Our compliance system
The JT Group Compliance Committee plays a significant role in the JT Group governance. Its aim isto ensure that all directors and employees fully comply with applicable laws, our Articles ofIncorporation, cultural expectations, and other compliance standards. The roles of the Compliance
Committee are as follows:■

Hold meetings where compliance-related matters are reviewed and discussed to report directly
to the Board of Directors■

Appoint an Executive Officer responsible for the JT Group Compliance■

Discuss the Annual Compliance Program and Annual Compliance Action Plans■

Report on the progress of compliance initiatives to the Board of Directors

The head of the JT Group Compliance Committee is the Chairperson of the Board, and theCommittee includes external experts as key members. The Committee meets regularly every year.
Among the matters discussed are initiatives to promote compliance throughout the Group, which
will be executed based on the Annual Compliance Action Plan. The Action Plan includes
maintenance/enhancement of compliance programs, taking action on Company priority issues,
carrying out trainings and seminars, handling the Reporting Concerns Mechanism andimplementing the Compliance Promotion Month. The Compliance Promotion Month takes place inJune every year. The aim is to raise employees' awareness of this important subject, throughinformation sessions in every workplace, e-learning, and seminar for managers in our headquarters.
The Compliance Office administers our compliance system, promotes compliance and endeavors to
identify deficiencies. It also conducts various training programs and other educational activities for
directors and employees in the aim of more effective compliance. Employees can report any
violations or consult about possible violations of the JT Group Code of Conduct by calling internalor external hotlines. The Compliance Office is responsible for investigating reported cases, and in
the case of proven violations, each work division must implement corrective measures. Serious
problems are referred to the JT Group Compliance Committee for review and, as necessary,
reported to the Board of Directors.
Similarly, our international tobacco business has its own compliance system, the Compliance
Function. This function is led by a Chief Compliance Officer, responsible for promoting andenhancing the ethical culture of the business. The Chief Compliance Officer guides and supports
employees with various compliance processes and trainings. Employees are supported to makedecisions in full compliance with all applicable laws and internal policies to mitigate reputational,
legal and financial risks for our international business. Employees can report any violations of theCode of Conduct through the internal reporting system known as ''Your Voice'', available to all
employees and all business partners. Serious cases of Code of Conduct violations are referred to
the Business Ethics Committee for review and investigation and, where necessary, shared with JT
Compliance.

Related links
Our
responsibilities
to stakeholders

Our compliancesystemOur Code of
Conduct

Compliance risk
management

Copyright© Japan Tobacco Inc. All rights reserved.

Our Code of Conduct
Our Code of Conduct form the foundation of our business ethics.
Reflecting our commitment to the 4S model, they outline our
responsibilities towards our consumers, our shareholders, ouremployees, and the wider society. Our Reporting Concerns Mechanism
allows employees and business partners to report concerns in aconfidential manner. We take a zero-tolerance approach to bribery,corruption, and other financial crime, and we actively manage risks
related to these areas.
Employees are trained on the Code, and there are communication
channels for employees to report concerns about potential breaches orviolations.
Besides the JT Group Code of Conduct, our international tobacco
business and Torii Pharmaceutical have developed a version of the Codeof Conduct to reflect the needs of their operations.

The JT Group Code of Conduct
JTI Code of Conduct
The JT Group Supplier Standards

Living our Code of Conduct
Our Code of Conduct guides us to conduct business ethically and be a responsible corporate
citizen. We ensure that they are communicated effectively throughout the entire business byrunning various training courses for employees.
Our employees sign an acknowledgment form to show their commitment to following our Code of
Conduct. This can be done either online or face-to-face.
We continuously review and update our Code of Conduct to improve our standards, and the latest

revision took place in 2018. In our international tobacco business, we have digitalized the Code into
an accessible, easy-to-read document, including a decision-making guide to assist employees inmaking the right choices. It is now available in 40 languages, and we provide printed booklets for
those with limited internet access.

Training and communication
We continued to provide training on the Code of Conduct to our employees online and face-to-facein 2020.
In our Japanese operations, 99.8% of employees completed the online courses *C.
In our international tobacco business, we continue our effort to ensure the highest standard acrossour business operations. We use an interactive Code of Conduct video in multiple languages toguide our employees to make the right choices. For employees without computer access, we
provide face- to- face training in local languages. As part of our annual global business ethics
behavior training, we rolled out a global harassment training video. This addressed various forms ofharassment and guided employees on how to address this sensitive issue.

