Buildings, building improvements and leasehold improvements 3,575 16 ( 50) 1,383 4,924 Machinery and equipment 4,218 654 ( 112) 1,579 6,339 Water and electricity system 846 21 ( 15) 157 1,009 Furniture, fixtures and office equipment 348 65 ( 65) 13 361 Vehicles 297 22 ( 7) 11 323 Utilities system 700 24 ( 8) 141 857 Construction in progress and machinery under installation 1,494 4,062 - ( 3,284) 2,272 Total 11,478 4,864 ( 257) - 16,085

Accumulated Depreciation Buildings, building improvements and leasehold improvements 1,288 223 ( 12) - 1,499 Machinery and equipment 2,593 464 ( 92) - 2,965 Water and electricity system 635 72 ( 11) - 696 Furniture, fixtures and office equipment 239 44 ( 53) - 230 Vehicles 179 38 ( 7) - 210 Utilities system 523 54 ( 6) - 571 Total 5,457 895 ( 181) - 6,171 Building and Equipment - Net 6,021 3,969 ( 76) - 9,914

Property, Plant and Equipment - Net 7,792 4,972 ( 79) - 12,685 In 2001, a subsidiary (BKP) entered into a Co-Generation Power Plant Agreement with a local company to design and construct the co-generation power plant as well as controlling and examining the operation to comply with the planned schedule. The contract value is Baht 166 million. Consequently, the subsidiary has been provided with financial support by Global Environment Facility and a local bank (see Note 14) and interest support by Electricity Generating Authority of Thailand. The project was completed in 2003.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 As at December 31, 2004 and 2003, the Company and subsidiaries have certain fixed assets under finance leases as mentioned in Note 16 with the net book value of Baht 28 million and Baht 38 million (excluding assets classified as assets held for sale), respectively. 12. INTANGIBLE ASSETS The movements of intangible assets during the years 2004 and 2003 are summarized below: In Million Baht Consolidated Balance as at Balance as at January 1, Movements during the year December 31, 2004 Additions Disposals Transfers 2004 At Cost Goodwill 1,454 - - - 1,454 Negative goodwill ( 2,096) ( 773) 76 - ( 2,793) Development cost of software applications 139 - ( 1) ( 37) 101 Others 110 56 - 35 201 Total ( 393) ( 717) 75 ( 2) ( 1,037) Accumulated Amortization Goodwill ( 702) ( 92) - - ( 794) Negative goodwill 1,051 329 ( 76) - 1,304 Development cost of software applications ( 9) ( 10) - - ( 19) Others ( 8) ( 15) - - ( 23) Total 332 212 ( 76) - 468 Intangible Assets – Net ( 61) ( 505) ( 1) ( 2) ( 569) In Million Baht The Company Only Balance as at Balance as at January 1, Movements during the year December 31, 2004 Additions Disposals Transfers 2004 Other Intangible Asset 9 4 ( 2) - 11 Less Accumulated Amortization ( 2) ( 1) - - ( 3) Intangible Assets - Net 7 3 ( 2) - 8

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 13. BANK OVERDRAFTS AND LOANS FROM FINANCIAL INSTITUTIONS In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Bank overdrafts 154 327 39 129 Promissory notes 930 2,161 810 800 Short-term loans 703 - - - Packing credits 4,435 4,990 - - Liabilities under trust receipts 6,191 6,648 1,384 1,107 Total 12,413 14,126 2,233 2,036 Add net receivables arising from forward exchange contracts 4 - - - Net (at forward contract rate for foreign currency liabilities) 12,417 14,126 2,233 2,036 Less deferred forward premium - - - - Net 12,417 14,126 2,233 2,036 The above loans include loans denominated in foreign currencies as follows: Amount (In Million) Consolidated The Company Only 2004 2003 2004 2003 U.S. Dollar 2 - - - Turkish Lira 12 - - - Pound Sterling 5 - - - During the years 2004 and 2003, the Company and the subsidiaries hedged substantial loans which are in foreign currencies by entering into forward exchange contracts with banks to purchase a certain amount of the foreign currencies at the agreed rates. The Company and subsidiaries have the following overdraft lines with several banks which bear interest at the rates as follows: In Million Baht 2004 2003 Overdraft lines The Company 297 292 The subsidiaries 1,738 1,732 Interest rate per annum (%) 3.58 - 6.50 5.75 - 9.75 The short-term loans of local subsidiaries bear interest rates ranging from 1.60% to 3.50% per annum in 2004 and from 2.50% to 3.56% per annum in 2003. The short-term loans of foreign subsidiaries bear interest rates ranging from 5.75% to 6.75% per annum except a certain subsidiary (CPS) bears interest at rates 4.25% and 24% per annum.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Packing credits bear interest at the rates ranging from 1.65% to 2.64% per annum in 2004 and from 1.55% to 2.00% per annum in 2003. Under the terms of agreements covering the Company and subsidiaries’ liabilities under trust receipts, certain machinery, equipment and inventories have been released to the Company and subsidiaries in trust for the banks. The Company and subsidiaries are accountable to the banks for the trusteed machinery, equipment and inventories or their sales proceeds. 14. LONG-TERM LOANS In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Loans in foreign currency - at exchange rate at balance sheet dates 3,195 8 3,107 - Loans in Baht 4,431 1,637 3,360 450 Total 7,626 1,645 6,467 450 Less Net receivable arising from currency swap agreement ( 89) - ( 89) - Current portion ( 797) ( 304) ( 390) ( 40)Long-Term Loans - Net 6,740 1,341 5,988 410 During the year 2000, the Company and subsidiaries (CP FOOD) obtained long-term loans in Thai Baht from a local bank totalling Baht 410 million. The loans are repayable in quarterly installments of Baht 10 million for the Company and Baht 13 million for subsidiaries starting September 2001 to June 2006 and October 2001 to July 2005, respectively. During 2001, a subsidiary (BKP) obtained long-term credit lines from two banks totalling Baht 742 million as follows: - The credit line of Baht 532 million has been fully drawndown. The loan of Baht 425 million is repayable in quarterly installments from September 2002 to June 2009. The remaining loan of Baht 107 million is repayable in quarterly installments from September 2004 to June 2007. - The credit line of Baht 210 million for constructing the co-generating power plant has been partially drawn down at Baht 188 million. The loan is repayable in monthly installments of Baht 3 million from March 2003 to September 2008. In addition, another subsidiary (BLP) obtained and has fully drawndown long-term loans from two banks totalling Baht 580 million. The loans are repayable in quarterly installments of Baht 10 million and Baht 17.5 million from December 2001 and May 2003, respectively. The foreign currency loans of a foreign subsidiary (CP USA) amounting to USD 0.2 million equivalent to Baht 8 million are repayable in monthly installments up to April 2004. During the year 2003 and 2004, the Company issued bills of exchange to a local bank amounting to Baht 350 million and Baht 2,950 million, respectively. The bills of exchange have discount rates ranging between 3.45% - 4.65% p.a. and are repayable from December 2005 to December 2007. The Company recorded the discount as prepaid interest expenses and amortizes this as an interest expense using the straight-line method over the term of the bill of exchange.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In March 2004, the Company obtained a long-term loan in Japanese Yen from a branch of a foreign bank totalling JPY 8,200 million, equivalent to approximately Baht 3,018 million, bearing interest at the 6-month LIBOR rate plus 0.65% p.a.. Interest is payable semi-annually installments in March and September and the loan is repayable in two equal installments. The first installment is due to be repaid March 2006 and the second installment will be in March 2007. The Company must comply with specific loan covenants e.g. maintaining total debt to equity ratio below 2:1. To mitigate the exchange and interest rate risk, the Company entered into a currency swap agreement with the foreign bank to swap the currency of the loan principal from Japanese Yen to Thai Baht equivalent to Baht 3,018 million and from a floating interest rate to fixed rate equivalent to 3.86% p.a. (based on Thai Baht principal) covering the term of the loan agreement. A subsidiary (CPS) has long-term loans of approximately USD 2.3 million (equivalent Baht 89 million). The loans are repayable from January 7, 2005 to April 15, 2005. In May 2004, a subsidiary (BAP) obtained a long-term loan in Thai Baht from a local bank totalling Baht 140 million. The loan is repayable in semi-annual installments of Baht 14 million from March 2005 to September 2009. All long-term loans bear interest at the rates indicated in the loan agreements. Under the terms of the loan agreements, the Company and subsidiaries must comply with certain conditions and restrictions stated in the agreements. 15. DEBENTURES In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Debentures - in Thai Baht 10,970 10,150 10,970 10,150 Less current portion ( 3,780) ( 5,180) ( 3,780) ( 5,180)Net 7,190 4,970 7,190 4,970 On March 9, 2000, the Company issued unsubordinated, unsecured and amortized debentures (Debenture#1/2000) in registered name form of Baht 7 billion. The term of the debentures is five (5) years. The first repayment of debentures was in March 2003 and subsequently in semi-annual installments at 20% of the face value. The debentures bear interest at 7.5% p.a. during the first three years and at the rate of a local bank’s six-month fixed deposit plus 3% p.a. during the final two years. In this connection, the Company must comply with specific covenants e.g. maintaining total debt to equity ratio in the semi-annual and annual financial statements. On March 23, 2001, the Company issued additional unsubordinated, unsecured and amortized debentures (Debenture#1/2001) in registered name form of Baht 7 billion. The term of the debentures is five (5) years. The first repayment of debentures will be in September 2003 at the rate of 15% of the face value and subsequently in semi-annual installments at the rate of 17% of the face value. The debentures bear interest at 5.5% p.a. during the first two years, 5.75% p.a. in the third year and at the rate of a local bank’s six-month fixed deposit plus 3% p.a. during the final two years. The Company must comply with the specific covenants e.g. maintaining total debt to equity ratio in the annual financial statements through the term of the debentures. These debentures have a credit rating of “A” updated by TRIS Rating Limited on May 28, 2004. The debentures were registered with the Thai Bond Dealing Centre on August 31, 2001.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 During the first quarter and the third quarter of 2004, the Company repaid the installments of debenture # 1/2000 at 20% of the face value each, amounting to Baht 2,800 million, and repaid the installment of debenture # 1/2001 at 17% of the face value, amounting to Baht 2,380 million. During the year 2002, the Company entered into an interest rate swap agreement with a branch of a foreign bank for the interest payment of part of Debenture#1/2001. The interest rates will be swapped from the rate of 5.5% p.a. for the period from March 2002 to September 2002 to 4.5% p.a.; and from the interest rate of 5.5% p.a. for the period from September 2002 to March 2003 and the interest rate of 5.75% p.a. for the period from March 2003 to March 2004 to 6-Month THBFIX (reported by REUTERS) plus 2.08% p.a. The underlying notional principal for calculating the amount to be received or paid among the parties for the period from March 23, 2002 to September 22, 2003 is Baht 3,500 million and for the period from September 23, 2003 to March 22, 2004 is Baht 2,975 million. As at November 17, 2004, the Company issued unsubordinated and unsecured debentures (Debenture#1/2004) in registered name form of Baht 6,000 million divided into;

