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Message from the CEO

Ideas behind the JT Group Purpose“ he moments that give consumers and people
Tin society fulfillment change with the time.
Staying close to their diversifying needs, the JT
Group strive to realize ’fulfilling moments’
through our evolving business operations, without limiting ourselves to what we are now.

”

How we determined our Purpose
To show us the way forward in a social and businessenvironment defined by discontinuous change, we opened
discussion of a JT Group Purpose that will help assure thesustainability of our businesses and the society in which weoperate.
To define that Purpose we focused on what the JT Groupwants to become, as well as what the society of the future
expects us to be, and what kinds of contributions we canmake to society in embodying those ideals. “Staying closeto people in fulfilling moments through our products andservices, and creating such moments together,” we thought,
would describe the area where the JT Group can do most tocreate value.

Our objectives in determining our Purpose“Fulfilling moments” represents a core value that the JT
Group has traditionally offered through its products andservices. Establishing the JT Group Purpose, therefore,
does not mean introducing an entirely new set of values.
To maintain the trust that society gives us as a facilitatorof “fulfilling moments” and continue making our share ofsocial contributions, I think the JT Group must be constantly
evolving, flexibly changing the ways in which we help create“fulfilling moments” to best suit the changing values ofpeople and society.

Masamichi Terabatake

JT Group Purpose

Representative Director and President,
Chief Executive Officer

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By clarifying our focus on “fulfilling moments” and thedirection for our evolution, which will require us to flexibly
adjust our means to those ends as necessary, I believe that
our Group Purpose, along with the rock-solid philosophy
expressed in the 4S model, will enable our corporate Group,business divisions and employees to consider for themselves what to offer to whom from the broader viewpoint of“value,” and take action.
We have also decided to replace the JT Group Mission andVision, which expressed our reasons for the Group’s existence and the ideals we aspire to embody, with the new JT
Group Purpose, which inherits their essence and takes them
to a higher evolutionary level.
In our existing business divisions, we put our top priority
on the strategies we’ve shown you so far, and with that as
our premise, we are evolving our initiatives and efforts toachieve our goals. One specific example is the new Business
Purposes for each division (see pages 57, 70, and 74) asshown below, based on the JT Group Purpose. This is meantto link the Group Purpose to the evolution of the operationsof each business. By actualizing its Business Purpose, eachdivision will help realize the JT Group Purpose for the organization as a whole. To accelerate the operations of eachdivision with clear awareness of its Business Purpose, we arealso creating a code of conduct for each division.

JT Group Purpose“Fulfilling Moments,
Enriching Life”

Tobacco Business Purpose

Pharmaceutical Business Purpose

Processed Food Business Purpose“Creating fulfilling moments.
Creating a better future.”“Respecting science, technologyand people, we will contribute topatients’ lives”“Bringing joy to meals andfun to the table”

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Initiatives for growth (D-LAB)
Independent of the established business divisions, we set
up D-LAB, a corporate R&D organization to actualize theJT Group Purpose through research centered on “fulfillingmoments,” and effort to explore prospects and create seeds
for future business. The areas connecting with “fulfillingmoments” are broad. Some appeal to the five senses, likearomas and food, and others are related to wellness, suchas breathing and sleep. They offer us ample, diverse fields tooperate in.

JT Group Purpose“Fulfilling Moments,Enriching Life”

D-LAB works with a long term view to help “fulfillingmoments” grow in our society while helping the JT Groupgrow profits as well. Its operations can be roughly divided
into three aspects: multifaceted research on the value wecall “fulfilling moments,” exploration of business prospects,
and creation of seeds for future business. Following trial anderror, several dozen projects are always ongoing.

The business environment surrounding the JT Group remains highly unpredictable due to major changes in society
and consumer behavior following the pandemic, and otherfactors including worldwide inflation, economic slowdown,
the Russia-Ukraine war, and major exchange fluctuations.

