キユーピー（2809） – Notice of Convocation Annual General Meeting 2022

Note: This document has been translated from a part of the Japanese original for reference purposes only. In the event of any discrepancy between this translated document and the Japanese original, the original shall prevail. Securities Code of Japan: 2809 Kewpie Corporation NOTICE OF THE 109TH ORDINARY GENERAL MEETING Date and hour of meeting: Friday, February 25, 2022, at 10:00 a.m. (Reception to start at 9:00 a.m.) Place of meeting: Hall A, Tokyo International Forum Matters to be resolved: Proposition No. 1: Election of nine (9) Directors Proposition No. 2: Election of two (2) Corporate Auditors TABLE OF CONTENTS Notice of the 109th Ordinary General Meeting of Shareholders ································ 1 Procedures for Exercise of Voting Rights Reference Document for the General Meeting of Shareholders ································· 5 Proposition No. 1: Election of nine (9) Directors Proposition No. 2: Election of two (2) Corporate Auditors February 4, 2022 To the Shareholders: Dear Shareholders: NOTICE OF THE 109TH ORDINARY GENERAL MEETING OF SHAREHOLDERS Please take notice that the 109th Ordinary General Meeting of Shareholders of Kewpie Corporation (the “Company”) will be held as described below. Furthermore, in the event that concern over the spread of the novel coronavirus disease (COVID-19) continues, we ask that shareholders consider exercising voting rights via the Internet or in writing (by Mail) instead of voting in person. (please refer to pages 3 to 4) Yours very truly, Osamu Chonan Representative Director President and Chief Executive Corporate Officer Kewpie Corporation 4-13, Shibuya 1-chome, Shibuya-ku, Tokyo 2. Description 1. Date and hour of meeting: Friday, February 25, 2022, at 10:00 a.m. Place of meeting: Hall A, Tokyo International Forum 5-1, Marunouchi 3-chome, Chiyoda-ku, Tokyo – 1 – 3. Agenda of the meeting: Matters to be reported: 1. Report on the Business Report and Consolidated Financial Statements for the fiscal year 2021 (from December 1, 2020 to November 30, 2021) and the results of audit of the Consolidated Financial Statements by the accounting auditors and the Board of Corporate Auditors 2. Report on the Non-consolidated Financial Statements for the fiscal year 2021 (from December 1, 2020 to November 30, 2021) Matters to be resolved: Proposition No. 1: Election of nine (9) Directors Proposition No. 2: Election of two (2) Corporate Auditors If any amendment is made to the Reference Document for the General Meeting of Shareholders (including Business Report, Consolidated Financial Statements and Non-consolidated Financial Statements), it will be publicized on the official Website of the Company. Information Available on our Website Official Website of the Company: https://www.kewpie.com/en/ir/ E N D – 2 – 2. 3. 4. Procedures for Exercise of Voting Rights Exercise of voting rights via the Internet Time frame: No later than 5:30 p.m., Thursday, February 24, 2022 Suspension period (please be noted that voting rights cannot be exercised via the Internet due to website maintenance): From 5:00 a.m., Friday, February 11, 2022 (public holiday) through 5:00 a.m., Monday, February 14, 2022 Please enter your “approval” or “disapproval” for each proposition. [Voting process via the “Website for the exercise of voting rights”] 1. Access the website for the exercise of voting rights https://www.web54.net Click on “次へすすむ” (“NEXT”). Enter the Code for the exercise of voting rights Enter the “Code for the exercise of voting rights” (議決権行使コード) indicated at the bottom left of the Voting Form and click on “ログイン” (“Log in”). Enter the Password Enter the “Password” (パスワード) indicated at the bottom left of the Voting Form and click on “次へ” (“NEXT”). * The next screen will prompt you to set a new Password. Please hold the updated Password in a safe manner. Enter your “approval” or “disapproval” for each proposition by following the instructions displayed on the screen. Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Business Planning Dept. Web Support Dedicated Dial: Phone No: 0120-652-031 (available at 9:00 a.m. through 9:00 p.m.) Contact for inquires: Institutional investors may use the “ICJ Platform”, a platform for electronic exercise of voting rights for institutional investors operated by ICJ Inc. if its application for this process were accepted by ICJ Inc. in advance. – 3 – Exercise of voting rights in writing (by Mail) Time frame: Must reach us no later than 5:30 p.m., Thursday, February 24, 2022 Please return by Mail the enclosed Voting Form after filling out your “approval” or “disapproval” for each proposition. Please be noted that if no “approval” or “disapproval” of each proposition is indicated in the returned Voting Form, you will be deemed to have approved it. Please be noted that if you intend to disapprove a particular candidate(s) in Propositions No. 1: and No. 2: Put 〇 in the column of “Approve” and specify the relevant candidate number(s) you intend to disapprove. Treatment of multiple exercise of voting rights (1) Please be noted that if the voting rights are exercised both via the Internet and in writing (by Mail), the voting rights exercised via the Internet shall be treated as valid. (2) Please be noted that if the voting rights are exercised twice or more times via the Internet, the latest exercise thereof shall be treated as valid. Attendance at the General Meeting of Shareholders Date and hour of meeting: Place of meeting: Friday, February 25, 2022, at 10:00 a.m. Hall A, Tokyo International Forum Please attend with the enclosed Voting Form and present it to the receptionists of the meeting. Please be noted that if a shareholder attends the shareholders meeting in person, any previous exercise of voting rights (via the Internet or in writing (by Mail)) by the same shareholder will be rescinded. Any major changes to administration of the General Meeting of Shareholders in the course of future developments will be published on the official Website of the Company. Official Website of the Company (English language page): https://www.kewpie.com/en/ir/ (Japanese language page): https://www.kewpie.com/ir/event/meeting/ – 4 – REFERENCE DOCUMENT FOR THE GENERAL MEETING OF SHAREHOLDERS Proposition No. 1: Election of nine (9) Directors The term of office of all Directors currently in office (Messrs. Amane Nakashima, Osamu Chonan, Nobuo Inoue, Seiya Sato, Yoshinori Hamachiyo, Ryota Watanabe, Kazunari Uchida, Ms. Shihoko Urushi and Mr. Hitoshi Kashiwaki (nine in all)) will expire at the close of this General Meeting of Shareholders. In that regard, it is proposed that nine (9) Directors be elected. The candidates for Director are as follows: For information on the expected titles and assignments of each candidate after the General Meeting of Shareholders as well as his or her experience and expertise, please refer to pages 23 to 25. For independence criteria for outside Directors, please refer to page 22. (Outside): Outside Director (Independent): Independent Officer 〇: Member of Nominating and Remuneration Committee Candidate Number Name Title Assignment 1 Amane Nakashima Chairman and Director Reelection 〇 2 Nobuo Inoue Director Reelection 〇 Chairman of the Board of Directors In charge of Compliance and Brand Executive Corporate Officer in charge of Corporate (including Medium-term Business