[This is an English translation prepared for the convenience of non-resident shareholders. Should there be any
inconsistency between the translation and the official Japanese text, the latter shall prevail.]

Securities Code: 2914
February 29, 2016
To Our Shareholders
Mitsuomi Koizumi
President, Chief Executive Officer andRepresentative Director

Japan Tobacco Inc.
2-1, Toranomon 2-chome, Minato-ku, TokyoNOTICE OF CONVOCATION OF
THE 31ST ORDINARY GENERAL MEETING OF SHAREHOLDERS
You are cordially invited to attend the 31st Ordinary General Meeting of Shareholders of Japan Tobacco Inc.
(“JT” or the “Company”) to be held as set forth below.
If you cannot attend the meeting, you may exercise your voting rights in written form or byelectromagnetic means including the Internet. Please see the “Reference Documents for the General
Meeting of Shareholders” hereinafter described and exercise your voting rights by 6:00 p.m., on
Tuesday, March 22, 2016, by returning to us by that time the Voting Rights Exercise Form enclosed
herewith indicating whether you are for or against each of the items, or by accessing the web-site
designated by us for the exercise of voting rights (http://www.evote.jp/).
Particulars
1. Date and Time of the Meeting: Wednesday, March 23, 2016 at 10:00 a.m.
2. Place of the Meeting:

The Prince Park Tower Tokyo
Second basement, Ball Room
8-1, Shibakoen 4-chome, Minato-ku, Tokyo

3. Purpose of the Meeting:
Matters to be Reported:

1. Report on the Business Report, the Consolidated Financial Statements,
and the Accounting Auditors’ Report and JT’s Audit & Supervisory
Board Report on the Consolidated Financial Statements for the 31st
Business Term (From January 1, 2015 to December 31, 2015)
2. Report on the Non-Consolidated Financial Statements for the 31st
Business Term (From January 1, 2015 to December 31, 2015)

Matters to be Resolved:
Item 1:
Item 2:Item 3:Item 4:

Distribution of Surplus
Partial Amendment to the Articles of Incorporation
Election of Seven (7) Members of the Board
Election of One (1) Substitute Audit & Supervisory Board Member

4. Other Decisions on the Convocation of the Meeting(1) If the voting right is exercised both by posting the Voting Rights Exercise Form and via the Internet,
only the exercise of the voting right via the Internet shall be valid.
(2) If the voting right is exercised more than once via the Internet, only the last exercise of the voting rightshall be valid.

-1-

Information on Matters Posted on JT’s Web-site
1. Notes to Consolidated and Non-Consolidated Financial Statements are posted on our web-site(https://www.jti.co.jp/) in accordance with laws and regulations, and the provision in Article 17 of the
Articles of Incorporation. Therefore, they are not included in this Notice of Convocation of the 31st
Ordinary General Meeting of Shareholders.
In addition to documents stated in the reference documents attached to the Notice of Convocation of the
31st Ordinary General Meeting of Shareholders, Notes to Consolidated and Non-Consolidated Financial
Statements posted on the Company’s web-site are included in Consolidated and Non-Consolidated
Financial Statements audited by Audit & Supervisory Board Members and the Accounting Auditors in thecourse of preparing Audit Report and Accounting Auditors’ Report respectively.

2. If there is any amendment to the Reference Documents for the General Meeting of Shareholders, Business
Report (available in Japanese), or Non-Consolidated and Consolidated Financial Statements (available inJapanese), it will be published on our web-site (https://www.jti.co.jp/).

JT’s web-site

https://www.jti.co.jp/

Guidance to our shareholders attending the General Meeting of Shareholders* For those attending, please bring this Notice of Convocation of the 31st Ordinary General Meeting of
Shareholders with you.
* It is expected to be crowded immediately before the meeting begins. If meeting room No.1 becomes full,
you will be ushered to meeting room No.2. We ask that you come to the meeting at your earliest
convenience.
* In case an agent attends the meeting, your agent must bring a letter of attorney along with the Voting Rights
Exercise Form. Only one other shareholder who can exercise the voting rights at the 31st Ordinary General
Meeting of Shareholders is supposed to be eligible to serve as your agent.
* Please note that the meeting will be conducted in Japanese only. An interpreter, including a sign language
interpreter, may accompany you. If you would like to have an interpreter accompany you, please tell so at
the reception desk. It is also possible for us to arrange a Japanese sign language interpreter for you. If you
are in need of this service, please inquire us in writing by March 15 (Tuesday) (your letter of inquiry mustreach us by this date).
* The Company plans to give gifts to the shareholders who attend on the day. Please note, however,shareholders will receive just one package, regardless of how many Voting Rights Exercise Forms are held.

-2-Instructions for Exercising Your Voting Rights
Exercise of voting rights at the Company’s General Meeting of Shareholders is shareholders’ important right.
Please by all means exercise your voting rights.
There are three methods to exercise your voting rights as indicated below.

A．

Attend the meeting

B．

Post the Voting Rights
Exercise Form

C．

Exercise the Voting Rights
via the Internet

Please present the Voting Rights Exercise Form at thereception desk on arrival at the meeting. (Not required toplace a seal.)
Date and time of the General Meeting of Shareholders:
10:00 a.m., on Wednesday, March 23, 2016
Please post the Voting Rights Exercise Form indicating
whether you are for or against each of the items.
Exercise due date:
To be returned to us no later than 6:00 p.m., on Tuesday,
March 22, 2016
Please access the Voting Rights Exercise Web-site(http://www.evote.jp/) and indicate whether you are for oragainst each of the items.
Exercise due date:No later than 6:00 p.m., on Tuesday, March 22, 2016

Guide to filling in the Voting Rights Exercise Form
Please indicate for or against about each item.
Items 1, 2, and 4
When you are for the proposed item, mark 〇 in the “for” box, and when you are against the item,
mark 〇 in the “against” box.
Item 3
When you are for all of the proposed persons in the item, mark 〇 in the “for” box, and when you
are against all in the item, mark 〇 in the “against” box.
If you are against certain candidates, mark 〇 in the “for” box, and also write the candidate number foreach candidate you are against inside the parentheses.
* For those attending, procedures for posting the Voting Rights Exercise Form or exercising your voting
rights via the Internet are unnecessary.

-3-Instructions for Exercise of the Voting Rights via the Internet

For the exercise of the voting rights via the Internet, please access the designated web-site for the exercise of
the voting rights (“Voting Rights Exercise Web-site”), and exercise your voting rights after confirming theitems below.
If you have any enquiries, please contact “Enquiries on systems, etc. (Help Desk)” provided below.
For those attending, procedures for posting the Voting Rights Exercise Form or exercising your voting rights
via the Internet are unnecessary.

Particulars
1. Voting Rights Exercise Web-site
Voting Rights Exercise
Web-site

http://www.evote.jp/(1) The exercise of the voting rights via the Internet is available only by accessing the Voting Rights
Exercise Web-site from your computer or smartphone. (However, you will not be able to access theweb-site from 2:00 a.m. to 5:00 a.m. each day during the exercise period.)(2) If you use firewalls, etc. for the Internet connection, antivirus programs or a proxy server, you may not
be able to access the web-site depending on your Internet environment.
(3) The exercise of the voting rights via the Internet is only available until 6:00 p.m. on Tuesday, March 22,
2016. We appreciate it if you exercise your voting rights at your earliest convenience.

2. Exercise of the Voting Rights via the Internet(1) On the Voting Rights Exercise Web-site, please indicate whether you are for or against each of theitems following the directions on the web-site using the “Log-in ID” and “Temporary Password”
described in the Voting Rights Exercise Form.
(2) In order to prevent unauthorized access (web spoofing) or alteration of the voting by non-shareholders,
you will be asked to change your “Temporary Password” on the Voting Rights Exercise Web-site.
(3) JT will notify you of the new “Log-in ID” and “Temporary Password” at each convocation of theGeneral Meeting of Shareholders.

3. In the Event Voting Rights Are Exercised More than Once
(1) If the voting right is exercised both by posting the Voting Rights Exercise Form and via the Internet,
only the exercise of the voting right via the Internet shall be valid.
(2) If the voting right is exercised more than once via the Internet, only the last exercise of the voting rightshall be valid.

4. Fees Incurred When Accessing the Voting Rights Exercise Web-site
Each shareholder shall bear any fees for accessing the Voting Rights Exercise Web-site (Internet provider
connection fees, communications fees, etc.).

-4-

If you have any enquiries, please contact “Help Desk” shown below.
Mitsubishi UFJ Trust and Banking Corporation
Corporate Agency Division
Enquiries on systems, etc.

Help Desk
Tel: 0120-173-027 (Japanese-language only)(Business hours: 9:00 to 21:00, Toll-free)

To institutional
investors

JT participates in the electronic voting rights exercise platform operated
and administered by ICJ, Inc.

-5-

REFERENCE DOCUMENTS
FOR THE GENERAL MEETING OF SHAREHOLDERS
Item 1: Distribution of Surplus
The Company has prioritized business investments for sustainable future profit growth in the mid- to longterm, in line with its management principles, and seeked to improve the attractiveness of our shareholder
returns at the same time by benchmarking global FMCG*1 companies in a variety of sectors.
In accordance with this policy, year-end dividends for the 31st Business Term will be paid as described*2
below. This equates to a consolidated dividend payout ratio of 53.2% (on a continuing operations basis )which exceeds the target of 50% that was set in the Business Plan 2015.
(1) Type of assets to be paid as dividends:
Cash(2) Allotment of assets to be paid as dividends and their aggregate amount:¥64 per share of Common Stock of JT

Aggregate amount: ¥114,605,732,416

Together with the interim dividends of ¥54 per share paid in September 2015, the annual dividends forthe 31th Business Term will be ¥118 per share, a ¥18 increase year-on-year.
(3) Effective date for distribution of surplus:
March 24, 2016
*1FMCG: Fast Moving Consumer Goods (daily consumer goods)*2 For the current fiscal year, as a result of the transfer of shares the Company held in subsidiaries conducting thevending machine operation business and the termination of the manufacture and sale of JT beverage products, the“Beverage Business” has been classified as discontinued operations, and continuing operations and discontinued
operations are presented separately.

