Our Theme for the Next Three Years: Growth and Challenge Strategies - - PowerPoint PPT Presentation

Presentation May 17, 2007

Our Theme for the Next Three Years: “Growth and Challenge” Strategies to Expand Profit Base

— —New Medium-Term Business Plan, FY08/3 through FY10/3—

(Stock code: 2871) Nichirei Corporation Tel: (+81-3) 3248-2132 E-mail: takeshitas@nichirei.co.jp URL: http://www.nichirei.co.jp/ir/en/index.html

Table of Contents

[Main Features of the New Medium-Term Business Plan] [Business Strategy: Logistics] Improved Financial Condition and Profitability Allow Active New Investments 1 Logistics Network Will Drive Medium-Term Growth 10 The Japanese Market in Core Businesses, Processed Foods and Logistics, Will Continue to Expand 2 Expand Logistics Network Business by Increasing Joint Distributions and Contracting New Center Operations 11 ¥66.7 Billion in Operating Cash Flow Will Be Invested in Core Businesses over the Next Three Years 3 Resume Large-Scale Capital Investment to Meet Future Needs in Regional Storage 12 Challenges: Improve Profit Margins in Processed Foods, and Increase Sales in Logistics 4 [Reference Materials] Numerical Targets in the New Medium-Term Business Plan 5 Data 13 [Business Strategy: Processed Foods] Operating Income Margin of 4.8% by FY10/3 6 Establish Top Brand Group in the Commercial-Use Market by Focusing on Specific Product Categories 7 Further Accelerate Expansion in the Health Value Field through Business Partnerships 8 [Business Strategy: Marine Products] Continue Efforts to Create a More Focused Product Line, and Achieve Positive Operating Income by FY08/3 9 Note: Figures shown in graphs and tables have been rounded to the nearest unit where necessary, except where otherwise specified.

Main Features of the New Medium-Term Business Plan

<Main Features of the New Medium-Term Business Plan>

Improved Financial Condition and Profitability Allow Active New Investments

１

1,718 1,873 1,898 1,931 1,917 2,006 2,173 1,959 1,948 1,727 1,674 1,453 1,243 1,120 862 730 2.09 2.23 2.16 2.00 2.03 2.14 2.51 2.43 2.36 1.93 1.91 1.60 1.38 1.19 0.84 0.66 500 1,000 1,500 2,000 92/3 93/3 94/3 95/3 96/3 97/3 98/3 99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 100 million yen 0.00 0.50 1.00 1.50 2.00 2.50 Interest-bearing debt Shareholders' equity Debt/equity ratio

FY

ROIC and ROE 1.9 2.0 2.0 2.1 2.1 2.2 2.3 2.2 2.4 2.5 2.5 2.5 2.6 2.0 2.2 1.8% 1.4% 1.0% 1.4% 3.0% 3.3% 2.5% 3.2% 2.8% 2.9% 3.4% 4.0% 3.9% 4.0% 4.2% 3.6% 2.9% 2.1% 2.8% 6.1% 6.9% 5.4% 7.4% 6.2% 6.4% 8.1% 0.2% 2.0%

• 5.6%

0.2% 5.3% 4.7% 4.5% 5.8%

• 2.0%

5.4% 6.4% 10.1% 8.8% 11.1% 9.7% 10.2% 9.7% 8.4% 8.9%

• 6.0%
• 4.0%
• 2.0%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 96/3 97/3 98/3 99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) Operating Margin 0.0 0.5 1.0 1.5 2.0 2.5 Turnover Rate Employed capital turnover rate Operating margin ratio Employed capital operating margin Return on shareholders' equity

• 1. Achievements in the previous Medium-Term Business Plan

i. Improved financial condition and better return on equity ii. Focused management resources on core businesses and improved profit margins iii. Transformed management system by shifting to a holding company structure, etc.

• 2. Overall strategy for the new Medium-Term Business Plan, and medium-term management goals

i. The new Medium-Term Business Plan is designated as a period of “Growth and Challenge” building on the reinforced financial base, improved profit-generating capability in core businesses, and strengthened management system achieved in the previous Plan. ii. Interest-bearing debt will remain at present levels, and the operating cash flow for ¥66.7 billion generated over the next three years can be prioritized for investments to expand the revenue base. iii. Medium-term ROE target is set at 10%, and the policy on returns to stockholders is to maintain dividends on equity (DOE) of 2.5%, and a dividend payout ratio of 25%.

