ANNUAL REPORT 2011 YEAR ENDED MARCH 31, 2 011 The Maruchan logo reflects the Toyo Suisan Group’s goal of providing food that brings a smile to your face, and we have long worked to create delicious, high-quality food products in this spirit. Delicious food that naturally makes you smile, right on your table. Safe and healthy products that stand the test of time, for everyone. “Smiles for All.” Everything we do is to make you smile, and we intend to continue to honor this commitment in the years to come. About the Maruchan logo Since its debut in 1962, the Maruchan logo has become widely recognized and loved as the symbol for Toyo Suisan’s processed foods among every Japanese age group ranging from small children to the elderly. In 1972, Toyo Suisan established a local subsidiary in the United States and began manufacturing and selling products for North America. Accordingly, products featuring the Maruchan label are highly acclaimed for their flavor both domestically and overseas. CONTENTS TO OUR SHAREHOLDERS / CONSOLIDATED FINANCIAL HIGHLIGHTS 1 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS 9 REVIEW OF OPERATIONS 2 CONSOLIDATED STATEMENTS OF CASH FLOWS 10 FEATURE 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11 CORPORATE GOVERNANCE / BOARD OF DIRECTORS AND CORPORATE AUDITORS 5 INDEPENDENT AUDITORS’ REPORT 24 CONSOLIDATED BALANCE SHEETS 6 CORPORATE DATA 25 CONSOLIDATED STATEMENTS OF INCOME / CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 8 Forward-looking Statements In this annual report, statements other than historical facts are forward-looking statements that reflect our plans and expectations. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results and achievements to differ materially from those anticipated in these statements. TO OUR SHAREHOLDERS I would like to begin by expressing my sincere appreciation for our shareholders’ continued support. We are pleased to report the business results for Toyo Suisan Kaisha, Ltd., for fiscal 2011, ended March 31, 2011. In a severe operating environment, the Toyo Suisan Group seeks to enhance its competitiveness for continued development and to carry out swift reforms. We will also strive to maintain the support and trust of our customers, improve corporate value, and boost shareholder value. Operating results for the year ended March 2011 The Japanese economy in the consolidated fiscal year under while recognizing our duty to contribute to society through review enjoyed a moderate recovery and saw higher corporat e foodstuffs and provide customers with safe and secure foods and earnings as business conditions improved on increased exports services. Additionally, in order to successfully address intense and the positive effects of economic stimulus measures. However, sales competition, we continued to rebuild the Group's production the Great East Japan Earthquake has made conditions extremely and distribution systems, further reduced costs and promoted challenging and will likely have a deep impact on the economy aggressive sales activities. going forward. It is further feared that nationwide power shortages As a result, in the consolidated fiscal year under review, net sales will put significant restrictions on economic activity. decreased 3.0% compared to the previous fiscal year to ¥305,911 Conditions in the food products industry continued to be million, operating income declined 17.1% year on year to ¥25,811 extremely challenging. Prices for certain raw materials remained million and ordinary income fell 16.5% year on year to ¥27,191 high, forcing cuts to manufacturing costs and spurring even million. We also stated an extraordinary loss associated with the greater competition among companies. In addition, consumer earthquake, and as a result net income declined 32.9% compared awareness of food safety issues increased still further and fulfilling to the previous year to ¥12,415 million. social responsibilities such as strengthening quality management and addressing environmental issues became even more of an June 2011 imperative for companies in the industry. Amid such conditions, the Toyo Suisan Group, guided by our Tadasu Tsutsumi corporate slogan, "Smiles for All," engaged in business activities President TOYO SUISAN KAISHA, LTD., AND ITS SUBSIDIARIES Consolidated Financial Highlights Thousands of Millions of yen U.S. dollars Years ended March 31, 2010 and 2011 2010 2011 2011 For the year: Net sales ¥ 315,337 ¥ 305,911 ＄$ 3,679,026 ¥ 315,337 Operating income 31,121 25,811 310,415 31,121 Ordinary income 32,545 27,191 327,011 18,506 Net income 18,506 12,415 149,308 At year-end: ￥229,242 Total assets ￥¥ 229,242 ＄¥ 232,532 ＄$ 2,796,536 170,288 Total net assets 170,288 172,807 2,078,256 Per share of common stock: (in yen and U.S. dollars) ￥¥ 181.3 Net income ￥¥ 181.3 ＄¥ 121.5 ＄$ 1.46 40.0 Cash dividends 40.0 40.0 0.48 Dollar amounts represent translations at the rate of ¥83.15 = US$1, the rate prevailing on March 31, 