Reference: Trends in dividend per share and consolidated dividend payout ratio*1,2,3*1 The consolidated dividend payout ratio of 53.2% for the current fiscal year is on a continuing operations
basis. The consolidated dividend payout ratio with discontinued operations included is 43.6%.
*2 Consolidated dividend payout ratio for the fiscal year ended March 31, 2011 and prior fiscal years arecalculated in J-GAAP based on earning before goodwill amortization. The fiscal year ended March 31,
2012 and fiscal years thereafter are calculated in IFRS.
(Consolidated dividend payout ratio for the fiscal year ended December 31, 2014, a transitional period, isbased on the nine month period from April 1 to December 31)*3 A 200 for 1 share split was effectuated as of July 1, 2012. The above numbers are calculated on theassumption that the share split was retroactively effective.

-6-

Reference

Shareholders

Consumers

Society

Employees

Management Principles
We will balance the interests of consumers, shareholders, employees and wider
society, and fulfill our responsibilities towards them, aiming to exceed their
expectations.

In accordance with the 2016 Business Plan, the Group will continue to pursue mid to high single-digit*1
annual average growth rate over the mid- to long-term with an adjusted operating profit growth (at constantrates of exchange)*2.
The Group's management resources allocation policy and returns to shareholders policy are as follows.

Management resources allocation policy
Execute management resources
allocation, based on the 4S
model that underlies theGroup's management
principles.

・Prioritize business investments that lead to sustained profit
growth over the mid- to long-term
・ Emphasize a balance between profit growth throughbusiness investments and returns to shareholders

Returns to shareholders policy
・Aim for stable and continuous growth in dividend per share・Consider the pros and cons of implementing own sharespurchases, taking into account the mid- to long-term outlook
for the business environment and financial conditions.
・ Continue to monitor trends in returns among global
FMCGs*4
mid to high single-digit: mid to high single-digit-percentage
Adjusted operating profit is calculated by deducting amortization cost of acquired intangibles associatedwith acquisitions and adjustment items (income and costs) from operating profit (loss). Adjustment items(income and costs) include impairment losses on goodwill and restructuring-related income and costs.
Adjusted operating profit growth rate (at constant rates of exchange) is a financial measurement that
excludes foreign exchange effects by converting and calculating adjusted operating profit for the current
period in the international tobacco business using the foreign exchange rates of the same period in theprevious fiscal year.
As its financial policy, JT will maintain a strong financial base that secures stability in case of changes inbusiness environment such as economic crises and flexibility enabling expeditious responses to business
investment opportunities.
A Fast-Moving Consumer Goods (daily consumer goods) company is a company that achieves a highgrowth business by adopting a stakeholder model.

Improve returns to shareholders
in agreement with mid- to longterm profit growth, while
maintaining a firm financial
base*3
*1
*2

*3

*4

-7-

Item 2: Partial Amendment to the Articles of Incorporation
1. Reasons for the Proposed Amendments(1) The purpose of Proposed Amendment is to build an optimal framework for executing business by
allowing the selection of the President and Executive Vice President not only from among Members of
the Board, but also from among Executive Officers who are not Members of the Board by amending
Articles 23 of the Articles of Incorporation. In conjunction with this, other necessary amendments areproposed regarding provisions for convening a General Meeting of Shareholders or a Board of Directors
and the chairing of such meetings (Articles 15, 16, and 24 of the Articles of Incorporation).
(2) The Company introduced the Executive Officer System in 2001. In conjunction with the above
amendments, a certain provision (Article 27 of the Articles of Incorporation) will be newly created toclarify the selection method and roles of Executive Officers, and the title of the Chapter containing thesaid article will be revised accordingly.
(3) In light of the fact that the Act Partially Amending the Companies Act of the Companies (Act No.90 of
2014) enacted on May 1, 2015, allowing the execution of an agreement on limitation of liability withMembers of the Board who do not execute business and Audit & Supervisory Board Members(previously allowed solely with Outside Directors and Outside Audit & Supervisory Board Members),
amendments of Articles 26 and 31 of the Articles of Incorporation are proposed to enable the said
Members of the Board and the said Audit & Supervisory Board Members to fully perform their expectedroles, and to allow the Company to secure appropriate personnel from a larger pool of resources whether
inside or outside the Company.
In addition, the Audit & Supervisory Board Members have unanimously agreed to the amendment to theprovision on limitation of liability for Members of the Board (Article 26 of the Articles ofIncorporation).
(4) In connection with the above amendments, subsequent numbering of Articles will be adjusted
accordingly.

2. Proposed amendments
Proposed amendments are as follows.
(Underlined parts denote amendments)
Current Articles of Incorporation

Proposed Amendments(Convocation)(Convocation)

Article 15

Article 15

1. The ordinary General Meeting of Shareholders of
the Company shall be convened in March of every
year and the extraordinary General Meeting of
Shareholders may be convened at any time when
deemed necessary by the President pursuant to theresolution of the Board of Directors.

1. The ordinary General Meeting of Shareholders of
the Company shall be convened in March of every
year and the extraordinary General Meeting of
Shareholders may be convened at any time when
deemed necessary by the Member of the Board
previously appointed by the Board of Directors
pursuant to the resolution of the Board of
Directors.

2. If the President is prevented from so acting, one ofthe other Members of the Board shall convene theGeneral Meeting of Shareholders in his/her placein the order previously determined by the
resolution of the Board of Directors.

2. If the Member of the Board appointed pursuant to
the preceding paragraph is prevented from so
acting, one of the other Members of the Board
shall convene the General Meeting of
Shareholders in his/her place in the orderpreviously determined by resolution of the Boardof Directors.

3. The General Meeting of Shareholders may be
convened at the location of the Company's head
office or its neighborhood.

3.

-8-

(Same as current version)

Current Articles of Incorporation

Proposed Amendments(The Chairman of General Meeting of Shareholders)(The Chairman of General Meeting of Shareholders)

Article 16

Article 16

1. The President of the Company shall act aschairman at the General Meeting of Shareholders.

1. The Member of the Board previously appointed by
the Board of Directors shall act as chairman at theGeneral Meeting of Shareholders.

2. If the President is prevented from so acting, one ofthe other Members of the Board shall act on
his/her behalf in the order previously determinedby the resolution of the Board of Directors.

2. If the Member of the Board appointed pursuant to
the preceding paragraph is prevented from so
acting, one of the other Members of the Board
shall act on his/her behalf in the order previously
determined by the resolution of the Board of
Directors.

Chapter 4 Members of the Board and Board of
Directors

Chapter 4 Members of the Board, Board of
Directors, Etc.

(Representative Director and Executive Director)(Representative Director, Executive Director, Etc.)

Article 23

Article 23

1. The Company shall elect one President and, as theneeds arise, one Chairman of the Board, and acertain number of Executive Vice Presidents, fromamong the Members of the Board, by the
resolution of the Board of Directors.

1. The Company shall elect one President and, as theneeds arise, a certain number of Executive Vice
Presidents, from among the Members of the Boardand the Executive Officers, by the resolution of theBoard of Directors.

2. The President has the authority to represent theCompany.

2. The Company shall elect, as the needs arise, one
Chairman of the Board from among the Membersof the Board by the resolution of the Board of
Directors.

3. In addition to the President, the Company may
appoint by the resolution of the Board of Directors
a certain number of Members of the Board who
have the authority to represent the Company.

3. The Company shall appoint by the resolution of
the Board of Directors a certain number ofMembers of the Board who have the authority torepresent the Company.

4. The President presides, oversees and manages thebusiness of the Company in accordance with theresolution of the Board of Directors.

4.

(Same as current version)

5. Executive Vice Presidents shall execute thebusiness of the Company as assistants to the
President.

5.

(Same as current version)

6. If the President is prevented from performing
his/her duty, the other Members of the Board shallact on his/her behalf in the order previously
determined by the resolution of the Board of
Directors.

6. If the President is prevented from performing
his/her duty, the other Members of the Board or
Executive Officers shall act on his/her behalf inthe order previously determined by the resolutionof the Board of Directors.

(Board of Directors)(Board of Directors)

Article 24

Article 24

1. The President shall convene the meeting of theBoard of Directors and shall act as chairman of themeeting.

1. The Member of the Board previously appointed by
the Board of Directors shall convene the meetingof the Board of Directors and shall act as chairmanof the meeting.

-9-Current Articles of Incorporation

Proposed Amendments

2. Notwithstanding the provision of the preceding
paragraph, any meeting of the Board of Directors
shall be convened by the Chairman of the Board ifsuch officer is appointed, and the Chairman of theBoard shall act as chairman thereof; provided,
however, that if the Chairman of the Board isprevented from so acting, the President shallconvene the meeting and act as its chairman.

2. Notwithstanding the provision of the preceding
paragraph, any meeting of the Board of Directors
shall be convened by the Chairman of the Board ifsuch officer is appointed, and the Chairman of theBoard shall act as chairman thereof; provided,
however, that if the Chairman of the Board isprevented from so acting, the other Members of
the Board shall convene the meeting and act as its
chairman in the order previously determined by
the resolution of the Board of Directors.

3. For the convocation of the meeting of the Boardof Directors, a notice thereon shall be given atleast three (3) days prior to the date of the meetingto each Member of the Board and each Audit &Supervisory Board Member; provided, however,that such period may be shortened when the
convocation of the meeting is urgent.

3.