Compliance and Employee Engagement Survey
In order to better implement compliance in our workplace, each department in our Japanese
operations makes Compliance Action Plans every year. These Action Plans are rolled out on a yearlybasis, which means that we base the plans on the results of the compliance survey and the statusof our initiatives in the previous year.
We conduct a compliance survey every year. In 2020, 95.5% of employees completed the survey.
The survey outcomes are analyzed by the JT compliance office, and reported to the head of eachdepartment while ensuring confidentiality. Next, the JT compliance office develops an AnnualCompliance Action Plan based on the results of the analysis. The relevant departments thenintroduce a remediation plan to address any issues raised, using quantitative targets to evaluate theeffectiveness of the plan.

In our Japanese operations, the 2019 survey results showed that harassment* and undeclared
overtime work were the most important concerns. With these results in mind, we provided support
for our subsidiaries to comply with the Work Style Reform Act and Harassment Law.
In 2020, the survey results showed that information management and harassment are now themost important issues. We will continue to make every effort to improve the situation by providing
employees with training in these areas.

In our international tobacco business, we
cover the subject of compliance in our
Employee Engagement Survey every three
years. The most recent survey indicated that
employee understanding of the Code of
Conduct was increasing. The next Employee
Engagement Survey is scheduled for 2021.

* Harassment includes sexual harassment andbullying.

Reporting concerns
Across the JT Group, each of our operatingcompanies has specially trained members
who handle compliance matters. If an
employee is concerned about a potential
violation of our Code of Conduct, they can* In our Japanese operations, we distribute aReporting Concerns Booklet to all employees withdetailed information about the process for reporting
concerns.

contact their line manager, HR lead, or amember of the compliance team. Employees
in Japan receive a booklet explaining theprocess for reporting concerns. We also
provide an external concern-reporting
service, run by an independent provider andavailable 24/7. Every reported concern andinvestigation report are treated on a strictly
confidential basis, and retaliation against
anyone reporting a concern will not betolerated.
JT reporting concerns (for business
partners)
JT reporting concerns*
JTI reporting concerns

We believe that everyone should be able to raise concerns and have their voice heard, even if they
do not have access to a company computer and/or the company network. That’s why we ensure
secure access to reporting system for all of our employees, at all times and from anywhere.
We offer multiple communication channels for employees, customers, and business partners to
confidentially raise concerns about potential violations of our Code of Conduct or policies. We
review all concerns raised, launch investigations as needed, and take appropriate corrective actions.
Employees are informed about our Reporting Concerns Mechanism through various channels,
including the JT Group intranet. In our Japanese operations, the Mechanism is available in four
languages (Japanese, English, Vietnamese, and Nepalese) to meet the needs of our diverse
workforce.
Any concerns are then dealt with by specially trained contact persons, who all follow a mandatory
face-to-face training course.
In the final quarter of 2020, our international tobacco business upgraded its reporting concerns tool,
introducing a new channel for raising concerns through a voice messaging system. Together withthe existing email system, this makes it easier for our employees and business partners to reportconcerns of misconduct. The tool is available in more than 70 languages.
In 2020, we received 668 reports across the JT Group. In the case of proven violations of our Codeof Conduct, we took appropriate action in the form of dismissal, verbal or written warnings, financial
penalties, or other measures.

*There were no cases related to anti-competitive behavior for the past three years.

Related links
Our
responsibilities
to stakeholders

Our compliancesystemOur Code of
Conduct

Compliance risk
management

Copyright© Japan Tobacco Inc. All rights reserved.

Compliance risk
management
We make every effort to ensure that all of our business operations are carried out in an appropriate
way, and that we focus on compliance risk management to maintain our stakeholders’ trust.
In our Japanese domestic tobacco, pharmaceutical, and processed food businesses, every division
is required to assess their compliance risks and submit action plans to address any risks identified.
A compliance survey is conducted every year and each organization incorporates the results into
their action plan.

Anti-bribery and corruption
With operations spanning the world, some ofour businesses are conducted injurisdictions with a high prevalence ofbribery and corruption. Our Code of Conduct
clearly prohibit bribery and forbid corrupt
practices in any form. Taking into accountlegislation such as the Unfair Competition
Prevention Act of Japan, the U.S. Foreign
Corrupt Practices Act, the U.K. Bribery Act,and anti-bribery laws in China, we haveintroduced the JT Group Anti-Bribery Policy.