- Baht 2,500 million with the term of three (3) years, fully repayable on November 17, 2007 and bearing interest at 4.25% p.a.

- Baht 3,500 million with the term of five (5) years, fully repayable on November 17, 2009 and bearing interest at 5.50% p.a.

The Company must comply with the specific covenants e.g. maintaining total debt to equity ratio in the semi-annual and annual financial statements through the terms of debentures. These debentures have a credit rating of “A” by TRIS Rating Limited and were registered with the Thai Bond Dealing Centre and the Stock Exchange of Thailand on December 16, 2004 and February 7, 2005, respectively. As at December 31, 2004, the carrying values of all debentures noted above are not significantly different from the fair values estimated from the current market interest rates of debentures which have similar conditions and due dates. 16. LIABILITIES UNDER FINANCE LEASES The consolidated financial statements as at December 31, 2003 included the liability of CP USA under two utility purchase contracts with The Baker Hill Water Authority amounting to USD 4 million (equivalent to Baht 149 million converted at the closing rate as at December 31, 2003) which bore interest at 5% p.a. repayable in monthly installments at several rates with the longest lease agreement ending in 2039. During the first quarter of 2004, as described in Note 2, CP USA sold the property, plant and equipment which included assets under finance lease to a third party whereby the purchaser agreed to assume of the liability under the finance leases. The assumption of the liability under the finance leases was offset with the proceeds payable to CP USA. During 2004 and 2003, the Company and certain subsidiaries entered into finance lease agreements covering equipment and vehicles totalling Baht 13 million and Baht 61 million, respectively. The liabilities bear interest at rates ranging from 2.25% to 8.66% p.a. and are repayable in installmens from 2003 to 2007.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 17. ALLOTMENT OF COMMON SHARES

(Unit: Thousand) 2004 2003 Common

Shares

Baht Common

Shares

Baht Authorised At January 1 and December 31 Common shares of Baht 1 each 8,206,664 8,206,664 8,206,664 8,206,664 Issued and fully paid At January 1 Common shares of Baht 1 each 5,718,533 5,718,533 4,849,591 4,849,591 Issued of shares Issued on exercise of warrents(Note 18) CPF-W - - 852,477 852,477 CPF-W2 9,029 9,029 16,465 16,465 At December 31 Common shares of Baht 1 each 5,727,562 5,727,562 5,718,533 5,718,533 Total common share reserved for warrants unexercised 2,479,102 2,479,102 2,488,131 2,488,131 18. WARRANTS Warrants consist of: Number of warrants (In Million Units) Exercise Exercise December 31, December 31, Ratio Price 2004 2003 per unit (Baht per share) Expiration CPF-W - - 27.95007 2.862 January 7, 2003 CPF-W2 383.87 385.68 5.00000 4.000 July 21, 2005 383.87 385.68 The above exercise ratios and exercise prices of the CPF-W warrants were adjusted under the terms of the warrants as a result of the change in par value of common shares and the result of issuance and offer of the new warrants as mentioned in (b). (a) In relation to the business restructuring since 1998, the Company issued and sold 47.5 million stock warrants in registered name form to Charoen Pokphand Group Company Limited (CPF-W) at Baht 20 each in 1999. 17 million units of CPF-W warrants were exercised for common shares in October 2002 and 30.5 million units were exercised in January 2003 amounting to Baht 2,440 million. The Company issued 852,477,135 new common shares for this exercise and transferred the remaining balance of CPF-W warrants amounting to Baht 610 million from “Warrants” to “Premium on share capital” after the exercise of warrants during the first quarter of 2003.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 (b) The Company issued and sold warrants to existing shareholders # 2 (CPF-W2) on July 22, 2002 totalling 388,970,582 units, whereby the holder of one unit of stock warrant is entitled to purchase five new common shares at the exercise price of Baht 4 per share. The exercise date is every first business day of each quarter starting from January 2, 2003, except that the last exercise date is the expiry date is the warrants, which will be July 21, 2005. The warrant holders had exercised CPF-W2 warrants for common shares as follows:

Exercised Issued Cash Receipt Date of Registration Warrants Common Shares from Exercise of Paid-up

Exercise Date (Units) (Shares) (Million Baht) Share Capital January 2, 2003 1,219,035 6,095,175 24 January 20, 2003 April 1, 2003 1,815 9,075 - April 10, 2003 July 1, 2003 1,179,952 5,899,760 24 July 10, 2003 October 1, 2003 892,209 4,461,045 18 October 14, 2003 Total in 2003 3,293,011 16,465,055 66 January 5, 2004 1,802,799 9,013,995 36 January 19, 2004 July 1, 2004 502 2,510 - July 15, 2004 October 1, 2004 2,672 13,360 - October 14, 2004 Total in 2004 1,805,973 9,029,865 36 19. DIVIDENDS The Company has a policy to pay dividends to the shareholders four times a year. Each dividend payment will be appropriated from the operating results of each quarter. The sum of dividend payments from the operating results of each year will be approximately 50% of net profit after tax and appropriations to legal reserve. The dividend payments might change subject to the Company’s operations, financial position, future projects and the overall economic conditions. During the years 2004 and 2003, The Board of Directors approved dividend payments as summarized below:

Approval date Rate Number of Amount Appropriated to pay dividend (Baht) Shares (Million Baht) Operating results From

March 3, 2003 0.03 5,708,162,731 171 The fourth quarter of 2002 (a) August 8, 2003 0.05 5,714,071,566 286 Unappropriated retained (a) earnings November 6, 2003 0.14 5,718,532,611 801 The third quarter of 2003 (a) Total 1,258 February 24, 2004 0.04 5,727,546,606 230 The fourth quarter of 2003 (a) August 10, 2004 0.07 5,727,549,116 401 The first six months of 2004 and unappropriated retained earnings (b) November 9, 2004 0.04 5,727,562,476 229 The third quarter of 2004 (c) Total 860

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 (a) Appropriated from net profit which was not exempted from corporate income tax under the Investment Promotion Act B.E. 2520 (b) The portion of revenue which was not applicable for corporate income tax (c) Dividend income from subsidiaries, which was paid from the subsidiaries’ taxable profit from operations which are subject to 30% corporate income taxes. The payments of interim dividends for the year 2003 and the annual dividend payment of the years 2002 and 2003 have been reported to, and approved, at shareholders’ meetings. The interim dividend payments during the year 2004 will be reported to the shareholders in the annual shareholders’ meeting of 2005. 20. LEGAL RESERVE The legal reserve created by the Company under the provisions of the Public Limited Companies Act B.E. 2535. This law requires the Company to appropriate at least 5% of its annual net profit after deduction of the deficit brought forward (if any) as a legal reserve until the reserve reaches 10% of authorized share capital. The legal reserve is not available for dividend distribution. As at December 31, 2004 and 2003, the legal reserve was provided in full as required by the law. 21. EARNINGS PER SHARE Basic earnings per share and diluted earnings per share for the years ended December 31, 2004 and 2003 are calculated as follows:

Net Profit Number of Shares Earnings Per Share (In Thousand Baht) (Share) (In Baht) 2004 2003 2004 2003 2004 2003

Basic earnings per share Profit from normal operation 1,235,621 2,242,439 5,398,730,601 5,383,414,079 0.23 0.42 Extraordinary items – net 898 - - - - - Net profit 1,236,519 2,242,439 5,398,730,601 5,383,414,079 0.23 0.42 The effect of diluted equivalent shares - CPF - W2 - - - 229,741,870 - (0.02) Diluted earnings per share 1,236,519 2,242,439 5,398,730,601 5,613,155,949 0.23 0.40