(Same as current version)

4. If a Member of the Board makes a proposal on
any agenda concerning the objectives of resolutionof the Board of Directors and all Members of theBoard who may participate in the voting for suchagenda unanimously agree to his/her proposal inwriting or by electromagnetic records, theCompany shall deem that such proposal is adopted
by the resolution of the Board of Directors unless
objected by a Audit & Supervisory Board Member.

4.

(Same as current version)

5. Other matters in respect of the Board of Directors
shall be in accordance with the Regulations of theBoard of Directors adopted by the resolution of theBoard of Directors.

5.

(Same as current version)(Limitation of Liability for Members of the Board)(Limitation of Liability for Members of the Board)

Article 26

Article 26

1. In accordance with the provision of Article 426,
Paragraph 1 of the Companies Act, the Company
may, by the resolution of the Board of Directors,
exempt any Member of the Board (including any
former Member of the Board) from the liabilities
under Article 423, Paragraph 1 of the Companies
Act, to the extent permitted by laws andregulations.

1.

2. In accordance with the provision of Article 427,
Paragraph 1 of the Companies Act, the Company
may enter into an agreement with Outside
Directors to limit the liability under Article 423,
Paragraph 1 of the Companies Act to the amountprovided by laws and regulations.

2. In accordance with the provision of Article 427,
Paragraph 1 of the Companies Act, the Company
may enter into an agreement with Members of theBoard (excluding those are Executive Directors,etc.) to limit the liability under Article 423,
Paragraph 1 of the Companies Act to the amountprovided by laws and regulations.

(Newly Established)(Same as current version)(Executive Officers)
Article 27
The Company may, by the resolution of the Boardof Directors, appoint Executive Officers, set forth- 10 -

Current Articles of Incorporation

Proposed Amendments
their duties and responsibilities, and cause them to
execute business of the Company.

Article 27~Article 30 (Omitted)

Article 28~Article 31 (Same as current Article
27~Article 30)(Limitation of Liability for Audit & Supervisory
Board Members)(Limitation of Liability for Audit & Supervisory
Board Members)

Article 31

Article 32

1. In accordance with the provision of Article 426,
Paragraph 1 of the Companies Act, the Company
may, by the resolution of the Board of Directors,
exempt any Audit & Supervisory Board Member(including any former Audit & Supervisory Board
Member) from the liabilities under Article 423,
Paragraph 1 of the Companies Act, to the extent
permitted by laws and regulations.

1.

2. In accordance with the provision of Article 427,
Paragraph 1 of the Companies Act, the Company
may enter into an agreement with Outside Audit &Supervisory Board Members to limit liability
under Article 423, Paragraph 1 of the Companies
Act to the amount provided by laws andregulations.

2. In accordance with the provision of Article 427,
Paragraph 1 of the Companies Act, the Company
may enter into an agreement with Audit &Supervisory Board Members to limit liability
under Article 423, Paragraph 1 of the Companies
Act to the amount provided by laws andregulations.

Article 32~Article 34 (Omitted)

Article 33~Article 35 (Same as current Article
32~Article 34)- 11 -(Same as current version)

Item 3: Election of Seven (7) Members of the Board
The terms of office of all eight (8) present Members of the Board will expire at the conclusion of thisOrdinary General Meeting of Shareholders. Accordingly, the election of seven (7) Members of the Board is
proposed.
The candidates for the office of Member of the Board are as follows:
No.

Name

Current Positions and Responsibilities
in the Company

Attendance at meetings ofthe Board of Directors
Number of years as director

1

Yasutake Tango[Reappointed]

Chairman of the Board

Attended 18 out of 18
meetings held
1 year and 9 months

2

Mitsuomi Koizumi[Reappointed]

President, Chief Executive Officer andRepresentative Director

Attended 18 out of 18
meetings held
8 years and 9 months

3

Yasushi Shingai[Reappointed]

4

Mutsuo Iwai

[Newly appointed]

5

Hideki Miyazaki[Reappointed]

67(Notes)Motoyuki Oka

Main Kohda[Reappointed][Candidate for Outside

Director][Independent Director][Reappointed][Candidate for Outside

Director][Independent Director]

Executive Vice President, Deputy
Chief Executive Officer andRepresentative Director
Assistant to CEO in Compliance,
General Administration, Legal,
Strategy, IT, Business Development,
HR and Operational Review &Business Assurance
Senior Executive Vice President
President, Tobacco Business
Headquarters
Executive Vice President, Member ofthe Board
Assistant to CEO in Finance, CSR andCommunications

Attended 18 out of 18
meetings held
10 years and 9 months

Attended 18 out of 18
meetings held
3 years and 9 months

Outside Director

Attended 16 out of 18
meetings held
3 years and 9 months

Outside Director

Attended 18 out of 18
meetings held
3 years and 9 months

1.

Attendance at meetings of the Board of Directors held in the fiscal year ended December 31, 2015 is presented.

2.

The numbers of years as Member of the Board at the conclusion of this Ordinary General Meeting of
Shareholders are presented.

- 12 -

Candidate Number

1

Yasutake Tango(Born March 21, 1951)

Number of the Company’s Shares Held

1,700

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1974

Entered Ministry of FinanceReasons for nomination as a
candidate for Director

October 2006

Director-General of the Financial Bureau

July 2007

Deputy Vice Minister

Chairman of the Board of the Company

July 2008

Director-General of the Budget Bureau

in June 2014. In addition to a career

July 2009

Administrative Vice Minister

positions as Administrative Vice

July 2010Retired from the office of Administrative Vice
Minister

Minister of the Ministry of Finance in

Yasutake Tango assumed the position ofhistory that includes such important

his long-standing experience inministries and bureaus, he also

December 2010

Corporate Auditor, The Yomiuri Shimbun Holdings

possesses abundant knowledge andDecember 2012

Special Advisor to the Cabinet

experience on topics that include

April 2014

Retired from Special Advisor to the Cabinet

June 2014

Chairman of the Board of the Company

corporate governance, gained through(Current Position)

networking with diverse personalconnections not limited to the public or
private sectors. We therefore propose hiselection as we believe his broad outlook
and high standing, backed by hisexperienced, will be essential to theimprovement of the governance of the
JT Group going forward.

(Significant Concurrent Positions outside the Company)

Reappointed

Outside Director, The Ogaki Kyoritsu Bank, Ltd.

- 13 -

Candidate Number

2

Mitsuomi Koizumi(Born April 15, 1957)

Number of the Company’s Shares Held

26,900Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1981

Joined the Company (Japan Tobacco and Salt
Public Corporation)

June 2001

Vice President of Corporate Planning Division

June 2003

Senior Vice President, and Head of Human
Resources and Labor Relations Group

June 2004

Senior Vice President, and Vice President ofTobacco Business Planning Division, Tobacco
Business Headquartersof Member of the Board of the

Executive Vice President, and Vice President ofTobacco Business Planning Division, Tobacco
Business Headquarters

Director in June 2012. Amid challenging

Reasons for nomination as a
candidate for Director
Mitsuomi Koizumi assumed the position

June 2006

Company in June 2007, and assumed theposition of President and Representative
business environments, he has
demonstrated excellent management
ability as a senior executive, always

June 2007

July 2007

June 2009

Reappointed

Member of the Board, Executive Vice President,
and Head of Marketing & Sales General Division,
Tobacco Business Headquarters

maintaining a broad perspective while

Member of the Board, Executive Vice President,
and Chief Marketing & Sales Officer, Tobacco
Business Headquarters

Company with the aim of transforming

Representative Director, Executive Deputy
President, and President, Tobacco Business
Headquarters

election as we believe his broad and in-June 2012

President and Representative Director

January 2016

President, Chief Executive Officer andRepresentative Director(Current Position)- 14 -

working to develop a firm foundation
for the sustainable growth of thethe Company into one that grows on a
global scale with the tobacco business at
its core. We therefore propose his
depth expertise in various fields andleadership backed by experience, will beessential to the JT Group management
going forward.

Candidate Number

3

Yasushi Shingai(Born January 11, 1956)

Number of the Company’s Shares Held

25,300Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1980

Joined the Company (Japan Tobacco and Salt
Public Corporation)

July 2001

Vice President of Financial Planning Division

candidate for Director

June 2004

Senior Vice President, Head of Finance Group

Yasushi Shingai, assumed the position

July 2004

Senior Vice President, Chief Financial Officer

of Member of the Board of theJune 2005

Member of the Board, Senior Vice President, andChief Financial Officer

position of Executive Vice President,

Member of the Board

He has demonstrated excellent

Reasons for nomination as a

Company in June 2005, and assumed theJune 2006

Representative Director in June 2011.
management ability as a senior

Executive Vice President, JT International S.A.
June 2011

June 2012

January 2016

Executive Vice President, Representative Director,
Assistant to CEO in Strategy, HR, Legal and FoodBusiness

perspective. Some of his major feats
including leading the M&A with British
company Gallaher while Executive Vice
President of JT International S.A. andExecutive Vice President, Representative Director,
Assistant to CEO in Compliance, Strategy, HR,
General Administration, Legal, and Operation
Review & Business Assurance

establishing the strong base that has

Executive Vice President, Deputy Chief Executive
Officer and Representative Director, Assistant to
CEO in Compliance, General Administration,
Legal, Strategy, IT, Business Development, HR andOperational Review& Business Assurance

believe the broad and in-depth expertise(Current Position)(Significant Concurrent Positions outside the Company)

Reappointed

executive, always maintaining a broad

Outside Director, Recruit Holdings Co., Ltd.

- 15 -

allowed the International Tobacco
Business to deliver profit growth. We
therefore propose his election as weand experience that he has thusfar
gained both in Japan and overseas are
essential to the JT Group management
going forward.