Multifaceted research on the value we call“fulfilling moments”

The environment for each business division is increasingly
challenging. In the tobacco business, shrinking industry
volume, continuing downtrading, cost increases due toinflation, tighter regulations, and expansion of the RRP(Reduced-Risk Products) market, mainly for HTS (heatedtobacco sticks), are the main trends. Our pharmaceuticalbusiness is under pressure to follow government reductionsof official drug prices, and affected by progress with industry
reorganization due to increasing M&A and corporate alliances. The processed food business is also influenced by higher
costs for raw materials due to fluctuations in internationalcommodity prices and exchange rates, as well as increasing
labor and distribution costs due to labor shortages.

nExploration of business prospects

In addition to the changing environment that our management and operations face, the needs and expectations

nCreation of seeds for future business

D-LAB works with a long view to help
“fulfilling moments” grow in our society while
helping the JT Group grow profits.

nCorporate R&D group
D-LAB

Understanding our business environment

To help make our planet and society more sustainablethrough our efforts to realize the JT Group Purpose, wehave conducted a review of our materiality to which weshould give priority. The external conditions and business environment have changed since we last identified
our materiality. Through our engagement with internal
as well as external stakeholders, we have performed afresh assessment of our material issues. With the new JT
Group Materiality in mind, we will update our sustainability initiatives and goals for the Group and for eachbusiness division.

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While I’m on this topic, I’d like to express my sincere condolences to the people and families who have been affectedby the earthquake that hit Turkey in February 2023. Throughhumanitarian organizations, the JT Group is taking part inemergency support, participating in rescue operations andproviding relief supplies. We will stay close to local needs inproviding support, and we plan to offer additional aid. We
are also deeply concerned about developments in the warin Ukraine, where many people are facing tragedy and devastation, and we sincerely hope that peace will return soon.
Our top priority remains the safety of our employees andtheir families, and the JT Group will spare no effort in providing as much support as we can to the people suffering.

Business Plan 2023
The Group as a whole

Updating material issuesof society and our shareholders are changing as well,influenced by the advancement of digital technology andgreater public awareness of ESG, SDGs and sustainability. I
have a fresh realization that we have to maintain constanteffort to be perceptive about the potential effects of environmental change we see today and take appropriate steps
to address them.

Through 2022 we had to operate in a difficult businessenvironment. That said, thanks to the contribution of ourtobacco business, the JT Group saw adjusted operating
profit at constant currency and profit rise substantially over
the year, and over our initial targets as well. As a result, weachieved new record highs for all metrics from revenue toprofit on the income statement.
As announced in February 2023, Business Plan 2023, ourthree-year business plan, marks the continuation of our
fundamental pursuit of sustainable medium- and long-term
profit growth.
To achieve this goal, the core tobacco business will further
strengthen its organizational capabilities globally. In addition, we are working to increase return on investment inour combustibles operation, accelerate investment in RRP,

especially HTS, and pursue higher efficiency throughout ourbusinesses.
We designate 2023 as a year for reinforcing our foundations
for future profit growth, actively investing in our businesses,
particularly towards HTS. We are projecting adjusted
operating profit at constant currency for 2023 on a par withthat for 2022, due mainly to worldwide inflation pushingup supply chain costs. As we increase investments between
2023 and 2025, we project low single digit profit growth.
Over the medium and long terms, we will continue generating sustainable profit growth, specifically in the mid tohigh single digit on annual average for adjusted operating
profit at constant currency, by increasing our share of theRRP market as well as the profitability of the entire productcategory. We also expect to steadily grow both profit andshareholder returns in line with our shareholder return
policy.

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With the prolongation and increasingly complex situationof the Russia-Ukraine war, the JT Group has been operatingin strict compliance with all sanctions and regulations
imposed, nationally and internationally. As we announced
in March 2022, we are continuing our operations whilesuspending new investment and marketing efforts.
As we respond to changes in the situation, we will remaincommitted to decision-making based on the 4S model.