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 22. INCOME TAX Income tax expenses for the years ended December 31, 2004 and 2003 consisted of: In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Income tax expenses on the taxable income for the year 625 591 21 187 Deferred tax expense from the temporary differences – net ( 189) (1,055) 32 ( 865)Tax Expenses (Income) – net 436 ( 464) 53 ( 678) In accordance with Royal Decree No. 387 B.E. 2544 dated September 5, 2001, listed companies in the Stock Exchange of Thailand have been granted a d reduction in the corporate income tax rate from 30% to 25% for taxable profit not exceeding Baht 300 million for the five (5) consecutive accounting periods which begin on or after enactment. Therefore, the Company calculated income tax on the its taxable profit for the portion not exceeding Baht 300 million at the 25% income tax rate during 2004 and 2003. Changes in deferred income tax assets and liabilities during the year 2004 are summarized below: In Million Baht Consolidated Credited/ Balance as at (Charged) Credited/ Balance as at January 1, to income (Charged) December 31, 2004 statement to equity 2004 Deferred tax assets Allowance for loss on impairment of Investments 237 ( 12) - 225 Difference of exchange rates from forward exchange contracts ( 2) 16 - 14 Equity loss in subsidiary 920 - - 920 Others 156 284 4 444 Total 1,311 288 4 1,603

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht

Consolidated

Addition from (Credited)/ Balance as at the acquisition Charged Credited/ Balance as at January 1, of the new to income (Charged) December 31, 2004 subsidiary statement to equity 2004

Deferred tax liabilities Portion of the new subsidiary - 24 ( 5) - 19 Revaluation increment in land and equity in associated companies of the subsidiary portions recorded as part of negative goodwill on subsidiary acquisition date 1,217 - - ( 5) 1,212 Revaluation increase from changes in available - for - sale investment valuation ( 85) - - 35 ( 50) Revaluation increment in land 548 - - - 548 Effects from translation of financial statements of foreign associated companies - Nets 127 - - ( 12) 115 Equity in associated companies 429 - 120 - 549 Others 103 - ( 14) - 89 Total 2,339 24 101 18 2,482 In Million Baht

The Company Only

Credited/ Balance as at (Charged) Credited/ Balance as at January 1, to income (Charged) December 31, 2004 statement to equity 2004

Deferred tax assets Allowance for loss on impairment of Investments 149 ( 12) - 137 Difference of exchange rates from forward exchange contracts ( 2) 2 - - Equity loss in subsidiary 920 - - 920 Others 1 22 - 23 Total 1,068 12 - 1,080

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Baht

The Company Only

(Credited)/ Balance as at Charged (Credited)/ Balance as at January 1, to income Charged December 31, 2004 statement to equity 2004

Deferred tax liabilities Revaluation increase from changes in available - for - sale investment valuation ( 60) - 21 ( 39) Revaluation increment in land 248 - ( 1) 247 Change in translation of financial Statements ( 3) - 1 ( 2) Equity in associated companies 92 47 - 139 Total 277 47 21 345 The reconciliation between the income tax expense (income) and the multiple of accounting income and tax rate for the year 2004 is summarized as follows; In Million Baht

Consolidated

12.5% (Reduction of tax rate as Other Applicable tax rates 0% 10% Note 24) 15% 30% Tax rate Total Accounting profit before income tax – net 857 53 - 60 493 257 1,720 Tax at the applicable tax rates - 5 - 9 148 52 214 Tax effect of income and expenses that are not taxable income or not deductible in determining taxable profit – net - - - - 221 4 225 Net - 5 - 9 369 56 439 In Million Baht

The Company Only

12.5% (Reduction of tax rate as Applicable tax rates 0% Note 24) 25% 30% Total Accounting profit before income tax – net 37 - - 1,255 1,292 Tax at the applicable tax rates - - - 377 377 Tax effect of income and expenses that are not taxable income or not deductible in determining taxable profit – net - Equity in profit of associated - - - ( 291) ( 291) - Other - - - ( 30) ( 30) Net - - - 56 56

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 As of December 31, 2004 and 2003, the temporary difference arising from loss carryforward of Baht 6,306 million and Baht 5,527 million, respectively, for which no deferred tax asset is recognized in the balance sheets due to the uncertainty of its recoverability. As of December 31, 2003, the Company recognized the deferred tax assets arising from temporary differences in the investment in the foreign subsidiary (CP USA) totalling Baht 920 million because the Company determined that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilized. 23. EXTRAORDINARY ITEMS On December 26, 2004, there was a Tsunami which devastated the Southern Coasts of Thailand. As a result, the property of a branch of the Company located at Phang-nga Province has been affected. All inventories and almost all of the building and equipment were damaged. The assets had net book value of approximately Baht 66 million. The Company wrote off the net book value of the damaged assets and recorded the loss as and extraordinary item in the statement of income net of tax income of Baht 14 million. However, the Company has an insurance coverage for the event of Act of God on partial assets. The Company has preliminarily estimated the compensation from the insurance company for the damage at approximately Baht 70 million with related tax expense of Baht 18 million. 24. PROMOTIONAL PRIVILEGES By virtue of the provisions of the Industrial Investment Promotion Act B.E. 2520, the Company and certain subsidiaries have been granted privileges by the Board of Investment relating to certain feedmill operations, shrimp farms, shrimp hatchery, chicken farms, chicken egg hatching operations, duck farms, duck hatchery, frozen chicken meat, frozen aquaculture and frozen cooked and semi-cooked food products which include, among other things, the following: 1. Exemption from payment of import duty on machinery as approved by the Board. 2. Exemption from payment of income tax for certain operations for a period of 5 years or 8 years from the dates on which the income is first derived from such operations. 3. A fifty percent reduction in the normal income tax rate on the net profit derived from certain operations for a period of 5 years commencing from the expiry dates in 2 above. 4. A deduction of an amount equal to five (5) percent of the increase in income of certain promoted operations over previous year for ten (10) years. As promoted companies, the Company and subsidiaries must comply with certain conditions and restrictions provided for in the promotional certificates.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 25. SEGMENT FINANCIAL INFORMATION The segment financial information of the Company and its subsidiaries for the years 2004 and 2003 was as follows:

In Million Baht Consolidated Aquaculture Livestock Business Business Total 2004 2003 2004 2003 2004 2003

Net sales 22,661 22,472 69,129 60,637 91,790 83,109 Operating profit before loss on impairment in fixed assets 2,133 2,393 534 955 2,667 3,348 Loss on impairment in fixed assets - - - ( 938) - ( 938)Operating profit 2,133 2,393 534 17 2,667 2,410 Central expenses – net ( 436) ( 140)Interest expense ( 910) ( 1,004)Gain (loss) on foreign exchange rate – net ( 336) 259 Gain on monetory transactions - net 15 - Equity in net profit of associated companies 717 267 Tax income (expense) ( 436) 464 Extraordinary items 1 - Add minority interest profit ( 45) ( 14)Net profit 1,237 2,242 Fixed assets - net at December 31 6,195 4,164 24,892 20,498 31,087 24,662 Central fixed assets - net 252 254 Other assets 40,879 39,805 Total Assets 72,218 64,721

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 The segment financial information of the Company and its subsidiaries based on geographical segments for the years 2004 and 2003 was as follows: In Million Baht Consolidated Revenue from external customers Fixed assets 2004 2003 2004 2003 Thailand 63,427 59,269 29,620 24,614 Europe 17,572 7,630 1,404 20 Asia 6,540 8,552 270 231 America 3,581 7,208 45 51 Others 670 450 - - Total 91,790 83,109 31,339 24,916 26. DISCLOSURES OF FINANCIAL INSTRUMENTS Foreign Exchange Risks The Company and the subsidiaries use forward exchange contracts to mitigate exposure to foreign currency risk. Forward exchange contracts are accounted for as foreign currency transactions. Gains and losses on derivative financial instruments used for hedging of foreign currency transactions are recognized as income or expense on the same basis as the corresponding hedge position. Foreign exchange contracts are translated at exchange rate prevailing at the balance sheet date which approximate their fair value. The impact of hedging anticipated future transactions is deferred until the time of recognition of the related assets or liabilities. At December 31, 2004 and 2003, the Company and the subsidiaries have the outstanding forward exchange contracts and deferred gains or losses as follows: In Million Consolidated The Company Only Currency 2004 2003 2004 2003 Forwards used to hedge USD 56 61 - - monetary assets YEN 23 32 - - GBP 12 18 - - SGD 2 3 - - EUR 4 - - - KRW 3,929 - - - Forwards used to hedge USD 5 5 - 2 monetary liabilities YEN 8,200 4 8,200 - Forwards used to hedge anticipated USD 11 7 4 3 future purchases of goods YEN 47 - - - CHF - 1 - - DKK - 2 - 2

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 In Million Consolidated The Company Only Currency 2004 2003 2004 2003 Forwards used to hedge anticipated USD 57 102 - 1 future sales orders YEN 58 42 - - EUR 1 3 - - GBP 16 26 - - SGD 1 2 - - KRW 576 - - - ZAR 2 - - - Deferred exchange gain (loss) arising from anticipated future transactions Baht 96 ( 14) ( 4) ( 7) The above forward exchange contracts used to hedge the long term loan is due in 2007, the remaining contracts are due within one year. Except for the loans that the Company made to the foreign subsidiaries, the Company and the subsidiaries do not have any material unhedged foreign currency assets and liabilities. Interest Rate Risks The operations and cash flows of the Company and subsidiaries are substantially dependent on changes in market interest rates. The Company and subsidiaries are exposed to interest rate risk because they have cash deposits, temporary investments, loans to subsidiaries, loans from financial institutions and debentures. These financial assets and liabilities are principally pegged to floating market rates except for a long-term loan and a portion of debentures which the interest rates are fixed. However, the Company has entered into an interest rate swap agreement to hedge the interest rates for a long-term loan and a portion of debentures as discussed in Note 14 and 15. Cash inflows and outflows in relative to the interest rate swap are limited to the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional principal amounts and terms of the agreements. At December 31, 2004 and 2003, the Company and the subsidiaries have financial assets and liabilities that are exposed to value and cash flows risks arising from changes in interest rates as follows: Consolidated In Million Baht % Fixed interest rate Float interest rate Average interest rate 2004 2003 2004 2003 2004 2003 Deposits at financial institutions 317 208 1,544 1,318 0.53 0.35 Bank overdrafts - - 154 327 5.38 5.81 Short - term borrowings 12,263 13,799 - - 2.43 1.98 Long - term borrowings 6,407 350 1,131 1,295 4.08 4.99 Liabilities under finance leases 30 215 - - 5.48 5.15 Debentures 6,000 5,950 4,970 4,200 4.54 5.34 Total 24,700 20,314 6,255 5,822

