(Translation)

Matters to be disclosed on the Internet
pursuant to laws and ordinances and the Articles of Incorporation

Systems to Secure the Properness of Business Activities(Fundamental Policy to Establish its Internal Control Systems)
Summary of Fundamental Policy on Control of Joint-Stock Corporation
Consolidated Statements of Changes in Net Assets
Notes to Consolidated Financial Statements
Non-Consolidated Statements of Changes in Net Assets
Notes to Non-Consolidated Financial Statements

For the Fiscal Year 2016
(December 1, 2015 to November 30, 2016)

Kewpie Corporation
These matters are made available by publication on the Internet website of the Company
pursuant to laws and ordinances and its Articles of Incorporation.
(http://www.kewpie.co.jp/english/ir/news.html)* The contents of the consolidated statements of changes in net assets, the notes toconsolidated financial statements, the non-consolidated statements of changes in net assets,
and the notes to non-consolidated financial statements are those audited by the accountauditors by January 19, 2017.

Systems to Secure the Properness of Business Activities (as of November 30, 2016):
The Company has adopted a resolution with regard to its "Fundamental Policy toEstablish its Internal Control Systems," as described below:(1)

General introduction

The resolution provides for the fundamental policy of the Company on its internal
control systems as adopted by its Board of Directors pursuant to Article 362, paragraph 5 of
the Companies Act of Japan, as well as an outline for the provisions required for establishingsuch systems as stipulated in Article 100 of the Regulations for the Enforcement of theCompanies Act of Japan.
The internal control systems pursuant to the resolution are contemplated to be
implemented swiftly and improved by periodic and timely reviews, whereby establishingefficient and lawful corporate systems.
(2)(i)

Systems to secure the execution by the directors of their duties to comply with laws
and ordinances and the Articles of Incorporation
The Company has advocated the following motto and precepts as its spirit offoundation and cultivated its corporate culture through its continued efforts to educate
its directors and employees about the spirit and develop awareness thereof among
them for years. The directors must pay serious attention to the corporate culture in
making management decisions.
The Company's motto:

Share the joy of endeavors

The Company's precepts:

 Value moral;
 Endeavor to innovate; and Respect your parents(ii) The Company has stipulated compliance regulations so that its directors andemployees can act in compliance with laws and ordinances, the Articles ofIncorporation, the spirit of foundation of the Company and the Group's philosophy.
The Company also has stipulated and publicized the Group Policies, with which its
directors shall be obligated to comply.
(3)(i)

Systems concerning storage and management of information on the execution by the
directors of their duties
Pursuant to the document management rules, corporate information handling rules,
basic personal information protection rules and respective management manuals
relating thereto, the director in charge of the Operation Promote Department shallproperly store and manage (and destroy) documents concerning the execution by the
directors of their duties and other information, in written or electronic form. The-1-situations of management shall be verified and such rules and manuals shall berevised, whenever necessary.
(ii) The directors and corporate auditors shall have access to such information, written or
electronic, at all times.
(4)(i)

Regulations concerning management of exposure to the risk of loss and other systems
In accordance with the master risk management regulations of the Company,
individual risks shall be continuously monitored by its relevant divisions and withregard to risks to the Company as a whole, information shall be collected unilaterally
by the Risk Management Committee chaired by the Representative Director, President
and Chief Executive Corporate Officer, which shall generally manage such risks,
including the evaluation and prioritization thereof.

(ii) The Internal Auditing Department shall, in cooperation with self-audit staff in chargeof qualities, environments, safety, etc., audit the situations of daily risk management
by each division and department and periodically report to the Risk Management
Committee, the Board of Directors and the Board of Corporate Auditors mattersconcerning risk management and the current status of development of the risk
management systems of the Company.
(iii) In accordance with the master risk management regulations, the Company shallprepare risk management manuals and establish systems to convey information
quickly and properly and take swift action in case of an emergency, by assuming andcategorizing specific risks in advance.
(5)(i)

Systems to secure efficient execution by the directors of their duties
The Company will set up a company-wide management target to be shared by the
directors and employees and get it across among them and also formulate an optimal
system to achieve the management target and the Representative Director, President
and Chief Executive Corporate Officer shall appoint personnel responsible for eachbusiness sector in accordance with resolutions of the Board of Directors. By
delegating authorities to such personnel, the Company will pursue efficient and swift
execution of business.

(ii) With regard to execution of business in accordance with the resolutions of the Boardof Directors, the scope of responsibilities of directors and personnel and procedures
for making final decisions shall be established in a schedule of procedures for making
final decisions and filing reports.
(iii) Specific measures to promote management activities shall, in accordance with thefundamental policy on execution of business determined by the Board of Directors, beleft to discussions on ordinary and extraordinary bases by the Management Council,
an advisory organ to the Representative Director, President and Chief Executive-2-

Corporate Officer, to ensure decision-making and expedient execution of business.
(6)(i)

Systems to secure the execution by the employees of their duties to comply with laws
and ordinances and the Articles of Incorporation
The Company will establish provisions for compliance systems and set up the Group
Policies so that all directors and employees can act in compliance with laws andordinances and the Articles of Incorporation, as well as the Company's motto andprecepts. In addition, to ensure their strict compliance, the Company will appoint a
director responsible for compliance to preside over the Compliance Committee. Thus,
the Company will exert its efforts to improve its company-wide compliance systems
and grasp any problems involved therein and make the committee, among others, set
up compliance manuals and train employees. These activities shall be reported
periodically by the director responsible for compliance to the Board of Directors andthe Board of Corporate Auditors.

(ii) As a whistle blower system under the control of the Compliance Committee to protect
whistle blowers, the Company will set up a "helpline" with independent attorneys,
third-party institutions and corporate auditors as information recipients. Whenever theCompliance Committee receives a report or notice from the information recipients, it
shall investigate the same. If any violation is found, it shall, upon consultation withthe relevant division, decide on a preventive measure and disclose the same, as well as
the result of punishment, within the Company and implement such preventive
measure company-wide.
(7)(i)

Systems to secure the properness of business activities of the corporate group
comprising the Company and its parent company and subsidiaries
Each subsidiary of the Company shall file with the directors of the Company a reporton operating results and managerial risks on a monthly basis. In addition, any directorof the Company who has been dispatched as a director of a subsidiary appointed by
the Company and who has attended a meeting of the board of directors of such
subsidiary shall file a report on the situations of discussions thereat and managerial
problems with the directors designated by the Representative Director, President andChief Executive Corporate Officer of the Company.

(ii) The Risk Management Committee of the Company shall include person in charge ofsubsidiary oversight as its members and manage risks of the subsidiaries. The
Company's Compliance Committee, internal-audit divisions and helpline shall also
cover the subsidiaries.
(iii) Consolidated management targets and policy on business operations of the corporategroup shall be shared at the Group Joint Management Council and in meetings ofdifferent business areas. Moreover, the entire Group shall work toward optimization
with respect to the organization and human resources, and fund procurement. Also,with regard to execution of duties, the Company shall define areas of authority for-3-managing subsidiaries based on the "group-wide form stating decision-making andreporting procedures," and shall also streamline delegation of authority whileachieving balance with Group management.
(iv) To secure the properness of business activities of the subsidiaries, the Company shallshare its motto and precepts, along with the Group's goal of "unceasingly contributing
to better and healthier dietary lifestyles of people from around the world premised on
the notions of good taste, kindness and uniqueness" which make up the Group's
philosophy. Furthermore, all Directors and employees shall adhere to the Group
Policies which encompass the Code of Ethics and Code of Conduct.
(v) A Management Advisory Board has been set up as an advisory body to theRepresentative Director, President and Chief Executive Corporate Officer, whoreceives the board's advice and recommendations for maintaining and improving theGroup's soundness, fairness and transparency, and reflects these in decision making.
(vi) The Group, as members of society, shall enter into no connection with any antisocial
force that poses any threat to the social order and safety, and definitely reject any
undue demand.
(vii) To establish systems to secure the properness of financial reporting, the Group shallstipulate relevant rules and regulations and give education and awareness for thecompliance with accounting standards and other relevant laws and ordinances toenhance internal control over financial reporting. In addition, the relevant departments
and divisions and the corporate auditors of subsidiaries shall cooperate with eachother to establish a scheme to periodically evaluate the developments of the
improvement and operation of the systems thereof and improve them.
(viii) With K.R.S. Corporation and Aohata Corporation, subsidiaries of the Company, theCompany shall share consolidated management targets and closely exchange
information on risk management and compliance. Simultaneously, as each of thesubsidiaries is a company listed on the Tokyo Stock Exchange and forms its own
corporate group, it shall institute a system of its own to secure the properness ofbusiness activities.
(8)

Matters concerning the assignment of employees to assist the corporate auditors to
execute their duties

The Internal Auditing Department shall conduct internal audits of such matters asrequested by the corporate auditors upon consultation with the Board of Corporate Auditors
and file a report on the results thereof with the Board of Corporate Auditors. In addition, inthe event that the Board of Corporate Auditors requests the Company to assign its employees
to assist the corporate auditors to execute their duties, the Company shall accommodate such
request promptly.

