Growth Path

Competencies

Strategies

Outlook and Goal

Appendix

Growth Path

Corporate Profile

History

Ten-year Performance

Nong Shim’s Position

Corporate Profile

??? General Information ??? Sales Breakdown (Wbn)

W1,301bnMarket Capitalization*

W1,232bn (2003.12.31)Total Assets

4,400Number of Employees

Domestic : AnyangAnseongAsanGumiBusan

Overseas : ShanghaiQingdaoShenyang

Factory

W28.8bn (5,771,358 shares)Paid-in Capital

September 18, 1965Established

Sang-Yoon LeeCEO

Nong Shim Co., LtdCompany Name

`01 `02 `03

Others

Beverage

Snack

Instant Noodle818

901

1862045366161

1691,218

1,340

1,522

??? OP / NP (Wbn)

`01 `02 `03

Operating Profit

Net Profit

6980

10291

106

149

* As of end of April

4

1,004 (66.0%)

216 (14.2%)89 (5.8%)

213 (14.0%)

Note : ( %) of Sales

History

04. Commencement of Construction of Instant NoodlePlant in U.S.A

03. Manufacturing Subsidiary Established in the U.S.03. Strategic Alliance with Nestle Korea 03. Launching of Holding Company Structure

02. Entry into Instant Rice Market01. Selected as One of Four Companies with Sustained

Profitable Growth by Bain & Company 01. Designated as World-Class Product by MOCIE00. Operation of Shenyang Plant in China

66. Instant Noodle Plant Established in Seoul65. Founding of Lotte Industrial

76. Listed on the Korea Stock Exchange71. Commencement of Snack Business (Development of Shrimp Crackers)

86. Development of “Shinramyun”

85. Attained No. 1 Share of the Instant Noodle Market81. Entry into Cereal Markets

98. Operation of Qingdao Plant in China98. Entry into Natural Mineral Water Business98. Commencement of Operations in China (Shanghai Plant)

2000

1990

1980

1970

1960

Secure Underlying Competitiveness

Establish Foundations for Growth

Create Profit Base

Go Global

5

Sales (Wbn)

Net Profit (Wbn)

NP Margin (%)

6.76.05.6

6.66.3

4.64.7

2.0

0.30.8

5 2

16

4251

7175

69

80

102

601653

787

898

1,096 1,119 1,1461,218

1,340

1,522

`94 `95 `96 `97 `98 `99 `00 `01 `02 `03

Ten-year Performance

? Solid sales growth due to increasing market share of core products, successful introduction of new products and expansion into new businesses

? Continued improvement of profitability due to profit-focused management

Sales and net profit growing at an average annual rate of 10.9% and 40.1%

6

Snack

35.834.4

0

10

20

30

40

`99 `00 `01 `02 `03

Nong Shim’s Position

? Expansion of instant noodle and snack market shares as a result of expanded distribution channels of core brands

? Expansion of natural mineral water market share due to enhanced brand loyalty of “Samdasoo” and reinforced marketing activities

(%)

Nong Shim

Tong Yang Confectionary

Crown Confectionery

Instant Noodle

73.864.9

0

20

40

60

80

100

`99 `00 `01 `02 `03

(%)

Nong Shim

Sam Yang Foods

Ottogi

Mineral Water (Bottle)

39.0

34.7

0

10

20

30

40

50

`00 `01 `02 `03

(%)

Nong Shim

Jinro

Lotte Chilsung

7

Competencies

Brand Power

Flexible Manufacturing System

Sales Network & Logistics

Research & Development

Brand Power

Brand-oriented Marketing – “No. 1 in each category”Brand-oriented Marketing – “No. 1 in each category”

Mineral Water BusinessNo.1 Brand = “Samdasoo”

1998

Instant Noodle Business No.1 Brand = “Shinramyun”

1986

Snack Business No.1 Brand = “Shrimp Crackers”

1971

2003M/S

9

39.0%

29.9%

8.6%

Flexible Manufacturing System

10

Enhanced productivity through factory automation

Factory Automation

• Advanced automated production lines (IFS)- Completed investing in the automation of 5 lines- Two more automated lines are in the process of construction

• Advanced soup powder manufacturing facilities (CIM)

• Establishment of process control system by computer

• Received certifications related to food safety

• Operation of diverse packaging systems

Quality & Safety

Customer-oriented Packaging System

(person) (bil. pack)

2,500

2,600

2,700

2,800

2,900

3,000

`99 `00 `01 `02 `03

3.0

3.2

3.4

3.6Output (R-scale)Factory worker (L-scale)

Sales Network & Logistics

Specialized infrastructure for sales

11

??? Distribution Network

??? Logistics System

Logistics Infrastructure

- 5 plant bases (CDC)- 17 distribution centers,

18 warehouses

E-logistics

- TMS- WMS

Enhanced Logistic Services

- Optimal supply system- GPS system

Specialized Sales System Advanced Management SystemNetwork

- Operation of product-oriented specialized organization

- Operation of customer-oriented specialized organization

- Electronic finance system(Business Model Patent)

