IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERS

Corporate governanceCorporate governance structure

latter is comprised entirely of Directors who do not serve as
Executive Officers, and more than half of its members are
Independent Outside Directors. We have also streamlined
our Board of Directors and expedited operational execution
by delegating authority to Executive Officers.

Our corporate governance system

We continuously seek to improve corporate governance andincrease management transparency and objectivity through,General Meeting of Shareholders

Select/dismiss
members

Select/dismiss
members

Accounting
AuditorBoard of Directors

9 directors(4 Outside Directors)
ReportOversee performance
Audit
Report/proposeCooperate

Audit & Supervisory
Board

5 members(3 outside members)

Audit & Supervisory
Board Members’
OfficeReportOperational
Review andBusiness
Assurance
Division

ReportAdvisory Panel on Nomination
and Compensation

6 members(4 outside members)

Report/propose

JT Group Compliance
Committee
President andChief Executive Officer

Internal
audit

Divisions
Group
audit

Internal Director and Executive Officer

5 members(3 outside members)

Executive Officers

Subsidiaries

ReportInternal Director

Board of Directors (met 13 times with 98% attendance rate in fiscal 2022)

Select/dismiss
members
Report results ofaudit

Outside Director

We have established the JT Corporate Governance Policy inrecognition that improvement in corporate governance isconducive to sustainable profit growth and corporate value

096

Japan Tobacco Inc. Integrated Report 2022

supervisory functions and make management transparent.
In March 2022, we amended the term of the Board of
Directors to one year from the previous two-year term inorder to build a management foundation to address thechanges in the business environment in a timely mannerand to strengthen our corporate governance by clearly
defining the responsibilities of the Directors and enhancing
trust with shareholders. The Board discussed importantmatters including the Business Plan and nomination of
Executive Officers in 2022.

Advisory Panel on Nomination and Compensation

Legal and Compliance
DivisionInternal Auditor

Outside Auditor

over the medium and long terms, benefits our stakeholders
and, in turn, helps to move the economy and society
forward. We believe that the Corporate Governance Codehas high affinity with the 4S model, and fully comply withthe principles of the Corporate Governance Code, which
includes the principles of the Prime Market.
We will endeavor to continuously enhance our corporate
governance as a key management priority.
Please visit our website for more on the JT Corporate
Governance Policy.

Rationale behind current governance regime
We are strengthening objective and impartial management
oversight functions by positioning an independent and fair
Audit & Supervisory Board that appropriately oversees thejob performance of Executive Officers and Members of theBoard (hereinafter Directors).

Our Board of Directors is responsible for setting JT Groupmanagement strategies, making decisions on importantmatters and overseeing all operations. The Board meetsonce monthly as a general rule, and meets promptly
whenever necessary, in order to make a decision with regard
to the important matters, including those specified by laws
and regulations, and to supervise business execution. It also
receives reports on the state of operational execution fromthe Directors. It includes at least one-third of Independent
Outside Directors with qualifications conducive to sustainable profit growth and the increase of corporate value
in the medium and long terms in order to strengthen theReportBasic policy
The JT Group believes that corporate governance is aframework for transparent, fair, timely and decisive decision-making in pursuit of the 4S model, our management
principle. Pursuing the 4S model means striving to fulfill
our responsibilities to our valued consumers, shareholders,
employees and the wider society, carefully considering therespective interests of these key stakeholder groups, andexceeding their expectations wherever we can.

for instance, the appointment of an additional Outside
Director and outside Audit & Supervisory Board Member
in 2019 and further appointment of an additional Outside
Director in March 2022. Through such measures, we settled
upon our current corporate governance regime as we
believe it functions effectively with respect to operational
execution and oversight.