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 The Company Only In Million Baht % Fixed interest rate Float interest rate Average interest rate 2004 2003 2004 2003 2004 2003 Deposits at financial institutions - - 180 225 0.25 0.25 Long - term loans to subsidiaries 2,335 3,088 2,449 2,951 4.60 5.54 Total 2,335 3,088 2,629 3,176 Bank overdrafts - - 39 129 6.00 6.07 Short - term borrowings 2,194 1,907 - - 2.50 2.04 Long - term borrowings 6,318 350 60 100 3.92 3.94 Liabilities under finance leases 4 - - - 3.07 - Debentures 6,000 5,950 4,970 4,200 4.54 5.34 Total 14,516 8,207 5,069 4,429 As at December 31, 2004, the above financial assets and liabilities are specified by year of expected maturities as follows: In Million Baht Consolidated Not exceeding Over 5 On demand 1 Year 1 – 5 years years Deposits at financial institutions 1,544 317 - - Bank overdrafts 154 - - - Short - term borrowings - 12,263 - - Long - term borrowings - 797 6,741 - Liabilities under finance leases - 18 12 - Debentures - 3,780 7,190 - Total 154 16,858 13,943 - In Million Baht The Company Only Not exceeding Over 5 On demand 1 year 1 – 5 years years Deposits in financial institutions 180 - - - Long - term loans to subsidiaries - 1,511 3,273 - Total 180 1,511 3,273 - Bank Overdrafts 39 - - - Short - term borrowings - 2,194 - - Long - term borrowings - 390 5,988 - Liabilities under finance leases - 1 3 - Debentures - 3,780 7,190 - Total 39 6,365 13,181 -

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 As at December 31, 2003, the above financial assets and liabilities are specified by year of expected maturities as follows: In Million Baht Consolidated Not exceeding Over 5 On demand 1 Year 1 – 5 years years Deposits at financial institutions 1,318 208 - - Bank overdrafts 327 - - - Short - term borrowings - 13,799 - - Long - term borrowings - 304 1,326 15 Liabilities under finance leases - 39 54 122 Debentures - 5,180 4,970 - Total 327 19,322 6,350 137 In Million Baht The Company Only Not exceeding Over 5 On demand 1 Year 1 – 5 years years Deposits in financial institutions 225 - - - Long - term loans to subsidiaries - 1,725 4,298 16 Total 225 1,725 4,298 16 Bank Overdrafts 129 - - - Short - term borrowings - 1,907 - - Long - term borrowings - 40 410 - Debentures - 5,180 4,970 - Total 129 7,127 5,380 - Credit Risks Credit risks arise when the counterparties fail to meet their obligations as agreed with the Company and the subsidiaries. The Company and the subsidiaries do not have any material credit risks because the Company and the subsidiaries constantly evaluate the debtors status and most of the debtors are geographically dispersed. The maximum credit risk exposure in the event other parties fail to perform their obligations is the account value of debtors and loans to subsidiaries less the allowance for doubtful accounts as expressed in the balance sheet. In addition, the counterparties to financial instruments of the Company and subsidiaries include various financial institutions. The Company and subsidiaries do not expect any of these counterparties to fail to meet their obligations, given their high credit ratings. The maximum credit risk exposure in the event the financial institutions fail to perform their obligation under financial instruments is the amount of net receivable (payables) arising from forward exchange contracts as at December 31, 2004 and 2003 totalling Baht 178 million and Baht 30 million, respectively.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Fair Value of Financial Instruments Cash and cash equivalents, trade receivables and payables and other receivables and payables. The carrying value of the above accounts approximate the fair value due to the cash status or the relatively short - term maturities of these financial instruments. Investments in securities Fair values of marketable securities are estimated based on their quoted market prices. However, it is not practicable to estimate the fair values of general investments without incurring excessive costs due to the absence of quoted market price of similar investments. Loans to Subsidiaries The carrying amounts in the financial statements approximate their fair values because they are short-term maturity loans. The carrying amounts of the long-term loans to subsidiaries approximate their fair value estimated from the current market interest rates available for borrowings with the same maturity profile. Borrowings and debentures The carrying amounts in the financial statements of accounts with fixed interest rates approximate their fair values estimated from the current market interest rates available for borrowings or debentures with the same maturity profile. The carrying amounts in the financial statements of other accounts with variable interest rates approximate their fair values. Forward exchange contracts and interest swap contract The fair value of forward exchange contracts and interest swap contract approximates the expected amounts that can be traded in the current exchange rate market. 27. COMPANY’S OPERATIONS In Million Baht The Company Only Promoted Businesses Promoted being Granted the Businesses being Reduction of Granted Exemption of Corporate Income Corporate Income Tax Rate/ Non- Tax Promoted Businesses (Note 24) (Note 24) Total

2004 2003 2004 2003 2004 2003 Net sales – local 2,511 3,829 22,442 18,961 24,953 22,790 Other income - - 2,069 2,906 2,069 2,906 Total revenues 2,511 3,829 24,511 21,867 27,022 25,696 Less costs and expenses ( 2,469) ( 3,375) (23,316) (20,079) (25,785) (23,454)Net profit 42 454 1,195 1,788 1,237 2,242

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 Direct costs and expenses are charged to the businesses concerned as incurred while indirect costs and expenses are allocated to individual businesses based on revenues of each business. As at December 31, 2004 and 2003, the Company computed income tax payable on taxable income of non-promoted businesses and on 50% of taxable income of promoted businesses being granted the reduction of the corporate income tax. The taxable income was computed based on net accounting income for each business adjusted by the equity in net profit of subsidiaries and associated companies, certain items of non-taxable income, certain non-deductible expenses for income tax computation. 28. COMMITMENTS AND CONTINGENT LIABILITIES As at December 31, 2004 the Company and subsidiaries had commitments and contingent liabilities as follows: a. The Company and subsidiaries had unused letters of credit amounted to approximately Baht 16 million and Baht 179 million, respectively. b. The Company and subsidiaries were contingently liable for letters of guarantee issued by local banks to Government organizations amounting to approximately Baht 246 million and Baht 1,089 million, respectively c. Cooperative Technical Agreements with Maejo University whereby the university allowed the Company to use its land and construction thereon in developing black tiger prawn ponds and as the research and training center for a period of ten years commencing from January 1, 1994. Under the terms of this agreement, the Company is committed to transfer the ownership of the Project property to the university at the expiration of the agreement and to pay total annual compensation of not less than Baht 0.5 million to the university. The net book value of the above assets as at December 31, 2004 and 2003, amounted to approximately Baht 6 million. However, the Company has entered into the agreement with the university to extend the agreement to December 31, 2006 and to increase the annual compensation to approximately Baht 1.5 million. d. Long-term lease agreements covering office premises, facilities, land, farms and vehicles with certain related and other companies for a period of 2-16 years expiring in 2005 to 2019. The annual total rental and facilities charges for the Company and subsidiaries amounted to approximately Baht 250 million and Baht 579 million, respectively. e. The Company and certain subsidiaries have commitments to pay for construction costs, machinery and other service expenses as indicated in the agreements totalling Baht 367 million and Baht 268 million, respectively.

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CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED AND SUBSIDIARIES Notes to Financial Statements (Continued) December 31, 2004 and 2003 29. ADDITIONAL INFORMATION The followings are expenses for the years ended December 31, 2004 and 2003: In Million Baht Consolidated The Company Only 2004 2003 2004 2003 Depreciation expense 2,818 2,551 895 679 Amortization of expenses (income) - net ( 215) ( 94) 1 1 Employee expenses 8,876 8,096 2,047 1,660 As of December 31, 2004 and 2003, the Company’s numbers of employees are 11,033 and 7,138 respectively. 30. EVENTS AFTER THE BALANCE SHEET DATE On October 29, 2004, the shareholders, at extraordinary meeting #1/2004 resolved for the Company to accept a business transfer from three wholly-owned subsidiaries of the Company; namely Seafoods Enterprise Company Limited, Thai Prawn Culture Center Company Limited and Klang Company Limited. The purpose of the transfer was to restructure the aquaculture business comprising of feed mill, farming and processing operations and allow them to be operated in the same company. The transaction value is approximately Baht 1,052 million. The transfer of such business has been completed in February 2005. On January 12, 2005, the Board of Directors of the Company resolved for CPIN to subscribe for the right issued share capital of Charoen Pokphand (India) Private Limited (CP India) up to 32.4 million shares, the portion for which other shareholders of CP India (Charoen Pokphand Group Company Limited and other three related companies), may not subscribe, with a value of Baht 311 million. If the other four shareholders of CP India waive their subscription rights and CPIN takes over the subscription, CPIN’s shareholding will increase from 19% to 71.2% and CP India will become an indirect subsidiary of the Company. As at the approval date of the financial statements by the Board of Director, the share subscription of the other shareholders has not yet been effected. 31. RECLASSIFICATION OF ACCOUNT Certain accounts in the 2003 financial statements were reclassified to conform with the 2004 financial statement presentation.