Plan Promotion, Group Governance, Risk Management and Sustainability) Executive Corporate Officer in charge of Retail Market Business in general Senior Corporate Officer in charge of Research Development, Fine Chemicals and Intellectual Property, Food Culture and Health Promotion Project and Senior General Manager of R&D Division Senior Corporate Officer in charge of Production and Quality – 5 – 3 4 Seiya Sato Director Yoshinori Hamachiyo Director Reelection Reelection 5 Ryota Watanabe Director Reelection 6 Mitsuru Takamiya President and Representative Director of Kewpie Egg Corporation New election Number of Board of Directors’ meetings attended for the fiscal year 2021 12/12 12/12 12/12 12/12 (After assuming the office of Director) 10/10 Name Title Assignment Candidate Number 7 8 Shihoko Urushi Hitoshi Kashiwaki Outside Director Outside Director 9 Atsuko Fukushima Number of Board of Directors’ meetings attended for the fiscal year 2021 11/12 (After assuming the office of Director) 9/10 Reelection (Outside) (Independent) Reelection (Outside) (Independent) 〇 〇 New election (Outside) (Independent) (Note) The titles and assignments are those in the Kewpie Group (the “Group”) at the time of the sending of this notice. – 6 – Candidate Number 1 (Reelection) Member of Nominating and Remuneration Committee Amane Nakashima (Date of birth: September 26, 1959) (Note 6) Reason for nomination for Director As Chairman of the Board of Directors, Mr. Nakashima has conducted the management of board meetings in an objective manner, and based on the Company’s “spirit of foundation”, he has fulfilled a vital role of education and guidance in matters related to compliance and brand. We judge that, having fulfilled his duties as Director of the Company appropriately, he meets the Company’s nomination policy and nominate him once again as a candidate for Director. In the event that he is reelected as Director, it is planned that he will also take on the duties of Chairman and Director. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director 259,681 shares 12/12 25 years February 1995 February 1997 July 2000 February 2003 February 2005 Brief history, title, assignment and important concurrent office April 1983 October 1993 Joined The Industrial Bank of Japan, Limited (currently, Mizuho Bank, Ltd.) Joined NAKASHIMATO CO., LTD. General Manager, Accounting Department of NAKASHIMATO CO., LTD. Director of NAKASHIMATO CO., LTD. Director of the Company General Manager, Legal Department of the Company Vice President and Director of NAKASHIMATO CO., LTD. Director of NAKASHIMATO CO., LTD. Executive Corporate Officer of the Company General Manager, Environment Office of the Company General Manager, Social and Environment Promotion Office of the Company Senior General Manager, CSR Promotion Department of the Company President and Director of NAKASHIMATO CO., LTD. Senior Executive Corporate Officer of the Company Chairman and Director of the Company, to this date President and Representative Director of NAKASHIMATO CO., LTD., to this date July 2005 October 2009 February 2010 February 2014 February 2016 February 2021 Special interest with the Company The Company has business relationships, including purchase of products, sales of goods and products and expense transactions, with NAKASHIMATO CO., LTD., for which Mr. Amane Nakashima is servicing as President and Representative Director. All transactions are determined individually upon consultation by reference to market prices, etc., as with other transactions in general. – 7 – Candidate Number 2 (Reelection) Member of Nominating and Remuneration Committee Nobuo Inoue (Date of birth: May 16, 1960) (Note 6) Reason for nomination for Director As the Director in charge of Corporate, in addition to promoting management reforms and the medium-term business plan, Mr. Inoue has participated in management from a broad ranging perspective. For these reasons, we judge that he meets the Company’s nomination policy and nominate him once again as a candidate for Director. In the event that he is reelected as Director, it is planned that he will also take on the duties of Executive Corporate Officer. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director 14,600 shares 12/12 12 years Brief history, title, assignment and important concurrent office April 1983 July 2004 October 2009 December 2009 February 2010 February 2016 February 2020 February 2021 Joined the Company General Manager, Corporate Planning Office of the Company Deputy Senior General Manager, Management Promotion Division of the Company Senior General Manager, Management Promotion Division of the Company Director of the Company, to this date Executive Corporate Officer of the Company, to this date Senior General Manager, Management Promotion Division of the Company In charge of Corporate of the Company, to this date Special interest with the Company None – 8 – Candidate Number 3 (Reelection) Seiya Sato (Date of birth: August 2, 1959) (Note 6) Reason for nomination for Director As the Director in charge of the Retail Market Business of the Company, Mr. Sato has worked to enhance business value through the promotion of strategies aligned with the market and the optimization of management resources. For these reasons, we judge that he meets the Company’s nomination policy and nominate him once again as a candidate for Director. In the event that he is reelected as Director, it is planned that he will also take on the duties of Senior Executive Corporate Officer. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director 9,200 shares 12/12 5 years Brief history, title, assignment and important concurrent office April 1982 July 2004 October 2008 December 2009 July 2012 February 2013 February 2015 February 2017 Joined the Company Branch Manager, Kanto Branch Office of the Company General Manager, Household Sales Dept., Wide-Area Sales Division of the Company Senior General Manager, Wide-Area Sales Division of the Company Branch Manager, Osaka Branch Office of the Company Corporate Officer of the Company Branch Manager, Tokyo Branch Office of the Company Director of the Company, to this date Senior Corporate Officer of the Company In charge of Salad and Delicatessen Business of the Company Executive Corporate Officer of the Company, to this date In charge of Condiments and Processed Foods Business of the Company In charge of Group Sales in general of the Company In charge of Retail Market Business in general of the Company, to this date February 2021 February 2019 Special interest with the Company None – 9 – Candidate Number 4 (Reelection) Yoshinori Hamachiyo (Date of birth: February 13, 1961) (Note 6) Reason for nomination for Director As Director, Mr. Hamachiyo has promoted initiatives to protect brand value and create new value through the use of the Group’s technology. For these reasons, we judge that he meets the Company’s nomination policy and nominate him once again as a candidate for Director. In the event that he is reelected as Director, it is planned that he will also take on the duties of Senior Corporate Officer. