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This paper introduces the p-q-r instantaneous power theory firstly, and then an improved p-q-r theory is proposed. Based on this theory, it presents a composite control strategy of unified power quality conditioner (UPQC), which is the combination of the ordinary direct and indirect control strategy. An algorithm of calculating the compensation current and the compensation voltage are introduced. A principle analysis of the proposed control strategy is described in particular. Meanwhile the control formulas on the p-q-r coordinate are deduced in detail. The control schematic diagram based on these formulas is presented. Simulation results show that, when the UPQC applying such control strategy is used for the compensation of the nonlinear and unbalance three-phase four-wire system, the harmonic current, reactive power of loads as well as neutral current are compensated well, load voltage get balanced and rated, power factor of power source is about unity, which verified the effectiveness of applying such control strategy in UPQC.