Nichimo : 2022 Sustainability Report

F r o m O c e a n To D i n i n g

Corporate philosophy

In the spirit that a company is a public organ of society, we widely contribute to societal development with technologies and services that lead the industry.

Since its foundation in 1910 (establishment was in 1919), Nichimo has been developing business operations mainly in the fishing and marine products industries, in response to changing times over its history spanning over more than 100 years.

Based on its corporate philosophy since its founding, Nichimo and the Nichimo Group companies continue to develop their businesses each aiming to be a company

that contributes to "people's healthy and vibrant lives" mainly in the field of "food" while maintaining a base in the fishing and marine products industries.

C o n t e n t s

Nichimo's corporate culture and strengths

model to one of selling imported marine products within Japan. Today, faced by rising demand for marine products

By contributing to people's healthy and vibrant lives through sustainable management,

we are paving a way for society's and the Nichimo Group's future

Kazuaki Matsumoto

President, Representative Director

NICHIMO CO., LTD.

Even in a business environment undergoing significant change, the corporate culture of the Nichimo Group is one of accepting such change, and contributing to society through dependable technology and reliable service, and I would even argue that this is the driving force behind our sustainable growth.

The history of the Nichimo Group could be said to be the history of accepting changes, choosing from among our options, and generating new businesses.

Nichimo was established in 1919. At that time both the offshore and deep-sea fishing industries were thriving, and we began our existence as a supplier of fishing nets and other materials to fishing vessels. Since then we have expanded our business in tandem with the development of the fishing industry itself. This changed completely with the introduction of the 200-nautical mile regulations in 1975. With both the offshore and deep-sea fishing industries facing headwinds, we looked ahead to the future and focused once again on the coastal fishing business, as well as working to transform our business

globally, primarily in Asia, and the challenging business environment caused by reduced catches in the seas around Japan due to factors such as climate change, we are under pressure to transform our business model once again. I believe we have come to a point at which we must add a new page to the history of the Nichimo Group, which has in the past successfully accepted change, chosen from among its options, and generated new businesses.

Since Nichimo was first founded, our unshakable corporate philosophy has been "In the spirit that a company is a public organ of society, we widely contribute to societal development with technologies and services that lead the industry," and these principles have established themselves deeply within the Group. Even when the business environment undergoes significant change, we will respond flexibly, focus on customer needs at all times, and contribute to society through dependable technology and reliable service. It is acting in accordance with this approach that is the corporate culture of the Nichimo Group, and that constitutes the driving force behind our sustainable growth.

Publication of the Sustainability Report

The primary objective of this report is to inform stakeholders of the way in which the Nichimo Group has developed over the years, and to make investors aware of the value it provides.

The publishing of this Sustainability Report is driven by two motivations.

One is the desire to ensure that as many people as possible understand how we intend to grow the business of the Nichimo Group going forward. Our core business involves buying and processing marine products from around the world and delivering them to the dining tables in Japan. However, with the continued growth in demand for marine products in China, South Korea, and other Asian countries, competition for catches has intensified and

it is becoming more difficult to buy marine products on favorable terms. Moreover, catches of squid, saury, salmon and other fish that were once available in abundance in

the seas around Japan have fallen in recent years. Under these circumstances, we feel it is important that our initiatives to support Japan's future eating habits, meaning how we intend to consistently deliver marine products to dining tables in Japan, are more widely understood by our stakeholders.

Our other motivation is the desire to ensure that investors have an accurate understanding of the value of the Nichimo Group. As part of the transition to the new market segments of the Tokyo Stock Exchange that began in April 2022, Nichimo selected TSE Prime Market. As a stock listed on the Prime Market, Nichimo must redouble its efforts to enhance corporate value, provide even fuller information disclosure, and secure the ongoing trust of investors. We consider the Sustainability Report to be an important tool for communicating with investors, and it incorporates our hope that this document will enable investors to achieve a better understanding of the value of the Nichimo Group.

Looking back at the previous medium-term plan

Important results include the building of a well-balanced structure of four businesses to support the Company, and the establishing of a framework to promote business through cooperation between the 17 Group companies that support the four businesses.

The fiscal year ended March 31, 2022 marked the final period of the three-year Fiscal 2020 Medium-Term Management Plan, known as "For the next 100 years" (hereinafter "the previous medium-term plan"), which began in the fiscal year ended March 31, 2020. During the previous medium-term plan, we pursued sustainable growth and the creation of new value through the management policies of building a high-profitability corporate structure, strengthening cooperation within the Group, and expanding overseas. Despite the impact of COVID-19, we were able to achieve a certain level of results.