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director 21,500 shares 12/12 5 years Brief history, title, assignment and important concurrent office April 1984 July 2010 February 2012 February 2014 February 2015 February 2017 Joined the Company General Manager, Intellectual Property Division of the Company General Manager, Intellectual Property Office of the Company Corporate Officer of the Company Senior General Manager, R&D Division of the Company, to this date Director of the Company, to this date Senior Corporate Officer of the Company, to this date In charge of Fine Chemicals Business of the Company In charge of Research Development, Fine Chemicals and Intellectual Property of the Company, to this date February 2020 February 2021 Special interest with the Company None – 10 – Candidate Number 5 (Reelection) Ryota Watanabe (Date of birth: July 17, 1964) (Note 6) Reason for nomination for Director As Director, Mr. Watanabe has promoted the enhancement of the Group’s productivity and initiatives for safety and reliability. For these reasons, we judge that he meets the Company’s nomination policy and nominate him once again as a candidate for Director. In the event that he is reelected as Director, it is planned that he will also take on the duties of Senior Corporate Officer. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director Brief history, title, assignment and important concurrent office April 1987 February 2012 4,700 shares Since assuming the office of Director: 10/10 1 year Joined the Company General Manager, Production Administration Department, Division of Production of the Company General Manager, Production Planning Department, Division of Production of the Company Deputy Senior General Manager, Division of Production of the Company Corporate Officer of the Company Senior General Manager, Division of Production of the Company Director of the Company, to this date Senior Corporate Officer of the Company, to this date In charge of Production and Quality of the Company, to this date October 2012 February 2015 February 2016 February 2021 Special interest with the Company None – 11 – Candidate Number 6 (New election) Expected to assume position of Member of Nominating and Remuneration Committee Mitsuru Takamiya (Date of birth: April 22, 1961) (Note 6) Reason for nomination for Director In addition to his experience with research institutes, marketing, and fine chemicals, Mr. Takamiya has promoted to expand demand for egg products as the President and Representative Director of Kewpie Egg Corporation, an important subsidiary of the Company, contributing to the Group. Due to his abundant experience, expertise and broad ranging insights that he has acquired thus far, we judge that he meets the Company’s nomination policy and nominate him as a candidate for Director. In the event that he is elected as Director, it is planned that he will take on the duties of Representative Director, President and Chief Executive Corporate Officer. Number of shares of the Company held by Candidate 3,000 shares Brief history, title, assignment and important concurrent office April 1987 July 2005 Joined the Company General Manager, New Product Development Department, Product Development Division of the Company Senior General Manager, R&D Division of the Company Corporate Officer of the Company Senior General Manager, Marketing Division of the Company In charge of Fine Chemicals Business of the Company Senior Corporate Officer of the Company President and Representative Director of Kewpie Egg Corporation, to this date (scheduled to retire on February 18, 2022) July 2012 February 2013 February 2015 February 2017 February 2019 February 2020 Special interest with the Company None – 12 – Candidate Number 7 (Reelection) (Outside) (Independent) Member of Nominating and Remuneration Committee Shihoko Urushi (Date of birth: April 4, 1961) (Notes 1, 2, 5 and 6) Reason for nomination for outside Director and outline of expected roles Ms. Urushi has both abundant experience as an educator and a willingness to take on challenges as a manager, and has proactively provided useful opinions and suggestions on overall management including human resources development, sustainability, overseas expansion, and marketing at the Board of Directors’ meetings and Nominating and Remuneration Committee meetings. We judge that Ms. Urushi will fulfill her duties as an outside Director established by the policy for nomination of outside Director candidates and nominate her once again as a candidate for outside Director. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director 0 shares 11/12 6 years Brief history, title, assignment and important concurrent office April 1986 April 1989 April 2006 February 2016 April 2017 Worked at a combined private junior high and high school for girls in Tokyo Worked at Shinagawa Joshi Gakuin Principal of Shinagawa Joshi Gakuin Outside Director of the Company, to this date President of Shinagawa Joshi Gakuin, to this date Principal of Shinagawa Joshi Gakuin Junior High School Outside Director of Culture Convenience Club Co., Ltd., to this date Outside Director of Nisshin Fire & Marine Insurance Co., Ltd., to this date Outside Audit & Supervisory Board Member of Tokio Marine & Nichido Fire Insurance Co., Ltd., to this date Outside Director of JAPAN POST BANK Co., Ltd., to this date Member of Administrative Reform Promotion Council, to this date April 2018 June 2019 June 2021 July 2021 Special interest with the Company None – 13 – Candidate Number 8 (Reelection) (Outside) (Independent) Member of Nominating and Remuneration Committee Hitoshi Kashiwaki (Date of birth: September 6, 1957) (Notes 1, 3, 5 and 6) Reason for nomination for outside Director and outline of expected roles As an experienced manager of operating companies that develop human resources and media-related businesses, Mr. Kashiwaki has abundant experience and a high level of insight including overseas business development and has proactively provided useful opinions and suggestions on overall management including business strategy, human resources development, overseas expansion, and marketing at the Board of Directors’ meetings and Nominating and Remuneration Committee meetings. We judge that Mr. Kashiwaki will fulfill his duties as an outside Director established by the policy for nomination of outside Director candidates and nominate him once again as a candidate for outside Director. Furthermore, in the new structure, Mr. Kashiwaki will be appointed as Chair of the Nominating and Remuneration Committee and will lead discussion at the committee. Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of years in office as a Director 600 shares Since assuming the office of Director: 9/10 1 year Brief history, title, assignment and important concurrent office April 1981 April 1994 June 1997 June 2001 April 2003 Joined of Japan Recruit Center Co., Ltd. (currently, Recruit Holdings Co., Ltd.) General Manager, Finance Division of Recruit Holdings Co., Ltd. Director of the Board of Recruit Holdings Co., Ltd. Director of the Board and Managing Corporate Executive of Recruit Holdings Co., Ltd. Representative Director of the Board and Managing Corporate Executive (COO) of Recruit Holdings Co., Ltd. COO, President, and Representative Director of the Board of Recruit Holdings Co., Ltd. CEO, President, and Representative Director of the Board of Recruit Holdings Co., Ltd. Director of the Board and Advisor of Recruit Holdings Co., Ltd. Outside Director of Suntory Beverage & Food Limited Outside Director of ASICS Corporation, to this date Outside Director of Matsuya Co., Ltd., to this date Outside Director of Tokyo Broadcasting System Holdings, Inc. (currently, TBS HOLDINGS, INC.), to this date Outside Director of the Company, to this date June 2003 April 2004 April 2012 December 2012 March 2016 May 2016 June 2018 February 2021 Special interest with the Company None – 14 – Candidate Number 9 (New election) (Outside) (Independent) Expected to assume position of Member of Nominating and Remuneration Committee Atsuko Fukushima (Date of birth: January 17, 1962) (Notes 1, 4, 5 and 6) Reason for nomination for outside Director and outline of expected roles In addition to her many years of experience as a journalist and abundant knowledge related to corporate management gained through dialogues with the top members of many companies, Ms. Fukushima has gained an understanding of the Company’s philosophy, culture, and business characteristics through her activities on the Management Advisory Board. As such, we expect that she will proactively provide opinions and suggestions from an objective, medium-to-long-term perspective on overall management, including diversity and sustainability. We judge that Ms. Fukushima will fulfill her duties as an outside Director established by the policy for nomination of outside Director candidates and newly nominate her as a candidate for outside Director. Number of shares of the Company held by Candidate 0 shares Brief history, title, assignment and important concurrent office April 1985 April 1988 October 1993 Joined CHUBU-NIPPON BROADCASTING CO., LTD. Contract newscaster of Japan Broadcasting Corporation Contract newscaster of Tokyo Broadcasting System, Inc. (currently Tokyo Broadcasting System Television, Inc.) Economics program newscaster of TV TOKYO Corporation Management Council Member of National University Corporation Shimane University, to this date Management Advisor of Matsushita Electric Industrial Co., Ltd. (currently Panasonic Corporation) External Director of Hulic Co., Ltd., to this date Outside Director of Nagoya Railroad Co., Ltd., to this date Outside Director of Calbee, Inc., to this date Member of Forestry Policy Council of Ministry of Agriculture, Forestry and Fisheries, to this date April 2005 April 2006 December 2006 July 2012 June 2015 March 2020 Special interest with the Company None (Notes) 1. Ms. Shihoko Urushi, Mr. Hitoshi Kashiwaki and Ms. Atsuko Fukushima are candidates for outside Director. Should the election to the position of outside Director be approved for the three (3) candidates, the Company plans for them to become independent officers in accordance with the provisions of Tokyo Stock Exchange, Inc. 2. The current term of service as an outside Director of the Company of Ms. Shihoko Urushi shall be six (6) years as of the closing of this General Meeting of Shareholders. She is Outside Director of Culture Convenience Club Co., Ltd. and JAPAN POST BANK Co., Ltd., and Outside Audit & Supervisory Board Member of Tokio Marine & Nichido Fire Insurance Co., Ltd. There is no special interest between the Company and the said companies. She satisfies the Company’s “Independence Criteria for Outside Corporate Officers” as well. Consequently, there is no risk of this having an impact on her independence. 3. The current term of service as an outside Director of the Company of Mr. Hitoshi Kashiwaki shall be one (1) year as of the closing of this General Meeting of Shareholders. He is an Outside Director of ASICS Corporation, Matsuya Co., Ltd. and TBS HOLDINGS, INC. There is no special interest between the Company and the said companies. He satisfies – 15 – the Company’s “Independence Criteria for Outside Corporate Officers” as well. Consequently, there is no risk of this having an impact on his independence. 4. Ms. Atsuko Fukushima is an External Director of Hulic Co., Ltd. and Outside Director of Nagoya Railroad Co., Ltd. and Calbee, Inc. There is no special interest between the Company and the said companies. She satisfies the Company’s “Independence Criteria for Outside Corporate Officers” as well. Consequently, there is no risk of this having an impact on her independence. 5. The Company has entered into an agreement to limit liability for damages with Ms. Shihoko Urushi and Mr. Hitoshi Kashiwaki pursuant to Article 427, paragraph 1 of the Companies Act of Japan (the “Companies Act”) and Article 28 of the Articles of Incorporation of the Company. If their election as outside Directors is approved, the Company intends to continue such agreements. The amount of maximum liability stipulated in the agreement is determined by each of the respective items under Article 425, paragraph 1 of the Companies Act, and this limitation of liability shall apply only when the above outside Directors have acted in good faith and without gross negligence in performing the duties giving rise to the liability. Furthermore, if Ms. Atsuko Fukushima’s election is approved, the Company plans to enter into the same agreement to limit liability for damages with her. 6. The Company has entered into a directors and officers liability insurance policy with an insurance company as provided for in Article 430-3, paragraph 1 of the Companies Act. The policy covers losses and such costs as related litigation expenses incurred from claims for damages borne by the insured where they receive a claim for damages from a shareholder or third party. In the event that the elections of the candidates are approved, each candidate will become an insured person in the policy. Furthermore, at the time of the next renewal, the Company plans to renew it with the same terms as the current policy. – 16 – Proposition No. 2: Election of two (2) Corporate Auditors Among the Corporate Auditors currently in office, the term of office of Mr. Kiyotaka Yokokoji and Mr. Kazumine Terawaki will expire at the close of this General Meeting of Shareholders. In that regard, it is proposed that two (2) Corporate Auditors be elected. The Board of Corporate Auditors has consented to this proposition. For information on the expected Board of Corporate Auditors Structure after the General Meeting of Shareholders as well as the experience and expertise of each Corporate Auditor, please refer to pages 23 to 25. For independence criteria for outside Corporate Auditor, please refer to page 22. Candidate Number 1 (New election) Hidekazu Oda (Date of birth: January 5, 1963) (Note 4) Reason for nomination for Corporate Auditor In addition to his broad operational experience in sales, corporate planning, and IR, recently as the General Manager of the Internal Audit Office of the Company, Mr. Oda has led and driven internal auditing and compliance throughout the Group in Japan and overseas and the evaluation of the effectiveness of internal control over financial reporting. For these reasons, we judge that he meets the Company’s nomination policy and newly nominate him as a candidate for Corporate Auditor. Number of shares of the Company held by Candidate 1,000 shares Brief history, title and important concurrent office April 1986 August 2007 August 2013 Joined the Company General Manager, Operation Management Department of the Company General Manager, Stock and Investor Relations Department, Management Promotion Division of the Company General Manager, Internal Audit Office of the Company, to this date February 2019 Special interest with the Company None – 17 – Reason for nomination for outside Corporate Auditor Mr. Terawaki has expertise