SECOND PARTY OPINIONKIRIN HOLDINGS COMPANY, LIMITED.
SOCIAL BOND DNV PERIODIC REVIEW (#1)

Prepared by: DNV Business Assurance Japan K.K.
Location: Kobe, Japan
Date: 23 June 2023
Ref. Nr.: PRJN-340461-2022-AST-JPN-02

Table of Contents
I. Scope and Objectives

3

Ⅱ. Project Overview

4

Ⅲ. Responsibilities of Kirin Holdings and DNV

5

Ⅳ. Basis of DNV s Opinion

6

V. Work Undertaken

7

Ⅵ. Findings and DNV's Opinion

8

Schedule-1 Social Bond Projects

12

Schedule-2 Social Bond Eligibility Assessment Protocol

13

Revision history
RevisionNo.
0Date of Issue
23 June 2023

Remarks
InitialDisclaimer
Our assessment relies on the premise that the data and information provided by Issuer to us as part of our review procedures have been provided in good faith.
Because of the selected nature (sampling) and other inherent limitation of both procedures and systems of internal control, there remains the unavoidable riskthat errors or irregularities, possibly significant, may not have been detected. Limited depth of evidence gathering including inquiry and analytical procedures andlimited sampling at lower levels in the organization were applied as per scope of work. DNV expressly disclaims any liability or co-responsibility for any decision aperson or an entity may make based on this Statement.

Statement of Competence and Independence
DNV applies its own management standards and compliance policies for quality control, in accordance with ISO/IEC 17021:2011 - Conformity Assessment
Requirements for bodies providing audit and certification of management systems, and accordingly maintains a comprehensive system of quality control, including
documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We
have complied with the DNV Code of Conduct1 during the assessment and maintain independence where required by relevant ethical requirements. This
engagement work was carried out by an independent team of sustainability assurance professionals. DNV was not involved in the preparation of statements ordata included in the Framework except for this Statement. DNV maintains complete impartiality toward stakeholders interviewed during the assessment process.

1 DNV Code of Conduct is available from DNV website (www.DNV.com)

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I. Scope and Objectives
Kirin Holdings Company, Limited (hereinafter, Kirin Holdings) has commissioned DNV to
conduct a a post-issuance periodic review of the Social Bond issued on 7 June 2022.

The objective of the post-issuance periodic review of DNV is to ensure that Kirin Holdings
meets the requirements of the Social Bond Principles (hereinafter, SBP) and the Social
Bond Guidelines (hereinafter, SBGLs) described below, and to provide a second party
opinion on the eligibility of this Social Bond.
Kirin Holdings issued a Social Bond on 7 June 2022. The issuance amount was JPY 20
billion. DNV conducted a periodic review (#1) based on the SBP and SBGLs, following theKirin Sustainable Finance Framework Second Party Opinion (issued on 18 March 2022).
DNV, as an independent external reviewer, identified no real or perceived conflict ofinterest associated with the delivery of this second-party opinion for Kirin Holdings.
In this paper, no assurance is provided regarding the financial performance of the Social
Bond, the value of any investment in the Social Bond, or the long-term social benefits ofthe transaction.
Standards to be Applied

*1

No.

Standards/Guidelines

1.

Social Bond Principles

2.

Social Bond Guidelines

Scheme owner
International Capital Market
Association (ICMA), 2021
Financial Services Agency,
2021

Applied level*1
Apply
Apply

Apply: Eligibility for all four core common elements to each principle and guideline was evaluated.

Page 3 of 17

Ⅱ. Project Overview
The Kirin Group has identified "Health and Well-being" as one of the key issues within "CSV
Purpose". It has determined "immunity", "brain function," and the "gut microbiome" as its
three key areas and is endeavoring to solve health issues in these areas through providing
products and services that use strategic ingredients produced by utilizing fermentation &biotechnology, the Kirin Group's core competencies.
Specifically, Kirin Group addresses the improvement of access to nutrition, support to brain
function improvement and brain function decline prevention, and the maintenance of
immune function. Human Milk Oligosaccharide (HMO), a unique nutrient of human breast
milk, was successfully mass-produced by the Kirin Group's fermentation production
technology utilizing microorganisms. β-Lactolin (Citicoline) is a proprietary ingredientderived from Kirin Group's brain research that supports the maintenance of memory, which
declines with age. The world's first Lc-PLASMA activates pDC (Plasmacytoid dendritic cells),
the command center of immune cells. By providing such highly functional products as theresult of various research and development efforts, the Kirin Group contributes to solvingsocial and health issues in Japan and around the world.
This time, Kirin Holdings has allocated a total of JPY 20 billion to the three projects forwhich eligibility has been confirmed.