-4-

(9)

(i)

Matters concerning the independence from the directors of employees who assist in
corporate auditor duties and ensuring effectiveness of corporate auditor instructions
conveyed to such employees
Any employee in the Internal Auditing Department who is requested by the corporate
auditors to conduct required internal audits shall not be instructed or ordered withregard to such internal audits by any director other than the director in charge of theInternal Auditing Department. In the event that the Board of Corporate Auditors
requests the Company to appoint an employee to assist them to execute their duties,
such any employee shall not be instructed or ordered by any director to remain
independent.

(ii) Committees contributing to the internal control systems such as the Risk Management
Committee and the Compliance Committee, the Internal Auditing Department, andstaff members in each division or department in charge of auditing duties shall respect
the opinions of each corporate auditor as they pertain to ensuring that the audit by the
corporate auditors is effective.
(10)

System for reporting to the corporate auditors including system for directors andemployees of the Company, and officers, employees, etc. of subsidiaries to report tothe corporate auditors(i)

The directors and employees, and officers and employees, etc. of subsidiaries shall, in
accordance as provided for by the Board of Corporate Auditors, give necessary
reports upon request from each corporate auditor.

(ii) The matters to be reported under item (i) above principally include:・

Details of propositions to be submitted to the General Meeting of Shareholders
for resolution;・State of activities of the divisions responsible for establishing internal control
systems of the Company;

・State of activities of the corporate auditors, the internal auditing departments
and self-audit staff of the subsidiaries and affiliated companies of the Company;

・Important accounting policies and accounting standards of the Company andamendment thereto;・

Details of publications of operating results and forecasts thereof and the details
of important disclosure documents;

・Management of the whistle blower system and the details of notices;-5-

・

Behavior in violation of laws and ordinances and the Articles of Incorporation,or fraudulent behavior; and・Matters entailing risk of inflicting substantial damage on the Company or asubsidiary thereof.

(iii) The Company shall establish a system, as part of the "helpline" internal reporting
system in order to enable direct contact with the Company's corporate auditors.
(11)

System to ensure that persons who have reported as aforementioned in section (10)above are not treated disadvantageously for making such reports(i)Compliance regulations applicable across the Group shall ensure protection of persons
who seek consultation or report issues.

(ii) The Company shall, within the "helpline" internal reporting system, set up an internalreporting contact point operated by an outside third-party entity, and shall establish asystem that enables directors and employees, as well as officers and employees ofsubsidiaries, to anonymously report to corporate auditors through that contact point.
(12)

Policy on procedures for prepaying or reimbursing expenses incurred by corporate
auditors in the course of executing their duties, and other matters involving handlingof expenses or debts incurred through execution of such duties(i)

The Company shall undertake budgetary measures annually with respect to audit
expenses necessary to ensure the smooth execution of corporate auditor duties.

(ii) The Company shall cover extraordinary expenses claimed by corporate auditors, suchas those incurred in enlisting the cooperation of outside specialists (such as lawyers
and accountants), unless the nature of the expense claimed is deemed unreasonable.
(13)
(i)

Other systems to assure effective audits by the corporate auditors
The Board of Corporate Auditors shall have opportunities to have talks with theexecutive directors and important employees and also have opportunities to exchange
opinions with the Representative Director, President and Chief Executive Corporate
Officer and the account auditors, respectively, on a regular basis.

(ii) Audit policies and important audit matters of respective fiscal years are to be reported
to the Board of Directors and shared with the directors.

-6-

The corporate governance system of the Group is summarized as follows:
General Meeting of Shareholders
Management
andMonitoring

ReportReportElection

Directors
Board of Directors

Election

ReportAccount
Audit

Corporate Auditors Cooperation
Board of Corporate
Auditors
Audit

ReportManagement
Advisory Board

Advice/proposal

ExecutionofBusiness

ReportAudit

Representative Director, President and Chief
Executive Corporate Officer

Cooperation

Response
Cooperation

Instructionordersupervision

Management Committee
ReportInternal Control
andRisk Management

Account
Auditors

Appointment/supervision

Consult

Legal counsels, certified
tax accountants andother professionals

Election

Advice/guidanceReferral/report
Audit

Executive Directors, Corporate Officers, business divisions, subsidiaries

Risk Management
Committee

Compliance
Committee
Helpline-7-

Information Security
Committee

Internal Auditing
Department

Summary of Fundamental Policy on Control of Joint-Stock Corporation(1)

Fundamental policy on what kind of person(s) should control the determination of
the financial and business policies of the Company

The Company has determined the "Fundamental policy on what kind of person(s)should control the determination of the financial and business policies of the Company"(hereinafter referred to as the "Fundamental Policy") at the meeting of its Board of Directors
held on January 11, 2008 and has maintained the Fundamental Policy since then.
(2)

Special measures to facilitate the implementation of the Company's Fundamental
PolicyTo encourage many investors to invest in the Company on a continued, long-termbasis, it has implemented institution of the Group's Medium-term Business Plan andupgrading of corporate governance to facilitate the enhancement of its corporate value and thecommon interests of its shareholders.
In addition, the Company, at the meeting of its Board of Directors held on January 25,
2017, set the Large Purchase Rules, that covers purchase of shares and other securities of theCompany to make the ratio of voting rights of any specified shareholder group 20% or more,or a purchase of shares and other securities of the Company resulting in making the ratio ofvoting rights of any specified shareholder group 20% or more (whether by market trading, by
TOB or otherwise, excepting any purchase agreed to by the Board of Directors in advance), as
measures to prevent the determination of the financial and business policy of the Company
from being controlled by any inadequate person in consideration of the Fundamental Policy (adefense plan against large purchase actions of the shares of the Company (takeover defenseplan)), and determined to continue and maintain the Defense Plan in case the Large Purchaser
observes the Large Purchase Rules and in case it doesn't, subject to approval of theshareholders at the 104th Ordinary General Meeting of Shareholders to be held on February
24, 2017.
(3)

Measures to prevent the determination of the financial and business policy of theCompany from being controlled by any inadequate person in consideration of theFundamental Policy (a defense plan against large purchase actions of the shares of
the Company (takeover defense plan))

The Board of Directors of the Company assesses that, since the measures noted inabove (2) respectively increase the Group's corporate value and the common interests of its
shareholders, and also protect the Company's corporate value and the common interests of its
shareholders, the measures live up to the Fundamental Policy, and in addition, the measures
do not injure the common interests of the shareholders and to maintain the positions of
directors or corporate auditors of the Company is not contemplated.
The details of (1) to (3) above were published in "Notice of continuation of the
Defense Plan Against Large Purchase Actions of the Shares of the Company (Takeover
Defense Plan)" on the Company's website (http://www.kewpie.co.jp/english/ir/news.html) on-8-

January 25, 2017.
For reference, the aforementioned details have also been provided under Proposition No. 5(page 23 to 46) of the Notice of the 104th Ordinary General Meeting of Shareholders.