We have built an effective corporate governance regime under the Audit & Supervisory Board’s oversight. It includes the
JT Group Compliance Committee and the Advisory Panel on
Nomination and Compensation, both established voluntarily. The former has outside experts serving in key roles; the(met 7 times with 97% attendance rate in fiscal 2022)

The Advisory Panel on Nomination and Compensation’s
purpose is to render the Board’s decision-making moreobjective and transparent, and to upgrade the Board’s
oversight functions by having the Board deliberate on executive appointment and remuneration in accordance withresults of deliberation in the Panel. Its specific roles include
supporting the growth, including succession plans, of
executive candidates; deliberating on selection of nominees
for seats on the Board of Directors and Audit & Supervisory
Board and dismissal of designated Directors and Directors
also serving as Executive Officers; and reporting the resultsof deliberation on remuneration of Directors and Executive
Officers. In order to ensure its independence and objectivity,
the Panel is comprised entirely of Directors who do not serve

as Executive Officers, in which more than half of its members
are Independent Outside Directors. The Panel determinedto elect a member from the Independent Outside Directors
as its Chairperson starting March 2022. Ms. Main Kohda waselected as the Chairperson for 2023. In 2022, the Panel met to
discuss changes to decision-making regarding the selectionof a chairperson for the Panel from among the Independent
Outside Directors based on mutual election; review remuneration levels; review executive candidates; decide on
candidates for the Board of Directors and Audit & Supervisory
Board nominations and discuss the development of a skills
matrix; discuss revisions to remuneration for directors; andreview the key performance indicators (KPIs) for the executive bonus and performance share unit plan for 2023.

Audit & Supervisory Board (met 15 times with 100% attendance rate in fiscal 2022)
The Audit & Supervisory Board conducts operational and accounting audits as an independent body serving the interestsof shareholders. It has five members, three of whom are outsiders, all of whom have experience in such fields as corporate
management, law, finance, and accounting. The Audit &Supervisory Board Members proactively exercise their authority, including attending and speaking at Board of Directors

meetings and other important meetings as well as actively
inspecting business sites. In addition, they also conduct audits
appropriately from an objective viewpoint in accordance withthe characteristics of the duties of the independent outside/standing Audit & Supervisory Board Members. In 2022, theAudit & Supervisory Board discussed issues including auditing
policies and preparation of Audit Report.

Japan Tobacco Inc. Integrated Report 2022

097

IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERS

Corporate governanceEvaluation of effectiveness of the Board of Directors

Succession planning

We evaluate annually the effectiveness of our Board of
Directors through a multi-step process. First, all Directors
and Audit & Supervisory Board Members complete a
self-assessment questionnaire with regards to factors
including the Board’s operations, oversight function anddialogues with shareholders and investors. Second, theBoard’s administrative staff interview the Directors and Audit& Supervisory Board Members individually as necessary
to delve deeper into their questionnaire responses andcompile the evaluation results. Lastly, the Board reviews andanalyzes the self-assessment results with the aim of further
improving its effectiveness.

We place priority on fostering successive generations of executives who will manage our future operations, expanding
our pool of executive candidates and improving its quality.

discussions on identification of the medium- and long-term
challenges the candidates are facing and the policies weprovide to support their growth.

To develop a steady stream of highly skilled, highly qualified
leaders capable of excelling in the global arena, we selectfuture executive candidates from each hierarchy throughGroup-wide open recruitment and nomination by top management. Our CEO, along with other senior management,
are deeply involved in these selections.

Especially for those who are regarded highly qualified as our
directors or Audit & Supervisory Board Members, we review
their development status and deliberate to enhance a succession plan and its planning process with input from both
external consultants and the Independent Outside Directors
on our Advisory Panel on Nomination and Compensation.

Our CEO participates in meetings held to support the
next-generation executives. In these meetings, participants
discuss which candidates receive support to become thenext-generation executives based on several factors. The
first factor is based on close examination of whether they
have an excellent mind of ownership, corresponding toa high sense of ethics, integrity and a broad perspective.
The second factor is based on their qualifications in termsof their abilities to accomplish achievements through ourGroup’s growth strategies as an executive or executive
officer. Other factors include the consideration of objective,
external evaluation and competitiveness in markets. We
also formulate development programs, which provide avariety of challenging business experiences; review statusesof development based on the programs ; and hold regular

As one example, our JT-Next Leaders Program, launched in2013, aims to continuously cultivate young executives whowill spearhead the JT Group globally.