Eligible projects

Social Projects
Categories

Capital investment, operation,and procurement of raw materials
contributing to the production of
Human Milk Oligosaccharide(HMO)
Capital investment, operation,and procurement of raw materials
contributing to the production of
Citicoline
Capital investment, operation,and procurement of raw materials
contributing to the research anddevelopment of Lc-PLASMA andthe production of raw material
powder utilizing Lc-PLASMA

Access to essential
services

Target population

Contribution
to SDGs

General public

Goals 2, 3, and9

General public, aging
people, patients

Goals 2, 3, and9

General public, aging
people, vulnerable youth

Goals 3 and 9(health, health care)

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Ⅲ. Responsibilities of Kirin Holdings and DNVKirin Holdings has provided the information and data used by DNV during the delivery ofthis review. DNV s second party opinion represents an independent opinion and is intended
to inform Kirin Holdings and other interested stakeholders in the allocated Social Bond ofwhether the established criteria have been met, based on the information provided to us.
In our work, we have relied on the information and the facts presented to us by Kirin
Holdings.
DNV is not responsible for any aspect of the nominated assets referred to in this opinion
and cannot be held liable if estimates, findings, opinions, or conclusions are incorrect.
Thus, DNV shall not be held liable if any of the information or data provided by the
management of Kirin Holdings and used as a basis for this assessment were not correct orcomplete.

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Ⅳ. Basis of DNV s Opinion
To provide as much flexibility for the issuer, Kirin Holdings, as possible, we have adapted
our Kirin Holdings Social Bond assessment methodology, which incorporate therequirements of the SBP and SBGLs, to create a Social Bond Eligibility Assessment Protocol(hereinafter, Protocol). (Refer to Schedule-2 and 3). The Protocol is applicable to Social
Bond based on the SBP and SBGLs.
Our Protocol includes a set of suitable criteria that can be used to underpin DNV s opinion.
The overarching principle and guidelines behind the criteria are that a Social Bond should"enable capital-raising and investment for new and existing projects with social benefits."
As per our Protocol, the criteria against which the Social Bond has been reviewed aregrouped under four Principles:Principle One: Use of Proceeds
The Use of Proceeds criteria are guided by the requirement that a Social Bondissuer must use the funds raised to eligible activities. The eligible activities should
produce clear social benefits.

Principle Two: Process for Project Evaluation and Selection
The Project Evaluation and Selection criteria are guided by the requirements thata Social Bond issuer should outline the process it follows when determining theeligibility of an investment using Social Bond proceeds and outline any impact
objectives it will consider.



Principle Three: Management of Proceeds
The Management of Proceeds criteria are guided by the requirements that a
Social Bond should be tracked within the issuing organization, that separate
portfolios should be created when necessary and that a declaration of howunallocated funds will be handled should be made.



Principle Four: Reporting
The Reporting criteria are guided by the recommendation that at least
Sustainability Reporting to the bond investors should be made of the use offinance proceeds and that quantitative and/or qualitative performance indicators
should be used, where feasible.

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V. Work Undertaken
Our work constituted a high-level review of the available information, based on theunderstanding that this information was provided to us by Kirin Holdings in good faith. We
have not performed an audit or other tests to check the veracity of the information
provided to us. The work undertaken to form our opinion included:i. Pre-Issuance Assessment of Social Bond (*not included in this report)Creation of the issuer s specific Protocol, adapted to the purpose of the Social Bond,
as described above and in Schedule-2 to this assessment;

Assessment of documentary evidence provided by the issuer on this bond andsupplemented by high-level desktop research. These checks refer to current
assessment best practices and standards methodology;Discussions with the issuer, and review of relevant documentation;

Documentation of findings against each element of the criteria.

ii. Post-Issuance Assessment of Social Bond *This Report•

Assessment of evidential documents provided by Kirin Holdings after the Social Bondissuance, and supplemental by desk review from a higher perspective;•

Interview with key personnel of Kirin Holdings and review the relevant
documentation;•

Field research and inspection (if necessary);•

Review of the nominated projects and assets at the time of post-issuance (update ofthe details mentioned in Schedule-1);•

Document creation at the time of post-issuance verification.