-9-Consolidated Statements of Changes in Net Assets(From December 1, 2015 to November 30, 2016)(Millions of yen)
Shareholders' equity

Balance at the
beginning of thecurrent fiscal year
Cumulative
effects ofchanges inaccounting
policies
Restated balance
Changes of items
during the fiscal
year
Dividends fromsurplusProfitattributable toowners ofparentRepurchase ofsharesChanges inequity incontrolledsubsidiaries
Net changes of
items other thanshareholders'equityTotal changes of
items during the
fiscal year
Balance at the endof the current
fiscal year

Paid-in capital

Capital surplus

Earned surplus

Treasury stock

Total
shareholders'equity24,10430,302

155,557(1,416)

208,548(1,136)24,10430,302

154,421(1,136)(1,416)

207,412(4,749)(4,749)17,09317,093(4,706)(2)(4,706)
(2)

–

(2)

12,343(4,706)

7,635

24,10430,300166,765(6,123)215,047- 10 -

Unrealized
holding
gains(losses) on
securities
Balance at the
beginning of thecurrent fiscal year
Cumulative
effects ofchanges inaccounting
policies
Restated balance
Changes of items
during the fiscal
year
Dividends fromsurplusProfitattributable toowners ofparentRepurchase ofsharesChanges inequity incontrolledsubsidiaries
Net changes of
items other thanshareholders'equityTotal changes of
items during the
fiscal year
Balance at the endof the current
fiscal year

9,330

9,330

Accumulated other comprehensive income
AccumulaUnrealized
Foreignted
gains
currency
adjustments(losses) on
translationforhedgesadjustments
retirement
benefits
(8)

(8)

(552)

(552)

(3,243)(3,243)

Total
accumulated othercomprehensive income
5,525

5,525

Noncontrollinginterests

Total net
assets31,856245,929(75)(1,211)

31,780244,717(4,749)17,093(4,706)
(2)

(414)

88

(3,395)(4,230)(7,951)

1,460(6,491)(414)

88(3,395)(4,230)(7,951)

1,460

1,143

8,916

79

(3,947)(7,474)(2,426)33,240245,861(Note) Figures are stated by discarding fractions of one million yen.

- 11 -

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 fifty-six consolidated subsidiaries in the current fiscal year. The
significant consolidated subsidiaries are Kewpie Egg Corporation, Deria Foods Co., Ltd.,
Kewpie Jyozo Co., Ltd., K.R.S. Corporation, Kanae Foods Co., Ltd., Gourmet Delica Co.,
Ltd., Salad Club, Inc. and Aohata Corporation. In the current fiscal year, the number ofconsolidated subsidiaries increased by two because Fresh Delica Network Co., Ltd. and
Kewpie Poland Sp. z o.o. were newly established.
Among the twenty non-consolidated subsidiaries, the principal one is K. LP Corporation.
These companies are excluded from the consolidation, because each of the total amountsof 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.

2. Application of the equity method
The equity method is applied to the investments in three affiliated companies. The
significant affiliate under the equity method is Summit Oil Mill Co., Ltd.
The investments in K. LP Corporation and nineteen other non-consolidated subsidiaries,
as well as AK Franchise System Co., Ltd. and two other affiliated companies, which are
not accounted for by the equity method, are excluded from the application of the equity
method, because each of the total amounts of profit and loss and earned surplus (based on
the Company's ownership percentage) does not have a significant effect on the
consolidated financial statements.
3. Fiscal years of consolidated subsidiaries
The closing date of eight foreign consolidated subsidiaries is September 30 and that offour foreign consolidated subsidiaries is December 31.
Four foreign subsidiaries whose closing date is December 31 are consolidated based on
their temporary financial statements at September 30. Other eight foreign subsidiaries areconsolidated based on the financial statements at their balance sheet date. However,significant transactions of those subsidiaries for the period from the date of theirrespective financial statements to the consolidated closing date are reflected in the
consolidated financial statements.
From the current fiscal year the closing date of Aohata Corporation is changed toNovember 30, which is the same as the consolidated financial closing date. Accordingly,
for consolidation purposes, the accounting period of Aohata Corporation for the year
under review was for 13 months (from November 1, 2015 to November 30, 2016), andthe difference was adjusted through the consolidated statements of income.

- 12 -

4.
(1)

Accounting policies
Basis and method of valuation of significant assets(a) Securitiesi)

Held-to-maturity bonds are stated at amortized cost (by the straight-line
method).

ii)

Capital stocks of subsidiaries and affiliated companies not subject to 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 bymarket prices, etc. as of the closing of the fiscal year (Revaluation differences
are all transferred directly to capital. 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.
Hedge accounting is applicable to hedge transactions that meet the requirements
thereof.
(c) Inventories
Products and purchased goods, work in process, raw materials and supplies are
principally stated at monthly moving average cost (the value method to devaluate abook value for decreasing profitability). Some joint products are stated at costusing the retail method (the value method to devaluate a book value for decreasing
profitability).
(2)

Depreciation of significant depreciable assets(a) Tangible fixed assets (excluding lease assets)
Tangible fixed assets are depreciated by the straight-line method.
(b) Intangible fixed assets (excluding lease assets)
Intangible fixed assets are amortized by the straight-line method.
Software for internal use is amortized by the straight-line method on the estimateduseful life of internal use (five years).
(c) Lease assets
Finance lease transactions other than those which are deemed to transfer the- 13 -

ownership of leased assets to lessees are calculated by the straight-line method byconsidering the lease period to be useful life and the scrap value to be zero.
(d) Long-term prepaid expenses
Long-term prepaid expenses are depreciated by the straight-line method.
(3)

Method of treatment of significant deferred assets
Business commencement expenses are recorded as expenses in full at the time of
payment.

(4)

Accounting standards for significant allowances(a) Allowance for doubtful accounts
To provide for losses on bad debts, the Company sets aside an estimateduncollectable 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 theindividual possibilities of collection in respect of possible non-performing credits
and other specific claims.
(b) Reserve for sales rebates
To provide for payments for sales rebates to be incurred during the current fiscal
year, a reserve for sales rebates is provided based on an accrual basis inaccordance with each company's policy (rate of the estimated payments for sales
rebates to sales).
(c) Reserve for bonuses
To provide for the payment of bonuses to employees, the reserves for bonuses areprovided according to the expected amount of the payment which attributes to thecurrent fiscal year.
(d) Reserve for officers' bonuses
To provide for the payment of bonuses to officers, a reserve for officers' bonuses isprovided according to the estimated amounts payable at the end of the fiscal year
under review.

(5)

Accounting for retirement benefits(a) Periodic allocation method for projected retirement benefits
In calculating retirement benefit obligations, expected retirement benefits are
attributed to the period up to the end of the current fiscal year on the benefit
formula basis.

- 14 -

(b) Method of accounting for actuarial gains and losses and prior service costs
Prior service costs are amortized by the straight-line method principally overtwelve years based on the average remaining employees' service years.
Actuarial gains or losses are amortized by the straight-line method principally overtwelve years based on the average remaining employees' service years at eachfiscal year, and their amortizations start from the next 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 consolidated balance sheet.
(6)

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. Special
processing is adopted for interest-rate swap transactions that meet the requirements
for special processing.
(b) Hedging instruments are forward exchange contracts and interest-rate swap
transactions.
(c) Hedged items are purchase transactions in foreign currencies and others.
(d) The Company enters into forward exchange contracts to hedge risks fromfluctuations in foreign exchange rates, and interest swap agreements to hedge risks
from fluctuations in interest rates in the future.
In addition, the Company never makes use of them for the purpose of speculativetransactions.
(e) Assessment of the effectiveness of hedge accounting
Control procedures of hedge transactions are executed according to eachcompany's bylaw. The effectiveness of the hedge is analyzed by comparing
movements in the fair value of hedged items with those of hedging instruments,
assessed and strictly controlled.
However, the measurement of the effectiveness of interest swap agreements that
conform to the special regulated terms is omitted.

(7)

Amortization of goodwill
Goodwill is amortized on a straight-line basis over its estimated useful life. However,trivial goodwill is fully amortized in the fiscal year in which it is incurred.

- 15 -

(8)Other important matters forming the basis of preparation of consolidated financial
statements
Consumption taxes are treated on a net-of-tax basis.