Notes: 1. ROE is calculated from net income (loss). Negative figures for FY98/3 and FY04/3 reflect restructuring support losses in investment businesses and reorganization losses. 2. Figures for FY07/3E include an extraordinary gain of ¥3.0 billion on sale of shares in an affiliated company. Excluding this gain, ROE is 8.5%.

ROIC and ROE Debt/Equity Ratio (Consolidate)

２

1. The percentage of household food budgets spent on restaurant food, takeaway lunchboxes, ready-to-eat, and frozen foods will continue to increase. 2. Given the chronic shortage of cooks and the steady extension in hours of operation, demand from supermarkets and restaurant chains for commercial-use products that helps reduce their food preparation workloads is rising. 3. In view of an aging population, and the introduction of policies intended to combat rising health care costs derived from metabolic syndrome and other illnesses, a better food style will become more popular for people to stay healthy. 4. The demand for logistics solutions and logistics outsourcing shifting from in-house logistics will continue to expand due to increasing needs for innovative logistics solutions to improve supply chain management, and trends toward joint distributions to help conserve resources and reduce environmental impacts.

Percentage of Food Budget per Household Spent on Foods Prepared Outside the Home

26.0% 28.0% 30.0% 32.0% 34.0% 36.0% 38.0% 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 Year Pre-cooked foods + restaurants, school lunches

Percentage of Logistics Costs Paid to Outside Logistics Companies (All industries)

56.7% 54.4% 56.4% 55.6% 62.2% 51.8% 30.0% 50.0% 70.0% 2000 2001 2002 2003 2004 2005 FY

<Main Features of the New Medium-Term Business Plan>

The Japanese Market in Core Businesses, Processed Foods and Logistics, Will Continue to Expand

Source: Created based on Family Income and Expenditure Survey, Ministry of Internal Affairs and Communications, Statistics Bureau. (Ready-to-eat foods + restaurant meals and school lunches) ÷ (Spending on food, excluding sweets, beverages and alcohol)

Source: Survey of Logistics Costs in Fiscal 2005, Japan Institute of Logistics Systems

Percentage of Logistics Costs Paid to Outside Logistics Companies (All industries) Percentage of Food Budget per Household Spent on Foods Prepared Outside the Home

３

<Main Features of the New Medium-Term Business Plan>

¥66.7 Billion in Operating Cash Flow Will Be Invested in Core Businesses

• ver the Next Three Years
• 1. Capital investment in facilities over the next three years will total ¥54.0 billion, ¥48.9 billion of which will be

focused on two core businesses.

• 2. Breakdown of ¥17.9 billion investment in Processed Foods

i. Expand in-house production capacity of pre-cooked frozen foods for commercial use. ii. Invest in the Health Value area.

• 3. Breakdown of ¥31.0 billion investment in Logistics

i. Construct six new refrigerated warehouses in Japan (mostly scrap and build projects) with a capacity of 60,000 tons. ii. Establish new Logistics Network distribution centers.

• 4. Take advantage of M&A and investment opportunities that may arise.

Changes in Level of Capital Investment

44 38 38 34 30 32 42 115 115 80 36 43 24 11 13 27 40 66 41 72 17 9 14 7 7 7 8 16 18 17

97 90 76 52 50 66 90 197 174 169 50 100 150 200

01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan)

FY 100 million yen

Capital investment (Logistics) Capital investment (Processed foods) Capital investment (Other)

Strategy Map for the New Medium-Term Plan

Growth in sales Improved profitability

Expansion of Logistics Network business Increase share of the commercial frozen foods market Control manufacturing costs by expanding in-house production capacity Control costs in Regional Storage Maintain present cargo booking capacity in Regional Storage Improve profit margins in transportation Expand logistics in Europe and China

Logistics Processed Foods

Expand our Health Value Creation business

Expansion of Logistics Network business

Continue strategy of rationalizing sales promotion costs in frozen foods for household use

• 1. Raise the operating income margin in Processed Foods from the present 3.4% to 4.8%.
• 2. Increase total sales in Logistics by 19% compared with FY07/3, by achieving 10% annual growth in the Logistics Network

business.

