ETIC decides to support Daimaru K.K., De-mer K.K. and Marutake
Hachinohe Fisheries K.K.
December 22, 2011
Enterprise Turnaround Initiative Corporation of JapanThe Enterprise Turnaround Initiative Corporation of Japan (“ETIC”) has decided to provide
support to Daimaru K.K., De-mer K.K. and Marutake Hachinohe Fisheries K.K. (hereaftercollectively the “Daimaru Companies”) under Article 25, Clause 4 of the Enterprise
Turnaround Initiative Corporation of Japan Act (Act 63, of 2009, hereafter “the ETIC Act”).

1．Name of companies concerned
Daimaru K.K., De-mer K.K. and Marutake Hachinohe Fisheries K.K. (hereaftercollectively the “Daimaru Companies”)

2．Name of the financial institutions and the companies jointly applying for rehabilitation
support with the Daimaru Companies
The Aomori Bank, Ltd., Japan Finance Corporation, Yoshida Kosan Y.K., andYoshida Sangyo K.K.

3．Outline of business revitalization plan
Please see appendix

4．Comment from State Ministers in charge of ETIC
Prime Minister, Minister of Internal Affairs, Minister of Finance, Minister of Economy,
Trade and Industry: No opinion expressed.
Minister of Health, Labour and Welfare: I have no objections to this decision.
However, I request that ETIC will, after confirming that support will
be provided to the Daimaru Companies, promptly ensure that
discussions with workers are conducted and in the course of theprovision of advice and guidance in the execution of the business
revitalization plan, will observe all applicable laws, and will consult
with workers to give due consideration to their stable employment.

15．Comment from State Ministers supervising business activities
Minister of Agriculture, Forestry and Fisheries: I have no objections to this decision.
Given the recognized importance of the seafood processing
industry in this region, I ask that in implementing the business
revitalization plan, appropriate consultations take place with
regional stakeholders with regard to supply stability of processedseafood products and employment security.

6．Debt purchase application period
From Thursday December 22, 2011 for receipt by ETIC no later than Thursday
March 1, 2012.

7．Request for temporary suspension
Under Article 27, Clause 1 of the ETIC Act, financial institutions and others havebeen requested not to recover loans or exercise any other rights they may have as
creditors, other than those permitted under the corporate revitalization plan, before
the end of the debt purchase period as per item 6 above.

8．Treatment of trade creditors
The decision by ETIC to provide support involves requesting financial support only
from financial institutions providing loans to the Daimaru Companies. No request
for support will be made with regard to trade debt. Therefore there will be no impact
on trade and general creditors.

9．Basis for decision to support
ETIC‟s basis for deciding to provide support is as follows.
9.1 Rationale
The Daimaru Companies operate a seafood processing businesses in Hachinohe
City in Aomori Prefecture, mainly handling pickled mackerel. The Daimaru
Companies established the Hachinohe Pickled Mackerel brand, and theirapproximately 130 local employees currently account for around 11% of a total of
production of 6,000 tons (according to data from Aomori Prefecture) of pickledmackerel.

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In Hachinohe City, the local government, industry and community are working
together to build brands such as Hachinohemaeoki Saba and Hachinohe- maeoki
Ginsaba, reflecting the fact that seafood processing, centered on pickled mackerel,is an important industry in Hachinohe City.
The Daimaru Companies use locally produced ingredients and advanced foodprocessing technology, and are recognized by Ministry of Economics, Trade andIndustry under the Agricultural Cooperation Promotion Act of Commerce and with
the Minister's Prize from the Ministry of Agriculture, Forestry and Fisheries. The
business contributes to activity in what is the region‟s number one industry, with
Aomori Prefecture being cited as a model case under the Agricultural Cooperation
Promotion Act of Commerce Act.
The Daimaru Companies have useful management resources for the region, and inconsideration of the impact on the local economy and revitalization of the region‟s
leading industry, ETIC believes that supporting the Daimaru Companies should
contribute to revitalizing the local economy and supporting the lifestyles of the local
population.
9.2 Role of ETICIn deciding to support the Daimaru Companies, ETIC will pursue the smooth
progress of the revitalization plan, by coordinating activities which the Daimaru
Companies would have found difficult to execute alone, including reconciling theinterests of related financial institutions, local sponsor companies and other relatedparties from a fair and neutral standpoint. ETIC will also join with local companies
to inject capital of ¥21 million, and will play a role in securing finance of up to ¥100
million as well as placing management within the company.
ENDS