II. Notes to changes in accounting policies(Application of Accounting Standard for Business Combinations, etc.)
Effective from the current fiscal year, the Company has applied the "AccountingStandard for Business Combinations" (ASBJ Statement No. 21, September 13, 2013), the"Accounting Standard for Consolidated Financial Statements" (ASBJ Statement No. 22,
September 13, 2013) and the "Accounting Standard for Business Divestitures" (ASBJ
Statement No. 7, September 13, 2013), etc. As a result, the Company changed the methodof recording the amount of difference caused by changes in the Company's ownershipinterests in subsidiaries in the case of subsidiaries under ongoing control of the Company
to one in which it is recorded as capital surplus, and the method of recording
acquisition-related costs to one in which they are recorded as expenses for the fiscal year
in which they are incurred. Furthermore, for business combinations carried out on or after
the beginning of the current fiscal year, the Company changed the accounting method to
one in which the reviewed acquisition cost allocation resulting from the finalization of theprovisional accounting treatment is reflected in the consolidated financial statements forthe fiscal year to which the date of business combination belongs. In addition, theCompany changed the presentation method for "net income" and other related items, andchanged the presentation of "minority interests" to "non-controlling interests."
Application of the Accounting Standard for Business Combinations, etc. is in linewith the transitional measures provided for in paragraph 58-2 (4) of the AccountingStandard for Business Combinations, paragraph 44-5 (4) of the Accounting Standard forConsolidated Financial Statements and paragraph 57-4 (4) of the Accounting Standard forBusiness Divestitures. The Company is applying the said standard, etc. prospectively
from the beginning of the current fiscal year.
The effect of this change on profit and loss is immaterial.
(Changes to standards for recording net sales)
The Group used to record part of expenses payable to business partners for sales
promotion (hereinafter referred to as "sales promotion expenses, etc.") under selling,
general and administrative expenses by mostly including them in sales promotion
expenses when the amount payable is fixed. From the current fiscal year, the Group haschanged the method to deduct the sales promotion expenses, etc. from net sales whenrecording sales.
In the business environment surrounding the Group, the competition becomes evenfiercer, constantly requiring the Group to spend sales promotion expenses, etc. As a result,it becomes necessary for the Group to ensure more timely and appropriate profit control
by clarifying correlation between the sales promotion activity and sales.

- 16 -

Under such business environment, the Group took the opportunity of formulating the
Medium-term Business Plan starting from the current year to re-verify the coverage ofsales promotion expenses, etc. and the actual status of transactions, in order to review
standards for recording net sales, which is one of the important indices to measurebusiness performance for the Group. It shed light on the status that sales promotion
expenses, etc. comprise a part of sales conditions. Accordingly, the Group concluded thatthe method to record net sales after deducting sales promotion expenses, etc. at the time
when sales are recorded should more appropriately reflect the business performance. At
the same time, the Group reviewed the method of managing sales and sales promotion
expenses, etc. and pushed forward improvement of a framework for operational processreviews and system development. As the framework is now in place, the Group has
implemented the change.
The changes in accounting policy have been applied retroactively, and thecumulative affected amount of changes in the accounting policy is reflected in the bookvalue of net assets at the beginning of the current fiscal year.
As a result of the above, the balance of earned surplus at the beginning of the fiscal
year after retroactive application of the change in the Consolidated Statements of
Changes in Net Assets decreased by ¥1,136 million.
III. Notes to changes in presentation method(Consolidated statements of income)"Gains on sales of investment securities" and "Gains on sales of fixed assets" were
included in "Other" account of "Extraordinary gains" for the previous fiscal year, but
because their materiality has increased for the current fiscal year, they were changed to bepresented as separate accounts.
"Losses on valuation of investment securities" was included in "Other" account of"Extraordinary losses" for the previous fiscal year, but because its materiality has
increased for the current fiscal year, it was changed to be presented as a separate account.
IV. Notes to changes in accounting policies that are difficult to distinguish from the changes
in accounting estimates, and changes in accounting estimates(Changes to depreciation method for tangible fixed assets and revision of useful life andresidual value)
The Group changed its depreciation method for tangible fixed assets to thestraight-line method from the current fiscal year from the declining balance method
mainly used in the past.
In the Foods business, following the terminated production in Sengawa Factory in
2011, the Group proceeded with gradual reorganization of production locations by- 17 -

consolidating the production capabilities of core products in the condiments products forhome use line into Goka Factory. In addition, in accordance with the Medium-term
Business Plan that has started in the current fiscal year, we plan to implement a drastic
reorganization of our production locations centering on operations in Kobe Factoryequipped with the state-of-the-art production facility. The Group expects to be able to use
the production facility efficiently and consistently by concentrating production of coreproducts.
In the Distribution system business, it is confirmed that the ratio of genericwarehouse facilities has increased; stable operation at warehouse facilities is expectedgoing forward through standardization, leveling, and simplification of operations enabled
by investments in large-sized facilities with a main focus on the joint distribution
business; and stable operation of vehicles is expected over its useful life by applying
limitation to drivers' on-duty hours.
As a result, the Group has concluded that distribution of expenses using thestraight-line method is the depreciation method that reflects the reality of the Group.
Furthermore, as a result of another review on the expected period of use and the disposal
value of tangible fixed assets, the Group has changed the useful life of some vehicles, to
8 to 15 years depending on the types of vehicles from the current fiscal year from 4 years
applied in the past. The residual values of tangible fixed assets (excluding some vehicles)
have also been changed to ¥1, the memorandum value.
With these changes described above, operating income for the current fiscal year
increased ¥2,395 million, and ordinary income and profit before income taxes increased¥2,440 million respectively compared with those by the previous method.
V. Notes to consolidated balance sheet
1.

Pledged assets and secured obligations
Amount of pledged assets (book value):
Obligations secured by such pledged assets:

Tangible fixed assets¥1,188 million

Total¥1,188 million

Short-term borrowings¥814 million

Long-term borrowings¥804 million

Total¥1,618 million

2. Contingent liabilities
Guarantee obligations¥480 million- 18 -

VI. Notes to consolidated statements of changes in net assets
1. Classes and total numbers of shares issued and outstanding and shares of treasury stock

Number of shares as of December 1, 2015
Increase in the number of shares during the year
Decrease in the number of shares during the year
Number of shares as of November 30, 2016

Class of shares issued andoutstanding
Shares of common stock
153,000,000 shares
153,000,000 sharesClass of shares oftreasury stock
Shares of common stock
1,232,318 shares
2,101,673 shares
3,333,991 shares(Note) The increase of 2,101,673 shares in the number of shares of treasury stock includes
an increase of 2,100,000 shares due to the Company's acquisition of treasury stock
pursuant to the provisions of Article 156, paragraph 1 of the Companies Act, which isapplied with the necessary replacements in accordance with the provisions of Article
459, paragraph 1 of the said Act, and also includes an increase of 1,673 shares due tothe acquisition of shares less than one unit.
2. Distribution of surplus(1)

Amount of dividends paid(a) At the meeting of the Board of Directors held on January 25, 2016, a resolution was
adopted as follows:・

Matters concerning dividends on shares of common stock

1) Total amount of dividends¥2,504,166,753

2) Amount of dividend per share¥16.503) Record dateNovember 30, 20154) Effective dateFebruary 5, 2016(b) At the meeting of the Board of Directors held on June 24, 2016, a resolution was
adopted as follows:(2)・

Matters concerning dividends on shares of common stock

1)

Total amount of dividends¥2,245,002,600

2)Amount of dividend per share¥15.003)

Record date

May 31, 2016

4)

Effective dateAugust 8, 2016

Dividends the record date of which fell during the fiscal year under review but theeffective date of which will fall during the next fiscal year
A proposition is planned to be submitted to the meeting of the Board of Directors to beheld on January 25, 2017 as follows:- 19 -

・

Matters concerning dividends on shares of common stock

1)

Total amount of dividends¥2,918,487,176

2)

Fund of dividends

Earned surplus

3)

Amount of dividend per share¥19.504)

Record dateNovember 30, 2016

5)

Effective dateFebruary 3, 2017

VII. Notes to financial instruments
1.
(1)

Matters relating to the status of financial instruments
Policy in relation to financial instruments:
The Group raises required funds through bank loans and bond issues according to its
equipment investment plan. Floating money is invested in high-security financial
assets and short-term operating funds are provided by bank loans. The Group uses
derivatives to hedge risks, as described below, and has a policy not to conduct
speculative trading.