We take a zero-tolerance approach to corruption and bribery, and all executives and employees
must respect and comply with the JT Group Anti-Bribery and Corruption Policy. Our training courses
help us to reinforce this policy. We run an e-learning course on anti-bribery and corruption every two
years. The next one will take place in 2021.
In our international tobacco business, employees in our acquisitions are trained in the first 12

months. Anti-bribery and corruption are also covered in the training we provide locally for
employees as a part of our general Code of Conduct training.
The JT Group Code of Conduct
JTI Code of Conduct
The JT Group Anti-Bribery Policy

Gifts, hospitality, and entertainment
Our internal policies and procedures help to prevent bribery and to ensure an appropriate level ofexchange of gifts, hospitality, and entertainment, which must be transparent and reasonable, andmust respect local regulations. We therefore require all employees in our Japanese operations toseek approval for anything they receive or wish to give. To ensure that compliance is well-embedded
within the organization, we conduct regular training and run communication campaigns across the
JT Group.
In our international tobacco business, where possible, we require all employees to obtain approval
for the Gift, Hospitality and Entertainment policy before offering or accepting any GHE. To ensurecompliance with every relevant laws and regulations, and to prevent bribery or a conflict of interest,
all exchanges with non-governmental third parties above US$250 must be approved. For
government and public officials, all requests, regardless of the amount, have to be approved. The
number of gifts, hospitality, and entertainment requests sent for approval in 2020 was 268, vs. 632
in 2019.

Anti-competitive behavior
Compliance with competition laws is covered by our Code of Conduct, which require employees tocompete fairly in all markets.
Our international tobacco business has a policy with detailed guidelines in place to ensure thatbusiness operations are conducted fairly and in compliance with competition laws, wherever we dobusiness. The policy provides guidance for employees on how to conduct business in a compliant
and ethical manner. For example, all activities and strategic decisions must be carried out
independently of our competitors.
Our customers must be free to make their own business decisions concerning their customers andhow they compete in the market. Employees in our international tobacco business are required toattend regular training on compliance with competition laws and our policy.

Preventing financial crime
The JT Group does not tolerate any form of financial crime. In our international tobacco business,
we perform policy controls and provide program training to our employees. We also publish
communications on the subject regularly. The global policy sets out principles and guidelines toprevent employees from being involved in any form of financial crime, including money laundering,tax evasion, and facilitating tax evasion.

Tax compliance
The JT Group Tax Policy outlines our approach to tax compliance, tax risk management, theutilization of external tax advisors, and our relationship with tax authorities. Read more on
Tax practices.

Related links
Our
responsibilities
to stakeholders

Our compliance

Our Codes ofCompliance risk

systemConductmanagement

Copyright© Japan Tobacco Inc. All rights reserved.

Tax practices
In accordance with our responsibilities to all stakeholders in our 4S model, we are fully committed
to paying our fair share of taxes within both the letter and spirit of local laws. This commitment
ensures that our tax affairs remain transparent and sustainable on a long-term basis; we therefore
do not engage in aggressive tax planning or tax avoidance schemes. We never use legal entities,
secrecy jurisdictions or tax havens for tax purposes only, nor do we undertake any transactions
whose sole purpose is to reduce our tax contribution.
This approach is spearheaded by our experienced in-house global tax team. The team ensures thatall departments and geographies adhere to our global tax policy and that appropriate expert advice
is sought on all commercial and financial decisions. Furthermore, the global tax team provides
guidance to other departments, and issues detailed annual reports showing how we meet local tax
obligations. In addition, experienced local tax resources are embedded in the finance teams in our
key tax jurisdictions.
When taking operational or financial decisions impacting the JT Group or its stakeholder groups,
our management takes into serious consideration the impact on tax affairs, to ensure compatibility
with our 4S model and global tax policy.
Tax legislation and practice have become increasingly complex. This complexity brings inherent tax
risks. We maintain proactive communication with tax authorities in order to enhance theirunderstanding of the JT Group business and resolve matters in an open and constructive mannerwhere disputes arise with regard to the interpretation and application of tax legislation or to improvethe efficiency of tax compliance.
In 2016, the U.K. introduced a law that requires large U.K. businesses to publish an annual tax
strategy which sets out, among other things, the approach towards tax planning and how tax risk ismanaged. Our tax strategy and global tax policy, which are on our website, describe our statement
on U.K. tax strategy in more detail.
JTI UK Tax Strategy

Our tobacco business is subject tosubstantial taxation, including tobacco
excise taxes, which is paid at the point ofsale and which we pass on to governments.
Out of the 7,555,062 million Yen grossrevenue we generate, 65% will flow back tosociety through taxation which includes
income taxes. In 2020, we accrued
4,821,891 million Yen in tobacco excise
taxes, amounting to 64% of global revenues;
and 111,142 million Yen in current income
taxes (corporate tax), accounting for afurther 1% of revenue.

Read more about the JT Group Tax Policy.

Related links
Governance andcompliance

Our policies

Tax practices

Risk

Information

management

security

Copyright© Japan Tobacco Inc. All rights reserved.