<Main Features of the New Medium-Term Business Plan>

Challenges: Improve Profit Margins in Processed Foods, and Increase Sales in Logistics

４

• 1. Goals for FY08/3

i. Overall growth in sales of 3% (¥13.9 billion), driven by growth in Processed Foods and Logistics, and by improvements in Marine Products as a result of the ongoing Revitalization Plan. ii. Operating income target is ¥18.3 billion, about the same as the previous FY. Regulatory change in the depreciation method will increase depreciation costs by ¥0.5 billion, and revenue from Real Estate is expected to fall by ¥1.2 billion compared with FY06/3. By Segment, profits in Processed Foods and Marine Products are expected to grow by ¥1.1 billion and ¥0.7 billion, respectively, as compared with the previous FY.

(Amounts less than 100 million yen are omitted)

07/3 (Actual) 08/3 E 07/3 (Comparison) 10/3 (Target) 07/3 (Comparison) Net Sales 4,576 4,716 103% 5,331 116% Operating Income 181 183 101% 226 125% Recurring Income 173 173 99% 208 120% Net Income 108 102 94% 114 105% ROE 10% 9% 9% EPS 34 yen 32 yen 36 yen

1,848 1,773 1,847 1,900 2,000 811 747 800 860 900 846 809 820 900 1,000 1,590

• 270
• 291
• 314

1,271 1,341 1,385 1,458 100 79 69 69 74 87 70 65 73 81

• 269
• 242

4,716 4,577 4,694 4,969 5,331

• 1,000

1,000 2,000 3,000 4,000 5,000 6,000 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 100 million yen Intercompany elimination Other Real estate Logistics Meat and poultry Marine products Processed foods

５

Note: Estimates for FY08/3 and targets for FY10/3 have been adjusted to account for the effects of a change in the system of accounting for depreciation, and a change in method of accounting for leased assets. For more information about the amounts involved please refer to page 13 of these materials.

55 60 71 83 97 68 73 78 33 34 34

• 4
• 17

3 5 6 6 3 9 9 8 72 58 45 61 5 3 2 1 1

• 3
• 5
• 2

1

• 1

181 160 183 202 226

• 20

20 40 60 80 100 120 140 160 180 200 220 240 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 100 million yen

Net Sales by Segment Operating Income by Segment

<Main Features of the New Medium-Term Business Plan>

Numerical Targets in the New Medium-Term Business Plan

Business Strategy: Processed Foods

556 504 524 526 526 798 803 830 851 887 128 122 254 366 344 338 334 333 1,848 1,773 1,847 2,000 189 155 1,900

3.0% 3.4% 3.8% 4.4% 4.8%

500 1,000 1,500 2,000 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 100 million yen Pre-cooked frozen foods for household-use Pre-cooked frozen foods for commercial-use Health value Other Operating profit ratio 08/3E 71 Change in method of accounting for depreciation -1 Increase in fixed costs -2 Higher expenditure in advertising -3 Higher costs in raw materials -3 Acerola +4 Improved commercial distribution expense ratios in pre-cooked frozen foods +2 Improved gross profit margins in pre-cooked frozen foods +3 Effect of improved plant capacity utilization in pre-cooked frozen foods +3 Increase in sales of pre-cooked frozen foods +8 07/3 50 55 65 75 100 million yen

６

• 1. Sales growth will be driven by pre-cooked frozen foods for commercial use, in response to an increasing dependence on

external food services, and by the expanding Health Value products.

• 2. Further cost reduction will be achieved through an increased plant capacity utilization by giving priority to in-house production
• f the additional demand generated by increased sales of value-added pre-cooked frozen foods for commercial use.
• 3. Health Value products (wellness foods/acerola) is expected to expand its market size through active collaboration with other

business partners, taking advantage of the new business opportunities where corporate health insurance associations will be required to provide mandatory health counseling services to the employees and families starting in FY08/3.

• 4. Brazilian fruit raw materials, especially acerola, will be a key linchpin of our global strategy. The fruit juice concentrate

manufactured at our new production line at Nichirei Brazil Agricola will expand its sales channel to Japan, Asia and Oceania in addition to Brazil and Europe.

• 5. Sales of pre-cooked frozen foods for household use are expected to hold steady at present levels during the period of this Plan.