Candidate Number

4

Mutsuo Iwai

(Born October 29, 1960)

Number of the Company’s Shares Held

19,800Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1983

Joined the Company (Japan Tobacco and Salt
Public Corporation)

Reasons for nomination as a
candidate for Director

June 2003

Vice President of Corporate Planning Division

July 2004

Vice President of Corporate Strategy Division

June 2005

Senior Vice President, and Vice President of FoodBusiness Division, Food Business

June 2006

Member of the Board, Executive Vice President,
and President, Food Business

June 2008

Executive Vice President, and Chief Strategy
OfficerJune 2010

Member of the Board, Senior Vice President, andChief Strategy Officer and Assistant to CEO in
Food Business

Mutsuo Iwai, has taken command of
business operations in various areas
such as food business, beveragebusiness, and corporate strategy. As
Executive Vice President at JT
Internationals S.A., in the International
Tobacco Business, he undertook major
responsibilities concerning businessgrowth and contributed to achieving thisgrowth. Since January 2016, he assumed
the position of President of the Tobacco
Business Headquarters that takecommand of both domestic andinternational tobacco business. We

June 2011

Member of the Board

therefore propose his election as

Executive Vice President, JT International S.A.

Member of the Board as we judge fromthe experience he has thus far

June 2013

Senior Executive Vice President, and Chief
Strategy Officer

January 2016

Senior Executive Vice President, and President,
Tobacco Business Headquarters

accumulated that he amply possesses
immense ability in executing businessbacked by accurate decision-making andthe capacity to oversee business
operations from diverse perspectives.

(Current Position)

Newly
appointed(Significant Concurrent Positions outside the Company)
Chairman, JT International Group Holding B.V.

- 16 -

Candidate Number

5

Hideki Miyazaki(Born January 22, 1958)

Number of the Company’s Shares Held

14,300Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1980
July 2005

Joined Nomura Securities Co., Ltd.
Senior Manager of Accounting Division of theCompany

Reasons for nomination as a
candidate for Director
Hideki Miyazaki assumed the positionof Executive Vice President, Member ofJanuary 2006

Deputy Chief Financial Officer

June 2008

Senior Vice President, and Chief Financial Officer

June 2010

Executive Vice President, and Chief Financial
Officer

place of employment and has cultivatedJune 2012

Executive Vice President, Member of the Board,
Assistant to CEO in CSR, Finance andCommunications

and taxation matters of Japan and

the Board of the Company in June 2012.
He has long-standing experience withboth the Company and his previous
indepth knowledge regarding financial
overseas. He has demonstrated excellent
management ability as an executive,
mainly in the fields of finance, CSR, and(Current Position)communications, concentrating on
establishing a strong base necessary forthe sustainable growth of the Company.
We therefore propose his election as we
believe his experience and knowledge
are essential for the JT Groupmanagement going forward.

Reappointed- 17 -

Candidate Number

6

Motoyuki Oka(Born September 15, 1943)

Number of the Company’s Shares Held0

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1966

Joined Sumitomo Corporation

Reasons for nomination as a
candidate for Outside Director

June 1994

Director, Sumitomo Corporation

April 1998

Managing Director, Sumitomo Corporation

served as Outside Director of theApril 2001

Senior Managing Director, Sumitomo Corporation

Company. We have benefited from hisJune 2001

President and CEO, Sumitomo Corporation

broad knowledge of management inJune 2007

Chairman of the Board of Directors, Sumitomo
Corporation

global corporations and of the financial

Since June 2012, Motoyuki Oka has

long-standing abundant experience andsector being reflected in the
management of the Company and he has

June 2012

Adviser, Sumitomo Corporation

worked tirelessly to supervise business(Current Position)

execution from an independent and fairstandpoint. He has also enormously

June 2012

Outside Director of the Company

contributed to improving corporate(Current Position)

governance in the Group throughactively providing proposals and advice
to the Board of Directors. We therefore

Reappointed

propose his election as we believe his

Candidate for
Outside Director

for the JT Group management goingexperience and knowledge are essential
forward.

(Significant Concurrent Positions outside the Company)

Independent
Director

Outside Director, NEC Corporation- 18 -

Candidate Number

7

Main Kohda(Born April 25, 1951)

Number of the Company’s Shares Held0

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
September 1995

Started independently as Novelist

Reasons for nomination as a
candidate for Outside Director(Current Position)
January 2003

Member of Financial System Council, Ministry of
Finance Japan

April 2004

Visiting professor, Faculty of Economics, Shiga
University

Since June 2012, Main Kohda hasserved as Outside Director of theCompany. We have benefitted from herabundant knowledge of international
finance, her broad experience gained
from serving on government

March 2005

November 2006

Member of the Council for Transport Policy,
Ministry of Land, Infrastructure, Transport andTourism
Member of the Tax Commission, Cabinet Office,
Government of Japan

examination committees and similar
positions, and her deep insight andobjective point of view that she has
demonstrated through her activities as anovelist being reflected in the
management of the Company and sheJune 2010

Member of the Board of Governors, Japan
Broadcasting Corporation

has worked tirelessly to supervise

June 2012

Outside Director of the Company

and fair standpoint. She has also

business execution from an independent
enormously contributed to improving(Current Position)

corporate governance in the Groupthrough actively providing proposals
and advice to the Board of Directors. We
therefore propose her election as we
believe her experience and knowledge

Reappointed

are essential for the JT Groupmanagement going forward.

Candidate for
Outside Director(Significant Concurrent Positions outside the Company)
Novelist

Independent
Director(Notes)

Outside Director, LIXIL Group Corporation1.

No conflict of interest exists between the Company and the above candidates.

2.

The Company has entered into agreements with both Motoyuki Oka and Main Kohda to limit their liabilities
stipulated in Article 423, Paragraph 1 of the Companies Act to the extent permitted by the laws and regulations.
Should their election be approved, the Company intends to extend the respective agreements.
If item 2: Partial Amendment to the Articles of Incorporation and the election of Yasutake Tango are approved during
this General Meeting, the Company intends to enter into an agreement with him, pursuant to the provision of Article
26 of the amended Articles of Incorporation, to limit his liabilities stipulated in Article 423, Paragraph 1 of theCompanies Act to the extent permitted by the laws and regulations.

3.

Both Motoyuki Oka and Main Kohda satisfy the Criteria for Evaluating the Independence of Outside Executives of
the Company and the requirements of an independent director prescribed by the Tokyo Stock Exchange, Inc.

4.

The Company has designated Motoyuki Oka and Main Kohda as independent directors as prescribed by the Tokyo
Stock Exchange, Inc. and intends to designate both of them as such again, should their election be approved.

- 19 -

Item 4: Election of One (1) Substitute Audit & Supervisory Board Member
In preparation against a situation where the number of Outside Audit & Supervisory Board Member falls
below the statutory required number, the election of one (1) Substitute Audit & Supervisory Board Member is
proposed.
The Audit & Supervisory Board has approved this proposition.
The candidate for the office of Substitute Audit & Supervisory Board Member is as follows:

Michio Masaki(Born February 20, 1961)

Number of the Company’s Shares Held0

Brief Personal History, Positions in the Company, and Significant Concurrent Positions outside theCompany
April 1987

Judicial Apprentice

April 1989

Appointed as Public Prosecutor

July 2003

Head of Takasaki Branch, Maebashi District
Public Prosecutors Office

April 2004

Registered as Attorney at Law

Reasons for candidacy as a
Substitute Outside Audit &Supervisory Board Member
Michio Masaki possesses abundant
experience in the legal circles and broad
insight. Therefore, we judge he would
be able to appropriately execute hisCity-Yuwa Partners

duty as Outside Audit & Supervisory(Current Position)

Board Member of the Company.
While he has not been involved incorporate management except the roleof outside executive, we judged that hewould be able to appropriately execute
his duty as Outside Audit &Supervisory Board Member for theabove-mentioned reasons.

(Significant Concurrent Positions outside the Company)
Attorney at Law, City-Yuwa Partners
Outside Director, Hamai Co., Ltd.
(Notes)1.

No conflict of interest exists between the Company and the above candidate.

2.

The Company proposes Michio Masaki be elected as substitute Outside Audit & Supervisory Board Member.

3.

Should Michio Masaki assume the position of Audit & Supervisory Board Member, the Company intends to enter
into an agreement with him to limit his liabilities stipulated in Article 423, Paragraph 1 of the Companies Act to theextent permitted by the laws and regulations.

4.

Michio Masaki satisfies the Criteria for Evaluating the Independence of Outside Executives of the Company and therequirements of an independent auditor prescribed by the Tokyo Stock Exchange, Inc.

- 20 -

【Reference】Criteria for Evaluating the Independence of Outside Executives
The Company has established a Criteria for Evaluating the Independence of Outside Executives andIndependent Directors/Audit & Supervisory Board Members must not fall under any of the following
categories.
1 A person who belongs or belonged to JT or an affiliate or sister company of JT
2 A person who belongs to a company or any other form of organization of which JT is a major shareholder
3 A person who is a major shareholder of JT or who belongs to a company or any other form of organization
which is a major shareholder of JT
4 A person who is a major supplier or customer of JT (if the supplier or customer is a company or any otherform of organization, a person who belongs thereto)
5 A major creditor of JT including a major loan lender (if the creditor is a company or any other form oforganization, a person who belongs thereto)
6 A certified public accountant who serves as an accounting auditor or an audit advisor of JT, or a person
who belongs to an auditing firm which serves as an accounting auditor or an audit advisor of JT
7 A person who receives a large amount of fees from JT in exchange for providing professional services forlegal, financial and tax affairs or business consulting services (if the recipient of such fee is a company or
any other form of organization, a person who belongs thereto)
8 A person who receives a large amount of donation from JT (if the recipient of such donation is a company
or any other form of organization, a person who belongs thereto)
9 A person who has fit any of the descriptions in 2 to 8 above in the recent past
10 A close relative of a person who fits any of the following descriptions:(1) A person who fits any of the descriptions in 2 to 8 above (if such descriptions apply to a company or
any other form of organization, a person who performs important duties thereof)(2) A member of the board, audit & supervisory board member, audit advisor, executive officer or
employee of JT or an affiliate or sister company of JT(3) A person who has fit the descriptions in (1) or (2) in the recent past

- 21 -

[Attached Documents]

Business Report(From January 1, 2015 to December 31, 2015)

Effective from the previous fiscal year, the Company and those of its consolidated subsidiaries with fiscal year
ends other than December 31 have changed their fiscal year ends to December 31. As a result of this change,
the accounting period for the previous fiscal year was the 9-month period from April 1, 2014, throughDecember 31, 2014. In addition, the fiscal year end date of JT International Holding B.V. and its subsidiaries,
which operate the Group’s International Tobacco Business, is already December 31. Consequently, theaccounting periods of these companies for the previous fiscal year were the 12-month period from January 1,
2014, through December 31, 2014.
Comparisons of the current fiscal year accounting period are with the same 12-month period in the previous
fiscal year (January 1, 2014 to December 31, 2014).
In addition, for the current fiscal year, as a result of the transfer of shares the Company held in subsidiaries
conducting the vending machine operation business and the termination of the manufacture and sale of JT
beverage products, the “Beverage Business” has been classified as discontinued operations, and continuing
operations and discontinued operations are presented separately. (Revenue, operating profit, adjusted
operating profit, and profit attributable to owners of the parent company are shown for continuing operations.)
Performance for the same period of the previous fiscal year is shown in the same manner.