and broad insight as a legal expert and has secured sufficient time to provide valuable suggestions and opinions on overall management including compliance and risk management in the Company’s internal governance system. For these reasons, we judge that he meets the Company’s nomination policy and nominate him once again as a candidate for outside Corporate Auditor. Candidate Number 2 (Reelection) (Outside) (Independent) Member of Nominating and Remuneration Committee Kazumine Terawaki (Date of birth: April 13, 1954) (Notes 1 to 4) Number of shares of the Company held by Candidate Number of Board of Directors’ meetings attended for the fiscal year 2021 Number of Board of Corporate Auditors’ meetings attended for the fiscal year 2021 Number of years in office as a Corporate Auditor 900 shares 12/12 13/13 4 years September 2003 Brief history, title and important concurrent office Appointed as Public Prosecutor April 1980 Deputy Chief, General Affairs and Planning Department, the Research and Training April 1998 Institute of the Ministry of Justice Director-General, Criminal Affairs Division of the Nagoya District Public Prosecutors Office Chief Public Prosecutor of the Fukui District Public Prosecutors Office Deputy Superintending Prosecutor of the Sendai High Public Prosecutors Office Director-General of Public Security Intelligence Agency Superintendent Public Prosecutor of the Sendai High Public Prosecutors Office Superintendent Public Prosecutor of the Osaka High Public Prosecutors Office Admitted as attorney at law (Tokyo Bar Association), to this date Outside Corporate Auditor of the Company, to this date External Audit & Supervisory Board Member of The Shoko Chukin Bank, Ltd., to this date Outside Director of TOSHIBA MACHINE CO., LTD. (currently SHIBAURA MACHINE CO., LTD.), to this date Outside Audit & Supervisory Board Member of KAJIMA CORPORATION, to this date June 2007 July 2008 January 2014 January 2015 September 2016 June 2017 February 2018 June 2018 June 2019 Special interest with the Company None (Notes) 1. Mr. Kazumine Terawaki is a candidate for outside Corporate Auditor. If his election as outside Corporate Auditor is approved, the Company plans for him to become an independent officer in accordance with the provisions of Tokyo Stock Exchange, Inc. 2. The current term of service as an outside Corporate Auditor of the Company of Mr. Kazumine Terawaki shall be four (4) years as of the closing of this General Meeting of Shareholders. He is an outside Director of SHIBAURA MACHINE CO., LTD., external Audit & Supervisory Board Member of The Shoko Chukin Bank, Ltd., and outside Audit & Supervisory Board Member of KAJIMA CORPORATION. There is no special interest between the Company and the said companies. He satisfies the Company’s “Independence – 18 – Criteria for Outside Officers” as well. Consequently, there is no risk of this having an impact on his independence. 3. The Company has entered into an agreement to limit the liabilities for damages with Mr. Kazumine Terawaki pursuant to Article 427, paragraph 1 of the Companies Act and Article 38 of the Articles of Incorporation of the Company. If his election as outside Corporate Auditor is approved, the Company intends to continue such agreement. The amount of maximum liability stipulated in the agreement is determined by each of the respective items under Article 425, paragraph 1 of the Companies Act, and this limitation of liability shall apply only when the above outside Corporate Auditor has acted in good faith and without gross negligence in performing the duties giving rise to the liability. 4. The Company has entered into a directors and officers liability insurance policy with an insurance company as provided for in Article 430-3, paragraph 1 of the Companies Act. The policy covers losses and such costs as related litigation expenses incurred from claims for damages borne by the insured where they receive a claim for damages from a shareholder or third party. In the event that the elections of the candidates are approved, each candidate will become an insured person in the policy. Furthermore, at the time of the next renewal, the Company plans to renew it with the same terms as the current policy. – 19 – Policies and Procedures for Election of Directors and Corporate Auditor The Board of Directors of the Company, in working to follow the mandate of the shareholders, shall have responsibilities to respect corporate philosophy, promote sustainable corporate growth and the improvement of corporate value over the medium to long term, and enhance earnings power and capital efficiency. Concerning the election of Directors, the Board of Directors has set forth the following criteria through which the persons deemed capable of fulfilling these responsibilities are nominated as candidates. Inside Director 1) Must respect the corporate philosophy of the Company and embody these values. 2) Must possess abundant knowledge on domestic and international market trends concerning the Group business. 3) Must possess excellent competency in objective managerial judgment and business execution that contributes beneficially to the Group’s management direction. Outside Director 1) Must provide a guiding role in particular fields, such as corporate management, legal affairs, overseas, human resource development, and ESG and possess abundant experience and expertise in such fields. 2) Must have high affinity with the corporate philosophy and business of the Company, and possess the ability to express opinions, provide guidance and advice, and carry out supervision with respect to the inside Directors when deemed timely and appropriate to do so. 3) Must secure sufficient time to perform duties as an outside Director of the Company. The Corporate Auditors, in working to follow the mandate of the shareholders, shall have responsibilities to strive to prevent occurrences of infringements of laws and regulations and the Articles of Incorporation and maintain and improve the soundness of the Group’s management and its trust from society. Concerning the election of Corporate Auditors, the Board of Directors has set forth the following criteria through which the persons deemed capable of fulfilling these responsibilities are nominated as candidates. Inside Corporate Auditor 1) Must respect the corporate philosophy of the Company and embody these values. 2) Must maintain a stance of fairness and possess the capability to fulfill auditing duties. 3) Must have an overall grasp of the Group operations and be able to propose management tasks. Outside Corporate Auditor 1) Must provide a guiding role in particular fields, such as corporate management, accounting, legal affairs, overseas, human resource development, and ESG and possess abundant experience and expertise in such fields. 2) Must have high affinity with the corporate philosophy and business of the Company, and possess the ability to express opinions, provide guidance, and carry out supervision with respect to the Directors from an objective and fair standpoint. 