INVESTMENTS

Investments consist of the following:



Equity Investment	Segment	% Owned	April 28, 2013		April 29, 2012
			(in millions)
Campofrío Food Group (CFG)	International	37%	$	376.2	$	385.2
Mexican joint ventures	International	50%	129.6		111.2
All other equity method investments	Various	Various	26.6		26.2
Total investments			$	532.4	$	522.6

We record our share of earnings and losses from our equity method investments in (income) loss from equity method investments. Some of these results are reported on a one-month lag which, in our opinion, does not materially impact our consolidated financial statements.

Each quarter, we review the carrying value of our investments and consider whether indicators of impairment exist. Examples of impairment indicators include a history or expectation of future operating losses and declines in a quoted share price, among other factors. If an impairment indicator exists, we must evaluate the fair value of our investment to determine if a loss in value, which is other than temporary, has occurred. If we consider any such decline to be other than temporary (based on various factors, including historical financial results, product development activities and the overall health of the affiliate’s industry), then a write-down of the investment to its estimated fair value would be recorded. We have determined that no write-down was necessary for all periods presented.

As of April 28, 2013, we held 37,811,302 shares of CFG common stock. Shares of CFG are publicly traded on the Bolsa de Madrid Exchange (Madrid Exchange). As the table below shows, the carrying value of our investment in CFG was above the quoted market price on the Madrid Exchange as of April 28, 2013, indicating a possible impairment of our investment in CFG. However, we do not believe the quoted share price on the Madrid Exchange is, by itself, reflective of the fair value of our investment in CFG for the following reasons:


•	the minority shares traded on the Madrid Exchange confer no special rights or privileges to buyers. In contrast, the shares comprising our 37% stake in CFG contractually entitle us to two seats on CFG's 9-person board of directors, giving us the ability to exert significant influence over the strategic and operational decisions of our investee.


•	the stock is very thinly traded. CFG is a closely held company, with the three largest shareholders owning approximately 76% of the outstanding shares. We are CFG's largest shareholder, with a 37% stake.

•

The average daily trading volume during the last 24 months represents less than three hundredths of one percent of the total outstanding shares. The lack of an active market can cause significant fluctuations and volatility in the stock price that are not commensurate with fundamental changes in the underlying business and the fair value of our holding in CFG. Shares trading on the Madrid Exchange have ranged from a high of €9.28 ($13.74) to a low of €4.12 ($5.39) per share during the last 24 months, with upward and downward fluctuations in between.

The table below shows CFG's intra-day high share price and Smithfield's carrying value, expressed in euro per share, on various dates relevant to our disclosures during the last 24 months.



Date	Share Price		Carrying Value
May 5, 2011	€	9.27	€	7.93
February 17, 2012	€	7.20	€	7.54
April 29, 2012 ⁽¹⁾	€	6.30	€	7.70
April 28, 2013^{(1) (2)}	€	4.99	€	7.64

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⁽¹⁾	Share prices on quarter end date reflect the last trading day in the quarter.


⁽²⁾	Subsequent to the end of fiscal 2013, CFG's share price traded as high as €5.88 per share on May 30, 2013.

As noted above, we do not consider the share price on the Madrid Exchange, by itself, to be determinative of fair value. In assessing the fair value of our investment, we considered a variety of information, including an independent third party valuation report, which incorporates generally accepted valuation techniques, CFG's history of positive cash flows, expectations about the future cash flows of CFG, market multiples for comparable businesses, and an influence premium applied to the market price of CFG's shares on the Madrid Exchange to adjust for our contractual right to two board seats and our ability to exert significant influence over the operational and strategic decisions of the company.

Based on an evaluation of all these factors, we concluded the fair value of our investment in CFG as of April 28, 2013, exceeded its carrying amount. However, our estimate of fair value has declined over the last 24 months, significantly eroding the gap between fair value and carrying value. The fair value decline is primarily attributable to persistent recessionary conditions in Western Europe, which have dampened CFG's current operating performance. In addition, rising interest rates associated with European sovereign debt crises have forced discount rates higher, diminishing the values calculated using our discounted cash flow techniques. Finally, CFG's share price on the Madrid Exchange has declined and, notwithstanding our reservations about the Madrid Exchange price, we nonetheless utilize it as a component of our valuation work and believe such declines must be considered as part of our fair value estimate. While we do not believe our investment is impaired as of April 28, 2013, the confluence of these and other factors has decreased our estimate of CFG's fair value and increased the risk of impairment. If the trends contributing to our lower estimate of CFG's fair value continue, the investment would become impaired. Specifically, if the most sensitive factors affecting our fair value calculations (i.e., estimates of future cash flows, interest rates and share price) continue to deteriorate, it is reasonably possible that our estimate of fair value could fall below carrying value. If that occurs, and we determine that the decline is other than temporary, we would record a charge to income for the difference between the estimate of fair value and the carrying amount of our investment.

(Income) loss from equity method investments consists of the following:



		Fiscal Years
Equity Investment	Segment	2013			2012			2011
		(in millions)
CFG ⁽¹⁾	International	$	(4.8	)	$	25.0		$	(17.0	)
Mexican joint ventures	International	(9.3		)	(13.4		)	(29.6		)
All other equity method investments	Various	(0.9		)	(1.7		)	(3.5		)
Loss (income) from equity method investments		$	(15.0	)	$	9.9		$	(50.1	)

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⁽¹⁾	CFG prepares its financial statements in accordance with International Financial Reporting Standards. Our share of CFG’s results reflects U.S. GAAP adjustments and thus, there may be differences between the amounts we report for CFG and the amounts reported by CFG.

In December 2011 (fiscal 2012), the board of CFG approved a multi-year plan to consolidate and streamline its manufacturing operations to improve operating efficiencies and increase utilization (the CFG Consolidation Plan). The CFG Consolidation Plan includes the disposal of certain assets, employee redundancy costs and the contribution of CFG's French cooked ham business into a newly formed joint venture. As a result, we recorded our share of CFG's charges totaling $38.7 million in loss (income) from equity method investments within the International segment in fiscal 2012.

The following summarized financial information for CFG is based on CFG's financial statements and translated into U.S. Dollars:



	Fiscal Years
	2013		2012			2011
	(in millions)
Income statement information:
Sales	$	2,464.6	$	2,536.1		$	2,433.3
Gross profit	564.4		583.0			423.0
Net income (loss)	13.0		(71.2		)	46.1

			April 28, 2013			April 29, 2012
			(in millions)
Balance sheet information:
Current assets			$	909.9		$	944.5
Long-term assets			1,926.8			1,930.4
Current liabilities			993.6			941.9
Long-term liabilities			1,094.2			1,168.1