Efforts will be made to increase profitability by shifting resources saved from the revision of sale promotion expenditures to efficient advertising, and sales promotion of targeted products.

• 6. Targets for this segment in FY08/3 are a profit increase of ¥1.1 billion, and an operating income margin of 3.8%.

<Processed Foods Business Strategy>

Operating Income Margin of 4.8% by FY10/3

Net Sales and Operating Income Margin of Processed Foods Factors Expected to Affect Operating Income in Processed Foods in FY08/3 (Compared with FY07/3)

1. Focus management resources on six specific categories in the commercial-use market, including chicken, hamburgers and croquettes. i. Aim to distinguish Nichirei from the competition by upgrading business power in marketing , procurement, production, quality controls, and processing technologies. 2. Raise in-house production ratio. i. Raise in-house production ratio to over 50%. ii. Keep production-related profits inside the company through capital investment for production capacity expansion in our

• wn plants to meet an increased portion in sales.

iii. Raise capacity utilization rate of our own plants to 74%.

７

194 190 197 202 203 133 124 135 140 149 74% 69% 65% 68% 69% 50 100 150 200 250 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 1,000 tons Production capacity Production volume Capacity utilization

Example of Nichirei Technology: New Croquette Production Line at the Mori Plant

• i. Non-oily coating
• ii. Achieves

“the same texture as a potato”

Conventionally Method (Coating ratio 40%) New Technique (Coating ratio 35%)

Bread crumb layer Batter layer

<Processed Foods Business Strategy>

Establish Top Brand Group in the Commercial-Use Market by Focusing on Specific Product Categories

3. Use technology to achieve distinction i. Find ways to narrow the gap between present quality levels and customer needs. ii. Refine quality, and quickly transfer it to the production line. iii. Develop and accumulate key food processing technologies.

Note: Full capacity is defined as 15 hours per day, 290 days per year. Nichirei in-house production capacity and production volumes are calculated based on 8 plants located in Japan and 2 plants located overseas.

Capacity Utilization of Nichirei Group Promotion Plan

135 155 122 155 189 254 105 125 50 150 250 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY

100 million yen

Acerola Wellness foods 1７ 29 54 99

Expansion of target customers Target customers

Products Information channel

Nichirei New company

Direct sale

Sales

Partner companies

Hospital, medical clinic, pharmacy, health insurance association, etc.

８

1. As a result of the aging of Japanese society and reforms to the health care system, the market for nursing care and in-home medical support services, including food-related services, is expanding steadily. 2. A revision of the National Health Insurance Law scheduled to take effect in FY08/3 mandates that specific public health counseling be provided to all those enrolled in the system. This will create a need for support in providing dietary guidance to enrollees, which could further stimulate growth in the Health Value market. 3. Nichirei has long been exploiting the growing Health Value market by developing new products for its Wellness Foods business that take advantage of the controlling technology guaranteeing recipe ingredients that has been developed in its diabetic food product business, and by building its own direct marketing channel. Now Nichirei will seek to establish business tie-ups and/or joint ventures with other companies that aim to develop a new direct marketing channel through medical or health insurance institutions to reinforce the ability to deliver product information directly to target customers. The sales target of Wellness Foods calls for ¥10 billion during the new Medium-Term Business Plan.

Sample Business Model for Expanding Sales of Wellness Foods Products through Collaboration with Other Companies

<Processed Foods Business Strategy>

Further Accelerate Expansion in the Health Value Field through Business Partnerships

Net Sales in Health Value Business

Business Strategy: Marine Products

811 747 860 900 800

• 17
• 4

3 5 6 100 200 300 400 500 600 700 800 900 1,000 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY

Sales 100 million yen

• 20
• 15
• 10
• 5

5 10

Operating income/loss 100 million yen

Sales Operating income/loss

９

• 1. During the period of the New Medium-Term Business Plan, Marine Products will continue implementation of

the Revitalization Plan that began in FY07/3.

• i. Progress in FY07/3

Achieved reduction of ¥0.7 billion in fixed costs by shrinking the workforce and eliminating or consolidating offices. Improved profitability by eliminating marginal product lines, and reduced risk of marketing unprofitable products. Increased revenue from growth drivers such as fish eggs and octopus, and from crabs that needed to enhance the basic business domain. Improved capital turnover by reducing inventories and effectively managing accounts payable.