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Quick Facts(As of December 31, 2004)

Head Office C.P. Tower, 313 Silom Road, Bangrak, Bangkok 10500, Thailand

Telephone Number Main: (662) 625-8000

Corporate Secretary Office: (662) 625-8353-4

Investor Relations Office: (662) 638-2935-6

Facsimile Number (662) 638-2942

Web Address http://www.cpfoods.net

Business Category Agro-industrial and foods

Legal Status A public limited company registered in Thailand

Registration Number Listed company No. 271

Registered Capital THB 8,206.7 million (all in ordinary shares)

Paid-up Capital THB 5,727.6 million (all in ordinary shares)

Par Value THB 1.00 per share

Trading Symbol on the SET CPF for ordinary shares

CPF-W2 for warrants

CPF07NA for debentures No. 1/2004 series 1

CPF09NA for debentures No. 1/2004 series 2

Dividend PolicyCPF has a policy to pay dividends to shareholders 4 times a year from operating results of

each quarter. The interim dividend shall be paid from results of the 1st, 2nd, and 3rd quarter. The annual

dividend shall be paid from results of the 4th quarter. Total dividend paid each year shall approximately

be 50% of net income after income taxes and legal reserve. The annual and interim dividend payments

might be subject to change, depending on the Company’s operations, financial position, future projects

and overall economic conditions.

CPF, in addition, has duty to comply with the terms and conditions of CPF’s amortized deben-

tures No. 1/2000 due in 2005, CPF’s amortized debentures No. 1/2001 due in 2006, CPF’s debentures

No. 1/2004 series 1 due in 2007, as well as series 2 due in 2009, which prohibit CPF to pay cash divi-

dends to shareholders in the amount exceeding 60% of net profit in each fiscal year for the duration of

the term of those debentures. In addition, if CPF is not able to service interest or any amount becomes

due to the debenture-holders, it will not be permitted to pay cash dividends to shareholders.

For the subsidiaries that are public limited company, each company has policy to pay dividend

about 50% of its net profit after taxes and legal reserve. For other subsidiaries, the dividend payment will

depend upon its future investment plan, its financial structure, and its liquidity.

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Number of shareholdersType Number of persons Number of shares held

1. Thai person 16,412 1,522,423,274

2. Foreign person 154 25,451,018

3. Thai juristic person 145 3,464,094,644

4. Foreign juristic person 102 715,593,540

Total 16,813 5,727,562,476

Top ten major shareholdersNames Number of shares held % Holding

1. Charoen Pokphand Group Co., Ltd. (1)

and Related Persons by section 258 2,817,041,915 49.2

2. UNS Agro-chemical Co., Ltd. 279,950,259 4.9

3. Thai NVDR Co., Ltd. 124,297,398 2.2

4. Boston Safe Deposit and Trust Company 118,772,346 2.1

5. The Bank of New York (Nominees) Limited 96,707,249 1.7

6. Ms. Valaiporn Jirapoommin 77,000,000 1.3

7. Nomura Singapore Limited-Customer Segregated Account H 64,000,000 1.1

8. Mr.Montri Jiaravanont 51,144,300 0.9

9. Ms. Naree Jirapoommin 51,000,000 0.9

10. Clearstream nominees Ltd. 45,794,036 0.8(1) Shareholders of Charoen Pokphand Group Co., Ltd. comprise of 46 persons and 3 juristic persons. Detail of shareholders is as

reported at Business Development Department, Ministry of Commerce

Foreign Holding LimitCPF shares may be transferred without restriction, unless such transfer of shares would cause

the aliens to hold shares in CPF in excess of 40 percent of the total number of CPF’s issued ordinary

shares.

The aliens may acquire ordinary shares of CPF in excess of the restricted ratio prescribed

in preceding paragraph by means of subscription of newly issued ordinary shares (including dividend

shares or ordinary shares issued to the holders of ordinary shares who have acquired the shares

under conditions in this paragraph) issued and offered for sale by CPF; provided that the holding of new

ordinary shares in such case, when added to the ordinary shares held by aliens according to previous

paragraph, shall not cause the total number of ordinary shares held by aliens to exceed 49 percent of

the total number of ordinary shares then issued by CPF. This 49 percent restriction on shareholding

by the aliens shall apply to the case of transfer of ordinary shares from the aliens who have acquired

new ordinary shares by means of subscription of capital increase shares issued and offered for sale by

CPF under conditions in this paragraph (including dividend shares or new ordinary shares issued to the

holders of ordinary shares who have acquired such ordinary shares under conditions in this paragraph)

to aliens in every stage of transfer until such ordinary shares are transferred to the non-aliens.

As of November 25, 2004, the foreign holding in CPF’s shares was approximately 12.94% of

CPF paid-up shares.

Shareholding Structure(As of the latest closing date of CPF’s register book on November 25, 2004)

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1978 • Founded under the name “Charoen Pokphand Feedmill Co., Ltd. to produce and distribute animal feed

in southern Thailand

1987 • Expanded into livestock farming with the objective of moving towards further integration

• Listed on the Stock Exchange of Thailand (SET) under the name of “CPF”

1988 • Entered the aquaculture business (shrimp feed manufacturing and distribution, shrimp farming and

shrimp processing for export)

1994 • Became a public company limited and change its name to “Charoen Pokphand Feedmill Public Com-

pany Limited”

1998 • Share acquisition in the Charoen Pokphand Group’s agro-industrial public limited companies in Thailand

to be under its management

1999 • Share acquisition in 9 agro-industrial and food companies of Charoen Pokphand Group. Under this

new structure, resulted from the acquisition in 1998 and this time, CPF Group has business opera-

tions throughout Thailand. Its business can be classified into 2 main businesses, namely livestock and

aquaculture. Both businesses are fully integrated operations, from feed raw materials procurement, feed

manufacture and distribution, animal breeding, meat processing, and manufacturing of food products

from meat.

• Renamed “Charoen Pokphand Foods Public Company Limited” to reflect the Company’s business

structure and strategy to become a world-class food producer

2000 • Changed dividend payout policy (please see detail under “Dividend Policy” page 54)

• Increased shareholding in Charoen Pokphand (USA) Inc., making it the Company’s subsidiary

2001 • Split its par value of ordinary shares from THB 10 to THB 1 per share

• Set up a new subsidiary, Aqua Beauty, Inc., to be as a distribution arm for seafood products in the

US market

2002 • Set up 6 new subsidiaries, which CPF directly and indirectly has 99.99% shareholding in these

companies, as follows:

1) C.P. Aquaculture (Beihai) Co., Ltd., to manufacture and distribute aquatic feed and to operate aquatic

farms in the People’s Republic of China

2) C.P. Food Product (Shanghai) Co., Ltd., to operate Thai restaurants in the People’s Republic of

China

3) CPF Europe S.A., to import and distribute the Company’s products in the European Union

4) CPF IT Center Co., Ltd., to provide information technology services mainly to companies within the

CPF Group

5) CPF Training Center Co., Ltd., to provide training services mainly for management and employees

within the CPF Group

6) Fusion Foods Limited, a joint venture investment with a group of British businessmen, to distribute

the Company’s products in the United Kingdom. CPF indirectly has 52.00% shareholdings in this

company.

2003 • Set up 4 new subsidiaries, which CPF directly and indirectly has 99.99% shareholding in these

companies, as follows:

1) Aqua - Agri Foods International, Inc., to be a distribution channel for food products in the US market

2) Universal Foods and Marketing Co. Ltd., to distribute ready-to-eat food products both wholesale and

retail, and to operate convenience stores and fast food kiosks in Thailand

3) International Pet Foods Co. Ltd., to be a wholesaler and retailer of pet food products in Thailand

4) C.P. Aquaculture (Hainan) Co., Ltd., to produce and distribute animal feed in the People’s Republic

of China

From Past to Present

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• Increased shareholding from 18.00% to 99.99 % in Chanthaburi Aquaculture Farm Co., Ltd., which

operates shrimp farming business in Thailand, making it the Company’s subsidiary

• Increased shareholding from 19.20% to 31.70% in C.P. Aquaculture (India) Private Limited, which is

involved in shrimp feed production and distribution and the operation of shrimp hatchery in India,

making it the Company’s affiliate

• Entered into a joint venture with Aviagen, Inc., to establish Ross Breeders Siam Co., Ltd., to produce and

distribute parent-stock chicks (broiler line) in Thailand, making it the Company’s affiliate. CPF indirectly

has 49.99% shareholding in this company.

2004 • 84.49% share acquisition, by its subsidiaries, in C.P. Standart Gida Sanayi ve Ticaret A.S. (“CPS”), a

company involved in an integrated chicken business in the Republic of Turkey.

• Set up 2 new subsidiaries as follows:

1) CPF Tokyo Company Limited, to import and distribute processed meat and ready meal products in

Japan. CPF indirectly has 99.99% shareholdings in this company.

2) Joint venture with Shrimp Improvement Systems, L.L.C. to set up Shrimp Improvement (Thailand)

Company Limited to operate shrimp breeding business in Thailand. CPF has 51.00% shareholdings in

this company.

• At the Extraordinary Shareholders’ Meeting No. 1/2004, the shareholders resolved to transfer the aquatic

animal processing business of 3 subsidiaries, namely; Seafoods Enterprise Company Limited, Thai

Prawn Culture Company Limited, and Klang Company Limited to be under CPF. The transfer business

includes aquatic feed manufacturing, aquatic farming, and processing. The transfer is expected to be

completed within the 1st quarter of 2005.