(2)

Details of financial instruments and related risks:
Trade receivables – trade notes and accounts receivable – are exposed to clients' credit
risks. Securities and investment securities, which principally consist of shares in theclient companies related with the Group's business, are exposed to market risk.
Substantially all of trade payables – trade notes and accounts payable – have payment
due dates within one year. Some trade payables in relation to import of raw materials
are denominated in foreign currencies and exposed to foreign currency risk, which ishedged by using forward exchange contracts when necessary. Short-term borrowings
are funds raised principally in relation to business transactions and long-termborrowings and bonds are funds raised principally for equipment investment
requirements. Certain funds so raised bear floating interest rates and are exposed tointerest volatility risk, which is hedged by using interest swap agreements, among
others.
Derivatives are forward exchange contracts to hedge foreign currency risk involving
payables in foreign currencies, interest swap agreements to hedge interest volatility
risk relating to borrowings and oil swaps to hedge market risk relating to prices oflight oil and heavy oil. With regard to hedging instruments, hedged items, hedge
policies, the method of assessment of the effectiveness of hedges, etc., please refer tothe above "I. Notes on the matters forming the basis of preparation of consolidated
financial statements: 4. Accounting policies: (6) Signification methods of hedge
accounting."(3)

Risk management system relating to financial instruments:(i) Management of credit risk:- 20 -

The Company, through its operation management division and accounting andfinancing division, periodically monitor the conditions of its major clients andmanages the due dates and balances of its trade receivables by client to early
detect or reduce credits that may become uncollectable due to the deterioration of
its financial position or other reasons. Likewise, its consolidated subsidiaries
manage their trade receivables.
With regard to derivatives, the Company perceives very little credit risk as itenters into transactions solely with financial institutions with high ratings.
(ii) Management of market risk:
The Group uses forward exchange contracts to hedge foreign currency risk
involving payables in foreign currencies, interest swap agreements to hedge
interest volatility risk relating to borrowings and oil swaps to hedge market risk
relating to prices of light oil and heavy oil. The Company's risk management
relating to such derivatives is conducted by its Division of Production and
Financial Department pursuant to its internal rules and all of the trading results
are reported to the General Manager of the Financial Department. With regard toits consolidated subsidiaries, such risk management is conducted principally by
their respective administration divisions and all of the trading results are reported
to the respective directors of the subsidiaries responsible therefor.
With regard to securities and investment securities, the Company periodicallygains information on the market values and financial standings of the issuers(client companies) and review the holding of securities other than those held tomaturity on a continuous basis by taking into consideration the market conditions
and the relationships with the client companies.
(iii) Management of liquidity risk relating to fund-raising:
The Group prepares and revises cash flow projections on a timely basis and keeps
current cash flow at a specified level through overdraft agreements with several
banks and a cash management system to manage liquidity risk.
(4)

Supplementary explanation of matters relating to the fair values of financial
instruments, etc.:
The fair values of financial instruments include market prices and reasonably
estimated values if there are no market prices. As the estimation of fair values
incorporates variable factors, adopting different assumptions may change the values.

2. Matters concerning fair values, etc. of financial instruments
The following table shows amounts for items recorded in the consolidated balance sheet
as of November 30, 2016, along with their fair values and the variances. Items for which
determining the fair values is recognized as being extremely difficult are not included in
the table. (See Note 2)- 21 -

(Millions of yen)
(1)(2)

Cash and deposits
Trade notes and accounts receivable
Allowances for doubtful accounts (*1)(3)

Securities and investment securities:
Total assets
Trade notes and accounts payable
Short-term borrowings
Accounts payable - otherAccrued income taxes
Bonds
Long-term borrowings
Total liabilities
Derivatives (*2)

(4)
(5)
(6)
(7)
(8)
(9)

(*1)
(*2)

Balance sheet
amount35,79475,134(168)
74,96627,182
137,943
47,0506,137
22,074
7,016
10,00014,662
106,94188

Fair value

Variance

35,794–74,96627,182
137,943
47,0506,137
22,074
7,016
10,135
14,685
107,100
88

–
–
–
–
–
–
–
135
23
158
–

Allowances for doubtful accounts of trade notes and accounts receivable areexcluded from the trade notes and accounts receivable.
Net receivables and payables resulting from derivatives are presented in net
amounts.

(Note 1) Matters concerning the calculation method of the fair values of financial
instruments, as well as marketable securities and derivatives:
Assets(1) Cash and deposits and (2) Trade notes and accounts receivable:
The book value is used for these items, as the fair value is nearly equal to thebook value as a result of their short settlement periods.
(3) Securities and investment securities:
The fair value of stocks is determined by the price thereof traded on an
exchange. For bonds, the value is determined by the price on an exchange or the
price announced by the Company's financial institutions. For money in trust orotherwise, the book value is used, as the fair value is nearly equal to the bookvalue as a result of its short settlement periods.
Liabilities(4) Trade notes and accounts payable, (5) Short-term borrowings, (6) Accounts
payable - other and (7) Accrued income taxes:
The book value is used for these items, as the fair value is nearly equal to thebook value as a result of their short settlement periods.
(8) Bonds:
The fair value of bonds with fixed interest rates is calculated from the present
value of the total principal and interest discounted at a rate supposing newly
conducted similar borrowings.

- 22 -

(9) Long-term borrowings:
The fair value of long-term borrowings with fixed interest rates is calculated
from the present value of the total principal and interest discounted at a rate
supposing newly conducted similar borrowings. For long-term borrowings withfloating interest rates, the book value is used, as the fair value is nearly equal tothe book value as a result of the revision of interest rates based on the market
interest rates in short periods. With regard to some long-term borrowings withfloating interest rates subject to special processing of interest rate swaps, thefair value is calculated by discounting the total principal and interest to beprocessed together with such interest swaps, at a reasonably estimated rate
supposing conducted similar borrowings.
Derivatives
Fair values with respect to derivative transactions are calculated based on prices
indicated by counterparty financial institutions and other such entities. With regard
to derivatives subject to special processing of interest rate swaps, the fair value isindicated by inclusion in the fair value of long-term borrowings to be hedged, as
they are processed together with such long-term borrowings.
(Note 2) Financial instruments for which determining the market values is recognized as
being extremely difficult:Category
Unlisted shares

Balance sheet amount(Millions of yen)
5,225

The item has no market price. Accordingly, as determining the market value isrecognized as being extremely difficult, it is not included in "(3) Securities andinvestment securities."
VIII. Notes to leased and other real estate properties
Notes to leased and other real estate properties are omitted as the total amount thereof isinsignificant.
IX. Notes on information per share
Amount of net assets per share¥1,420.63

Net income per share (basic)¥113.47- 23 -

X.

Notes on material subsequent events(Establishment of a general incorporated foundation and disposition of treasury stock)
At the meeting of the Board of Directors held on December 26, 2016, the Company
resolved to establish the Kewpie Mirai Tamago Foundation, a general incorporated
foundation (hereinafter referred to as the "Foundation") and, in order to fund the activitiesof the Foundation through dividends, etc. of the Company's stock, resolved to allot
1,500,000 shares of treasury stock to a trust established by the Company at a disposition
price of ¥1 per share.
The disposition of treasury stock is subject to the approval at the 104th Ordinary
General Meeting of Shareholders to be held on February 24, 2017.

1.

Establishment of new foundation(1)

Purpose of establishment
To contribute to the realization of a healthy society by actively supporting a wide
range of activities by organizations that contribute to society with a focus on foodeducation as a means to work toward finding solutions to issues faced by society
related to food.

(2)

Outline of the foundation
(i)
(ii)

Name:
Activities:(iii) Funding for activities:(iv) Date of establishment:2.
(1)

Kewpie Mirai Tamago Foundation
Support organizations that conduct food-related
activities to contribute to society, with a focus on foodeducation
Approximately ¥50 million per year
Activities of the Foundation will be funded from funds
received as the beneficiary of the trust that will receive
the treasury stock to be disposed as described in 2.
below.
April 2017 (scheduled)

Disposition of treasury stock
Purpose and reason for disposition
The Company resolved to establish the Foundation at the meeting of the Board of
Directors held on December 26, 2016. In order to fund the activities of the Foundation
through dividends, etc. of the Company's stock, treasury stock will be transferred to atrust established by the Company by way of third-party allotment.