Information security
Our information security risks relate to all the valuable data we hold. This not only includes details
about our customers, consumers, suppliers, and employees, but also information on our businessstrategy and our engineering and experimental data, including results from research. The danger isthat this important information could be stolen, leaked, or damaged in some way.
In order to minimize this risk, we are committed to continuously enhancing our information security
framework. We understand the importance of awareness and the role every employee can play inkeeping our data safe. We ensure that our regularly updated policies and procedures are sharedwith and understood by employees, as education is a key component of our broader cyber defense
strategy.

In 2020, 99.7% of employees in ourJapanese operations received information
security training. Our international tobacco
business has a bespoke i-secure program,which was established to promote a cultureof cyber security awareness both at home
and at work. The annual learning program is
executed in 100% of locations worldwide,
and key behavior indicators allow us toconstantly measure the effectiveness of ourprogram. This learning programsupplements our technological defenses
against cyber-crime, by ensuring that all
employees understand how to better protect
our information.

As we increasingly move towards the use of cloud services for data processing, we are reevaluating risk and strengthening our security defenses. We continually assess the threat to ourCompany using a variety of security intelligence methods. The JT Group's vision to become one of
the leading global companies will require technological advances, which in turn bring new andcomplex security challenges.
It is the role and responsibility of Information Security to constantly adapt to the ever-changing
technical landscape. We are making great efforts to continually improve the security of all areas of
the business, with a focus on global collaboration to ensure that the best security practice anddefense technologies are used across the JT Group.

JTI - Information Security

Related links
Governance andcompliance

Our policies

Tax practices

Risk

Information

management

security

Copyright© Japan Tobacco Inc. All rights reserved.

Risk management
Our group operates a diverse business which includes tobacco, pharmaceuticals, and processed
food. We also operate on a global basis with offices in Europe, CIS, Africa, and the Middle East,
among others. Due to this diversity and as we operate in a changing business environment, we areexposed to various risks.
We look at emerging risk such as increase in cyber/IT security risk, risk of natural disasters arisingfrom climate change or increase in political risk. We examine financial and business risks such as
the effect of currency fluctuation or impact of regulatory developments. Our approach to addressing
key risks is detailed in our latest integrated report under 'Risk Factors'. We also address compliancerisk as we strive to ensure all of our business operations are carried out with integrity.
Corporate governanceIntegrated report

Risk management system
Our risk management system is based on four pillars – Identify, Assess, Plan, and Monitor. This
circular approach ensures a systematic approach to risk management and allows us to be
conscious of, and appropriately address, more complex, wide-ranging risk factors. The JT GroupCEO appoints a person who oversees the comprehensive review of all risks related to our Group(hereinafter ‘risk management officer’) amongst senior vice presidents.
■

Identify
Our risk management officer is responsible for the comprehensive review of all risks related to
the JT Group.

■

AssessSenior vice presidents perform a risk impact assessment under their own responsibilities andevaluates all of the risks to identify the key risks for our business operations. The key risks
identified are reported to the risk management officer. The risk management officer determines
the key risks to our Group are based on reports issued by each business division, then reports
these to the JT Group CEO.

■

Plan
Senior vice presidents develop an action plan to address the JT Group’s key risks. The plans arereported to the risk management officer and CEO.

■Monitor
We continue to monitor the implementation of our action plans in every relevant division. Senior
vice presidents report progress to the risk management officer and CEO periodically.

Our key financial and business risks are considered by the Board of Directors on a quarterly basis.
Internal audits are carried out by a division independent of the business, which reports directly to
the JT Group CEO.

Crisis risk management
We have a crisis management and disaster response protocol, whereby a project team, headed by
the JT Group CEO, can be swiftly called upon in times of crisis or disaster.

Compliance risk management
The JT Group Compliance Committee plays a significant role in the JT Group governance. Its aim isto ensure that all directors and employees fully comply with applicable laws, our Articles ofIncorporation, cultural expectations, and other compliance standards. The head of the JT Group
Compliance Committee is the Chairman of the Board, and the Committee includes external experts
as key members.
We make every effort to ensure that our business operations are carried out in an appropriate way,
and to gain a high level of trust and confidence from our stakeholders.
Group compliance
Information security
Tax practices

Enterprise risk management
We recognize the need for a Group-wide global risk management framework: this would allow us tobe conscious of, and appropriately address, more complex, wide-ranging risk factors. We areestablishing more systematic ways to analyze and respond to risk factors surrounding our Groupand our stakeholders, with a view to further strengthening our risk governance.

Related links
Governance andcompliance

Our policies

Tax practices

Risk

Information

management

security

Copyright© Japan Tobacco Inc. All rights reserved.