3Appendix: Outline of Business Revitalization Plan
Section 1: Overview of company receiving support (as of October 31, 2011)
1.1 Daimaru K.K. (hereafter “Daimaru”)
1. Name of company

Daimaru K.K.

2. Head office

10-2

Hinode-cho,Oaza-Samemachi,

Hachinohe-shi,

Aomori-ken
3. Date establishedMay 2, 1969

4. Capital¥30 million

5. StockNumber of authorized shares:

80,000 shares

Number of outstanding shares:

60,000 shares

6. Majorshareholders
7. Main businessIwao Shimamori; shares held: 26,040; percentage stake:
43.40%
Processed marine products business, trading business 、shipping agent business

8. Number of
employees

Fulltime: 23; part-time: 36; temporary: 1(As of Dec. 1, 2011)

9. Main business

Head office, #1 processing plant, #2 food processing plant,

locations#2 frozen works plant, #3 frozen works plant (all are locatedin the vicinity of the head office)10. Main banks

The Aomori Bank, Ltd., Japan Financing Corporation

11. Financial condition

Sales: ¥1,249 million

Period to April 2011

Ordinary income (loss): (¥30 million)
Net income (loss): (¥349 million)
Net assets(negative): (¥342 million)
Total assets: ¥1,640 million

1.2 De-mer K.K. (hereafter “De-mer”)
1. Name of company

De-mer K.K.

2. Head office

1-10-46 Numadate, Hachinohe-shi, Aomori-ken

3. Date established

October 25, 2005

4. Capital¥15 million

5. StockNumber of authorized shares:

1,200 shares

Number of outstanding shares:

300 shares

6. Major

Daimaru K.K.; shares held: 140; percentage stake:46.67%

shareholders
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7. Main business

Processed food business

8. Number ofFulltime: 16; part-time: 13; dispatched staff: 1 (as of Dec. 1,

employees
9. Main business

2011)
Head officelocations
10. Main banks

The Aomori Bank, Ltd., Japan Financing Corporation, others

11. Financial condition

Sales: ¥213 million

Period to February

Ordinary income (loss): (¥47 million)

2011

Net income (loss): (¥47 million)
Net assets(negative): (¥378 million)
Total assets: ¥537 million

1.3 Marutake Hachinohe Fisheries K.K. (hereafter “Marutake”)
1. Name of company

Marutake Hachinohe Fisheries K.K.

2. Head office2-8-1 Chikko-gai, Hachinohe-shi, Aomori-ken

3. Date established

January 31, 1955

4. Capital¥72 million

5. StockNumber of authorized shares:

192,000 shares

Number of outstanding shares:

72,000 shares

6. Majorshareholders
7. Main business

Chiya Shimamori; shares held: 22,000; percentage stake:
30.56%
Fisheries processing business, trading business, frozen
storage business

8. Number ofFulltime: 19; part-time: 20; temporary: 5 (as of Dec. 1, 2011)

employees
9. Main businesslocations

Head office, wharf freezing works plant (located in Kawaragi,
Kaigan, Hachinohe-shi)

10. Main banks

The Aomori Bank, Ltd., Japan Financing Corporation, others

11. Financial condition

Sales: ¥877 million

Period to August 2011

Ordinary income (loss): (¥74 million)
Net income (loss): (¥131 million)
Net assets(negative): (¥280 million)
Total assets: ¥891 million