• ii. Target in FY08/3

Carrying forward the process started in FY07/3, positive operating income is to be posted by implementing the following measures: Increase sales and profit margins in the growth drivers as shrimp by diversifying procurement routes. Exploit success case in transferring the products competitiveness into added-value in other products. Establish a consignment processing and marketing at the processing plants of business partners in China.

<Marine Products Business Strategy>

Continue Efforts to Create a More Focused Product Line, and Achieve Positive Operating Income by FY08/3

Marine Products: Sales and Operating Income/Loss

Business Strategy: Logistics

1. In view of an enormous demand for innovative logistics, Logistics Network is expected to drive growth in sales and profits over the medium term by providing solutions that utilize joint distributions, transfer centers and others. 2. Regional Storage will experience a temporary decline in sales due to a loss of storage capacity, but then bounce back again into positive growth. Cost-cutting measures will continue, and large-scale investment will resume on a scrap and build basis. 3. Overseas will continue to develop the businesses in Eastern Europe that started during the previous medium-term business plan and in Shanghai, China while trying to secure profits in the Western European market.

１０

632 688 746 806 925 463 454 437 444 448 156 178 186 189 194 1,271 1,341 1,385 1,458 1,590 23 19 16 21 20 500 1,000 1,500 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 100 million yen Logistics network Regional storage Overseas Other 13 17 24 31 37 47 53 45 43 42 6 12

• 15

10 9 7 1 1 1 3 2

• 14
• 11
• 6
• 9

78 73 68 58 72

• 25

25 50 75 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 100 million yen Logistics network Regional storage Overseas Other Inter-segment Operating income

<Logistics Business Strategy>

Logistics Network Will Drive Medium-Term Growth

Logistics: Sales by Sub-Segment Logistics: Operating Income by Sub-Segment

1. Logistics Network will provide an entire range of upstream and downstream solutions for SCM of chilled and frozen products. 2. Overall size of the market is estimated to be around ¥2.1 trillion. Sales grew by ¥19.1 billion during the three years of the previous medium-term business plan. 3. Goals are sales growth of 10% per year and incremental sales of ¥23.7 billion by the end of the new plan.

１１

Estimated size

• f the overall

market Growth in sales during the 3 years

• f the

previous business plan Target customers New business/solution content Anticipated growth in sales during 3 years of the new Medium-Term Business Plan Sales growth in FY08/3

5,500

・GMS ・Present TC customers ・Use existing customer delivery network for large-scale transport of primary commodities ・Expand to include products delivered to existing TC

38 8 3,300 121

・Regional supermarkets ・Existing customers ・Take advantage of our proven performance to extend marketing proposals ・Consigned operation of fresh produce centers ・Expand volume handled by existing TC

110 13 3,800 55

・Frozen foods ・Bakeries ・Local processors ・Expand scope of joint distributions and consolidated transport centered on the logistics needs of Nichirei Foods. ・Expand use of consolidated transport for small-lot shipments

65 32 8,700 20

・Confectionaries ・Restaurant chains ・Department stores ・Apply know-how gained in the Tokai district to horizontal expansion ・Expand cargo owner customer base by providing solutions involving joint distributions

25 5 21,300 191 237 58

Growth Factors in Logistics Networks

<Logistics Business Strategy>

Expand Logistics Network Business by Increasing Joint Distributions and Contracting New Center Operations

100 million yen

Store Store Store Store Store Store Store Store

Structure of the Field of Logistics Network

Procurement logistics

TC

Manufacturing logistics

B to b

Chilled Foods Frozen Foods

44 13 21 28 38 24

• 23
• 13
• 27
• 37
• 33
• 29
• 40
• 30
• 20
• 10

10 20 30 40 50 60 70 01/3 02/3 03/3 04/3 05/3 06/3 FY Capacity:Tons New Elimination/downscale Net increase of capacity

Increase

1. Large-scale capital investment has been curtailed since FY98/3 to improve financial health as corporate priority. 2. The industry as a whole, however, has made significant investments in new facilities during this period. 3. Nichirei will carry out scrap and build projects for those refrigerated storage facilities that face problems including safety, including seismic resistance, quality control, or urbanization as well as resuming large-scale capital investment in new facilities to meet increasing demand generated by locally oriented marketing efforts. 4. During the three years of the new Medium-Term Business Plan Nichirei will expand its refrigerated storage capacity by 35,000 tons in the Kanto district, 20,000 tons in the Kansai district, and 5,000 tons in other areas.