I.

Matters Concerning Present State of the Corporate Group1.

Overview and results of operations
General summary
Revenue
Revenue remained at the same level as the same period of the previous fiscal year, ¥2,252.9 billion (a0.3% decrease year-on-year). This was mainly the result of increases in revenue in the PharmaceuticalBusiness and the Processed Food Business despite major unfavorable foreign exchange effects on local
currencies in the International Tobacco Business and decreased revenue in the Domestic Tobacco
Business.

Operating profit, adjusted operating profit and profit attributable to owners of the parent
company
Adjusted operating profit decreased by ¥34.3 billion, or 5.2%, from the same period of the previous fiscal
year to ¥626.7 billion. This was mainly the result of unfavorable foreign exchange effects on local
currencies in the International Tobacco Business. Adjusted operating profit at constant rates of exchange
increased by 9.9% from the same period of the previous fiscal year. Operating profit decreased by ¥7.4
billion, or 1.3%, from the same period of the previous fiscal year to ¥565.2 billion. This was due todecreased costs for the measures to strengthen the competitiveness of the Domestic Tobacco Businessand the restructuring of manufacturing facilities of the International Tobacco Business in Europe, despite
decreased gain on sales of real estate and the recording of loss on disposal of real estate.
Profit attributable to owners of the parent company from continuing operations increased by ¥7.0 billion,
or 1.8%, from the same period of the previous fiscal year to ¥398.5 billion, due to decrease in income
taxes and others despite a decrease in operating profit. Profit attributable to owners of the parent
company from discontinued operations was ¥87.2 billion (loss of ¥2.4 billion for the same period of theprevious fiscal year). This was due to gains relating to the transfer of shares the Company held in its
subsidiaries conducting the operation business in the Beverage Business, despite expenses relating to thewithdrawal from the manufacture and sale of beverage products of the Company.

- 22 -

Profit attributable to owners of the parent company increased by ¥96.6 billion, or 24.8%, from the same
period of the previous fiscal year to ¥485.7 billion.

Consolidated performance

31st term (From January 1, 2015 to December 31, 2015)[Billions of yen]

Change [%]2,252.9(0.3)

Adjusted operating profit(Note 1)

626.7

(5.2)

Adjusted operating profit (atconstant rates of
exchange)(Note 2)

726.5

9.9

Profit attributable to owners of
the parent company fromcontinuing operations

398.5

1.8

Profit attributable to owners of
the parent company(continuing operations +discontinued operations)

485.7

24.8

Revenue(Notes)1. Adjusted operating profit is calculated by deducting amortization of intangible assets
associated with acquisitions and adjustment items (income and costs) from operating profit(loss). Adjustment items (income and costs) are impairment losses on goodwill,
restructuring-related income and costs, and others.
2. Adjusted operating profit (at constant rates of exchange) is a value that excludes foreignexchange effects by translating and calculating adjusted operating profit for the current
period in the International Tobacco Business using the foreign exchange rates of the same
period of the previous fiscal year.

- 23 -

【Reference】- 24 -

Review of operations by business segment
Domestic Tobacco Business 31st term (From January 1, 2015 to December 31, 2015)

RevenueCore revenue(Note 1)

Adjusted operating profit[Billions of yen]

Change [%]

677.3

(1.5)

642.2

(1.2)

254.1

6.4

Sales volume in the fiscal year ended December 31, 2015, decreased by 3.1 billion cigarettes, or 2.8%,
from the same period of the previous fiscal year to 109.2 billion cigarettes(Note 2). This mainly reflected adecline in total demand due to a trend toward decline and the impact of the consumption tax hike
implemented in April 2014.
Market share was 59.9% (compared with 60.4% for the same period of the previous fiscal year). Amid
intensifying competition triggered by new product launches by competitor companies, market share for
Mevius was solid, driven by the “Mevius Premium Menthol Option” series. The Company also continued
to focus its efforts on proactively launching new products and further strengthening brand equity in
Winston, with which brands were integrated in August 2015.
The decline in sales volume was partially offset by favorable pricing, increased sales volume at duty-free
shops in Japan and the like, and core revenue decreased by ¥7.6 billion, or 1.2%, from the same period of
the previous fiscal year to ¥642.2 billion. Domestic cigarette revenue per 1,000 cigarettes was ¥5,661.
Adjusted operating profit increased by ¥15.3 billion, or 6.4%, from the same period of the previous fiscal
year to ¥254.1 billion due to favorable pricing effects and other factors such as the effects of measures tostrengthen competitiveness and decreases in temporary costs incurred in the same period of the previous
fiscal year.
With the approval of the Minister of Finance, the Company intends to amend the retail price of Mevius
and former third class cigarettes(Note 3) on April 1, 2016.
(Notes) 1. Core revenue in the Domestic Tobacco Business is calculated by deducting revenue
pertaining to imported tobacco delivery charges, among others, from the revenue.
2. In addition to the figure stated above, during the fiscal year ended December 31, 2015, 3.8
billion cigarettes were sold at duty-free shops in Japan, as well as at markets in China, Hong
Kong and Macau that are under the control of JT’s China Division (this amount was 3.4
billion cigarettes in the same period of the previous year).
3. The term “Former third-class products” refers to tobacco products stipulated as third-classcigarettes in the Tobacco Product Price Act, repealed on April 1, 1985. This applies to
Wakaba, Echo, Uruma, Violet, Shinsei, and Golden Bat.

- 25 -

【Reference to Domestic Tobacco Business】- 26 -

International Tobacco Business

31st term (From January 1, 2015 to December 31, 2015)[Billions of yen]

Change [%]Revenue

1,317.2(0.8)

Core revenue(Note 1)

1,252.5(0.5)

Adjusted operating profit

394.4(11.8)

Adjusted operating profit (atconstant rates of exchange)[Millions of U.S. dollar]

4,712

10.8

Among GFBs(Note 2) for the fiscal year ended December 31, 2015, shipment volume increased by 11.4
billion cigarettes, or 4.3%, from the same period of the previous fiscal year to 273.6 billion cigarettes asa result of growth in market shares in countries mainly in Europe, where some improvements in thebusiness environment were seen. Robust sales were also seen in Turkey after a review of sales prices for
Camel. Despite the declines in total demand mainly in Russia, total shipment volume(Note 3) decreased by
4.1 billion cigarettes, or 1.0%, from the same period of the previous fiscal year to 393.9 billion cigarettes,
owing to growth in GFBs.
Despite favorable pricing effects, dollar-based core revenue decreased by $1,572 million, or 13.2%, fromthe same period of the previous fiscal year to $10,338 million, and adjusted operating profit decreased by$996 million, or 23.4%, to $3,257 million, due to unfavorable foreign exchange effects on local
currencies, particularly the ruble. Adjusted operating profit at constant rates of exchange increased by
10.8% from the same period of the previous fiscal year.
As a result of the effects of a weaker yen when making conversions to that currency, yen-based core
revenue decreased by ¥5.7 billion, or 0.5%, from the same period of the previous fiscal year to ¥1,252.5
billion, and adjusted operating profit decreased by ¥52.7 billion, or 11.8%, to ¥394.4 billion.
(Notes)1. Core revenue in the International Tobacco Business is calculated by deducting revenue
pertaining to distribution business and contract manufacturing, among others, from therevenue.
2. We have identified eight brands which serve as flagships of the JT Group’s brand portfolio,
Winston, Camel, Mevius, LD, Benson & Hedges, Glamour, Silk Cut, and Sobranie, which
we collectively call the Global Flagship Brands (GFBs).
3. Includes fine cut tobacco, cigars, pipe tobacco and snus, except for contract manufacturing
products, waterpipe tobacco products and emerging products.