5Section 2: Background and circumstances leading to request for ETIC support
Since Daimaru‟s establishment in 1936 as a fish distributor and shipping agent, thecompany has contributed to the local economy as a seafood business, working from theHachinohe fishing port to supply the area‟s core fish products such as squid and mackerel
nationwide. Marutake was established as a fish wholesaler in 1951, becoming closely
integrated into the local area as a seafood business and developing Japan‟s first pickledmackerel processing operations in 1968.
Due to the depletion of fish stock, exclusive economic sea zones and other factors, fish
catches nationwide have fallen. The mackerel market segment has shrunk, and the
low-price, high volume direct sales segment has expanded. However, Daimaru andMarutake, which have specialized in sales in the regional market segment and regional
wholesale activities, have been unable to respond to changes in the distribution market, andamid a decline in transactions with wholesalers, have continued unprofitable low pricetransactions with volume stores. As a result, business performance has worsened. In
particular, amid a nationwide deflationary trend since the Lehman Shock, demands fromvolume retailers for lower prices have meant that the company has been unable to stem thefall in sales. It is now difficult for the companies to repay interest-bearing debt through theirown cost reduction efforts.
De-mer develops, manufactures and sells processed foods using regional ingredients. It
was established in 2005 as a subsidiary of Daimaru with the aim of contributing to therevitalization of the regional economy. It began operations in the same year, having acquired
processing and refrigerated storage facilities. However, its level of interest-bearing debt
increased, due to factors such as the plant and refrigeration facilities being financed entirely
by loans, transactions continued after the acquisitions were significantly unprofitable, andnew products developed to expand sales were unable to cover the losses from unprofitabletransactions. In addition, moves to eliminate unprofitable transactions resulted in a decline
in sales, which were unable to be covered by replacement with sales of new products andcost reduction measures.
Daimaru, De-mer and Marutake (the „three companies‟), having fallen into excessive
indebtedness, received support from the financial institutions in the form of halting thepayment of loan principal, but had not developed any plan to resume regular transactions
and resume loan principal repayments.
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At that point, the three companies decided that, given their shared interest in the raw
materials of seafood processing, they would hold talks on management reform throughbusiness integration. Progress was being made on formulating a joint business revitalization
plan when the Great East Japan Earthquake struck, and although the three companies
resumed operations using the facilities available to each of them, financial support became
indispensable for their continued operation. Accordingly, after discussions among main bank,
The Aomori Bank, Ltd., Japan Finance Corporation, and planned investors Yoshida Kosan
Y.K., and Yoshida Sangyo K.K., an application was made to ETIC for support.

Section 3: Outline of business revitalization plan
1. Basic policy
The following measures are planned for the three companies prior to separation and for
De-mer after company separation.
(1) Strengthen core pickled mackerel sales
The sales strategy for the main business of the three companies, which is the production
and sale of pickled mackerel, will be adjusted to meet recent changes in the distribution
market and consumer trends. Specifically, the advanced product development
capabilities of De-mer (as recognized by the Agricultural Cooperation Promotion Act ofCommerce) along with the synergies arising from the strong brands and customer trust
held by Daimaru and Marutake, will be used optimally to shift away from a passive sales
approach, instead using a more proactive sales method to develop sales with retail
operators that are linked with intermediary distributors (receivers, wholesalers,commission agents, etc.) and with food chains. Concomitant with this, pickled mackerel
product development will be aimed at meeting the changing needs of consumers.
(2) Optimize production facilities
Each of the three companies has separate processing plants, refrigerated storage andother such facilities, so the scale of plant and products will be optimized to make themost efficient use of capital facilities. Productivity will also be significantly improved byreviewing processes.
(3) Reform personnel system
Concomitant with the integration of the three companies, the compensation, retirement
and other such systems will be unified.
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(4) Rigorously manage profitability
The organizational structure will be reviewed with the aim of increasing impetus,
preventing the reoccurrence of unprofitable transactions, and securing sound earnings.
Profitability management and expense reductions will be rigorously pursed, and links
between sales and production will be strengthened.
2. Business restructuring
De-mer will become the parent company with 100% ownership of Daimaru and Marutake,and using the company separation method, the operational assets and transferable loans,etc. of Daimaru and Marutake will be transferred to De-mer. The non-continuous debt of
De-mer will be assumed by Daimaru as a noncumulative obligation.
Subsequently, De-mer will undergo a 100% capital reduction, and Yoshida Kosan will
inject capital by underwriting the issuance of 10 million new ordinary shares andnon-voting classified shares for ¥100 million. ETIC will inject capital by underwriting ¥21
million of classified shares with voting rights. Through this procedure ETIC will acquire
more than two-thirds of the voting rights in De-mer.
After the company separation, Daimaru and Marutake will be wound up using special
liquidation procedures.
3. Request for financial support
Of the ¥3.4 billion owed to financial institutions by the Daimaru Companies, request for
debt forgiveness of approximately ¥2.7 billion will be made to financial institutions. (Thefinal amount is subject to change, as non-operating real estate assets will be disposed ofwith the funds being used to pay off debt.)
4. Financing
For the three companies prior to separation and De-mer after the company separation, it
is planned that funding for debt repayment will be provided by ETIC and Yoshida Kosan
through financing and capital injection, and by financial institutions, principally Aomori
Bank and Japan Finance Corporation, providing new financing. Within this, new finance ofa maximum of ¥200 million will be provided by ETIC and financial institutions, with amaximum of ¥200 million provided by capital injection and financing from Yoshida Kosan.