- 24 -

(2)Outline of disposition
(i)
(ii)
(iii)
(iv)
(v)

Number of shares to bedisposed:
Price of disposition:
Amount of proceeds:
Method of offering or
disposition:
Subscriber:(vi) Date of payment:(vii) Other:

1,500,000 shares of common stock¥1 per share¥1,500,000
Disposition by way of third-party allotment
Japan Trustee Services Bank, Ltd.
(sub-trustee, with Sumitomo Mitsui Trust Bank,
Limited as trustee)
To be decided
The disposition of treasury stock is subject to thespecial resolution on offering shares at a favorable
price at the 104th Ordinary General Meeting of
Shareholders to be held on February 24, 2017. Other
details regarding the disposition will be resolved at
the meeting of the Board of Directors following theOrdinary General Meeting of Shareholders.

(Business Acquisition)
The Company decided to acquire businesses of production and sale centered onmayonnaise and other condiments from a condiment production company in Poland,
Mosso Kwaśniewscy Sp.J., and a wholly-owned subsidiary of the Company "Kewpie
Poland Sp. z o.o." (the corporate name is projected to be changed to "Mosso Kewpie
Poland Sp. z o.o.") and Mosso Kwaśniewscy Sp.J. executed a business transfer agreement
on September 29, 2016, thus the business was acquired on January 12, 2017.
1.
(1)

Outline of business combination
Names and description of businesses of companies involved in the businesscombination(i)Company to acquire business

Name:
Description of businesses:(ii)

Kewpie Poland Sp. z o.o.
(consolidated subsidiary of the Company)
Production and sale centered on mayonnaise and othercondiments

Company to transfer business

Name:
Description of businesses:

Mosso Kwaśniewscy Sp.J.
production and sale centered on mayonnaise and othercondiments- 25 -

(2)Primary reasons for business combination
Primary reasons for the business combination is to accelerate our Europe extension byacquiring brands, production centers and sales channels in Eastern Europe.

(3)

Date of the business combination
January 12, 2017(4)

Legal form of the business combination
Business acquisition(5)

Name of company after the business combination
Scheduled to be changed to Mosso Kewpie Poland Sp. z o.o.

(6)Primary basis for determining the acquiring company
Kewpie Poland Sp. z o.o., a consolidated subsidiary of the Company, acquired a
production and sale business centered on mayonnaise and other condiments inconsideration for cash.

2.

Cost of acquisition of the acquired company and the breakdown thereof by consideration
type
Consideration for acquisition cannot be disclosed due to the Company’s obligation tomaintain confidentiality regarding the agreement with the counterparty.

3.

Details and amount of major acquisition-related costs
Remuneration and commissions to advisors

4.

¥64 million

Amount of goodwill recognized, reason for recognition of goodwill and method andperiod for amortization
Under calculation.

5.

Amounts and primary components of assets acquired and liabilities assumed as of thedate of the business combination
Under calculation.

(Note) Figures are stated by discarding fractions of one million yen. The ratios of voting
rights are stated by counting fractions of 1/2 or more of their units as one anddiscarding the rest.

- 26 -

Non-Consolidated Statements of Changes in Net Assets(From December 1, 2015 to November 30, 2016)(Millions of yen)
Shareholders' equity
Capital surplus

Balance at the
beginning of
the current
fiscal year
Cumulative
effects ofchanges inaccounting
policies
Restatedbalance
Changes of
items during
the fiscal year
Provision ofother capitalsurplus
Reversal ofother capitalsurplus
Adjustmentsof othercapitalsurplusresultingfrom tax ratechanges
Dividends
from surplus
Net income
Repurchaseof shares
Net changesof items
other thanshareholders'equityTotal changesof items during
the fiscal year
Balance at theend of thecurrent fiscal
year

Earned surplus
Other earned surplus
Reserve
Reserveforfor special
reduction
Generaldepreciaentry ofreservetion
replaced
property

Paid-in
capitalLegalcapitalsurplus

OthercapitalsurplusTotal
capitalsurplusLegalretainedearnings

24,104

29,418875

30,294

3,115

27

2,607

67,20024,104

29,418875

30,294

3,115

27

2,607

67,200

5
(6)

(47)

0

60

–

–

–

–

–

(6)

18

–

24,104

29,418875

30,294

3,115

21

2,625

67,200- 27 -

Shareholders' equity
Earned surplus
OtherearnedTreasury
surplusTotal
stockearnedRetained
surplusearnings
brought
forwardBalance at the
beginning of thecurrent fiscal
year
Cumulative
effects ofchanges inaccounting
policies
Restatedbalance
Changes of
items during the
fiscal year
Provision ofother capitalsurplus
Reversal ofother capitalsurplus
Adjustmentsof othercapitalsurplusresulting fromtax ratechanges
Dividends
from surplus
Net income
Repurchaseof shares
Net changesof items otherthanshareholders'equityTotal changes of
items during the
fiscal year
Balance at theend of thecurrent fiscal
year(1,457)

Valuation and translation adjustments

Totalshareholders' equity

Unrealized
holding
gains(losses) on
securities

Unrealized
gains(losses) onhedgesTotalvaluationandtranslation
adjustments

145,291

8,691

–

8,691

Total net
assets

19,40092,351(1,066)(1,066)

18,33491,285

(5)

–

–

–

54

–

–

–

(61)

–

–

–

(4,749)(4,749)(4,749)(4,749)

9,161

9,161

9,161

9,161

(4,706)(4,706)(1,066)(1,457)(4,706)144,225

153,982(1,066)

8,691

–

8,691

152,916

(446)

57

(389)

(389)

4,400

4,411

(4,706)

(294)

(446)

57

(389)

(684)

22,735

95,697(6,164)

143,930

8,244

57

8,302

152,232(Note) Figures are stated by discarding fractions of one million yen.

- 28 -

Notes to Non-Consolidated Financial Statements
I.

Notes on matters concerning significant accounting policies:

1.

Basis and method of valuation of marketable securities:(1)

Held-to-maturity bonds

Stated at amortized cost (by the straight-line method)(2)

Capital stocks of subsidiaries and affiliated companies:
At cost, determined by the moving average method(3)

Other securities:
Those with market value:

At market value, determined by market prices, etc. asof the closing of the fiscal year (Revaluationdifferences are all transferred directly to capital. Selling
costs are determined by the moving average method.)Those without market value: At cost, determined by the moving average method
2. Basis and method of valuation of derivatives:
At market value.
Hedge accounting is applicable to hedge transactions that meet the requirements thereof.
3. Inventories:(1)

Basis of valuation:
Merchandise and products, work-in-process and materials and stocks are valued atcost (the value method to devaluate a book value for decreasing profitability).

(2)

Method of valuation:
Merchandise and products, work-in-process and materials and stocks are valued by
the monthly moving average method.

4. Method of depreciation of fixed assets:(1)

Tangible fixed assets (excluding lease assets):
Tangible fixed assets are depreciated by the straight-line method.

(2)

Intangible fixed assets (excluding lease assets):
Intangible fixed assets are amortized by the straight-line method.
Software for internal use is amortized by the straight-line method based on the- 29 -

estimated useful life of internal use (five years).
(3)

Lease assets:
Finance lease transactions other than those which are deemed to transfer theownership of leased assets to lessees are calculated by the straight-line method byconsidering the lease period to be useful life and the scrap value to be zero.

(4)Long-term prepaid expenses:
Long-term prepaid expenses are depreciated by the straight-line method.

5. Accounting for allowances:(1)

Allowance for doubtful accounts:
To provide for losses on bad debts, the Company sets aside an estimated uncollectableamount, 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 individual possibilities ofcollection in respect of possible non-performing credits and other specific claims.

(2)

Reserve for sales rebates:
To provide for payments for sales rebates to be incurred during the current fiscal year,
a reserve for sales rebates is provided based on an accrual basis in accordance with theCompany's policy (rate of the estimated payments for sales rebates to sales).

(3)

Reserve for bonuses:
To provide for the payment of bonuses to employees, the reserves for bonuses areprovided according to the expected amount of the payment which attributes to thecurrent fiscal year.

(4)

Reserve for officers' bonuses:
To provide for the payment of bonuses to officers, a reserve for officers' bonuses isprovided according to the estimated amounts payable at the end of the fiscal year
under review.