3) Must secure sufficient time to perform duties as an outside Corporate Auditor of the Company. – 20 – Concerning the nomination of candidates for Directors and Corporate Auditors, the Board of Directors will deliberate and decide after discussions in a meeting of the Nominating and Remuneration Committee. As for candidates for Corporate Auditors, election propositions for the General Meeting of Shareholders must be approved by the Board of Corporate Auditors pursuant to stipulations in the Companies Act. – 21 – Independence Criteria for Outside Corporate Officers To judge the independence of outside Directors and outside Corporate Auditors as stipulated in the Companies Act, we check the requirements for independent officers stipulated by Tokyo Stock Exchange, Inc. as well as checking whether the following apply. 1) 2) 3) 4) 5) 6) 7) 8) *1 *2 *3 *4 *5 A major shareholder of the Group (holding 10% or more of voting rights either directly or indirectly), or a person who executes business for a major shareholder of the Group (*1) A person/entity for which the Group is a major client, or a person who executes business for such person/entity (*2) A major client of the Group or a person who executes business for such client (*3) A person who executes business for a major lender of the Group (*4) A representative employee or employee of the accounting auditor for the Group A provider of expert services, such as a consultant, attorney at law, or certified public accountant, who receives cash or other assets exceeding ¥10 million in one business year other than Director/Corporate Auditor compensation from the Group A person/entity receiving contributions from the Group exceeding ¥10 million in one business year, or a person who executes business for such person/entity A person to whom any one of 1) to 7) above has applied in the past three business years 9) Where any of 1) to 8) apply to a key person, the spouse or relative within two degrees of kinship of such person (*5) 10) A person with a special reason other than the preceding items that will prevent the person from performing their duties as an independent outside corporate officer, such as the potential for a conflict of interest with the Company A person who executes business means an executive director, executive officer, executive, or other employee, etc. A person/entity for which the Group is a major client means a person/entity who receives payments from the Group amounting to at least the higher of either 2% of their consolidated net sales or ¥100 million. A major client of the Group means a client that makes payments to the Group amounting to at least 2% of the Group’s consolidated net sales. A major lender of the Group means a lender named as a major lender in the Group’s Business Report. A key person means a director (excluding outside directors), corporate auditor (excluding outside corporate auditors), executive officer, executive, or other person in the rank of senior general manager or above, or a corporate officer corresponding to these positions. – 22 – The Board of Directors and Board of Corporate Auditors Structure (Planned) After the General Meeting of Shareholders (Outside): Outside Director or Outside Corporate Auditor (Independent): Independent Officer 〇: Member of Nominating and Remuneration Committee (●: Chair) Name Title Assignment Chairman of the Board of Directors In charge of Compliance and Brand President and Chief Executive Corporate Officer in charge of Overseas Senior Executive Corporate Officer in charge of Retail Market Business in general Executive Corporate Officer in charge of Corporate (including Medium-term Business Plan Promotion, Group Governance, Risk Management and Sustainability) Senior Corporate Officer in charge of Research Development, Fine Chemicals and Intellectual Property, Food Culture and Health Promotion Project and Senior General Manager of R&D Division Senior Corporate Officer in charge of Production and Quality Amane Nakashima Mitsuru Takamiya Chairman and Director Representative Director Seiya Sato Director Nobuo Inoue Director Yoshinori Hamachiyo Director Ryota Watanabe Director Shihoko Urushi Outside Director Hitoshi Kashiwaki Outside Director Atsuko Fukushima Outside Director 〇 〇 〇 (Outside) (Independent) (Outside) (Independent) (Outside) (Independent) 〇 ● 〇 (Outside) (Independent) (Outside) (Independent) 〇 (Outside) (Independent) Full-time Full-time Hidekazu Oda Emiko Takeishi Norimitsu Yamagata Corporate Auditor Corporate Auditor Outside Corporate Auditor Outside Corporate Auditor Outside Corporate Auditor (Note) The titles and assignments are those at the Group. Kazumine Terawaki Mika Kumahira – 23 – Experience and Expertise of Directors, Corporate Auditors and Certain Corporate Officers The experience and expertise possessed by Directors, Corporate Auditors, and senior Corporate Officers with special titles after the closing of the General Meeting of Shareholders are shown in the below skill matrix. Also, please see 1) to 4) below for the Company’s policy regarding the necessary skills, diversity, and scale for the Board of Directors. An outside Corporate Officer may concurrently serve as an officer at other companies, and such concurrent officer positions at the listed companies other than the Company shall be limited to three (3) or less companies in principle. 1) The Company aims at a well-balanced composition of officers as a whole (including Directors and Corporate Auditors) in terms of experience, expertise, attributes, etc., and works on making up for insufficient factors by those of non-officers. 2) Inside Directors are composed mainly of Corporate Officers who can take a broad view of the overall Group. 3) The maximum term of service of an outside Corporate Officer is 10 years in order to maintain their independency; however, we make efforts to keep three years or more average term of service for all outside Corporate Officers, given the importance of their understanding of the food business and the Company. 4) The number of Directors shall be up to twelve (12), and outside Directors shall make up one third or more of the total number of Directors. – 24 – Age Number of years in office Corporate management Management strategy ESG Risk management Finance & Accounting Experience & Expertise HR IT/Digital Overseas experience Sales and marketing Amane Nakashima 62 25 〇 〇 〇 〇 Production Research and development 61 12 〇 〇 〇 〇 Mitsuru Takamiya 60 Seiya Sato 62 Nobuo Inoue Director Yoshinori Hamachiyo 61 57 60 64 60 62 59 62 67 61 62 63 47 57 Ryota Watanabe Shihoko Urushi Hitoshi Kashiwaki Atsuko Fukushima Norimitsu Yamagata Hidekazu Oda Kazumine Terawaki Mika Kumahira Toshimasa Shirai Corporate Auditor Emiko Takeishi Corporate Officer with special titles Masami Fujita Kaori Fujiwara Shinya Hamasaki – 5 5 1 6 1 – 3 – 7 4 2 – – – – 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 〇 – 25 – (Notes) 1. The ages of each person are current as of February 25, 2022. 2. A circle has been placed for the experience and expertise of each person which is particularly expected by the Company. 