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Ⅵ. Findings and DNV's Opinion
DNV's findings and opinion are as follows.
(1)

Use of Proceeds

DNV confirmed that the proceeds raised by Kirin Holdings from the Social Bond havebeen allocated to social projects, which are consistent with the following eligible project
categories outlined in the SBP and SBGLs.
DNV also confirmed that these projects have social benefits and contribute to the three
SDGs (2. Zero hunger, 3. Good health and well-being, and 9. Industry innovation andinfrastructure).

<Social projects categories>
 Access to essential services (health, health care)
Eligible projects
Capital investment, operation, andprocurement of raw materials contributing
to the production of Human Milk
Oligosaccharides (HMO)
Capital investment, operation, andprocurement of raw materials contributing
to the production of Citicoline
Capital investment, operation, andprocurement of raw materials contributing
to the research and development of LcPLASMA and the production of raw
material powder utilizing Lc-PLASMATime of allocation (actual)

Allocated amountJune - December 2022
(completed)

JPY 7.3 billion*1(refinancing ratio: 86.8%)

June - December 2022
(completed)

JPY 9.5 billion(refinancing ratio: 58.7%)

June - December 2022
(completed)

JPY 3.2 billion(refinancing ratio: 90.0%)

Total amountJPY 20 billion(refinancing ratio: 74.0%)*1: Although allocations were made in local currency, DNV confirmed through the assessment that theallocation amount converted to Japanese yen was appropriate.

(2)

Process for Project Evaluation and Selection

For the evaluation and selection of projects closely related to the key issues outlined in"CSV Purpose" and "Management Issues for Sustainable Growth (the Kirin Group
Materiality Matrix (GMM)", DNV confirmed through the review that the accounting
department and the CSV strategy department selected the eligible projects which meetthe eligible criteria defined by the Framework, and the Executive Officer in charge ofFinancial Strategy made the final decisions on the selected eligible projects.
DNV confirmed that Kirin Holdings has met the eligibility criteria set out in the Standards
to be applied in selecting the project in question, and that it has assessed and considered
the negative impacts associated with the implementation of the project and identified theenvironmental and social risks in advance.

Page 8 of 17

(3)Management of Proceeds

DNV confirmed how Kirin Holdings tracked and managed the proceeds during the period
from the bond issuance to the periodic review.
Kirin Holdings allocated JPY 7.3 billion (refinancing ratio: 86.8%) of the proceeds raised
from the Social Bond for THAI KYOWA's capital investment contributing to the productionof Human Milk Oligosaccharide (HMO). Although the allocations were made in local
currency, DNV confirmed through the assessment that the allocation amount converted
to Japanese yen was appropriate.
Of the proceeds raised, JPY 9.5 billion (refinancing ratio: 58.7%) was allocated to the
procurement of raw materials contributing to the production of Citicoline.
Furthermore, JPY 3.2 billion (refinancing ratio: 90.0%) of the proceeds raised was allocatedto Capital investment, operation, and procurement of raw materials contributing to theresearch and development of Lc-PLASMA and the production of raw material powder
utilizing Lc-PLASMA.
DNV confirmed that Kirin Holdings has fully allocated the JPY 20 billion raised from theSocial Bond to the above three projects and that no unallocated proceeds have arisen.

(4)

Reporting

DNV confirmed that Kirin Holdings plans to report annually on its website with regard to
information specific to the Social Bond required by the SBP and SBGLs.
The annual report will include the allocation status of proceeds and social benefits as
described below until the proceeds have been allocated to projects and the production
facilities start operation.
Key reporting items will include the following.
<Allocation of Proceeds>