(5)

Accounting for retirement benefits
To meet the payment of retirement benefits to employees, the Company provides anamount based on estimated retirement benefit obligations and plan assets as of theclose of the said fiscal year.
(i) Periodic allocation method for projected retirement benefits
In calculating retirement benefit obligations, the method of allocating the projected
retirement benefits at the end of the current fiscal year is based on the benefit- 30 -

formula basis.
(ii) Method of accounting for actuarial gains and losses and prior service costs
Prior service costs are amortized by the straight-line method over twelve years
based on the average remaining employees' service years.
Actuarial gains or losses are amortized by the straight-line method over twelve
years based on the average remaining employees' service years at each fiscal year,
and their amortizations start from the next 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 plus unrecognized actuarial gains or losses forbenefit pension plan, it is provided as prepaid pension expenses on
non-consolidated balance sheet.
6. Method of hedge accounting:(1)

Methods of hedge accounting
Deferral hedge is adopted in hedge accounting.
Appropriation processing is adopted for transactions that meet the requirements forthat method.

(2)

Hedging instruments and hedged items:
Hedging instruments: Forward exchange contracts
Hedged items:
Purchase transactions in foreign currencies and others(3)

Hedging policy:
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.

(4)

Assessment of the effectiveness of hedge accounting
Control procedures of hedge transactions are executed according to the Company's
bylaw. The effectiveness of the hedge is analyzed by comparing movements in the fairvalue of hedged items with those of hedging instruments, assessed and strictly
controlled.

7.
(1)

Other important matters forming the basis of preparation of consolidated financial
statements:
Accounting for retirement benefits
The basis for accounting for unappropriated amounts of unrecognized actuarial gains- 31 -

or losses for retirement benefits and unrecognized prior service costs differs from thebasis therefor under consolidated financial statements.
(2)

Accounting for consumption taxes
Consumption taxes are treated on a net-of-tax basis.

II. Notes to changes in accounting policies(Changes to standards for recording net sales)
The Company used to record part of expenses payable to business partners for sales
promotion (hereinafter referred to as "sales promotion expenses") under selling, generaland administrative expenses by mostly including them in sales promotion expenses when
the amount payable is fixed. From the current fiscal year, the Company has changed themethod to deduct the sales promotion expenses, etc. from net sales when recording sales.
In the business environment surrounding the Company, the competition becomeseven fiercer, constantly requiring the Company to spend sales promotion expenses. As aresult, it becomes necessary for the Company to ensure more timely and appropriate
profit control by clarifying correlation between the sales promotion activity and sales.
Under such business environment, the Company took the opportunity of formulating
the Medium-term Business Plan starting from the current year to re-verify the coverage ofsales promotion expenses and the actual status of transactions, in order to review
standards for recording net sales, which is one of the important indices to measurebusiness performance for the Company. It shed light on the status that sales promotion
expenses comprise a part of sales conditions. Accordingly the Company concluded thatthe method to record net sales after deducting sales promotion expenses at the time whensales are recorded should more appropriately reflect the business performance. At thesame time, the Company reviewed the method of managing sales and sales promotion
expenses and pushed forward improvement of a framework for operational processreviews and system development. As the framework is now in place, the Company has
implemented the change.
The changes in accounting policy have been applied retroactively, and thecumulative affected amount of changes in the accounting policy is reflected in the bookvalue of net assets at the beginning of the current fiscal year.
As a result of the above, the balance of earned surplus at the beginning of the fiscal
year after retroactive application of the change in the Non-Consolidated Statements of
Changes in Net Assets decreased by ¥1,066 million.

- 32 -

III. Notes to changes in presentation method(Statement of income)"Gains on sales of investment securities" was included in "Other" account of"Extraordinary gains" for the previous fiscal year, but because their materiality has
increased for the current fiscal year, it was changed to be presented as a separate account.
IV. Notes to changes in accounting policies that are difficult to distinguish from the changes
in accounting estimates, and changes in accounting estimates(Changes to depreciation method for tangible fixed assets and revision of useful life andresidual value)
The Company changed its depreciation method for tangible fixed assets to thestraight-line method from the current fiscal year from the declining balance method
mainly used in the past.
Following the terminated production in Sengawa Factory in 2011, the Group
proceeded with gradual reorganization of production locations by consolidating the
production capabilities of core products in the condiments products for home use line into
Goka Factory. In addition, in accordance with the Medium-term Business Plan that has
started in the current fiscal year, we plan to implement a drastic reorganization of our
production locations centering on operations in Kobe Factory equipped with thestate-of-the-art production facility. The Company expects to be able to use the production
facility efficiently and consistently by concentrating production of core products.
As a result, the Company has concluded that distribution of expenses using thestraight-line method is the depreciation method that reflects the reality of the Company.
Furthermore, as a result of another review on the disposal value of tangible fixed assets,
the residual values of tangible fixed assets (excluding some vehicles) have also beenchanged to ¥1, the memorandum value.
With these changes described above, operating income for the current fiscal year
increased ¥95 million, and ordinary income and profit before income taxes increased¥124 million respectively compared with those by the previous method.

- 33 -

V. Notes to the balance sheet:(Millions of yen)
117,910

1. Accumulated depreciation of tangible fixed assets:
2. Contingent liabilities
Guarantee obligations:
3. Accounts receivable from related companies:
Current assets
Fixed assets
4. Accounts payable to related companies:
Current liabilities
5. Accounts payable to directors and corporate
auditors:
Long-term liabilities392
17,523257
35,920101

VI. Notes to the statement of income(Millions of yen)
1. Operating income from related companies:
17,492
2. Operating expenses to related companies:
95,187
3. Amount of transactions other than operating transactions with related
3,230
companies:

VII. Notes to the statements of changes in net assets
Class and total numbers of shares of treasury stock
Class of shares of treasury stock
Shares of common stock
Number of shares as of December 1, 2015

1,232,318 shares

Increase in the number of shares during the year

2,101,673 shares

Decrease in the number of shares during the year

– shares

Number of shares as of November 30, 2016

3,333,991 shares(Note) The increase in the number of shares of treasury stock includes an increase of
2,100,000 shares due to the Company's acquisition of treasury stock pursuant to theprovisions of Article 156, paragraph 1 of the Companies Act, which is applied with
the necessary replacements in accordance with the provisions of Article 459,
paragraph 1 of the said Act, and also includes an increase of 1,673 shares due to theacquisition of shares less than one unit.

- 34 -

VIII.

Notes on tax effect accounting

The principal details of deferred tax assets and liabilities are as follows:(Millions of yen)
Deferred tax assets (current)
Accrued expenses (sales promotion expenses)
Accrued enterprise taxes
Reserve for sales rebates
Accrued social security premiums
Others

615
231
183
117
234

Subtotal of deferred tax assets (current)
Valuation reserve

1,383
(61)

Total deferred tax assets (current)

1,322

Deferred tax assets (fixed)
Amount of trust of employee retirement benefits createdDepreciation and amortization
Gains on trust of employee retirement benefits
Gains on valuation of investment securities
Losses on impairment of fixed assets
Others

1,084
646
405
176
174
327

Subtotal of deferred tax assets (fixed)
Valuation reserve

2,815
(470)

Total deferred tax assets (fixed)

2,345

Total deferred tax assets

3,667

Deferred tax liabilities (short-term)
Forward exchange contracts(25)

Total deferred tax liabilities (short-term)(25)

Deferred tax liabilities (long-term)
Prepaid pension expenses
Reserve for deferred tax on replacement assets
Revaluation difference of other securities, etc.
Others(4,502)(1,159)(3,413)(9)

Total deferred tax liabilities (long-term)(9,085)

Total deferred tax liabilities(9,110)Net deferred tax income (liabilities)(5,443)- 35 -

IX. Notes on transactions with related parties
1. Parent company, leading corporate shareholders, etc.:(Millions of yen)
Category

Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)

Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)

Corporate
nameNakashimato
Co., Ltd.
(Note 3)

Address

Shibuya-ku,
Tokyo

Capitalstock

50

Principal
business

Sales ofvariousprocessed
foods

Ratio of voting
rights owned by
the Company(owned in the
Company)

Direct: 11.6%
Direct: 13.0%
Indirect: 7.9%

Relationship
Interlocking
officers

Director:
2 personsBusinessrelationship

Purchase of
products,
sales ofgoods andproducts andpayment ofbrand use
fees

Transaction

Purchase of
products

383

Sale of goods
and products

57

Payment ofbrand use fees
Lease ofproperty
Repurchase ofshares (Note 8)
Rent ofproperty

Touka Co.,
Ltd.
(Note 4)

Shibuya-ku,
Tokyo

100

Business ofrenting
property/
Leasingbusiness[Direct 7.9%]

36

Director:
1 personRent of theoffice, etc.
and purchaseof lease
assetsAmountPurchase of
tangible fixed
assetsPurchase oflease assets

Account
Accounts
payable trade
Accounts
receivable trade

End of
year

52
11

720
10
4,701
978
809
18

Guarantee
money
deposited
Accounts
payable other
Other current
liabilities
Other
non-current
liabilities

946
6
20
35

(Millions of yen)
Category

Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)

Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)

Corporate
name

Tou AdKewpie Co.,
Ltd.