For 2022, the questionnaire was administered as outlined
below.
We take advice from external consultants in drafting thequestionnaire and analyzing the results in order to ensure
objectivity and further improve the evaluation process.
nnn uestionnaire drafting period: Sept.–Nov. 2022
QPeriod for evaluation: 2022 (Jan. 2022–Dec. 2022)
Response period: Nov. 25, 2022–Dec. 9, 2022

n

n

n

 articipants: Total of 15 Directors and Audit & SupervisoryP
Board Members
Summary: Evaluation of each question (5 grades) andopen-ended response entry
Discussion by the Board of Directors: Feb. 22, 2023

Main evaluation items are as follows:
1. Role, function and composition of the Board of Directors(6 questions)
2. Operation of the Board of Directors (8 questions)
3. C ollaboration with auditing organizations and risk management (3 questions)
4. Relationships with shareholders and investors (3questions)
5. Voluntary committees (2 questions)
6. Issues for enhancing deliberation and sharing (1 question)
Evaluation items were also properly reviewed to ensure
they cover matters that require continued verification. In
addition, questions were formulated to confirm the status of
improvements concerning issues raised in 2021.

In 2022, the following initiatives were conducted for issues identified in the effectiveness evaluation pertaining to 2021.
Key issues

Initiatives in detail• Initiatives to further improve the quality of • Continued improvements in the Board of Directors operations
deliberations and discussions• F urther expansion of opportunities to discuss medium- and long-term strategies, etc.
• More robust discussions from a long-term • Further expansion of progress reporting and information sharing on key meaperspectivesures, etc.

As in 2021, the Board effectiveness evaluation for 2022
yielded generally positive results across all evaluation
items. It confirmed that the Board is functioning not only
effectively but increasingly so. In particular, the permeationof the 4S model as the guiding principle to which the Boardof Directors strives to conform itself is considered one of theBoard’s strengths. From the standpoint of improvements
since 2021, the Board was especially highly rated for the
sharing of information regarding medium- and long-term
strategies and progress on significant measures, etc., in a bid
to improve business understanding and the exchange of
opinions with executives.

For 2023 and beyond, the Board is pursuing initiatives focused on addressing the issues identified below, in order to continuously enhance the Board’s effectiveness.
Key issues

The Company’s action plans going forward• Further enhancement of the supervisory
functions of the Board of Directors• More effective and efficient operations of
the Board of Directors• Creation of more robust opportunities to share medium- and long-term strategies, key issues, the status of discussions at voluntary committees, etc.
• Continued improvements in Board of Directors operations, including smootherproceedings

The Company will continue to implement the necessary improvements, including the above mentioned initiatives, in the aimof further improving effectiveness.

098

Japan Tobacco Inc. Integrated Report 2022

It is open to employees in their 40s or younger who fulfil theconditions, including new recruits not yet officially onboarded. Applicants are screened objectively based on an integrated assessment with internal/external evaluation, such as
human assessment, 360-degree surveys, and interviews with
Executive Officers. We preferentially support the successful
applicants’ personal growth on a Group-wide basis overmultiple years. Through such programs, we are expanding
our talent pool from the bottom up age-wise as we continue to pursue reinforcement of our human resources.