Eligible criteria and the amount of allocated proceeds: Capital investment,
operation, and procurement of raw materials contributing to the production of
Human Milk Oligosaccharides (HMO) (JPY 7.3 billion); procurement of raw materials
contributing to the production of Citicoline (JPY 9.5 billion); Capital investment,
operation, and procurement of raw materials contributing to the research anddevelopment of Lc-PLASMA and the production of raw material powder utilizing LcPLASMA (JPY 3.2 billion)Management methods and the balance of unallocated proceeds: No balance of
unallocated proceeds, managed in cashProceeds to be allocated to refinancing: Capital investment, operation, andprocurement of raw materials contributing to the production of Human Milk
Oligosaccharides (HMO) (JPY 6.3 billion); procurement of raw materials contributing
to the production of Citicoline (JPY 5.6 billion); Capital investment, operation, andprocurement of raw materials contributing to the research and development of Lc-

Page 9 of 17

PLASMA and the production of raw material powder utilizing Lc-PLASMA (JPY 2.9billion)<Social benefits>

Human Milk Oligosaccharide production: Production facilities completed

Citicoline production (food): 0.51 million continuous users of the products(Calculation method: sales volume ÷ intake per day ÷ 12 months duration of use)

Citicoline production (Pharmaceutical): 1.02 million continuous users of the products(Calculation method: sales volume ÷ intake per day ÷ 6 months duration of use)

Lc-PLASMA production: 0.64 million continuous users of the products(Calculation method: sales volume ÷ intake per day ÷ 12 months duration of use)

Page 10 of 17

Assessment Conclusion
On the basis of the information provided by Kirin Holdings and the work undertaken, it is
DNV s opinion that Kirin Holdings meets the criteria established in the Protocol and isaligned with the stated definition and purpose of the Social Bond within the SBP and
SBGLs, which is to "enable capital-raising and investment for new and existing projects
with social benefits."
DNV Business Assurance Japan K.K.
June 23, 2023

Mark Robinson

Naoki Maeda

Manager, Sustainability Services

Managing Director

DNV Business Assurance, Australia

DNV Business Assurance Japan K.K.

Masato Kanedome

Yasuaki Miyamoto

Project Leader

Team Leader

DNV Business Assurance Japan K.K.

DNV Business Assurance Japan K.K.

About DNV
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Disclaimer
Responsibilities of the Management of the Issuer and the Second-Party Opinion Providers, DNV : The management ofIssuer has provided the information and data used by DNV during the delivery of this review. Our statement represents
an independent opinion and is intended to inform the Issuer management and other interested stakeholders in the Bond
as to whether the established criteria have been met, based on the information provided to us. In our work we haverelied on the information and the facts presented to us by the Issuer. DNV is not responsible for any aspect of thenominated assets referred to in this opinion and cannot be held liable if estimates, findings, opinions, or conclusions areincorrect. Thus, DNV shall not be held liable if any of the information or data provided by the Issuer s management andused as a basis for this assessment were not correct or complete.

Page 11 of 17

Schedule-1 Social Bond Projects
The projects in the table are those that have already been allocated after the issuance of the Social Bond (as of March 2023).
SocialTime of allocation
TargetCategories
Social Benefits
Eligible projects
Projects Categories(actual)population
Businesses that
contribute to theachievement of asociety of health andlongevity, mainly
through infant andtoddler healthimprovement anddisease prevention

Capital investment,
operation, andprocurement of raw
materials
General public
contributing to the
production of Human
Milk Oligosaccharide(HMO)

Businesses that
contribute to theachievement of asociety of health andlongevity, throughAccess to essential
services (health,brain function
improvement and brain health care)function decline
prevention

Businesses that
contribute to theachievement of asociety of health andlongevity, through themaintenance of
immune function

Allocated amountContributing to the health ofa wide range of ourJune - December
customers through providing
2022 (completed)products containing Human
Milk Oligosaccharide (HMO)

JPY 7.3 billion*1(refinancing ratio:
86.8%)

Capital investment,
operation, andprocurement of raw
materials
contributing to the
production of
Citicoline

Contributing to brain function
improvement and brain
General public, function decline prevention ofJune - December
aging people, our customers through2022 (completed)patients
providing products containing
Citicoline as health food andpharmaceutical ingredients

JPY 9.5 billion(refinancing ratio:
58.7%)

Capital investment,
operation, andprocurement of raw
materials
contributing to theresearch anddevelopment of LcPLASMA and the
production of raw
material powder
utilizing Lc-PLASMA

Contributing to theGeneral public,
maintenance of immune
aging people,
function of our customers
vulnerable
through providing products
youth
containing Lc-PLASMA

June - December
2022 (completed)

JPY 3.2 billion(refinancing ratio:
90.0%)

Total amountJPY 20 billion(refinancing ratio:
74.0%)

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Schedule-2 Social Bond Eligibility Assessment Protocol
The following SBP-1 ~ SBP-4 are DNV's Framework Eligibility Assessment Protocol created for Kirin Holdings based on the requirements of SBP(2021). The "Confirmed documents in the work undertaken includes internal documents of the issuer and are provided by the Kirin Holdings asevidence of eligibility judgement for DNV.