- Receivables recovery period of 21 days (Industry average: 52 days)

- Inventory turnover rate of 21x (Industry average: 16x)

- 106 business branches- 800 sales agencies, 5,000 sales

outlets

Research & Development

R&DCenter

• Patents – 20 in US, China, Japan etc.• Trademarks & Designs – 800 in 80 countries

• Patents – 70• Utility model patents – 20

• Trademarks – 3,000• Designs – 400

DomesticRegistration

OverseasRegistration

12

R&D based on in-house technologyR&D based on in-house technology

R&D Planning

Product Development Center

Analysis Center

Strategic Technology Center

? Developing new and unique flavors with state-of-the-art technology

? New technology research for new businesses

? Food safety research

? Packaging & design research

Creating unique flavors with differentiated technology

Strategies

Strategies at a Glance

Strategies by Division

Globalization

Strategies at a Glance

14

Reinforcementof BusinessCompetitive

-nessGlobalization

Development into Sales-oriented

Company

• Market leadership- Development of new business fields and highquality products

• Expansion of share of premium brands• Improvement of profit structure

• Expansion of development of prospective products • Enhancement of marketing capacity• Improvement of sales and distribution systems

• Globalization of “Shinramyun’s” brand power• Reinforcement of marketing activities for

China business• Penetration into new prominent markets• Development of new distribution channels in

the U.S. market

407

313

250

300

350

400

450

500

`00 `01 `02 `03 '04(E)

Nong Shim

Pack Ramyun

Cup Ramyun

??? ASP Trends(W/pack)

Creation of value

• Reinforcement of brand power of core products

• Reinforcement of new distribution channels

Strategies by Division – Instant Noodle

15

• Promotion of new big brands- Mupama Ramyun, Potato Ramyun, etc.

• Development of high-priced ramyun

• Diversification of basic ingredients - nutritional products

• Development of dried noodles/frozen & chilled products

• Exploitation of opportunities posed by 5-day work week

Generation of New Demands

Promotion of Premium Brands

Reinforcement of Market Dominance

Strategies by Division – Snack

??? Number of top-20 brands(Number of brands )

• Natural Chips• Functional & convenience products• Baked Snacks

• Re-positioning of target markets by product• Reinforcement of advertising and promotion

• Revamping of core products• Diversification of convenient packaging

Generation of new demands through development of healthy and functional products

16

2 2

5

67

4

0

4

8

12

`02 `03 `04(E)

11~20

Top 10

Development of New Concept Snacks

Reinforcement of Core Product Positioning Strategy

Revamping of Customer-oriented Products

Strategies by Division – Beverage

111

30

6.5

2.7

0

20

40

60

80

100

120

'99 '00 `01 `02 `03 `04(E)

0

2

4

6

8Beverage sales

% of total sales

??? Sales Contribution of Beverages

(Wbn)

• Sales strategy differentiation by product group- Mineral Water : Samdasoo- Juice : Welch’s, Capri-sun- Healthy concept beverages : Pure Green Tea, Hongsamsoo

• Expansion of supply capacity

• Penetration into new beverage markets- Fruits, vegetables, teas

• Entry into well-being market- Healthy, functional concept beverages

• Development of famous brands and reinforcement of marketing activities

• Expansion of sales organization• Development of in-house brands

Growth into the third business unit

(%)

17

Development of Specialized Beverages

Demand Expansion in Existing Product Categories

Infrastructure Establishment for Sales Expansion

Strategies by Division – Merchandise

??? Sales Breakdown

• Establishment of business infrastructure specializing in sales

• Differentiation of sales promotion by brand• Local production of popular and strong demand

products

• Centralized management of large target sales outlets

• Establishment of special sales agent network• Development of new distribution channels

New growth engines

W186bn

Kellogg 25.1%

Others 2.8%

MarineProducts 12.0%

Nestle 42.7%

Chupa Chups 5.9%

Ham 5.0%

Note : Figures based on 2004 estimates

18

• Development of popular overseas and local brands• Expansion of strategic alliance relationships

Development of No.1 Brands

Marketing-oriented Sales Organization

Development of New Brands

Globalization

Globalization of “Shinramyun” brand

19

EnhancementOf

Brand Power

KeyPenetration

MarketsBy

Region

Reinforcementof

Marketing

• Concentration on development of core brands• Sales expansion of new product groups : fresh

noodles, instant rice

• U.S. : Re-establishment of sales networkvis-à-vis local production & salesDevelopment of large distributionchannels (Wal-Mart, etc.)