Our policy pertaining to listed subsidiary’s governance
We have a publicly listed subsidiary, namely Torii
Pharmaceutical Co., Ltd. (hereinafter Torii), in light of the
management benefits of owning a subsidiary, including
capital market discipline and enhancement of humancapital by utilizing stock remuneration. Another motivation
is for Torii to acquire increased competitive advantage in its
business through factors, such as credibility building andrecruitment of excellent human capital, both of which areimportant in the pharmaceutical business.
Together with Torii, we have built an integrated value chain
to collaborate efficiently with each other. Specifically, we
conduct R&D while Torii handles manufacturing, sales andpromotional activities. From a Group-wide perspective, we
continue to optimize our pharmaceutical business modeland deepen collaboration between JT and Torii by, forinstance, having consolidated all R&D and clinical development functions into JT.

In regard to owning a listed subsidiary, we believe it is anindispensable prerequisite for the subsidiary to maintainindependence in terms of management and to duly protect
its minority shareholders’ interests in order for, not only thesubsidiary, but also for the Group to grow in value. Therefore,
we are striving to build an appropriate governance regime
for Torii as a listed subsidiary.
We have instituted the Group’s Responsibility and Authority
Regulations as an internal decision-making regulation.
Torii has opted to adopt these regulations, thereby gaining
autonomy in terms of decision-making authority. Suchautonomy ensures its independence as a listed subsidiary.
Additionally, Torii is upgrading its governance regime’s
effectiveness by transiting to a majority-independent Boardof Directors, which was approved at its Annual General
Meeting of Shareholders on March 26, 2020.

Japan Tobacco Inc. Integrated Report 2022

099

IDENTITY

MATERIALITY andSUSTAINABILITY

BUSINESS andSTRATEGIESGOVERNANCE

FINANCIAL INFORMATION /OTHERS

Corporate governance

Executive remuneration

Composition

Monetary remuneration

Monetary remuneration(Performance-linked)

Ratio*1

Base salary33-42%

Executive bonus
31-35%

2022

Executive remuneration policy
The Board determines the policies on executive remuneration including the methodology on determination of each
Director’s remuneration. These policies are determined
after being deliberated and reported by the Advisory Panelon Nomination and Compensation comprised entirely of
Directors who do not serve as Executive Officers, in whichmore than half of whose members being Independent
Outside Directors, in order to ensure independence andobjectivity. Based on these policies, our basic concept on

executive remuneration is as follows:
n

n

n

n

S et remuneration at an adequate level to retain personnel
with superior capabilities
Link remuneration to Company’s performance so as tomotivate executives to achieve their performance targets
Link remuneration to Company’s value in medium andlong terms
Ensure transparency by implementing objective andquantitative frameworks

Executive remuneration setting process
We benchmark the amount of remuneration for each
Director based on a survey on remuneration for directors
conducted by third parties, taking into account the
remuneration levels of major Japanese manufacturers withsimilar sizes and profits (benchmark corporate group) thatare expanding overseas. Specifically, after benchmarking
the level of base salaries for directors of peer companies,
and the percentage of variable remuneration including
annual bonuses and medium- and long-term incentives, theamount of remuneration for each Director is determinedfollowing various calculation methods stipulated in internal
regulations, based on deliberations at the Advisory Panelon Nomination and Compensation, within the maximum
amount approved at the Annual General Meeting. Currently,
the Board considers that the Representative Director andPresident is most qualified to determine the amount of
remuneration for each Director with having an overview of
the Company’s management and performance as well as
taking into account the evaluation on each Director’s execution of duties. Based on this concept, the Board delegates its

determination to the Representative Director and President.
The Representative Director and President determines theamount of remuneration for each Director including basesalary, executive bonus, monetary compensation claims forthe allotment of restricted stock remuneration plan and of
performance share unit plan, based on various calculation
methods stipulated in internal regulations, in accordancewith deliberation at the Advisory Panel on Nomination andCompensation. The Board concludes the Representative
Director and President’s determination is aligned with thepolicies. In 2021, Masamichi Terabatake, the Representative
Director and President, determined the amount of
remuneration.
The remuneration for Audit & Supervisory Board Members
is also benchmarked in the same way, and is determined bydeliberation among the Audit & Supervisory Board Members
within the maximum amount approved at the Annual
General Meeting.