• CPF’s Board of Directors resolved to set up 3 new subsidiaries, which are expected to be completed

within the 1st quarter of 2005, as follows:

1) Calibre Nature (M) Sdn Bhd, to operate aquaculture business in Malaysia, including aguatic feed

manufacturing and distribution, aquatic farming, and processing. CPF has 99.99% shareholdings in

this company.

2) CP-Yonekyu Company Limited, a joint-venture with Yonekyu Corporation, to produce food products

from meat. CPF has 80.50% shareholdings in this company.

3) Charoen Pokphand Foods (UK) Limited, to operate chilled ready meal products for the UK market.

CPF indirectly has 100.00% shareholdings in this company.

Note : The history of the Company under this section is mainly the business development and

the investment of the Company in brief.

Important Dates in the Fiscal Year 2004

Date Detail

April 21 Annual General Shareholders’ Meeting

April 28 Annual dividend payment of THB 0.04 per share for the 4th quarter results of 2003

September 9 Interim dividend payment of THB 0.07 per share from retained earnings and the first 6 months

results of 2004

October 29 Extraordinary Shareholders’ Meeting No. 1/2004

December 9 Interim dividend payment of THB 0.04 per share for the 3rd quarter results of 2004

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Subsidiaries (Sorted by Business Type and Shareholding Percentage)

As of December 31, 2004, there are 38 subsidiaries in which CPF directly or indirectly holds more than

50% of their paid-up capital.

Livestock Business in Thailand (Sorted by Shareholding Percentage)

9 Bangkok Farm Company Limited Type of Business Livestock farming & processing plant

Head Office Bangkok, Thailand

Telephone Number 0-2641-1234

Facsimile Number 0-2641-1979

Registered Capital THB 166,650,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

Information of Companies in which the Company has Shareholding

2 Bangkok Feedmill Company LimitedType of Business Livestock feedmill and farming

Head Office Bangkok, Thailand

Telephone Number 0-2675-9859

Facsimile Number 0-2675-9813

Registered Capital THB 666,600,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

1 Bangkok Livestock Processing Company LimitedType of Business Broiler Integration

Head Office Bangkok, Thailand

Telephone Number 0-2641-1234

Facsimile Number 0-2641-1979

Registered Capital THB 800,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

8 B.P. Feedmill Company Limited Type of Business Livestock feedmill and farming

Head Office Saraburi, Thailand

Telephone Number 0-3637-1885

Facsimile Number 0-3632-6578

Registered Capital THB 300,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

3 Charoen Pokphand Industry Company LimitedType of Business Livestock feedmill and farming

Head Office Bangkok, Thailand

Telephone Number 0-2675-9879

Facsimile Number 0-2675-9811

Registered Capital THB 166,650,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

4 C.P. Agro-Industry Company Limited Type of Business Livestock farming

Head Office Suratthani, Thailand

Telephone Number 0-7728-2229

Facsimile Number 0-7728-2230

Registered Capital THB 33,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

7 C.P. Food Industry Export Company Limited Type of Business Food processing plant

Head Office Bangkok, Thailand

Telephone Number 0-2989-4506

Facsimile Number 0-2989-4074

Registered Capital THB 40,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

5 C.P. Food Products Company Limited Type of Business Food processing plant

Head Office Bangkok, Thailand

Telephone Number 0-2919-5971

Facsimile Number 0-2919-5979

Registered Capital THB 228,200,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.99%

6 C.P. Merchandising Company LimitedType of Business Investment and international trading

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2749

Registered Capital THB 1,850,000,000 (all in ordinary

shares)

Par Value THB 10.00 per share

Shareholding 99.99%

10 Universal Foods and Marketing Company LimitedType of Business Wholesale and retail of food products,

and fast food outlets

Head Office Bangkok, Thailand

Telephone Number 0-2673-1095

Facsimile Number 0-2673-1546

Registered Capital THB 80,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

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13 International Pet Foods Company LimitedType of Business Pet Food Production and Distribution

Head Office Bangkok, Thailand

Telephone Number 0-2673-1095

Facsimile Number 0-2673-1546

Registered Capital THB 60,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

11 Rajburi Feedmill Company Limited Type of Business Livestock feedmill and farming

Head Office Rajburi, Thailand

Telephone Number 0-3236-8181-9

Facsimile Number 0-3236-8062

Registered Capital THB 470,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

12 Vee Food Products Company LimitedType of Business Food processing plant and distribution

Head Office Bangkok, Thailand

Telephone Number 0-2663-4293

Facsimile Number 0-2663-4115

Registered Capital THB 330,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

14 Bangkok Agro-Industrial Products Public Company Limited

Type of Business Livestock feedmill and farming

Head Office Bangkok, Thailand

Telephone Number 0-2675-9879

Facsimile Number 0-2675-9811

Registered Capital THB 300,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.90%

15 Charoen Pokphand Northeastern Public Company Limited

Type of Business Livestock feedmill and farming

Head Office Bangkok, Thailand

Telephone Number 0-2675-9879

Facsimile Number 0-2675-9811

Registered Capital THB 300,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.61%

16 Bangkok Produce Merchandising Public Company Limited

Type of Business Livestock feed raw material distribution

and broiler integration

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2631-0989

Registered Capital THB 600,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.44%

Aquaculture Business in Thailand (Sorted by Shareholding Percentage)

17 Chanthaburi Aquaculture Farm Company Limited Type of Business Shrimp farming

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2147

Registered Capital THB 40,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

19 Pokphand Aquatech Company LimitedType of Business Aquatic feed production and distribution

Head Office Chonburi, Thailand

Telephone Number 0-3829-7493

Facsimile Number 0-3829-7495

Registered Capital THB 400,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

18 Seafoods Enterprise Company LimitedType of Business Shrimp processing plant

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2631-0776

Registered Capital THB 425,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

20 Klang Company LimitedType of Business Shrimp processing plant

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2631-0776

Registered Capital THB 300,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

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21 Trad Prawn Culture Company Limited Type of Business Shrimp farming

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2147

Registered Capital THB 60,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.91%

22 Thai Prawn Culture Center Company Limited Type of Business Shrimp farming & shrimp processing

plant

Head Office Songkhla, Thailand

Telephone Number 0-7439-1191

Facsimile Number 0-7439-2957

Registered Capital THB 180,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.89%

23 Savee Farming Company LimitedType of Business Shrimp farming

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2147

Registered Capital THB 70,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 99.84%

24 Shrimp Improvement Systems (Thailand) Company Limited

Type of Business Shrimp hatchery business

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2147

Registered Capital THB 8,000,000 (comprise of 792,000

ordinary shares and 8,000 preferred

shares)

Par Value THB 10.00 per share

Shareholding 51.00%

Businesses Related to Operations in Thailand (Sorted by Shareholding Percentage)

25 Aqua Beauty, Inc.Type of Business Importer and distributor of seafood

products in USA

Head Office USA

Telephone Number 1-470-720-6668

Registered Capital USD 5,000,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 99.99%

26 Aqua-Agri Foods International, Inc.Type of Business Importer and distributor of seafood

products in USA

Head Office USA

Telephone Number 1-410-418-8937

Facsimile Number 1-410-418-8938

Registered Capital USD 3,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 99.99%

27 CPF Europe S.A.Type of Business Importer and distributor of processed

meat and food products in EU

Head Office Belgium

Telephone Number 32-2357-5387

Registered Capital EUR 1,000,000 (all in ordinary shares)

Par Value EUR 1.00 per share

Shareholding 99.99%

28 CPF Tokyo Company LimitedType of Business Importer and distributor of processed

meat and food products in Japan

Head Office Japan

Telephone Number 813-5401-2231

Facsimile Number 813-5401-2236

Registered Capital JPY 100,000,000 (all in ordinary shares)

Par Value JPY 1,000 per share

Shareholding 99.99%

29 Fusion Foods Limited Type of Business Importer and distributor of processed

meat and food products in UK

Head Office England

Telephone Number 44-1299-253131

Registered Capital GBP 300,000 (all in ordinary shares)

Par Value GBP 1.00 per share

Shareholding 52.00%

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30 CPF Training Center Company LimitedType of Business Training center service provider

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2139

Registered Capital THB 20,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

31 CPF IT Center Company LimitedType of Business Information technology service provider

Head Office Bangkok, Thailand

Telephone Number 0-2625-8000

Facsimile Number 0-2638-2139

Registered Capital THB 250,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 99.99%

Other Businesses in Thailand (Sorted by Shareholding Percentage)

Overseas Business (Sorted by Shareholding Percentage)

33 C.P. Aquaculture (Beihai) Co., Ltd.Type of Business Aquatic feed production & distribution

and aquaculture farming in the People’s

Republic of China

Head Office Kwangsi, People’s Republic of China

Telephone Number 86-779-208-4362

Facsimile Number 86-779-208-3932

Registered Capital USD 5,500,000 (all in ordinary shares)

Shareholding 100.00%

34 C.P. Aquaculture (Hainan) Co., Ltd.Type of Business Aquatic feed production & distribution

and aquaculture farming in the People’s

Republic of China

Head Office Hainan, People’s Republic of China

Telephone Number 86-898-6748-8578

Registered Capital USD 3,000,000 (all in ordinary shares)

Shareholding 100.00%

32 C.P. Food Product (Shanghai) Co., Ltd. Type of Business Thai food restaurant in the People’s

Republic of China

Head Office Shanghai, People’s Republic of China

Telephone Number 86-21-6431-9558

Facsimile Number 86-21-6433-0331

Registered Capital USD 3,000,000 (all in ordinary shares)