3. Mr. Shinya Hamasaki will be promoted to Senior Corporate Officer on February 25, 2022. Consolidated Financial Statements Consolidated Balance Sheets Assets Current assets Cash and deposits Notes and accounts receivable-trade Securities Purchased goods and products Work in process Raw materials and supplies Other current assets Allowances for doubtful accounts Total current assets Fixed assets Tangible fixed assets Buildings and structures Machinery, equipment and vehicles Land Lease assets Construction in progress Other tangible fixed assets Accumulated depreciation Total tangible fixed assets Intangible fixed assets Goodwill Software Other intangible fixed assets Total intangible fixed assets Investments and other assets Investment securities Assets for retirement benefits Deferred tax assets Other investments and other assets Allowances for doubtful accounts Total investments and other assets Total fixed assets Total assets Previous fiscal year (As of November 30, 2020) Current fiscal year (As of November 30, 2021) (Millions of yen) 58,343 56,875 10,000 18,277 1,369 10,419 2,303 (137) 157,451 157,939 149,308 30,850 5,562 2,488 12,497 (212,114) 146,532 552 10,979 1,771 13,303 43,629 11,128 2,981 6,096 (120) 63,715 223,552 381,003 56,835 73,783 10,000 16,214 1,398 9,609 6,696 (523) 174,012 191,496 183,338 53,504 12,106 5,352 17,247 (250,243) 212,802 1,676 9,383 4,084 15,144 27,110 9,601 3,791 12,002 (188) 52,316 280,263 454,276 (Note) Figures are stated by discarding fractions of one million yen. – 26 – Liabilities Current liabilities Notes and accounts payable-trade Short-term loans payable Accounts payable-other Accrued income taxes Reserves for sales rebates Reserves for bonuses Reserves for directors’ bonuses Other reserves Other current liabilities Total current liabilities Non-current liabilities Bonds Long-term loans payable Deferred tax liabilities Liabilities for retirement benefits Other non-current liabilities Total non-current liabilities Total liabilities Net assets Shareholders’ equity Paid-in capital Capital surplus Earned surplus Treasury stock Total shareholders’ equity Accumulated other comprehensive income Unrealized holding gains (losses) on securities Unrealized gains (losses) on hedges Foreign currency translation adjustments Accumulated adjustments for retirement benefits Total accumulated other comprehensive income Non-controlling interests Total net assets Total liabilities and net assets (Note) Figures are stated by discarding fractions of one million yen. (Millions of yen) Previous fiscal year (As of November 30, 2020) Current fiscal year (As of November 30, 2021) 41,828 12,153 14,480 3,901 747 1,817 163 52 11,228 86,373 10,000 51,861 6,223 3,619 8,842 80,546 166,920 24,104 28,647 201,705 (15,865) 238,592 8,882 (4) (3,411) (4,315) 1,151 47,612 287,356 454,276 28,015 11,591 17,908 4,182 741 1,442 86 58 7,172 71,199 10,000 16,356 5,856 2,750 5,538 40,502 111,702 24,104 28,632 194,015 (5,838) 240,913 8,690 8 (962) (3,008) 4,727 23,660 269,301 381,003 – 27 – Consolidated Statements of Income Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Non-operating income Interest and dividends income Equity in earnings of affiliates Other Total non-operating income Non-operating expenses Interest expenses Other Total non-operating expenses Ordinary income Extraordinary gains Gains on sales of fixed assets Other Total extraordinary gains Extraordinary losses Impairment losses Losses on disposal of fixed assets Other Total extraordinary losses Profit before income taxes Income taxes Income taxes – deferred Profit Profit attributable to non-controlling interests Profit attributable to owners of parent Previous fiscal year (From December 1, 2019 to November 30, 2020) Current fiscal year (From December 1, 2020 to November 30, 2021) (Millions of yen) 407,039 282,807 124,232 96,260 27,972 532 998 995 2,527 241 560 801 29,698 459 1,026 1,486 1,097 1,087 138 2,323 28,860 8,329 260 20,269 2,255 18,014 531,103 405,790 125,313 97,009 28,303 605 116 1,303 2,024 337 1,001 1,338 28,989 102 580 682 1,950 1,880 2,545 6,376 23,296 8,664 159 14,471 2,880 11,591 (Note) Figures are stated by discarding fractions of one million yen. – 28 – Matters to be disclosed on the Internet pursuant to laws and regulations, and the Articles of Incorporation Consolidated Statements of Changes in Net Assets Notes to Consolidated Financial Statements For the Fiscal Year 2021 (December 1, 2020 to November 30, 2021) Kewpie Corporation These matters are made available by publication on the Internet website of Kewpie Corporation (the “Company”) pursuant to laws and regulations and its Articles of Incorporation. (https://www.kewpie.com/en/ir/) The contents of the consolidated statements of changes in net assets and the notes to * consolidated financial statements are those audited by the accounting auditors by January 19, 2022. – 29 – Consolidated Statements of Changes in Net Assets (From December 1, 2020 to November 30, 2021) Shareholders’ equity Paid-in capital Capital surplus Earned surplus Treasury stock (Millions of yen) Total shareholders’ equity Balance at the beginning of the current fiscal year Effects of finalization of provisional accounting treatment Balance after reflecting the above effects Changes of items during the fiscal year Dividends from surplus Profit attributable to owners of parent Purchase of treasury stock Cancellation of treasury stock Change in ownership interest of parent due to transactions with non-controlling interests Change of scope of consolidation Net changes of items other than shareholders’ equity Total changes of items during the fiscal year Balance at the end of the current fiscal year 24,104 28,647 201,492 (15,865) 238,379 213 213 24,104 28,647 201,705 (15,865) 238,592 (15) (5,665) 18,014 (20,031) (8) (10,004) 20,031 (5,665) 18,014 (10,004) – (15) (8) – (15) (7,690) 10,026 2,320 24,104 28,632 194,015 (5,838) 240,913 – 30 – Accumulated other comprehensive income Unrealized holding gains (losses) on securities Unrealized gains (losses) on hedges Foreign currency translation adjustments Accumulated adjustments for retirement benefits Total accumulated other comprehen-sive income Non-controlling interests Total net assets 8,882 (4) (3,408) (4,315) 1,153 45,844 285,377 (2) (2) 1,768 1,979 8,882 (4) (3,411) (4,315) 1,151 47,612 287,356 Balance at the beginning of the current fiscal year Effects of finalization of provisional accounting treatment Balance after reflecting the above effects Changes of items during the fiscal year Dividends from surplus Profit attributable to owners of parent Purchase of treasury stock Cancellation of treasury stock Change in ownership interest of parent due to transactions with non-controlling interests Change of scope of consolidation Net changes of items other than shareholders’ equity Total changes of items during the fiscal year Balance at the end of the current fiscal year (192) (192) 8,690 12 12 8 (Note) Figures are stated by discarding fractions of one million yen. 1,306 1,306 (8) 3,576 (23,952) (20,376) 3,576 (23,952) (18,055) 2,448 2,448 (962) (3,008) 4,727 23,660 269,301 (5,665) 18,014 (10,004) – (15) – 31 – Notes to Consolidated Financial Statements I. Notes on the matters forming the basis of preparation of consolidated financial statements 1. Consolidated subsidiaries The Company has forty-six (46) consolidated subsidiaries. The significant consolidated subsidiaries are Kewpie Egg Corporation, Deria Foods Co., Ltd., Kewpie Jyozo Co., Ltd., Salad Club, Inc. and Aohata Corporation. In the current fiscal year, K.R.S. Corporation (“KRS”) and its fourteen (14) subsidiaries listed below have changed from being consolidated subsidiaries to being affiliated companies accounted for by the equity method, as the Company sold part of the shares of KRS. 1. K. Tis Corporation 2. S. Y. PROMOTION Co., Ltd. 3. Kewso Services Corporation 4. KLQ Corporation 5. San-ei Logistics Corporation 6. San Family Corporation 7. Osaka Sanei Logistics Corporation 8. KAT Corporation 9. Fresh Delica Network Corporation 10. Hisamatsu Transport Corporation 11. PT Kiat Ananda Cold Storage 12. PT Ananda Solusindo 13. PT Manggala Kiat Ananda 14. PT Trans Kontainer Solusindo On the other hand, Kewpie Trading Europe B.V., which was a non-consolidated subsidiary not accounted for by the equity method, has been included in the scope of consolidated subsidiaries, since the said company has become material. Furthermore, one company has been included in the scope of consolidation as a result of its establishment, and one company has been excluded from the scope of consolidation due to the sale of its shares. As a consequence, two companies were added and sixteen (16) companies were excluded. Among the ten (10) non-consolidated subsidiaries, the principal one is Kewpie-Egg World Trading U.S.A. Inc. These companies are excluded from consolidation, because each of the amount of their total assets, net sales, profit and loss and earned surplus (based on the Company’s ownership percentage) does not have a significant effect on the consolidated financial statements of the Company. 