Composition of executive remuneration
Executive remuneration comprises of (1) monthly “base salary,” (2) “executive bonus” linked to the Company’s businessperformance in a fiscal year, as well as (3) “restricted stock remuneration plan” and (4) “performance share unit plan,” bothof which are linked to the corporate value in the medium
and long terms. The composition of executive remuneration
is as follows.

Directors who also serve as Executive Officers
For the Directors who also serve as Executive Officers, remuneration consists of “base salary,” “executive bonus,” “restricted
stock remuneration plan” and “performance share unit plan.”

100Japan Tobacco Inc. Integrated Report 2022

This composition reflects that their role is to achieve performance targets through day-to-day operational execution.
From 2023, as for the medium- and long-term incentives
that consist of restricted stock remuneration plan andperformance share unit plan, we will increase the ratio of
mid- to long-term incentives further in the executive remuneration composition, as stated above, seeking to further
promote aggressive management from a medium- andlong-term perspective. The illustration in the next pageshows specific ratios after revision.

Composition

Monetary remuneration

Monetary remuneration(Performance-linked)

Ratio*1

Base salary
29-34%

Executive bonus
28-29%

2023

Stock remuneration

Stock remuneration(Performance-linked)

Restricted StockRemuneration Plan*2PSU*2

25-33%
Stock remuneration

Stock remuneration(Performance-linked)

Restricted StockRemuneration Plan*2PSU*2

38-43%*1 The composition ratios vary depending on the duties of Members of the Board and the ranges are indicated in the illustration*2 The ratio of restricted stock remuneration plan and performance share unit plan is about 3 to 1
*3 Under performance share unit plan, 50% is paid as cash towards tax payment*4 T he above illustration shows the ratio of remuneration composition if the “executive bonus” and “performance share unit plan” are paid at the standard amount. The
above ratios could fluctuate depending on the Company’s performance, share price, remuneration levels of benchmark companies, etc

Internal Directors and non-executive officers
Internal Directors and non-executive officers receive remuneration that consists of the “base salary” alone and excludes
performance-linked remuneration, as they are responsiblefor determining Group-wide management strategies toenhance corporate value and for fulfilling their supervisory
function: for example, monitoring the execution of mediumand long-term growth strategies, and others.

Outside Directors
Remuneration for Outside Directors is composed of “basesalary” alone and does not include performance-linked

compensation to ensure their independence. An Outside
Director who serves as the Chairperson of the Advisory
Panel on Nomination and Compensation receives remuneration at a level of the amount corresponding to theduty, in addition to the remuneration level of other Outside
Directors.

Audit & Supervisory Board Members
Remuneration for the Audit & Supervisory Board Members is
composed of “base salary” alone in light of their key responsibility for conducting audits.

Components of executive remuneration
Base salary
Executives are remunerated with a monthly base salary as
per their responsibilities. They are individually evaluatedon achievement of their performance targets throughexecution of their duties that will lead to the Company’s sustainable profit growth. Performance targets are set throughinterviews with the Group CEO at the beginning of the fiscal
year and evaluated at the end of the year. The base salary
for the following fiscal year will be set within a certain range
reflecting the individual performance evaluations. However,an individual performance evaluation is not applicable for
the Group CEO.

Executive bonus
Executive bonus for Directors who also serve as Executive
Officers will be paid as monetary remuneration reflecting
the performance of a fiscal year. Core revenue at constantcurrency, adjusted operating profit (AOP) at constant currency, adjusted operating profit on a reported basis, profit
results, and an RRP-related index, which will be used to measure the performance of the business itself, will be the key
performance indicators (KPIs) for the calculation of executive
bonuses, from the viewpoint of providing with shareholders
shared value of the performance of the business itself, whichis the foundation of sustainable profit growth, as well as theachievement rate of profit growth, and setting indices conducive to sustainable profit growth over the medium andlong terms. In calculating the amounts of executive bonuses, 15% accounts for core revenue at constant currency, 35%
for AOP at constant currency, 25% for adjusted operating
profit on a reported basis and 25% for profit. The ratio that
performance on a reported basis accounts for on the KPIs
used to determine executive bonuses has been set to 50%.
Performance-linked payout is based on the KPI achievementin the range of 0% to 190% and either -10%, 0% or +10% isadded/deducted to results depending on evaluations of the
RRP-related index. In a case where a Director who is a recipient of an executive bonus has carried out certain wrongful
behavior, the officer involved will be required to refund apart of the executive bonus already paid.