2011. TOYO SUISAN ANNUAL REPORT 2011 1 REVIEW OF OPERATIONS Domestic Instant Noodles Segment new brand Shiki-monogatari (The Tale of the Four million yen Seasons; seasonal cup-style noodle products) 101,755 launched in March of last year and the Gotsumori Sales from domestic instant noodle operations series of extra large cup-style noodle products increased owing to higher sales of core Japanese contributed to sales, and the overall cup-style noodle products including Men-Zukuri (non-fried noodle segment performed substantially better noodle products) and to actively launching new than the previous year. In packaged noodle brands and new products made with innovative products, core products like Mukashi Nagara- manufacturing techniques. For our mainstay no Chuka Soba (old-fashioned Chinese-style Japanese noodle products, we conducted a 30th noodles) put up a solid performance, but due in anniversary campaign and other activities for part to the hot summer weather, the packaged Midori-no Tanuki Tensoba (a series of buckwheat noodle segment fell short of last year's result. noodles with tempura). In February, we actively As a result of these development, overall sales promoted sales of Mukashi Nagara-no Sauce in this segment increased 4.9% compared to Yakisoba (old-fashioned fried yakisoba noodles the previous year to ¥101,755 million. Segment with sauce), which features glossy, chewy income fell 5.7% year on year to ¥11,640 million noodles made with a new manufacturing method due to higher sales promotion expenditures and that vastly improves noodle quality. In addition, the increased depreciation on the Kanto Plant. Frozen and Refrigerated Foods Segment competitor products, causing sales to fall short million yen of the previous year. In frozen food products, 63,378 commercial frozen food products and frozen In frozen and refrigerated food products, the vegetables put up a solid performance, but it fresh noodle market continues to contract and was not enough to offset decreased sales of conditions remain quite challenging. Seeking to frozen noodle products. As a result, sales in this raise product value we ran consumer campaigns segment decreased by 2.9% compared to the and conducted product development aimed previous year to ¥63,378 million. Segment income at creating new culinary possibilities. However, increased by 2.9% year on year to ¥4,287 million our core products, three-pack yakisoba thanks to a strong performance from cold ramen noodles and three-pack fresh ramen noodles products because of record summer heat as well encountered heated price competition with as increased sales of noodles with dipping sauce. Processed Foods Segment fish-based hams and sausages we worked to million yen ensure products were sold at appropriate prices 18,333 in response to rapidly rising ingredient prices. As In processed food products, the rice business a result, sales declined 5.3% compared to the saw sales decline due to manufacturing plants previous year to ¥18,333 million, and segment being damaged in the earthquake, but for minced income fell 14.7% year on year to ¥543 million. Overseas Instant Noodles Segment the strength of the yen, sales fell 15.3% compared to million yen the previous year to ¥50,191 million. Segment income 50,191 declined by 38.6% year on year to ¥7,447 million In overseas instant noodles, we achieved sales due to cost increases for sales promotions, higher volumes on par with the previous year as a result of costs for main ingredients caused by increases in aggressively conducting sales promotions starting in commodity prices worldwide, and higher distribution July. However, due to sales promotion measures and costs, as well as to the impact of the strong yen. 2 TOYO SUISAN ANNUAL REPORT 2011 Seafood Segment and heighted sales competition, making it a very million yen challenging year. Operating in these conditions, 33,355 we actively worked to promote sales, primarily In the Seafood Segment, global market conditions of salmon, trout, roe, tuna, minced fish and other made a remarkable recovery, and demand rose core products, to both existing customers and overseas, especially in Europe, North America, new customers. As a result, sales dipped 0.1% Russia and China, forcing Japanese trading compared to the previous year to ¥33,355 million. companies and seafood product manufacturers Segment income increased 81.6% year on year to import and sell raw materials at high market to ¥707 million thanks in part to developing new prices. At the same time, the domestic Japanese salmon, trout, roe and southern fish products. market continued to be marked by low prices Cold-Storage Segment outbound volume trended at a high level, causing million yen storage revenues to decline. Aggressive sales 12,842 activities, however, increased inbound volume, The Cold-Storage Segment saw a decline in so warehousing revenue was steady and handling volume nationwide due to shippers underpinned income.