*- 27 -

【Reference to International Tobacco Business】

The exchange rates of major currencies against the U.S. dollar were as follows.
Foreign exchange rate
per U.S. dollar

From January 1, 2014
to December 31, 2014

From January 1, 2015
to December 31, 2015

Yen

105.79yen

121.10 yen

Ruble

38.40 rubles

60.98 rubles

0.61 pounds sterling

0.65 pounds sterling

0.75 euros

0.90 euros

Pounds sterlingEuro- 28 -

Pharmaceutical Business

31st term (From January 1, 2015 to December 31, 2015)[Billions of yen]

Revenue

Adjusted operating profit

Change

75.6

14.8%

(2.3)

¥(7.3) billion forthe same periodof the previous
fiscal year

In the Pharmaceutical Business, we are striving to establish a stronger profit platform by maximizing
the value of each product and promoting R&D on next-generation strategic products.
In the area of product development, the number of compounds developed in-house that are underclinical development is now nine. Among these compounds, an application for approval of domestic
manufacturing and distributing of the anti-HIV drug “elvitegravir/cobicistat/emtricitabine/tenofovir
alafenamide fumarate” will be submitted during the first quarter of the fiscal year ending December 31,
2016.
The Group company Torii Pharmaceutical Co., Ltd. launched sales of “MITICURE House Dust Mite
Sublingual Tablets,” which is an allergen immunotherapy tablet for house dust mite allergy for theindication of allergic rhinitis, in December 2015 and “Allergen Scratch Extract Positive control (Torii)
Histamine Dihydrochloride” in January 2016. In December 2015, the company also filed an application
for approval of manufacturing and distributing of “TO-206” (a sublingual tablet), which is an allergen
immunotherapy tablet for Japanese cedar pollinosis.
Revenue in the fiscal year ended December 31, 2015 increased by ¥9.8 billion, or 14.8%, from thesame period of the previous fiscal year to ¥75.6 billion, reflecting the increased royalty income fromgrowing sales of out-licensed compounds and the strong sales of Torii Pharmaceutical’s products
including “Riona® Tablets 250mg,” a hyperphosphatemia treatment, and “Stribild® Combination
Tablets,” an anti-HIV drug. Adjusted operating loss improved by ¥5.0 billion to ¥2.3 billion (comparedto adjusted operating loss of ¥7.3 billion in the same period of the previous fiscal year) due to anincrease in revenue, etc.
【Reference to Pharmaceutical Business】- 29 -

【Reference】
Japan Tobacco Inc. Clinical Development as of February 4, 2016
＜In-house development＞
Code（Generic Name）

Potential
Indication/Dosage form

Mechanism

Phase

Note

JTK303(elvitegravir)/cobicistat/emtricitabine/
tenofovir alafenamide
fumarate

HIV infection/Oral

Suppresses blood HIV levels by inhibiting
HIV integrase inhibitor/
the activities of integrase and reverse
Preparing to file (Japan)
Nucleoside reverse
transcriptase, enzymes involved in thetranscriptase inhibitor
replication of HIV.

JTK-303(elvitegravir);
In-house
Cobicistat, Emtricitabine,
Tenofovir Alafenamide;In-license(Gilead Sciences)

emtricitabine/
tenofovir alafenamide
fumarate

HIV infection/Oral

Suppresses blood HIV levels by inhibiting
Nucleoside reverse
Preparing to file (Japan)
the activity of reverse transcriptase, antranscriptase inhibitor
enzyme involved in the replication of HIV.

In-license(Gilead Sciences)JTT-851

Type 2 diabetes mellitus/Oral

G protein-coupled
receptor 40 agonist

Decreases blood glucose by stimulationof glucose-dependent insulin secretion.

Phase2 (Japan)
Phase2 (Overseas)

In-house

JTZ-951

Anemia associated withchronic kidney disease/Oral

HIF-PHD inhibitor

Increases red blood cells by stimulatingproduction of erythropoietin, anerythropoiesis-stimulating hormone, via
inhibition of HIF-PHD.

Phase2(Japan)
Phase1(Overseas)

In-house

JTE-052

Autoimmune/allergic
diseases/Oral, Topical

JAK inhibitor

Suppresses overactive immune response
via inhibition of Janus kinase (JAK)
related to immune signal.

Phase2(Japan)

In-house

JTE-051

Autoimmune/allergic
diseases/Oral

Suppresses overactive immune response
Interleukin-2 inducible
via inhibition of the signal to activate T
T cell kinase inhibitor
cells related to immune response.

Phase1(Overseas)

In-house

JTE-151

Autoimmune/allergic
diseases/Oral

RORγ antagonist

Suppresses overactive immune response
via inhibition of ROR γ related to Th 17
activation.

Phase1(Overseas)

In-house

JTT-251

Type 2 diabetes mellitus/Oral

PDHK inhibitor

Decreases blood glucose by activation of
pyruvate dehydrogenase (PDH) related tocarbohydrate metabolism.

Phase1(Overseas)

In-house

JTK-351

HIV infection/Oral

Suppresses blood HIV levels by inhibiting
HIV integrase inhibitor the activity of integrase, an enzyme
involved in the replication of HIV.

Phase1(Japan)

In-house

Clinical trial phase presented above is based on the first dose.

＜Licensed compounds＞
Compound（JT's code）

trametinib

Mechanism

LicenseeNovartis

MEK inhibitor

Inhibits cellular growth by specificallyinhibiting the activity of MAPK/ERK Kinase(MEK1/2).

Anti-ICOS monoclonal
antibody

MedImmune

ICOS antagonist

Suppresses overactive immune response
via inhibition of ICOS which regulates
activation of T cells.

JTE-052

LEO Pharma

JAK inhibitor

Suppresses overactive immune response
via inhibition of Janus kinase (JAK)
related to immune signal.

- 30 -

Note

MelanomaJapan marketing approval submitted

Processed Food Business

31st term (From January 1, 2015 to December 31, 2015)[Billions of yen]

Change [%]

165.8

2.9

2.7

92.2

Revenue
Adjusted operating profit

With Group company TableMark Co., Ltd. taking a central role, the Processed Food Business is
primarily engaged in business concerning frozen and room temperature processed food, mainly staple
food products such as frozen noodles, frozen rice, packed rice and baked frozen bread, bakery chain
outlets in the Tokyo metropolitan area, and seasonings including yeast extracts and oyster sauce. In theProcessed Food Business, we make every effort to produce strong staple food products with establishedmarket shares and work to improve cost competitiveness, thus striving to improve profitability.
In the fiscal year ended December 31, 2015, we continued working to expand product sales with anemphasis on staple food products. Specifically, we reviewed products beginning with formulation ofingredients, and launched sales of 38 new and 56 renewed frozen home-use products and room
temperature home-use products, including “Sanuki Udon Noodles 5 packs,” with enhanced glutinousand smooth texture, and the “Asari to Takenoko Gohan” series of Japanese rice dishes using selectedseasonal ingredients. Marking the 20th year of our packed rice products, we sold logo-branded products
and also rolled out products including the new “Bishoku Seikatsu, Niigata-san Koshihikari, Shokumotsu
Seniiri Gohan” series, and engaged in active sales promotion.
Revenue in the fiscal year ended December 31, 2015, increased by ¥4.7 billion, or 2.9%, from the same
period of the previous fiscal year to ¥165.8 billion, due mainly to strong sales of frozen and room
temperature processed food in particular. Adjusted operating profit increased by ¥1.3 billion, or 92.2%,
from the same period of the previous fiscal year to ¥2.7 billion, due to the increase in revenue.
【Reference to Processed Food Business】- 31 -

2.

Status of capital expenditures
In this fiscal year, we made capital expenditures totaling ¥129.8 billion for continuing operations.
In the Domestic Tobacco Business, we spent ¥37.4 billion, mainly on investments accompanying
maintenance and upgrade of manufacturing processes, productivity improvements, adaptation to new
products, improvements in product specifications, and others. In the International Tobacco Business, weinvested ¥77.2 billion mainly for improvements in product specifications in addition to optimization of
manufacturing facilities. In the Pharmaceutical Business, we spent ¥6.2 billion on enhancing andstrengthening research and development structures and the like. In the Processed Food Business, weinvested ¥5.7 billion in improvement, maintenance and renewals of production capability.
Please note that our own capital was allocated for capital expenditures.
* Capital expenditures includes land; building and structures; machinery and vehicles; and otherproperty, plant and equipment, as well as goodwill, right of trademark, software and other intangible
assets, necessary for production improvements at factories and other facilities, strengthening
competitiveness and executing business in a variety of fields, excluding assets acquired throughbusiness combinations.
* In conjunction with the transfer of the Company’s holdings of shares of Japan Beverage Holdings Inc.
in July 2015, the head office, work sites, and other sales and distribution facilities of that company are
excluded from the main facilities of the Group. The book value of those facilities as of the end of July,
2015 is ¥23,480 million.

3.

Status of financing
The Company conducted an issuance of corporate bonds totaling ¥115.0 billion on July 15, 2015, to be
applied to the repayment of short-term borrowings.

4.

Business transfers, absorption-type company split or incorporation-type company split
No items to report.

5.

Business transfers from other companies
The Group entered into an agreement with the Reynolds American Inc. group of companies (“RAI”) toacquire the Natural American Spirit business outside the United States, including trademarks involved
with the Natural American Spirit business outside the United States and all shares of RAI’s subsidiaries
outside the United States that are sales companies for tobacco products of the same brand. On September
29, 2015, the parties concluded a contract.
In accordance with this contract, the Group completed the acquisition of the business on January 13,
2016.

6.

Succession of rights and obligations relating to other entities’ business as a result of absorptiontype merger or company split
No items to report.

7.

Acquisition or disposal of shares, other equities or subscription rights to shares of other companies
We transferred shares we held in our subsidiaries conducting vending machine operation business, Japan
Beverage Holdings Inc. and JT A-Star Co., Ltd., and beverage brands of the Company, “Roots” and“Momono Tennensui,” to Suntory Beverage & Food Limited on July 31, 2015.

- 32 -

8.