SBP-1 Use of Proceeds
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1aType of bond

The bond must fall in one of the following Confirmed Documents:
categories:• Kirin Sustainable Finance
Use of Proceeds Bond
Framework (hereinafter,

Revenue Bond
Framework)Project Bond
• Social bond periodic review
Securitized or covered Bondmaterials
Interviews with stakeholders

Through the evaluation process, DNV confirmed that Kirin Holdings'
Social Bond falls into the following categories.
(Standard) Social Bond

1b

Social Project
Categories

The cornerstone of a Social Bond is theutilization of the proceeds of the bondwhich should be appropriately describedin the legal documentation for the
security.

Confirmed Documents:• Framework• Social bond periodic review
materials

DNV confirmed that all of the proceeds have been allocated to thefollowing projects.
Access to essential services (health, healthcare)

1cSocial benefits

All designated Social Project categories
should provide clear socially sustainable
benefits, which, where feasible, will bequantified or assessed by the issuer.

Confirmed Documents:• Framework• Social bond periodic review
materials
Interviews with stakeholders

DNV confirmed that the social project is a solution for the objective
social issue, that local characteristics are taken into account, andthat the target population and social contribution (outcome) of the
project are clearly identified by the issuer.
Specifically, DNV confirmed that each social project had social
benefits respectively: production of Human Milk Oligosaccharide(HMO) for the health of a wide range of customers, production of
Citicoline for brain function improvement of customers, andproduction of Lc-PLASMA for maintenance of immune function ofcustomers, and that the benefits were quantitatively evaluated interms of the number of continuous users.

Page 13 of 17

Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

1dRefinancing
share

In the event that a proportion of theproceeds may be used for refinancing, it
is recommended that issuers provide anestimate of the share of financing vs.
refinancing, and where appropriate, also
clarify which investments or project
portfolios may be refinanced.

Confirmed Documents:• Framework• Social bond periodic review
materials
Interviews with stakeholders

DNV confirmed that the proceeds from the Social Bond have been
fully allocated to Social Bond projects listed in Schedule-1.
Kirin Holdings will report the eligible projects and refinancing ratios
in its annual reporting.

Page 14 of 17

SBP-2 Process for Project Selection and Evaluation
Ref.

Criteria

Requirements

Work Undertaken

DNV Findings

2aInvestmentdecision
process

The issuer of a Social Bond should outline

Confirmed Documents:• Framework• Social bond periodic review
materials• Project selection records
Interviews with stakeholders

DNV confirmed that the accounting department and the CSV
strategy department selected the eligible projects which meet theeligible criteria defined by the Framework, and the Executive
Officer in charge of Financial Strategy made the final decisions on
the selected eligible projects.
DNV also confirmed that Kirin Holdings has met the eligibility
criteria set out in the Standards to be applied in selecting the
project in question, and that it has assessed and considered thenegative impacts associated with the implementation of the projectand identified the environmental and social risks in advance.

Confirmed Documents:• Framework• Social bond periodic review
materials
Interviews with stakeholders

DNV confirmed that Kirin Holdings' social projects are in line with
Kirin Holdings' CSV Purpose and the Long-Term Management
Vision Kirin Group Vision 2027 (KV2027), and compliance withenvironmental laws, regulations, ordinances and agreements withthe relevant regions was taken into account when implementing
the projects. DNV also confirmed that the social benefits of social
projects have been clearly identified through the review of the
Framework and other documents and interviews with relevant
stakeholders.

the decision making process it follows todetermine the eligibility of projects using
Social Bond proceeds. This includes,
without limitation:• A process to determine how the projects
fit within the eligible Social Projects
categories identified in the ICMA SBP
2020;• The criteria making the projects eligible
for using the Social Bond proceeds; • The social sustainability objectives

2bIssuer s
environmentalsocialgovernanceframework

In addition to information disclosed by anissuer on its Social Bond process, criteria
and assurances, Social Bond investors
may also take into consideration thequality of the issuer s overall framework
and performance regarding social
sustainability.