• Japan : Supply of diverse new productsExport expansion in preparation forKorea-Japan FTA

• Russia : Promotion of bowl RamyunPenetration into high-end markets,expansion of local distribution

• Others : Europe, Southeast Asia, Mexico,South America

• Expansion of advertising & sales promotion in strategic regions

• Concentration on premium product markets

“Establishment of Global Network”

Domestic 92.8%

Exports 4.9%

Overseas Local Production 2.4%

1,559Billion Won

LocalizationExport Expansion

Globalization - China

Future of Global Nong Shim

• Establishment of “Korean taste” and “high quality”image

• Reinforcement of advertisement of core brands & new products

• Hosting of Shinramyun paduk(go) competition

• Establishment of a global food ingredient company (Qingdao factory)

• Penetration of export markets

• Expansion of differentiated product items• Concentration of new sales channels on large cities• Achievement of break-even point in 2004

20

??? Sales Breakdown by China Subsidiaries(US$ thousand)

7,587

9,544

14,0009,428

11,942

17,600

14,3007,094 9,806

`02 `03 `04(E)

Shanghai

Qingdao

Shenyang

CAGR 38%

24,109

31,292

45,900

Continued Growth

Enhancement of Brand Recognition

Supply Base for Global Operations

Globalization - USA

Full-scale penetration into industrialized markets

• Development of large distribution channels- Wal-Mart, Costco, Sam’s Club, etc.

• Differentiation of marketing strategies- Asians, Hispanics and other ethnic communities

• Establishment of 3 ramyun production lines- 1 pack Ramyun line, 2 cup Ramyun lines

• Operation due in April 2005

21

??? Export to USA (US$ thousand)

• Canada• Mexico• Latin America

31,50030,787

26,96424,131

19,614

`00 `01 `02 `03 `04(E)

CAGR 12.6%

Focus on Target Markets

Construction of Local Factory

Supply Base for Americas Region

Outlook and Goal

1Q Results

Sales in 2004

Profits in 2004

Goal

1Q Results

? Sales in 1Q increased 16.2% YoY due to robust demand for Ramyun and sales contributions of new businesses

? Operating margins hovered over 10% backed by solid sales growth of core businesses

23

318.9 322.3334.2

364.2 362 354.9383

421.8 420.6

10.49.19.79.4

11.1

8.28.5

6.2

8.7

0

100

200

300

400

500

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

0

5

10

15

20Sales (Wbn)

OP margin (%)

2002 2003 2004

Sales in 2004

Sales expected to grow 11.7% YoY

24

818 9011,004 1,080

186204

216235

53

66161

169

274

111

89

213

0

500

1,000

1,500

2,000

`01 `02 `03 `04(E)

OthersBeverageSnackInstant Noodle

(Wbn)

1,218

1,340

1,522

1,700

??? Instant Noodles

??? Snacks

??? Beverages

??? Others

• Expansion of market shares of core brands

• Active development of new sales channels through diversification of packaging

• Reinforcement of sales competitiveness of potato chips

• Development of new concept snack products

• Reinforcement of core brand sales (Samdasoo, Welch’s, Capri Sun, etc.)

• Development of new health products (Hongsamsoo, etc.)

• Focus on sales of Nestle

• Reinforcement of sales competitiveness of ham and instant rice products

Gross Profit

Profits in 2004

? Gross profit margins are expected to remain at the previous year’s levels as a result of reduction in costs of goods sold for core businesses, despite rising prices of raw materials.

? Ordinary profit margins are expected to exceed 10% due to stable operating profit margins and rise in non-operating income.

Recurring Profit

25

Net Profit

361408

487

546

32.132.0

30.429.6

`01 `02 `03 `04(E)

Gross profit (Wbn)GP margin (%)

101113

144

170

10.09.5

8.58.3

`01 `02 `03 `04(E)

Recurring profit (Wbn)

RP margin (%)

6980

102

114

6.76.7

6.05.6

`01 `02 `03 `04(E)

Net profit (Wbn)

NP margin (%)

Goal

26

Revitalization of Nong Shim

Market Leader of theFood & Beverage Industry

in Korea

Creator of Food Culture

“Global Great Company”

Holding Company Structure/Securing of Cash Cows/Globalization/Development of Future Priority Businesses

• Shareholder-oriented Management

• Continued Management Innovation

• No. 1 in instant noodle market

• No. 1 in snack market

• No. 1 in natural mineral water market

• Leader in penetration of overseas markets

Appendix

Major Financial Ratios

Holding Company Structure

Balance Sheet

Income Statement

Major Financial Ratios

28

??? EPS (won)

9,02610,539

17,60419,683

`01 `02 `03 `04(E)

??? BPS (won)

86,578 93,908

132,354115,692

`01 `02 `03 `04(E)

??? ROE (%)

10.4 11.2

14.7 15.9

`01 `02 `03 `04(E)