Trends in assets and operating results(1) Trends in assets and operating results of the JT Group

28th term
FY201229th term
FY201330th term
From April 1,2014 toDecember 31,
2014(Reference)
From January 1,
2014 toDecember 31,
2014

31st term
From January 1,
2015 toDecember 31,
2015

Revenue(Millions of yen)

2,120,196

2,399,841

2,019,745

2,259,240

2,252,884

Profit before income
taxes(Millions of yen)509,355

636,203502,526

574,572

565,113

Profit attributable toowners of the parent
company(Millions of yen)343,596

427,987364,502391,431

398,454

Basic earnings per
share
(Yen)

181.07235.48200.55215.36221.95

Total assets(Millions of yen)

3,852,567

4,616,766

4,704,706

4,704,706

4,558,235

Total equity(Millions of yen)

1,892,431

2,596,091

2,622,503

2,622,503

2,521,524(Notes) 1. Effective from the previous fiscal year, the Company and those of its consolidated
subsidiaries with fiscal year ends other than December 31 have changed their fiscal year
ends to December 31. As a result of this change, the accounting period for the previous fiscal
year was the 9-month period from April 1, 2014, through December 31, 2014. In addition,
the fiscal year end date of JT International Holding B.V. and its subsidiaries, which operate
the Group’s International Tobacco Business, is already December 31. Consequently, theaccounting periods of these companies for the previous fiscal year were the 12-month period
from January 1, 2014, through December 31, 2014. Comparisons of the current fiscal year
accounting period are with the same 12-month period in the previous fiscal year (January 1,
2014 to December 31, 2014).
2. Consolidated financial statements of the JT Group are prepared based on IFRS.
3. The Company conducted a share split at a ratio of 200 to 1 with July 1, 2012 as effective
date. Consequently, basic earnings per share are calculated on the assumption that this share
split was conducted at the beginning of the 28th term.
4. The Beverages Business was categorized as discontinued operations during the current fiscal
year, and the 30th term is shown revised. Accordingly, revenue, profit before income taxes,
profit attributable to owners of the parent company, and basic earnings per share in “30thterm,” “Reference,” and “31st term” are shown for continuing operations.
Profit attributable to owners of the parent company and basic earnings per share withamounts for discontinued operations added are as follows.
(continuing operations + discontinued operations)30th term(Reference)
31st term
From April 1, 2014 to From January 1, 2014 to From January 1, 2015 to
December 31, 2014
December 31, 2015
December 31, 2014
Profit attributable to owners of
the parent company(Millions of yen)

362,919

389,065

485,691

Basic earnings per share (Yen)

199.67214.06270.54- 33 -

(2) Trends in assets and non-consolidated operating results of JT

28th term
FY201229th term
FY201330th term
From April 1,2014 toDecember 31,
2014

31st term
From January 1,
2015 toDecember 31,
2015

Net sales(Millions of yen)

781,067

809,967

572,323

732,483

Ordinary income(Millions of yen)

210,568

230,900

159,746

371,989

Net income(Millions of yen)

149,773

168,779

108,656

345,009

Net income per share
(Yen)

78.93

92.86

59.78

192.18

Total assets(Millions of yen)

2,784,914

2,732,637

2,729,270

2,756,785

Net assets(Millions of yen)

1,714,529

1,734,379

1,649,151

1,713,068(Notes) 1. Effective from the previous fiscal year, the Company has changed its fiscal year end to
December 31. As a result of this change, the accounting period for the previous fiscal year
was the 9-month period from April 1, 2014, through December 31, 2014.
2. The figures were prepared based on Japanese GAAP.
3. The Company conducted a share split at a ratio of 200 to 1, with July 1, 2012 as effective
date. Consequently, net income per share is calculated on the assumption that this share split
was conducted at the beginning of the 28th term.
9.

Issues to be addressed(1) Basic management policy
Our management principles are based on the pursuit of the “4S” model (“S” is for satisfaction). The
model requires us to fulfill our responsibility towards four classes of stakeholders—consumers,
shareholders, employees and society, with a particular emphasis on consumers—in a well-balanced andhigh level manner ensuring satisfaction for all of them.
We created our vision and mission based on the “4S” model. Our vision is to become a company
committed to global growth by providing diversified value that is uniquely available from JT Group. Our
mission is to create, develop and nurture our unique brands to win consumer trust, while understanding
and respecting the environment and the diversity of societies and individuals.
In order to accomplish it, we have set “The JT Group Way” as code of conduct which all of the JT Group
members should follow. The JT Group Way requires that we: fulfill the expectations of our consumers
and behave responsibly; strive for quality in everything we do through continuous improvement; andleverage diversity across the JT Group.
The JT Group has attained sustainable profit growth and will continue to do so through the pursuit of the“4S” model. Since attaining sustainable profit growth requires us to continue to provide new value andsatisfaction to consumers, we believe it is essential to steadily make business investments for future midto long-term profit growth.
We believe that the pursuit of the “4S” model will lead to a consistent increase in corporate value in themid- to long-term and therefore that it is the best approach to serve the interests of all stakeholders.

(2) Mid- to long-term management strategy and issues
The JT Group formulated its business plan, a three-year plan that is renewed each year on a rolling basis
in order to speed up the Group’s ability to respond appropriately to unexpected changes in accordancewith its recognition that strengthening its “adaptability to a changing environment” is an important theme.
Through the plan, the Group intends to carry on strategies that have hitherto been implemented for the- 34 -

Group’s long-term vision of becoming a “Company committed to global growth that provides consumers
diversified value uniquely available from JT” while also taking them to a higher level.
In the “Business Plan 2016,” there is no change in the Group’s management resources allocation policy,
under which we will continue to place a high priority on making business investments that contribute tosustainable mid- to long-term profit growth as well as on valuing the balance between profit growththrough business investments and shareholder returns.
In accordance with the “Business Plan 2016,” the Group will continue to pursue mid to high single-digit
annual average growth rate over the mid- to long-term with an adjusted operating profit growth rate (atconstant rates of exchange)(Note 1).
With regard to shareholder return policies, the Group will pursue enhanced shareholder returns inproportion to the mid- to long-term profit growth by continually making proactive business investments
while maintaining a strong financial base(Note 2) that enables response to any possible environmental
changes.
Specifically, the Group will work toward stable and consistent growth in dividend per share. Whether to
execute the acquisition of treasury shares will be considered in view of factors including the mediumterm outlook on business environment and financial positions.
Adopting a stakeholder model, the Group will continue to monitor a trend in shareholder returns ofglobal FMCG(Note 3) companies which achieve a high-growth business.
The mid- to long-term targets and roles for each business are as follows.
Tobacco Business

Grow adjusted operating profit at mid to high single-digit rate perannum over the mid- to long-term as the core business and profit
growth engine of the JT Group

Domestic
InternationalCore business that serves as the highly competitive profit generator
Also a core business that serves as the profit growth engine

Pharmaceutical Business

Strive to make stable profit contribution to the JT Group throughpromotion of R&D on next-generation strategic products and value
maximization of each product

Processed Food Business

Strive to achieve operating profit margin that is, at very least, on
par with industry average and aim to make further profit
contribution to the JT GroupIn order to achieve the consolidated mid- to long-term profit targets, our strategic focus across all
businesses is to achieve quality top line growth by striving in accordance with each target and role. For
each business, our strategic focus is to improve cost competitiveness and business foundations that
support these efforts, thereby achieving sustainable profit growth.
We will work to strengthen our CSR initiatives further with an emphasis on the pursuit of high-level,well-balanced stakeholder satisfaction based on the “4S” model, which constitutes JT’s management
principles.
We think that the business environment surrounding the JT Group will continue to change on the global
scale and at a faster rate. In order to respond to the various changes that may happen in the future, wewill continue to strive for sustained profit growth in the mid- to long-term and steadily actualizing
shareholder returns, based on the “4S” model and through consistent business investment and an
adaptability to a changing environment.
(Notes) 1. Adjusted operating profit is calculated by deducting amortization of intangible assets
associated with acquisitions and adjustment items (income and costs) from operating profit(loss). Adjustment items (income and costs) are impairment losses on goodwill,
restructuring-related income and costs, and others.
Adjusted operating profit growth rate (at constant rates of exchange) is a financial
measurement that excludes foreign exchange effects by translating and calculating adjusted
operating profit for the current period in the International Tobacco Business using the foreignexchange rates of the same period of the previous fiscal year.

- 35 -

2. As its financial policy, the Group will maintain a strong financial base that secures stability
in case of changes in business environment such as economic crises and flexibility enabling
expeditious responses to business investment opportunities.
3. FMCG: Fast Moving Consumer Goods (daily consumer durables)
10. Main business contents
Business segment

Main business

Manufacture and sale of tobacco products, mainly Mevius andSeven Star
Manufacture and sale of tobacco products, mainly Winston andInternational Tobacco Business
Camel
Research and development, manufacture and sale of prescription
Pharmaceutical Business
drugs
Manufacture and sale of frozen and room temperature processed
Processed Food Businessfoods, bakery products and seasonings(Note) The Beverage Business was removed from the main businesses in the fiscal year ended
December 31, 2015.
Domestic Tobacco Business11. Status of important subsidiaries

Company name

Equityownership(%)

CapitalMain business(Millions of yen)

TS Network Co., Ltd.
Japan Filter Technology
Co., Ltd.

460

74.5

Distribution of tobacco products

88.6

Manufacture and sale of filters for
tobacco products(100.0)

Manufacture and sale of tobacco
products(100.0)

Manufacture and sale of tobacco
products(Millions of yen)

461
(Thousands of CHF)

JT International S.A.

1,215,425(Thousands of GBP)

Gallaher Ltd.
Torii PharmaceuticalCo., Ltd.

172,495(Millions of yen)

5,190

53.5

Manufacture and sale ofprescription drugs(100.0)

Manufacture and sale ofprocessed foods(Millions of yen)

TableMark Co., Ltd.

22,500(Notes) 1. Figures in parentheses in the “Equity ownership” column indicate indirect holding rates.
2. There were 194 consolidated subsidiaries in this fiscal year, including 6 above-mentioned
important subsidiaries, as well as 12 affiliates accounted for by the equity method. In
addition, consolidated revenue for the fiscal year ended December 31, 2015 amounted to¥2,252.9 billion with profit attributable to owners of the parent company from continuing
operations at ¥398.5 billion.
3. JT Beverage Inc. has been removed from important subsidiaries beginning with the fiscal
year ended December 31, 2015.
4. On the last day of the fiscal year ended December 31, 2015, there were no specified wholly
owned subsidiaries as stipulated in Article 118, item 4 of the Ordinance for Enforcement of
the Companies Act.