Address

Shibuya-ku,
Tokyo

Capitalstock

4

Principal
business

Servicebusiness

Ratio of voting
rights owned by
the Company(owned in the
Company)

None

Relationship
Interlocking
officers

Employee:
2 persons(Note 4)

MinatoShokai, Co.,
Ltd.
(Note 4)

Minato-ku,
Tokyo

10

Wholesaleof liquors
and foods

None

37

None

BusinessrelationshipTransaction

Payment ofadvertisingexpensePayment ofPayment of
sales
advertisingpromotion
expense and
cost
sales
Purchase ofpromotion
supplies
cost, and sales
Purchase ofof goods andtangible fixed
products
assetsSales ofgoods andproducts

AmountAccount

End ofyear

6,930

Accounts
payable other

1,717

83

14
24

Sale of goods
and products

69

Accounts
receivable trade

9

Sale of goods
and products

108

Accounts
receivable trade27

(Millions of yen)
Category

Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)
Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)
Company whose
director(s) andhis/her close
relative(s) own amajority of thevoting rights(including thesubsidiary of thecompany)

Corporate
name

Tou Solutions
Co., Ltd.
(Note 5)

Yu ShokaiCo., Ltd.

Address

Chofu,
Tokyo

Ratio of voting
rights owned by
the Company(owned in the
Company)

Capitalstock

Principal
business90

Plan,development,sale,maintenanceand operations
support ofcomputersystems

Direct: 20.0%

Relationship
Interlocking
officers

Employee:
1 personBusinessrelationship

Outsourcing
of computing
workTransaction
Payment of
IT-related
expensePurchase ofsoftwarePurchase of
tangible fixed
assetsRent of realestateAmountAccount

End ofyear

1,982

Accounts
payable other278

Guarantee
money
deposited

117

445
268
39

Shibuya-ku,
Tokyo

10

Business ofrenting
property

None

None

Rent of theofficeRent of realestate96

T&A Co., Ltd. Shibuya-ku,
Tokyo(Note 7)

100

Business ofrenting
property[Direct: 1.4%]

Director:
1 personRent of thedormitory

Rent of realestate61(Note 6)38

(Note 1)(Note 2)
(Note 3)(Note 4)(Note 5)(Note 6)(Note 7)(Note 8)In principle, the terms of all transactions are determined individually upon consultation by reference to market prices, etc., as with othertransactions in general.
With regard to the above-listed transaction amounts, the amount of ending balance includes consumption taxes but the transaction amount
does not include consumption taxes.
Amane Nakashima, Chairman of the Company, and his close relatives and the company in which they own a majority of voting rights
directly own 82.9% of the voting rights of the relevant company.
The company in which Amane Nakashima, Chairman of the Company, and his close relatives own a majority of voting rights directly
owns 100.0% of the voting rights of the relevant company.
The company in which Amane Nakashima, Chairman of the Company, and his close relatives own a majority of voting rights directly
owns 80.0% of the voting rights of the relevant company.
Amane Nakashima, Chairman of the Company, and his close relatives directly own 100.0% of the voting rights of the relevant company.
Amane Nakashima, Chairman of the Company, and his close relatives directly own 89.5% of the voting rights of the relevant company.
For repurchase of shares, the Company acquired 2,100,000 shares of common stock of the Company by TOB for ¥2,239 per share, in
accordance with the resolution at the meeting of the Board of Directors on March 15, 2016.

39

2.

Subsidiaries, etc.:(Millions of yen)

Category

Subsidiary

Subsidiary

Subsidiary

Subsidiary(Note 1)
(Note 2)

Corporate
nameKewpie Egg
Corporation

Kanae Foods
Co., Ltd.

Address

Chofu,
Tokyo

Chofu,Tokyo

Salad Club,Inc.

Chofu,
Tokyo

GourmetDelica Co.,Ltd.

Chofu,
Tokyo

Capital
stock

350

50

300

98

Principal business

Ratio of voting
Relationshiprights owned by
the Company Interlocking
Business(owned in theofficers
relationship
Company)

Transaction

Production and saleof liquid eggs,
frozen eggs, etc.

Sales ofgoods andproducts andpurchase of
products andmaterials

Purchase of
products andmaterials
Borrowing of
fund
Payment ofinterest

Director:
2 persons
Direct: 100.0% Employee:
11 persons

Production and saleof processed eggs,
including egg
spread, thickomelets andshredded eggs

Director:
2 persons
Direct: 100.0% Employee:
2 persons

Processing and saleof fresh vegetables

Direct: 51.0%

Director:
2 persons
Employee:
3 personsProduction and saleof delicatessen
products

Director:
2 persons
Direct: 100.0% Employee:
8 personsPurchase of
products
Purchase of
products

Borrowing of
fund
Payment ofinterest
Borrowing ofSale of goods fundand products Payment ofinterest
Lending ofSale of goods fundand products Receipt ofinterest

AmountAccount

End ofyear

19,800Accounts
payable - trade

664

2,492

Short-termborrowings

5,784

15,209Accounts
payable - trade

2,854

2,097

Short-termborrowings

2,947

Short-termborrowings

3,951

Short-term
loans

6,322

18

15
2,897
21
6,369
62

In principle, the terms of all transactions are determined individually upon consultation by reference to market prices, etc., as with othertransactions in general. Interest on loans and borrowings are determined reasonably in consideration of market interest rates.
Loans and borrowings are associated with fund management under the cash management system. The transaction amounts thereof are
shown by the average outstanding loans and borrowings.

40

(Note 3)

With regard to the above-listed transaction amounts, the amount of ending balance includes consumption taxes but the transaction amount
does not include consumption taxes.

41

X.

Note on information per share
Net assets per share:
Earnings per share:¥1,017.15¥60.82

XI.

Notes on material subsequent events

1.

Capital increase of consolidated subsidiary
The Company adopted a resolution to subscribe in entirety for new shares to be issued byits consolidated subsidiary, Kewpie Poland Sp. z o.o., at the meeting of its Board of
Directors held on November 25, 2016, and executed the payment on December 5, 2016.
(1) Purpose of the capital increase
To strengthen the financial base in preparation of business acquisition(2) Outline of the capital increase
Amount paid: 179,650 thousand Polish złoty (¥4,755 million)
Payment date: December 5, 2016(3) Outline of the subsidiary
(i)
(ii)

Name:
Description ofbusinesses:(iii) Capital stock:Kewpie Poland Sp. z o.o.
Production and sale of mayonnaise and other products

Before the capital increase: 350 thousand PLN(¥9 million)
After the capital increase: 160,000 thousand PLN(¥4,235 million)(iv) Capital reserve:
Before the capital increase: – thousand PLN
After the capital increase: 20,000 thousand PLN(¥529 million)(v) Shareholding ratio: 100% by the Company
2.

Establishment of a general incorporated foundation and disposition of treasury stock
At the meeting of the Board of Directors held on December 26, 2016, the Company
resolved to establish the Kewpie Mirai Tamago Foundation, a General Incorporated
Foundation and, in order to fund the activities of the Foundation through dividends, etc.
of the Company's stock, resolved to allot 1,500,000 shares of treasury stock to a trust
established by the Company at a disposition price of ¥1 per share. The details thereof aredescribed in "Notes to Consolidated Financial Statements: X. Notes on material
subsequent events."42

XII. Note on company adopting consolidated dividend rules
The Company is a company adopting consolidated dividend rules.
(Note) Figures are stated by discarding fractions of one million yen. The ratios of voting
rights held by (in) the Company are stated by counting fractions of 1/2 or more of
their units as one and discarding the rest.

43