Shareholding 100.00%

35 CPF Investment LimitedType of Business Investment

Head Office British Virgin Island

Registered Capital USD 50,000,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 100.00%

36 Charoen Pokphand (USA), Inc.Type of Business Broiler integrations (Operation wound up

in March 2004)

Head Office USA

Telephone Number 1-410-418-8937

Facsimile Number 1-410-418-8938

Registered Capital USD 22,000,000 (all in ordinary shares)

Par Value USD 0.001 per share

Shareholding 99.95%

37 BKP Holdings Limited Type of Business Investment

Head Office British Virgin Island

Registered Capital USD 7,500,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 99.44%

38 C.P. Standart Gida Sanayi ve Ticaret A.S.Type of Business Chicken Integration

Head Office Turkey

Telephone Number 212-274-8536

Facsimile Number 212-274-7995

Registered Capital YTL 20,000,000 (all in ordinary shares)

Par Value YTL 0.001 per share

Shareholding 84.49%

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1 Ross Breeders Siam Company LimitedType of Business Chicken breeding and distribution

Head Office Bangkok, Thailand

Telephone Number 0-2988-0700

Facsimile Number 0-2988-0706

Registered Capital THB 70,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 49.99%

9 Kinghill LimitedType of Business Investment holding, of which invested

100.00% in company that

manages shopping center, “Super Brand

Mall”, in the People’s Republic of China

Head Office Cayman Island

Registered Capital USD 250,000,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 20.84%

Affiliates (Sorted by Shareholding Percentage)

As of December 31, 2004, there are 10 companies in which CPF directly or indirectly holds more than

20.00% to 50.00% of their paid-up capital.

2 Arbor Acres Thailand Company LimitedType of Business Chicken breeding and distribution

Head Office Bangkok, Thailand

Telephone Number 0-2988-0700

Facsimile Number 0-2988-0706

Registered Capital THB 4,000,000 (all in ordinary shares)

Par Value THB 100 per share

Shareholding 49.99%

3 Charoen Pokphand Holdings (Malaysia) Sdn. Bhd. Type of Business Investment holding, of which invested

100.00% in 9 livestock feed

production & livestock farming compa-

nies in Malaysia

Head Office Malaysia

Telephone Number 60-3317-63061

Registered Capital RM 36,550,000 (all in ordinary shares)

Par Value RM 1.00 per share

Shareholding 49.64%

4 C.P. Vietnam Livestock Company Limited Type of Business Livestock feed production & farming in

Vietnam

Head Office Vietnam

Telephone Number 84-6183-6251

Registered Capital USD 40,040,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 40.00%

6 C.P. Aquaculture (India) Private LimitedType of Business Livestock feed production & farming in

India

Head Office India

Telephone Number 9144-2491-7790

Registered Capital Rs 250,000,000 (all in ordinary shares)

Par Value Rs 10.00 per share

Shareholding 31.70%

5 Lotus-CPF (PRC) Investment Company LimitedType of Business Investment holding in 5 companies

(63%, 81%, 90%, 90%, and 90%) which

operate the “Lotus” wholesale stores in

the People’s Republic of China

Head Office British Virgin Islands

Telephone Number 86-208-638-2070

Registered Capital USD 200,000,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 40.00%

7 Nava 84 Company Limited Type of Business Investment holding, of which invested

99.93% in economic crop

plantation company in Thailand

Head Office Bangkok, Thailand

Registered Capital THB 1,500,000,000 (all in ordinary

shares)

Par Value THB 10.00 per share

Shareholding 25.00%

8 Allianz C.P. General Insurance Company LimitedType of Business Insurance business

Head Office Bangkok, Thailand

Telephone Number 0-2638-9000

Registered Capital THB 300,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 24.46%

10 C.P. Seven Eleven Public Company Limited Type of Business Convenience store business in Thailand,

under “7-Eleven” trademark

Head Office Bangkok, Thailand

Telephone Number 0-2677-9000

Facsimile Number 0-2631-1082

Registered Capital THB 2,250,000,000 (all in ordinary

shares)

Par Value THB 5.00 per share

Shareholding 21.32%

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Companies in which CPF holds more than 10.00% but less than 20% (sorted by shareholding percentage)

As of December 31, 2004, there are 4 companies in which CPF directly and indirectly holds more than

10 % but less than 20% of their paid-up capital.

1 Charoen Pokphand (India) Private Limited Type of Business Livestock feed production & farming in

India

Head Office India

Registered Capital Rs 330,000,000 (all in ordinary shares)

Par Value Rs 10.00 per share

Shareholding 19.00%

2 ACME ECI Investment Company LimitedType of Business Investment holding

Head Office Cayman Island

Registered Capital USD 8,000,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 17.95%

3 Trillion Brewery Co., Ltd.Type of Business Investment holding

Head Office Cayman Island

Registered Capital USD 50,000,000 (all in ordinary shares)

Par Value USD 1.00 per share

Shareholding 17.95%

4 CPPC Public Company Limited Type of Business Plastic products manufacturing & distri-

bution

Head Office Bangkok, Thailand

Registered Capital THB 78,000,000 (all in ordinary shares)

Par Value THB 10.00 per share

Shareholding 12.48%

Companies in which CPF hold less than 10.00% (Sorted by shareholding percentage)

As of December 31, 2004, there are 6 companies in which CPF directly and indirectly holds less than

10 % of their paid-up capital.

1 Chia Tai (Jilin) Company Limited Type of Business Investment holding, of which invested

50.00% in company that

operates feedmill business and farming

in the People’s Republic of China

Head Office People’s Republic of China

Shareholding 9.99%

2 Siam Makro Public Company LimitedType of Business Wholesale business under “Makro”

trademark

Head Office Bangkok, Thailand

Shareholding 9.13%

3 Vee Rum Choke Company LimitedType of Business Real estate business

Head Office Bangkok, Thailand

Shareholding 9.00%

4 CP Land Company Limited Type of Business Real estate business

Head Office Bangkok, Thailand

Shareholding 6.49%

5 Ayudhya Allianz C.P. Life Public Company LimitedType of Business Life insurance business

Head Office Bangkok, Thailand

Shareholding 3.47%

6 True Corporation Public Company LimitedType of Business Telecommunication business

Head Office Bangkok, Thailand

Shareholding 3.33%

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Securities Issued by the Company in briefOrdinary Shares(as of December 31, 2004)

Registered capital : THB 8,206,664,000 comprising of 8,206,664,000 ordinary shares

with a par value of THB 1

Paid-up capital : THB 5,727,562,476 comprising of 5,727,562,476 ordinary shares

with a par value of THB 1

Change in Paid-Up Capital

Capital Paid-Up Capital Details

Increase

(THB million) (THB million) (No. of Shares)

January 1978 - 5 500,000 Initial registered capital

March 1987 25 30 3,000,000 Offering to existing shareholders

May 1987 70 100 10,000,000 Offering to existing shareholders

June 1987 100 200 20,000,000 Offering to existing shareholders

August 1987 100 300 30,000,000 Offering to existing shareholders

July 1988 300 600 60,000,000 Offering to existing shareholders

June 1989 600 1,200 120,000,000 Offering to existing shareholders

November 1998 385 1,585 158,529,451 Offering to existing shareholders of Bangkok Agro-Industrial

Products Plc. (BAP), Bangkok Produce Merchandising Plc. (BKP),

Charoen Pokphand Northeastern Plc. (CPNE) in exchange for

shares of the 3 companies following the acquisition plan

May 1999 159 1,744 174,380,941 Stock dividend for 1998 results

December 1999 174 1,918 191,818,767 Interim stock dividend for 1999 results

July 2000 1,902 3,820 382,028,584 Offering to existing shareholders

July 2001 0.09855 3,820 382,038,439 Exercise of warrant#1 (CPF-W1), 3 times from October 2000 to

July 2001

September 2001 - 3,820 3,820,384,390 Par value change from THB 10 to THB 1

January 2002 0.15 3,820 3,820,536,390 Exercise of warrant#1 (CPF-W1)

April 2002 73 3,893 3,893,613,330 Exercise of warrant#1 (CPF-W1)

July 2002 481 4,374 4,374,439,231 Exercise of warrant#1 (CPF-W1)

October 2002 475 4,849 4,849,590,421 Exercise of warrant (CPF-W)

January 2003 859 5,708 5,708,162,731 Last exercise of warrant (CPF-W), and first exercise of Warrant#2

(CPF-W2)

April 2003 0.009 5,708 5,708,171,806 Exercise of warrant#2 (CPF-W2)

July 2003 6 5,714 5,714,071,566 Exercise of warrant#2 (CPF-W2)

October 2003 4 5,718 5,718,532,611 Exercise of warrant#2 (CPF-W2)

January 2004 9 5,727 5,727,546,606 Exercise of warrant#2 (CPF-W2)

July 2004 0.002 5,727 5,727,549,116 Exercise of warrant#2 (CPF-W2)

October 2004 0.013 5,727 5,727,562,476 Exercise of warrant#2 (CPF-W2)

January 2005 0.058 5,728 5,727,852,576 Exercise of warrant#2 (CPF-W2)

Securities Issued by the Company in brief

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Depositary Receipts of Ordinary SharesUS Exchange : Over the Counter (OTC), United States Exchange

DR Underlying Share Ratio : 1DR : 4 ordinary shares

DR Outstanding (December 31, 2004) : 565,120 units

Registrar : The Bank of New York

Non-Voting Depositary Receipts (NVDRs)As of December 31, 2004, CPF ordinary shares held by Thai NVDR Co., Ltd. (Thai NVDR) was

133,405,998 shares, equivalent to 2.33 percent of total issued and paid-up capital. Investors holding

NVDRs of CPF issued by Thai NVDR will receive all financial benefits similar to investing in CPF ordinary

shares, except for voting rights in shareholders’ meetings. Therefore. voting rights of other shareholders

will increase comparing to total number of voting shares, excluding shares held by Thai NVDR. Investors

can find number of CPF shares held by Thai NVDR at www.set.or.th/nvdr.