Restricted stock remuneration plan
The restricted stock remuneration plan is designed tofurther enhance shared value in the medium and longterms between the Directors who also serve as Executive
Officers (hereinafter eligible directors) and the shareholders.
Eligible directors receive monetary compensation claims
every fiscal year towards restricted shares and allocationof the Company’s common share by paying all of themonetary compensation claims in kind in accordance withJapan Tobacco Inc. Integrated Report 2022

101

MATERIALITY andSUSTAINABILITYIDENTITY

BUSINESS andSTRATEGIESFINANCIAL INFORMATION /OTHERS

GOVERNANCE

Corporate governancethe resolution of the Board of Directors (the allotment being
made from treasury shares). The Company enters into anagreement with the eligible directors with regards to theallotment of the shares. Although the restriction period isthirty years, in cases where any eligible director retires due
to expiration of the term or resigns due to reasons deemed
reasonable by the Board of Directors, from a position as
Director or any other positions separately specified by the
Board of Directors during the restriction period, the transfer
restrictions are removed on all of the allotted shares that theeligible director owns.
In the event that we acknowledge wrongful behavior as
determined by the Board or any other wrongful act by a
Director who was allotted restricted stock remuneration
plan during the restriction period, all or a part of theallotted shares are acquired by the Company without any
compensation.

Performance Share Unit Plan (PSU)
PSU is a performance-linked stock compensation systemthat aims to strengthen shared value with shareholders,to enhance company value over the medium and longterms and to commit to achieving business results over themidterm. PSU offers monetary remuneration claims and cash
to the Directors who also serve as Executive Officers during
the first year of the performance evaluation period, as performance-linked stock compensation. After a three-year performance evaluation period ends, attainment rates of numerictargets including earnings are determined following a review
by the Advisory Panel on Nomination and Compensation.
As a general rule, eligible directors receive the cash andmonetary claims after the end of each performance evaluation period. Eligible directors receive monetary remuneration
claims towards the purchase of Company shares and receive
the Company’s common shares (the allotment is made fromthe treasury shares).
We determine necessary indices to calculate the numberof shares given to eligible directors including each numerictarget used in this compensation system and performance-linked factors following a review by the Advisory
Panel on Nomination and Compensation. Profit (attributable
to the owners of the parent company) has been set as aperformance share unit plan KPI for the evaluation periods
starting in 2020 and 2021. For the evaluation period startingin 2022, the Company has decided to introduce an ESGrelated index on top of profit, in order for the Company andshareholders to seek an agreement on a mutual perspectiveof evaluating and being evaluated. The decision was madeto enact this same change for the evaluation period startingin 2023. Performance-linked payout is set to be in the range
of 0% to 200% based on the KPI (i.e., profit) achievement inboth 2020 and 2021. In 2022 and 2023, performance-linked
payout is set to be in the range of 0% to 190% based on the
KPI (i.e., profit) achievement and either -10%, 0% or +10% isadded/deducted to results depending on evaluations of the
ESG-related index.
In the event that we acknowledge wrongful behavior as
determined by the Board or any other wrongful act by a
Director during the performance evaluation period, theDirector is disqualified from receiving all or a part of the cash
and monetary claims that were planned to be paid.