8Section 4. Conformance with standards for support
1. Requirements related to standards of support(1) Useful business resources
The mackerel and other marine product processing business conducted by the threecompanies is a significant industry in Hachinohe, and the three companies form thefoundations of the Hachinohe Pickled Mackerel brand. The three companies currently
account for 11% of Hachinohe pickled mackerel production, and employ 130 staffs.
Local government has joined with local industry and community to support theestablishment of Hachinohe brands, and processing technology using these locally
produced foods contributes to the vitality of local primary industry.
(2) Excessive debt
The Daimaru Companies bear an excessive amount of debt compared to revenues.
Debt forgiveness and other financial support is essential to the revitalization of the
Daimaru Companies.
2. Factors confirming potential for business revitalization(1) Agreement of main creditors
The Daimaru Companies made a joint application for support with core creditor
Aomori Bank, Japan Financing Corporation, and local sponsor companies Yoshida
Kosan and Yoshida Sangyo.
(2) Standards for productivity improvement
The required standards for productivity improvement are expected to be met throughthe implementation of this business revitalization plan.
(3) Standards for financial soundness
The required standards for financial soundness are expected to be met through theimplementation of this business revitalization plan.
3. Comparison with liquidation value
The liabilities expected to be recovered through the execution of this business
revitalization plan exceed the estimated liabilities that could be recovered fromconducting bankruptcy proceedings.

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4. Potential to refinance within three years
Implementation of the business revitalization plan is expected to significantly improve
the financial condition of the Daimaru Companies, enabling them to reach an
appropriate level of financial stability for the repayment of debt principal and interest,
thereby making refinancing highly possible.
5. Connection with structural oversupply
Under the business revitalization plan, there will be no attempt to increase the supply
capacity of the Daimaru Companies. Accordingly, the plan has been judged as nothindering the resolution of structural oversupply as specified in Article 19 of the Act on
Special Measures for Industrial Revitalization.
6. Status of consultation with workforce
Although there are no labor unions at the Daimaru Companies, it is planned thatmeetings with the employees will be scheduled promptly after announcement of thedecision to provide support, and opportunities provided to discuss aspects of thebusiness revitalization plan, along with employment and working conditions.
Section 5. Responsibility of management and investors
The responsibility of the former management team for the current predicament of the
Daimaru Companies will be reflected through the resignation of all directors, without
directors‟ retirement benefits. They shall have no role in the management of De-mar after
the company separation

Section 6. Responsibility of investors
The responsibility of shareholders will be reflected in the scheduled acquisition withoutcompensation of all shares held by shareholders, using Class Shares Subject to Wholly
Call.
Ends

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