The Nichimo Group is involved in the four business fields of food, marine, machinery, and materials. At the point at which we were formulating the previous medium-term plan and looking ahead to the major turning point of our 100th anniversary, we explored the things that only Nichimo

can do from the viewpoint of developing the business in a way that would enable it to once again overcome competition and differentiate itself. We concluded that in order to pursue this it would be necessary to generate synergy effects through cooperation within the Group, and concentrate management resources to further refine our organizational capabilities, thus enabling us to develop distinctive products and services. The major objective of these initiatives was to rebuild profitability in each business in order to create a structure of four pillars to support the Group as a whole. Our intention was to change the structure of the business to ensure stable profits even in an era of drastic changes in the business environment. I believe this goal was achieved, as shown by visible improvements in profitability, such as posting record levels of ordinary profit for four consecutive years. In addition, the four businesses of the Nichimo Group are supported by 17 Group companies, and over the duration of the previous medium-term plan we were able to achieve the long-term objective of making all Group companies profitable, strengthen cooperation between the Nichimo parent company and Group companies in each field of business, and put in place a business structure that enables stable profits for the Group as a whole. The mechanisms for consolidated management functioned adequately, even during the COVID-19 pandemic. In the Food Business, for

example, sales to Japanese ryokan, restaurants and other components of the food service industry were negatively affected, but we were able to grow our mail-order and supermarket sales due to an increase in consumption within the home. The Machinery Business, which supplies equipment to the marine product and processing industries, benefited from strong sales, mitigating the damage caused by COVID-19 for the Company as a whole. This was due to labor shortages at marine product and food processing businesses caused by difficulties in securing foreign workers during the COVID-19 pandemic, which led in turn to increased capital investment in labor- and energy-saving processing equipment.

New medium-term plan and sustainable management

Utilizing the foundation that we built during the previous medium-term plan, over the next three years we will create new value by promoting sustainable management focused on people, business, and the future, thus covering "From Ocean To Dining."

In December 2021 we finalized and revealed the three- year Fiscal 2023 Medium-Term Management Plan "Toward the next stage" (hereinafter "the new medium- term plan"), the first period of which is the fiscal year ending March 31, 2023. As the embodiment of the "From Ocean To Dining" management policy of the Nichimo Group, this plan will generate new value focused on people, business, and the future.

Connecting to the Future

As we face the future, two topics of which we are keenly aware are expanding the scale of the business and sustainable management. In terms of the scale of the business, by maintaining and developing existing businesses and nurturing new businesses, we are targeting

130.0 billion yen in net sales in the final year of the new medium-term plan.

The major challenge of this new medium-term plan will be sustainable management. With the global depletion of fishery resources having become a matter for concern, promoting the conservation of these resources even as we seek to address abundant demand for them, primarily in Asia, is an important social and environmental issue that also links to the SDGs. Under our slogan for sustainable management of "Opening the way to a sustainable world!", we will conserve the abundant resources of the oceans and fulfill our responsibility to support environmentally friendly production and distribution, with the aim of enhancing corporate value over the medium to long term.

One of the initiatives we are taking to protect the marine environment is the development of a "biomass fishing net" using a biodegradable plastic derived from plants (PLA). We commercialized biomass fishing nets in order to address the marine plastics problem that confronts the entire planet, and also to reduce the CO2 that is emitted during the manufacture, scrapping, or incineration of traditional fishing nets using plastics derived from petrochemicals. As another means of reducing CO2 emissions, we are also working on the recycling of scrapped fishing nets.

We will further strengthen the overseas business by, amongst other measures, building a system for the stable processing of marine products, opening up overseas markets, mainly in Asia, and putting in place a system for the sale of food processing machinery overseas.

Connecting Businesses

For expanding the scale of the business, what will be important is strengthening cooperation within Group businesses. By bringing together the entire process from upstream to downstream within the Group, including catching, production, processing, and product distribution, and developing the business through cooperation between the parent company of Nichimo and the 17 Group companies, we will create new value that no other company can provide.

The key here is aquaculture. With the business of importing marine products for sale within Japan becoming increasingly difficult, one of the solutions to the problem of maintaining and ensuring Japan's food supply is aquaculture. In fact, the Nichimo Group has been developing its aquaculture business for the past

40 years. We believe that the time has almost come for us to begin utilizing the aquaculture technology and know-how that we have accumulated over 40 years. Aquaculture is divided into the two techniques of marine aquaculture and land-based aquaculture, and we are seeking to commercialize not only marine aquaculture but also land-based aquaculture. For the aquaculture business we will also utilize intra-Group cooperation that transcends the barriers between different businesses, providing total support from supply of aquaculture seedlings, and of equipment and materials, through cultivation management and sales. We are proud that this is a business that embodies the "From Ocean To Dining" management policy of the Nichimo Group.