PSU
KPI

Purpose/Details

Ratio

ProfitIntroduced to share attainment rate of profit growth with shareholders

100%

ESG-related index

Introduced in order for us (evaluatee) and shareholders (evaluator) to seek agreement on what is
conducive to corporate value
For 2023, indicator for evaluation will be based on efforts to realize Net-Zero, specifically, the degreeof achievement for GHG emissions reduction target.

±10%

Total amount of remuneration in 2022
Total amount by component (JPY MM)

Category

Total amount(JPY MM)

Base salary

Executive bonus

Restricted stock
remuneration

PSU

Directors (excluding Outside
Directors)

1,399

511

514

194

180

7

Audit & Supervisory Board
Members (excluding outside
members)

82

82

—

—

—

2

Outside Directors
Total

148

148

—

—

—

7

1,629

741

514

194

180

16

Notes: 1. The amount of PSU in the diagram is the amount booked as expenses for 2021
2. Executive bonus and PSU are categorized as performance-linked remuneration
3. Restricted stock remuneration plan and PSU are categorized as non-monetary compensation
4. The diagram above includes a Director who retired on March 23, 2022

Maximum amount of executive remuneration
The maximum total amount of executive remuneration for all Directors has been changed as follows with effect from 2023, as
resolved at the Ordinary General Meeting of Shareholders. The Company's Audit & Supervisory Board Members are eligible only
for base salary and the maximum amount of remuneration in total is set as 240 million yen per annum.
Internal Directors
Before revision

KPIs for executive remuneration
We have introduced indices such as one on a reported basis

conducive to medium- and long-term growth and further

and non-financial to design a more multifaceted system forstrengthen shared value with shareholders.

Base salary

Executive bonus

assessing our performance. We aim to evaluate our initiatives

Executive bonus
KPI

102

Purpose/Details

Ratio

Adjusted operating
profit at constantcurrency

Assess performance of business itself which is the foundation of sustainable profit growthProfitIntroduced to share attainment rate of profit growth with shareholders

25%Core revenue atconstant currency

Assess growth rate of top line. This KPI is introduced given significance of assessment of top-line growth
to realize medium- and long-term sustainable profit growth15%

Adjusted operating
profit on a reported
basis

Assess business performance including FX impact. This KPI is introduced to assess current
performance from a multifaceted perspective considering the balance between the constant FX basis
and reported basis

25%

RRP-related index

Assess qualitatively the implementation of strategies and attainment rate regarding RRP (ReducedRisk Products), our focus area

±10%

Japan Tobacco Inc. Integrated Report 2022

35%

Number of
eligible persons

Restricted Total amount of monetary remuneration
stock remuneration
Number of shares
plan
distributed

PSU

After revision

Within 800 million yen(160 million yen for OutWithin 1,100 milside Directors)
lion yen(100 million yen for Up to 0.3% of profit (profOutside Directors) it attributable to ownersof the parent company)
Within 210 million
yenWithin 600 million yen

Within 115,200
sharesWithin 300,000 shares

Total amount of monetary remuneration andcash for tax payment

Within 130 million
yen

Up to the amountobtained by multiplying fixed number ofbase share units*1 (upto 200,000 shares) withshare price at offering*2

Number of shares
distributed

Within 76,800
sharesWithin 100,000 shares

OutsideDirectors

Executive
Officers

Non-executive
officers

O

O

O

O

—

—

O

—

—

O

—

—

*1 Number of base share units (determined by the Board of Directors based on the duties, etc., of respective eligible Members of the Board) x Offering ratio (within arange of 0-200% based on the degree of achievement of targets)*2 A
 fter the performance evaluation period ends, based on the closing price of the ordinary shares of the Company on the TSE on the preceding business day ofthe date of the resolution by the Board of Directors concerning the allotment of the ordinary shares of the Company under the plan (or the closing price on theimmediately preceding business day, if transactions are not executed on that day), the amount shall be determined by the Board of Directors of the Company
within the range not particularly favorable to eligible Members of the Board

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