2. Application of the equity method An equity method is applied to the investments in eighteen (18) affiliated companies. The significant affiliate under the equity method is KRS. The investments in Kewpie-Egg World Trading U.S.A. Inc. and nine other non-consolidated subsidiaries, as well as EGG TRUST JAPAN K.K. and eight other affiliated companies are not accounted for by the equity method, since each of the amounts of profit and loss and earned surplus (based on the Company’s ownership percentage) did not have a significant effect on the consolidated financial statements of the Company. – 32 – 3. Fiscal years of consolidated subsidiaries Among consolidated subsidiaries of the Company, the fiscal year end of nine foreign consolidated subsidiaries is September 30 and that of six foreign consolidated subsidiaries is December 31. Six foreign subsidiaries whose fiscal year end is December 31 are consolidated based on their provisional financial statements based on a provisional settlement of accounts as at September 30. Other nine foreign subsidiaries are consolidated based on the financial statements as at their fiscal year end. However, significant transactions of those subsidiaries recognized during the period after their settlement of accounts (September 30) to the fiscal year end of the Company’s consolidated financial statements (November 30) are reflected. Basis and method of valuation of significant assets 4. Accounting policies (1) (a) Securities method). i) Held-to-maturity bonds are stated at amortized cost (by the straight-line ii) Shares in subsidiaries and affiliated companies not accounted for by the equity method are stated at cost, determined by the moving average method. iii) Other securities with market value are stated at market value, determined by market prices, etc. as of the closing of the fiscal year. (Revaluation differences are all transferred directly to net assets. Selling costs are determined by the moving average method.) Those without market value are stated at cost, determined by the moving average method. (b) Derivatives Stated at market value. requirements thereof. (c) Inventories Hedge accounting is applicable to hedge transactions that meet the Purchased goods and products, work in process, raw materials and supplies are principally stated at moving average cost (the value method to devaluate a book value for decreasing profitability). – 33 – (2) Depreciation and amortization of significant depreciable and amortizable assets (a) Tangible fixed assets (excluding lease assets) Tangible fixed assets are depreciated by the straight-line method. The main useful lives are as follows. Buildings and structures: Machinery, equipment and vehicles: 2–10 years 2–50 years (b) Intangible fixed assets (excluding lease assets) Intangible fixed assets are amortized by the straight-line method. The main useful life is as follows. Software: 5–10 years (c) Lease assets Lease assets in finance lease transactions other than those which are deemed to transfer the ownership of lease assets to lessees are calculated by the straight-line method by considering the lease period to be useful life and the residual value to be zero. Foreign consolidated subsidiaries that adopted IFRS have applied IFRS 16 “Leases”. Due to this application, lessees, in principle, record all leases as assets and liabilities on the balance sheets, and the right-of-use assets recorded under assets are depreciated using the straight-line method. Business commencement expenses are recorded as expenses in full at the time of (3) Method of treatment of significant deferred assets payment. (4) Accounting standards for significant allowances (a) Allowances for doubtful accounts To provide for losses on bad debts, the Company sets aside an estimated uncollectable amount, by taking into consideration the possible credit loss rate in the future based on the actual loss rate in respect of general credits, and the particular possibilities of collection in respect of possible non-performing credits and other specific claims. (b) Reserves for sales rebates To provide for payments for sales rebates to be borne during the current fiscal year, reserves for sales rebates are provided based on an accrual basis in accordance with each company’s policy (rate of the estimated payments for sales rebates to sales). – 34 – (5) (6) (c) Reserves for bonuses To provide for the payment of bonuses to employees, reserves for bonuses are provided according to the expected amount of the payment which attributes to the current fiscal year. (d) Reserves for directors’ bonuses To provide for the payment of bonuses to directors, reserves for directors’ bonuses are provided according to the estimated amounts payable at the end of the current fiscal year. Accounting for retirement benefits (a) Periodic allocation method for projected retirement benefits In calculating retirement benefit obligations, the method of allocating the projected retirement benefits to the period up to the end of the current fiscal year is the benefit formula basis. (b) Method of accounting for actuarial gains or losses and prior service costs Prior service costs are amortized by the straight-line method principally over twelve (12) years based on the average remaining employees’ service years at the time of accrual. Actuarial gains or losses are amortized by the straight-line method principally over twelve (12) years based on the average remaining employees’ service years at each fiscal year, and their amortizations start from the next fiscal year of the respective accrual years. In addition, if the amount of pension fund assets exceeds that of retirement benefit obligations for benefit pension plan, it is provided as assets for retirement benefits on the consolidated balance sheets. Significant methods of hedge accounting (a) Deferral hedge is adopted in hedge accounting. Appropriation processing is adopted for transactions that meet the requirements for that method. (b) Hedging instruments are forward exchange contracts. (c) Hedged items are purchase transactions in foreign currencies. (d) The Company enters into forward exchange contracts to hedge risks from fluctuations in foreign exchange rates. In addition, the Company never makes use of them for the purpose of speculative transactions. – 35