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SBP-3 Management of Proceeds
Ref.

Criteria

3a

Tracking
procedure

3b

3cTracking
procedure

Temporaryholdings

Requirements

Work Undertaken

DNV Findings

The net proceeds of Social Bonds shouldbe credited to a sub-account, moved to a
sub- portfolio or otherwise tracked by theissuer in an appropriate manner andattested to by a formal internal processthat will be linked to the issuer s lending
and investment operations for Social
Projects.

Confirmed Documents:• Framework• Social bond periodic review
materials
Interviews with stakeholders

DNV confirmed through document review and interviews thefollowing required by the cash management.

So long as the Social Bonds areoutstanding, the balance of the tracked
proceeds should be periodically reducedby amounts matching eligible Social
investments or loan disbursements madeduring that period.

Confirmed Documents:• Framework• Social bond periodic review
materials
Interviews with stakeholders

DNV confirmed through document review and interviews thefollowing required by the cash management.

Pending such investments orConfirmed Documents:
disbursements to eligible Social Projects, • Framework
the issuer should make known to• Social bond periodic review
investors the intended types of temporary materials
investment instruments for the balance of Interviews with stakeholders
unallocated proceeds.

DNV confirmed through document review and interviews thefollowing required by the cash management.

Page 16 of 17

The net proceeds were credited to the account of Kirin Holdings
and allocated through group companies and local subsidiaries tothe eligible projects indicated in Schedule-1. DNV also confirmedthat the proceeds from the Social Bond were managed by theinternal management system, which specifies the recipients andthe amount of proceeds to be allocated.

Tracking and management of proceeds from the Social Bond
(deposits, withdrawals, and balance checks) were conducted by the
Kirin Holdings accounting department every month, and were
controlled by the internal management system and internal
regulations.

The proceeds were fully allocated and there is no unallocatedbalance. The proceeds were managed in cash until the time ofactual allocation.

SBP-4 Reporting
Ref.

Criteria

4aPeriodical
reporting

Requirements

Work Undertaken

DNV Findings

In addition to reporting on the use ofproceeds and the temporary investmentof unallocated proceeds, issuers should
provide at least annually a list of projects
to which Social Bond proceeds have been
allocated including - when possible withregards to confidentiality and/or
competitive considerations - a brief
description of the projects and theamounts disbursed, as well as the
expected socially sustainable impact.

Confirmed Documents:• Framework• Social bond periodic review
materials
Interviews with stakeholders

DNV confirmed that Kirin Holdings plans to disclose information on
the Kirin Holdings website regarding specific items required by theSocial Bond (reporting of allocation status and impact reporting).
 Eligible criteria and the amount of allocated proceeds: Capital
investment, operation, and procurement of raw materials
contributing to the production of Human Milk Oligosaccharides(HMO) (JPY 7.3 billion); procurement of raw materials
contributing to the production of Citicoline (JPY 9.5 billion);
Capital investment, operation, and procurement of raw materials
contributing to the research and development of Lc-PLASMA andthe production of raw material powder utilizing Lc-PLASMA (JPY
3.2 billion)
 Management methods and the balance of unallocated proceeds:
No balance of unallocated proceeds, managed in cash Proceeds to be allocated to refinancing: Capital investment,
operation, and procurement of raw materials contributing to the
production of Human Milk Oligosaccharides (HMO) (JPY 6.3
billion); procurement of raw materials contributing to the
production of Citicoline (JPY 5.6 billion); Capital investment,
operation, and procurement of raw materials contributing to theresearch and development of Lc-PLASMA and the production of
raw material powder utilizing Lc-PLASMA (JPY 2.9 billion)
 Human Milk Oligosaccharide production: Production facilities
completed Citicoline production (food): 0.51 million continuous users of the
products
 Citicoline production (Pharmaceutical): 1.02 million continuous
users of the products
 Lc-PLASMA production: 0.64 million continuous users of the
products

Page 17 of 17