To all our stakeholders

Making our accumulated management resources work for the future

By fully utilizing the management resources that we have accumulated over the span of more than 100 years and making them work for the future, we will achieve steady growth even amid changes in the business environment and the ongoing evolution of the marine products industry.

The Nichimo Group is a company with a long history spanning more than 100 years, and it has accumulated management resources in the form of people, know-how, technology, and facilities that constitute a high level of competitive advantage. We take pride in the fact that these management resources have

Connecting with People

In other areas of the new medium-term plan, we will work on initiatives for Group-level internal control systems, strengthened IR activities, and more comfortable working environments. Specifically, we will strengthen the corporate governance system, such as by addressing the revised Japan's Corporate Governance Code, with a focus on maintaining our listing on the Tokyo Stock Exchange Prime Market. We will also concentrate on strengthening IR activities, emphasizing the raising of our profile and enhancing information disclosure, which will include the holding of financial results meetings.

In terms of more comfortable working environments, we will take proactive measures to put in place systems that take the standards of international society into account, such as work style reforms and the active promotion of female employees.

seeking to meet the increased demands for corporate social responsibility and to help achieve a sustainable society, and promoting the initiatives of the new medium- term plan to steadily generate results.

I urge all of our stakeholders to expect great things of the Nichimo Group as it takes on the challenge of achieving new growth through the application of these outstanding management resources.

Basic policy on sustainability

Opening the way to a sustainable world!

In accordance with our corporate philosophy since the founding of the Company, which is "In the spirit that a company is a public organ of society, we widely contribute to societal development with technologies and services that lead the industry," we cover "From Ocean To Dining" through cooperation within the Nichimo Group. At the same time we conserve abundant marine resources, and fulfill our responsibility to support environmentally friendly production and logistics, "Opening the way to a sustainable world!" and seeking to enhance corporate value over the medium to long term.

Nichimo's future-

focused aquaculture

enabled us to respond flexibly to repeated changes in the business environment, and to evolve successfully.

Nevertheless, however valuable the management resources, they are meaningless without the ability to utilize them going forward. It is important to consider how to use in future businesses the value that we have acquired and accumulated over our long existence.

Going forward, we will fully utilize the management resources we have cultivated,

Nichimo's Value Creation Medium-Term Management Plan

Looking back at Fiscal 2020 Medium-Term Management Plan,

known as "For the next 100 years"

Overview of "Fiscal 2023 Medium-Term Management Plan (Toward the next stage)"

Basic concept

The Company will work to improve corporate value with management that takes into consideration

the three "connections" based on the management policy of "From Ocean To Dining"

Connecting to the Future

Increase corporate value through expanding the scale of the business

Sustainable management (response to SDGs)

Management policies and their results

Corporate philosophy

Lead the fishing and marine products industries as a public organ of society

Contribute to the extensive development of society through technology and services

Management policy

Generate new value and contribute to "Contributing to people's healthy and vibrant lives" by covering "From Ocean To Dining"

Numerical targets for the fiscal year ending

March 31, 2025 (final fiscal year)

Management policies

Establishment of a high-profit structure

Results

Sustainable management

Management that responds to the expansion of demand for marine products, which will increase globally, while carrying out strict fishery resource management and protecting marine ecosystems

• Realization of profitability for the entire Group
• The Food Business promoted the selection and concentration of businesses to rebuild a profitable business structure
• The Marine Business, Machinery Business and Materials Business each established new businesses for further profit growth

Reinforcement of Group collaboration

• Changed from the previous inshore fishing business to the inshore aquaculture business
• Developed unique products and established a sales structure through Group collaboration that works on covering "From Ocean To Dining"

Expansion of overseas business

• Aim for overseas sales ratio of 20%

MISSION:

Stabilization of revenues

1. Selection and concentration of businesses
2. Enhancement of manufacturing functions: Processed foods
   (Northern frozen fish, salmon, tuna)
3. Building a system for the stable processing of marine products

MISSION:

Reform the business structure

1. Restructure into business that Nichimo can operate and manage
2. Establish new business offices

MISSION:

Entry into overseas markets

1. Build overseas sales platform for own products (AglyMax®, etc.)
2. Expand domestic share

Measures

MISSION:

Creation of new businesses

1. Commercialization of land-based aquaculture
2. Practical application of biomass fishing nets
3. Opening up of overseas markets, mainly in Asia

MISSION:

Take initial steps for business expansion

1. Establish system to double overseas sales
2. Expand business through M&A
3. Train personnel for sales expansion

MISSION:

Strengthening of trading company function

1. Expand sales of various environmentally conscious materials
2. Boost converting (adhesive processing) business