??? Net Cash (Wbn)

-19

111

37

140

`01 `02 `03 `04(E)

??? Net Int-bearing DebtEquity Ratio (%)

3

-15-18

-6

`01 `02 `03 `04(E)

??? Debt Equity Ratio (%)

69.1 72.384.6

73.7

`01 `02 `03 `04(E)

Holding Company Structure

29

??? Nong Shim Shareholder Composition

Individual Investors5.9%

Nong Shim Holdings30.8%

Subsidiaries6.6%Majority

shareholder10.5%

DomesticInstitutional Investors

21.8%

Foreign Investors24.1%

??? Status of Nong Shim Holdings’Affiliates

(30.8%)

(38.6%)

(51.7%)

(50.0%)

(65.0%)

(96.9%)Nong Shim Development

Nong Shim ENG

Nong Shim Communications

Taekyung Nongsan

Nong Shim

Youlchon Chem.

Listed CompanyUnlisted Company

Over-seas

Shanghai NS, Qingdao NS, Shenyang NS, NS America,NS Foods(U.S.), NS Japan

Nong Shim Holdings(Pure Holding Co.)

Majority Shareholder 61.89%

Affiliated Companies 5.82%

As of end April 2004 As of end December 2003

Balance Sheet

30

0.50.50.52.40.0CPLTD

40.015.247.639.18.8Accrued expenses payable

79.793.165.951.656.9S/T borrowings (foreign currency)

10.010.010.048.515.0S/T borrowings

88.187.184.787.191.4Investment assets

1,232.8

667.7

(157.8)

500.5

296.1

28.9

565.1

1.2

115.6

221.0

449.5

1,232.8

1.4

756.9

845.4

76.1

97.5

154.0

45.9

311.2

387.3

2003

1,070.5

632.3

(28.1)

301.5

320.9

38.0

438.2

2.5

79.3

164.1

358.9

1,070.5

1.2

733.5

826.1

55.4

65.4

102.3

7.5

189.0

244.3

2000

1,112.5

663.2

(30.2)

334.5

320.9

38.0

449.3

26.4

63.4

165.4

385.9

1,112.5

1.3

770.9

859.3

59.0

72.9

100.5

6.8

194.2

253.2

2001

1,230.0

724.2

(33.7)

409.5

310.5

38.0

505.9

1.7

76.3

201.6

429.5

1,230.0

1.4

760.7

846.8

71.9

81.2

151.1

63.4

311.3

383.2

2002

1,327.2

763.9

1.2

437.7

296.1

28.9

563.3

1.1

135.0

218.3

428.3

1,327.2

1.4

750.0

839.5

83.0

105.0

260.0

30.0

405.0

490.0

2004(E)

Liabilities & shareholders' equity

Shareholders’equity

Capital adjustment

Retained earnings

Capital surplus

Paid-in capital

Total liabilities

L/T borrowings

Fixed liabilities

Trade payable

Current liabilities

Total assets

Intangible assets

Tangible assets

Fixed assets

Inventories

Trade receivable

S/T financial products

Cash & cash equivalents

Quick assets

Current assets

(Wbn)

Income Statement

31

71.463.756.425.847.4Sales promotion

3.94.14.62.214.4Interest expenses

27.239.425.921.828.4Non-operating expenses

5.81.11.21.51.2FX translation gain

1.85.11.90.00.0Commission

4.66.27.33.86.5Rent

57.350.844.919.736.3Transportation & warehousing

101.6

42.6

144.3

0.0

144.3

18.9

8.6

12.6

35.0

148.6

12.3

53.0

18.0

74.6

338.3

486.9

1,034.8

1,521.7

2003

78.6

37.6

116.2

0.0

116.2

0.5

3.5

21.7

51.0

93.5

6.4

41.3

12.0

56.8

254.6

348.1

833.2

1,181.3

2000

35.1

15.2

50.3

0.0

50.3

1.5

1.2

5.6

18.1

54.0

3.3

22.9

6.2

28.8

135.1

189.1

433.2

622.2

2001

80.1

33.1

113.2

0.0

113.2

0.4

2.8

12.4

33.2

105.9

8.5

46.9

14.2

71.5

301.6

407.5

932.2

1,139.6

2002

113.6

56.4

170.0

0.0

170.0

1.5

4.0

13.5

40.8

156.4

17.7

57.4

18.5

82.8

389.8

546.2

1,153.8

1,700.0

2004(E)

Net profit

Corporate taxes

Pretax profit

Extraordinary gain or loss

Recurring profit

Donation

FX translation loss

Interest income

Non-operating income

Operating profit

Samples

Advertisement

Depreciation

Salaries

SG&A expenses

Gross profit

COGS

Sales

(Wbn)

* 2001 result covers the period from July 1 to December 31, 2001 due to the change in the fiscal year.