Tobacco businessIn the tobacco business, under the new unified businessstructure that began in January 2022, we are making steadyprogress by designing and executing globally unified
strategies and effectively applying our global resources. Our
new tobacco business structure began with the goal to raise
the JT Group to a new level in its evolution as a truly global
firm in both name and substance. I believe this will help theGroup grow for years to come.
We are working to enhance the quality and speed of ourdecision-making by strengthening our effective and efficient business structure, while offering increasing value toconsumers* through optimal resource allocation based onpriorities set with a global view.
Specifically we think that pricing, which we have been
doing strategically, will remain our top-line growth driver forcombustibles. We are also establishing priorities for investment targets with the strategic roles of each market in mind.
We plan to invest more than 300 billion yen in RRP, mainly
HTS, during the current business plan. Over the medium andlong terms, we project to more than double our revenue
from the 2022 level by 2025, hold a mid-teens share of theHTS category in the key HTS markets, and turn a profit fromthe RRP business by 2028. To make this happen, we will accelerate our global operation for Ploom X, adding momentum from the debut in the U.K. in October 2022 and in Italyin April 2023, to introduce the product in 28 countries by
the end of 2024. Along with accelerating the introduction ofPloom X, we plan to actively invest in marketing for HTS.
We project growing demand for RRP, which we define asproducts with the potential to reduce the risks associatedwith smoking. Smoking is considered a health risk due
mainly to substances in the smoke generated from burning
tobacco leaves. This new style of tobacco products that
do not involve burning, we believe, has the potential toreduce those associated risks. As they produce no smokeand less odor, we think they also reduce inconvenience tonon-smokers.
However, all in all, we believe that tobacco-consumer needs
are diverse and require a broad range of choices, ensuringthat every consumer can find a product offering a highlevel of satisfaction. To that end the JT Group continues toexpand product categories to meet global changes andimprove the product value of all tobacco products.
To reinforce the foundations of our business, we conducted
the JTI “transformation” and measures to enhance ourcompetitiveness in Japan. These efforts bore expected fruit,valued at over 40 billion yen during the three-year period
starting in 2020. We will never cease our work to increase
supply chain efficiency.

Pharmaceutical business/Processed foodbusiness
The pharmaceutical and processed food businesses also
face challenging business environments, but their role ofsupplementing profit growth for the JT Group remains
unchanged. In the pharmaceutical business, we plan tobroaden research themes and revamp our drug discovery
processes to build up our capabilities for developing newdrugs. In partnership with Torii Pharmaceutical, we will
optimize the value of our products and enhance licensing
operations to reinforce the business foundations. In theprocessed food business, we will carry out price revisions,mainly on frozen and ambient foods, to defray the current
surge in costs for materials. We are making the shift toa high-earning business structure by allocating moreresources to groups of high-value-added products as partof our work to achieve more sustainable profit growth. With
the future of food in mind, we are accelerating initiatives tosecure long-term growth and promote value creation forour consumers.

Resource allocation policy

maintaining a target payout ratio of about 75%*.

Based on the 4S model and the JT Group Purpose, there
is no change in our resource allocation policy to put toppriority on investment in business that leads to sustainableprofit growth, especially the tobacco business.

Our dividend for 2022 was 188 yen per share, an all-timehigh. We plan to pay 188 yen per share for 2023 as well.
* To be in the range of approximately ±5%

We will also work to increase returns to shareholders
through medium- and long-term profit growth, while

To our stakeholders
As I’ve said previously, we have established the JT Group
Purpose to clarify the best direction for the JT Group. The
Group will never cease to evolve to maintain the trust of society in creating the value of “fulfilling moments,” which willchange in diverse ways with the times and each individual,
and will continue to make important contributions.
In an environment growing more unpredictable andcomplex than ever, the JT Group will maintain across-theboard effort under the 4S model to offer products andservices that transcend consumer expectations and support
sustainable business growth. With firm commitment, I am
personally striving to promote the continuous evolutionof the JT Group to ensure that it remains necessary to ourconsumers, shareholders, employees and society.

* The word “consumers” in the context of the tobacco business means adult consumers. Minimum legal age for smoking varies in accordance with legislation in eachcountry. In Japan, smoking is not permitted for those under 20 years of age026

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