１２

102 100 78 66 20 44 38 38 34 30 32 42 31 31 30 43 44 33 41 17 40 81 81 88 89 99 74 69 64 62 64 65 56 57 63 63 20 40 60 80 100 120 140 96/3 97/3 98/3 99/3 00/3 01/3 02/3 03/3 04/3 05/3 06/3 07/3 08/3E 09/3 (Plan) 10/3 (Plan) FY 100 million yen Capital investment Maintenance Scrap and build Enhancement of capability Depreciation

Source: Annual change in refrigerated storage capacity in Japan (new facilities, eliminations, etc.) Japan Association of Refrigerated Warehouses

Change in Capital Investment and Depreciation in Logistics

<Logistics Business Strategy>

Resume Large-Scale Capital Investment to Meet Future Needs in Regional Storage

Industry-Wide Change in Refrigerated Warehouse Volume

Reference Materials

Data

Sales and Operating Income by Segment

１３

(Amount less than 100 million yen are rounded off.) 06/3 07/3 08/3 E 09/3 (Plan) 10/3 (Plan) 1,848 1,773 1,847 1,900 2,000 811 747 800 860 900 846 809 820 900 1,000 1,271 1,341 1,385 1,458 1,590 100 79 69 69 74 87 70 65 73 81

• 269
• 242
• 270
• 291
• 314

4,694 4,577 4,716 4,969 5,331 55 60 71 83 97

• 17
• 4

3 5 6 3 6 8 9 9 58 72 68 73 78 61 45 33 34 34 1 1 2 3 5

• 1

1

• 2
• 5
• 3

160 181 183 202 226 Effect of changes in system of accounting for depreciation, and changes in system of accounting for leased assets 100 million yen 08/3 E 09/3 (Plan) 10/3 (Plan) Operating Expenses 5 2 5 Increase due to change in system of accounting for depreciation 5 8 11 Decrease due to change in system of accounting for leased assets

• 6
• 6

Non-Operating Expenses

• 7

6 Increase due to change in system of accounting for leased assets

• 7

6 Extraordinary Loss

• 15
• Increase due to change in system of accounting for leased assets
• 15
• Real Estate

Other Intercompany Elimination Total Marine Products Logistics Meat and Poultry Products Intercompany Elimination Total (Operating Income) Processed Foods (Net Sales) Processed Foods Marine Products Meat and Poultry Products Logistics Real Estate Other

Forward-Looking Statements

Aside from historical facts, Nichirei’s present plans, forecasts and strategies as outlined in this publication consist of forward- looking statements about future business performance. These forecasts of future business performance and explanations of future business activities may or may not include words such as “believe”, “expect”, “plan”, “strategy”, “estimate”, “anticipate” or other similar expressions. These statements are based on the information available to Nichirei management at the time of publication. Actual results may differ significantly from these forecasts for a variety of reasons, and readers are therefore advised to refrain from making investment decisions based solely on these forward-looking statements. Nichirei will not necessarily revise its forward-looking statements in accordance with new information, future events, and other results. Risks and uncertainties that could affect Nichirei’s actual business results include, but are not limited to: (1) Changes in the economic conditions and business environment, especially personal consumption trends, that may affect the Nichirei Group’s business activities. (2) Foreign exchange rate risks, especially as regards the US dollar and the Euro. (3) Risks associated with the practicability of maintaining quality controls throughout the process from product development, procurement of raw materials, production, and sale. (4) Risks associated with the practicability of development of new products and services. (5) Risks associated with the practicability of growth strategies and implementation of low-cost systems. (6) Risks associated with the practicability of achieving benefits through alliances with outside companies. (7) Contingency risks. However, factors that may affect the performance of the Nichirei Group are not limited to those listed above. Further, risks and uncertainties include the possibility of future events that may have a serious and unpredictable impact on the Group. This publication is provided for the sole purpose of enhancing the reader’s understanding of the Nichirei Group, and should not be taken as a recommendation regarding investment decisions.