Warrants to subscribe ordinary shares offered to existing shareholders (CPF-W2)(as of December 31, 2004)

Warrant Type : Warrants issued to existing shareholders

Issue Date : July 22, 2002

Maturity : 3 years, commencing from the issue date

Selling Price : THB 0 per unit (THB zero)

Amount Outstanding : 383,871,598 units

Secondary Market : The Stock Exchange of Thailand

Registrar : Thailand Securities Depository Company Limited

Exercise Price : THB 4.00 per share

Exercise Ratio : 1 warrant: 5 ordinary shares

Exercise Date : First exercise date is 2 January 2003 and following exercise dates

are on the first business day of April, July, October and January

until maturity. Last exercise date is July 21, 2005. In case that the

last exercise date or the closing date of register book is a holiday

of commercial banks, the exercise date or the closing date of

register book will be postponed to the next business day.

Notice to Exercise : Warrant holders must state their intention to exercise warrants

in accordance with the procedures 15 days before the exercise

date during 8.30 - 15.30 hours. The register book will be closed

21 days prior to the last exercise date in accordance with the

procedures specified in the prospectus and/or CPF disclosures

to the SET prior to each period of notice to exercise.

Expiry Date : July 21, 2005

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DebenturesAs of December 31, 2004, CPF had the following outstanding debentures:

1 Amortization Debentures of Charoen Pokphand Foods Public Co., Ltd. # 1/2000 due 2005

Type of Debenture : Unsubordinated, unsecured amortized debentures with name

registered

Maturity : 5 years, commencing from the issue date

Total Value : THB 7,000,000,000

Offering Amount : 7,000,000 units

Face Value : THB 1,000 per unit

Offering Price : THB 1,000 per unit

Issue Date : March 9, 2000

Maturity Date : March 9, 2005

Interest Rate : Year 1-3 = 7.50% p.a.

Year 4-5 = 6-month fixed deposit rate announced by Bangkok

Bank Plc. (2 business days prior to the interest calculation period)

plus 3.00% p.a.

Interest Payment Date : Twice a year on March 9 and September 9, with the first payment

on September 9, 2000

Amortization Schedule : Debenture repayment at the end of Year 3 as follows:

20% of Face Value on March 9, 2003

20% of Face Value on September 9, 2003

20% of Face Value on March 9, 2004

20% of Face Value on September 9, 2004

20% of Face Value on March 9, 2005

Amount Outstanding : THB 1,400,000,000

Credit Rating : None

Registrar : Bangkok Bank Plc.

2 Amortization Debentures of Charoen Pokphand Foods Public Co., Ltd. # 1/2001 due 2006

Type of Debenture : Unsubordinated, unsecured amortized debentures with name

registered

Maturity : 5 years, commencing from the issue date

Total Value : THB 7,000,000,000

Offering Amount : 7,000,000 units

Face Value : THB 1,000 per unit

Offering Price : THB 1,000 per unit

Issue Date : March 23, 2001

Maturity Date : March 23, 2006

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Interest Rate : Year 1-2 = 5.50% p.a.

Year 3 = 5.75% p.a.

Year 4-5 = 6-months fixed deposit rate announced by Bangkok

Bank Plc. (2 business days prior to the interest calculation period)

plus 3.00% p.a.

Interest Payment Date : Twice a year on March 23 and September 23, with the first pay-

ment on September 23, 2001

Amortization Schedule : Debenture repayment as follows:

15% of Face Value on September 23, 2003

17% of Face Value on March 23, 2004

17% of Face Value on September 23, 2004

17% of Face Value on March 23, 2005

17% of Face Value on September 23, 2005

17% of Face Value on March 23, 2006

Amount Outstanding : THB 3,570,000,000

Credit Rating : “A” by TRIS Rating Company Limited

Registrar : Bangkok Bank Plc.

Secondary Market : Thai Bond Dealing Centre

3 Unsecured Debentures of Charoen Pokphand Foods Public Co., Ltd. # 1/2004 Series 1 Due 2007

Type of Debenture : Unsubordinated, unsecured debentures with name registered and

having debenture holders’ representative

Maturity : 3 years, commencing from the issue date

Total Value : THB 2,500,000,000

Offering Amount : 2,500,000 units

Face Value : THB 1,000 per unit

Offering Price : THB 1,000 per unit

Issue Date : November 17, 2004

Maturity Date : November 17, 2007

Interest Rate : Fixed rate at 4.25% p.a.

Interest Payment Date : Twice a year on May 17 and November 17, with the first payment

on May 17, 2005

Principal Repayment : Repay in full amount at the maturity date

Amount Outstanding : THB 2,500,000,000

Credit Rating : “A” by TRIS Rating Company Limited

Trustee & Registrar : Kasikornbank Plc.

Secondary Market : Thai Bond Dealing Centre and Stock Exchange of Thailand (Bond

Electronic Exchange)

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4 Unsecured Debentures of Charoen Pokphand Foods Public Co., Ltd. # 1/2004 Series 2 Due 2009

Type of Debenture : Unsubordinated, unsecured debentures with name registered and

having debenture holders’ representative

Maturity : 5 years, commencing from the issue date

Total Value : THB 3,500,000,000

Offering Amount : 3,500,000 units

Face Value : THB 1,000 per unit

Offering Price : THB 1,000 per unit

Issue Date : November 17, 2004

Maturity Date : November 17, 2009

Interest Rate : Fixed rate at 5.50% p.a.

Interest Payment Date : Twice a year on May 17 and November 17, with the first payment

on May 17, 2005

Principal repayment : Repay in full amount at the maturity date

Amount Outstanding : THB 3,500,000,000

Credit Rating : “A” by TRIS Rating Company Limited

Trustee & Registrar : Kasikornbank Plc.

Secondary Market : Thai Bond Dealing Centre and Stock Exchange of Thailand (Bond

Electronic Exchange)

Remarks : For information on terms and conditions of debentures no. (3) and (4), please visit www.sec.or.th.

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Share Registrar and Warrant RegistrarThailand Securities Depository Co., Ltd.

The Stock Exchange of Thailand Building, 4th, 6th, and 7th Floors

62 Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand.

Telephone number (662) 359-2800

Facsimile number (662) 359-1259

Bond Registrar of Amortization Debentures of Charoen Pokphand Foods Plc. #1/2000 due 2005

and Amortization Debentures of Charoen Pokphand Foods Plc. #1/2001 due 2006

Securities Services Department, Bangkok Bank Plc.

333 Silom Road, Bangrak, Bangkok 10500, Thailand.

Telephone number (662) 230-1477-8

Facsimile number (662) 626-4545-6

Bond Registrar of Debentures of Charoen Pokphand Foods Plc. #1/2004 Series 1 due 2007 and Unsecured Debentures of Charoen Pokphand Foods Plc. #1/2004 Series 2 due 2009

Securities Services Department, Kasikornbank Plc.

1 Soi Kasikornthai, Ratburana Road Ratburana, Bangkok 10140, Thailand.

Telephone number (662) 470-1982

Facsimile number (662) 470-1998

American Depositary Receipts RegistrarThe Bank of New York, Depositary Receipts Division

101 Barclay Street, 22nd Floor, New York 10286, USA.

Website: www.bankofny.com/adr

Contact List:

New York - Vinu Kurian Telephone number 212-815-8365

Hong Kong - Eugenia Lee Telephone number (852) 2840-9821

AuditorsMrs. Sudchit Boonprakob C.P.A. (Thailand) Registration No. 2991

Ms. Kalyarat Chaivaropongsa C.P.A. (Thailand) Registration No. 3460 and

Ms. Nittaya Chetchotiros C.P.A. (Thailand) Registration No. 4439

KPMG Poomchai Audit Ltd.

Empire Tower, 21st Floor 195 South Sathorn Road, Sathorn, Bangkok 10120, Thailand

Telephone number (662) 677-2000, 658-5000

Facsimile number (662) 677-2232

References

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70 I Annual Report 2004 I Charoen Pokphand Foods Public Company Limited Contents Annual Report 2004 I Charoen Pokphand Foods Public Company Limited I 71Contents

Annual Report Checklist

Annual report checklist in accordance with Form 56-2 of the Securities and Exchange Commission

Item Page number

1. General information

1.1 of the company 54

1.2 of companies in which the company has shareholding 58

1.3 of reference persons 69

2. Financial summary 3

3. Business

3.1 Business structure 3

3.2 Business profile 2, 6

3.3 Sales structure 9

3.4 Business objective 4, 5, 10

3.5 Operations of each product line 10

3.6 Environmental and energy saving 14-15

3.7 Research and development 15

3.8 Production standard and taxes benefits 17, 18

3.9 View on industries 19

4. Risk considerations 21

5. Shareholding structure and management

5.1 Shareholders 55

5.2 Management

5.2.1 Management structure 31

5.2.2 Board of Directors 31, 37

5.2.3 Audit Committee 34, 38

5.2.4 Executive Board 35, 38

5.2.5 Executives 36, 38

5.2.6 Personnel 43

5.2.7 Corporate governance 44

6. Connected transactions 51

7. Management discussion and analysis on results and financial status 26

8. Auditors’ fee 53

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