- 36 -

12. Major lenders
No items to report.
13. Major sales offices and factories(1) JT
Headquarters:

2-1, Toranomon 2-chome, Minato-ku, Tokyo, Japan

Regional sales headquarters:
Hokkaido (Hokkaido), Tohoku (Miyagi), Joshinetsu (Gunma), Kita-Kanto (Saitama)
Higashi-Kanto (Chiba), Tokyo (Tokyo), Kanagawa (Kanagawa), Hokuriku (Ishikawa),
Tokai (Aichi), Kita-Kansai (Osaka), Osaka (Osaka), Chugoku (Hiroshima),
Shikoku (Kagawa), Kyushu (Fukuoka), Minami-Kyushu (Kagoshima)
Factories:

Kita-Kanto (Tochigi), Tokai (Shizuoka), Kansai (Kyoto), Kyushu (Fukuoka),
and other 2 factories

Laboratories:

Leaf Tobacco Research Center (Tochigi),
Tobacco Science Research Center (Kanagawa),
and Central Pharmaceutical Research Institute (Osaka)(Notes)The Company performed consolidation of sales offices effective April 1, 2015,transitioning from a structure of 25 area branch offices to one of 15 regional sales
headquarters.
At the end of March, 2015, the Company discontinued the Koriyama factory,
Hamamatsu factory, and Okayama printing factory.

1.

2.
(2) Subsidiaries

TS Network Co., Ltd. (Tokyo)
Japan Filter Technology Co., Ltd. (Tokyo)
JT International S.A. (Switzerland)
Gallaher Ltd. (U.K.)
Torii Pharmaceutical Co., Ltd. (Tokyo)
TableMark Co., Ltd. (Tokyo)(Note) Text in parentheses shows the location of head office.

- 37 -

14. Status of employees(1) Employees of the JT Group
Number of employees(Person)Business segment
Domestic Tobacco Business

9,470International Tobacco Business

26,200

Pharmaceutical Business

1,839

Processed Food BusinessCommon company-wide services
within JT

5,798
1,178

Total
(Note)

44,485The above number of employees indicates the number of working employees.

(2) Employees of JT

Male/Female

Number of
employees(Person)Year on year
increase (decrease)(Person)Average age(Year old)

Average years ofservice(Year)

Male

6,511

(1,252)

43.5

20.3

Female

1,038

(114)

36.2

11.8

Total or average

7,549(1,366)

42.5

19.1

(Note)

1.
2.

The above number of employees indicates the number of working employees.
The number of employees is reduced by 1,366 from the previous term. This is primarily
due to factors including the implementation of voluntary retirement measures.

- 38 -

II.

Matters Concerning Shares of JT

1.

Total number of shares authorized:

8,000,000,000 shares

2.

Total number of shares issued:

2,000,000,000 shares(Including treasury shares

3.

Number of shareholders:

4.

Major shareholders

Name of shareholders

209,285,431 shares)

121,931

Number of shares held
(Share)The Minister of Finance

Equity ownership (%)

666,927,200

37.24

54,120,200

3.02

51,189,400

2.86

44,329,643

2.48

33,800,000

1.89State Street Bank and Trust Company

33,153,315

1.85

JPMorgan Chase Bank 380055

29,990,439

1.67

GIC Private Limited

27,439,663

1.53

26,504,296

1.48

20,390,143

1.14Japan Trustee Services Bank, Ltd.
(Trust Account)
The Master Trust Bank of Japan, Ltd.
(Trust Account)
State Street Bank and Trust Company
505223
Trust & Custody Services Bank, Ltd. as
trustee for Mizuho Bank, Ltd.
Retirement Benefit Trust Account reentrusted by Mizuho Trust and Banking
Co., Ltd.

State Street Bank and Trust Company
505001
Mitsubishi UFJ Morgan Stanley Securities
Co., Ltd.
(Note)

Equity ownership is calculated after deducting treasury stock (209,285,431 shares).

- 39 -

5.

Other significant matters concerning shares
In accordance with a resolution of the Board of Directors on February 5, 2015, and with the aim ofsupplementing mid- to long-term adjusted EPS* (at constant rates of exchange) growth as part of efforts
to increase shareholder returns, the Company acquired treasury shares as follows.
Class and number of acquired shares

Common shares

Acquisition cost
PeriodAcquisition method

26,896,200 shares¥99,999,695,750

From February 9, 2015 to March 18, 2015 (contract basis)
Purchase on the Tokyo Stock Exchange via a trust bank

(Note) Adjusted EPS = (Profit or loss attributable to owners of the parent company ± adjustment items(income and costs)* ± tax and minority interests relevant to adjustment items) / (weighted-averagecommon shares + increased number of common shares under subscription rights to shares)* Adjustment items (income and costs): Impairment losses on goodwill ± restructuring income andcosts ± others- 40 -

III. Matters Concerning Subscription Rights to Shares

1.

Total number and others of subscription rights to shares as of December 31, 2015

(1) Total number of subscription rights to shares:
5,660 units(2) Class and number of shares to be delivered upon exercise of subscription rights to shares:
Common shares

1,132,000 shares(200 shares per subscription right to shares)
2.

Status of subscription rights to shares held by Members of the Board and Audit & Supervisory
Board Members of JT as of December 31, 2015

(1) Class and number of shares to be delivered upon exercise of subscription rights to shares:
Common shares

324,800 shares(200 shares per subscription right to shares)(2) Value of property to be contributed when subscription rights to shares are exercised¥1 per share(3) Assignment of subscription rights to shares
The approval of the Board of Directors is required for the assignment of subscription rights to shares.
(4) Conditions for exercising subscription rights to shares
Subscription rights to shares holder may exercise his/her subscription rights to shares only if he/she loses
his/her all position as Member of the Board, Audit & Supervisory Board Member and Executive Officer(sikkoyakuin).
(5) Status of ownership by Members of the Board and Audit & Supervisory Board Members of JT

Category

Memberof theBoard

YeargrantedPayment due upon
allotment ofsubscription rights toshares

FY2007¥581,269 per unit

FY2008¥285,904 per unit

FY2009Exercise period of
subscription rights tosharesNumberof units

Number ofshareholders

46

4

81

5

¥197,517 per unit

From January 9, 2008
to January 8, 2038
From October 7, 2008
to October 6, 2038
From October 14, 2009
to October 13, 2039

212

5

FY2010¥198,386 per unit

From October 5, 2010
to October 4, 2040

183

5FY2011¥277,947 per unit

257

5

FY2012¥320,000 per unit

257

5

FY2013¥513,400 per unit

165

5FY2014¥483,200 per unit

178

6

FY2015¥711,200 per unit

245

6

From October 4, 2011
to October 3, 2041
From October 10, 2012
to October 9, 2042
From October 8, 2013
to October 7, 2043
From October 7, 2014
to October 6, 2044
From August 4, 2015
to August 3, 2045

- 41 -

(Note) Outside Directors are not included in the above category of “Member of the Board.”
3.

Status of subscription rights to shares granted to employees of JT from January 1, 2015 to
December 31, 2015
(1) Class and number of shares to be delivered upon exercise of subscription rights to shares:
Common shares

66,200 shares(200 shares per subscription right to shares)(2) Payment due upon allotment of subscription rights to shares¥711,200 per unit
(3) Value of property to be contributed when subscription rights to shares are exercised¥1 per share(4) Exercise period of subscription rights to shares
From August 4, 2015 to August 3, 2045
(5) Assignment of subscription rights to shares
The approval of the Board of Directors is required for the assignment of subscription rights to shares.
(6) Conditions for exercising subscription rights to shares
Subscription rights to shares holder may exercise his/her subscription rights to shares only if he/she loses
his/her all position as Member of the Board, Audit & Supervisory Board Member and Executive Officer(sikkoyakuin).
(7) Status of granting to employees of JT
331 subscription rights to shares were granted to 18 Executive Officers (sikkoyakuin) (excluding
persons serving as Members of the Board) of JT.

- 42 -

IV. Matters Concerning Members of the Board and Audit & Supervisory Board Members of JT

1.

Members of the Board and Audit & Supervisory Board Members
Position

Name

Chairman of the Board

Yasutake Tango

President andRepresentative Director
Executive Vice
President andRepresentative Director

Mitsuomi
KoizumiYasushi Shingai

Executive Vice
President andRepresentative Director

Noriaki Okubo

Executive Vice
President andRepresentative Director
Executive Vice
President and Memberof the Board
Member of the
Board
Member of the
Board

Akira Saeki

Standing Audit &Supervisory Board
MemberStanding Audit &Supervisory Board
MemberAudit & Supervisory
Board Member

Hideki Miyazaki

Responsibility

Assistant to CEO in
Compliance,
Strategy, HR,
GeneralAdministration,
Legal andOperational Review& Business
Assurance
Assistant to CEO inPharmaceuticalBusiness, Beverage
Business andProcessed FoodBusiness
President, Tobacco
Business

Significant concurrent positions
outside the Company
The Ogaki Kyoritsu Bank, Ltd.
Outside Director

Recruit Holdings Co., Ltd.
Outside Director

JT International Group Holding
B.V.
Chairman

Assistant to CEO in
CSR, Finance andCommunications

Motoyuki Oka

NEC Corporation
Outside Director
Novelist
LIXIL Group Corporation
Outside Director

Main Kohda

FutoshiNakamura
Tomotaka
KojimaYoshinori Imai

Obayashi Law Office
Attorney at Law
Daiwa Securities Co., Ltd.
Outside Audit & Supervisory
Board Member
Audit & Supervisory
Hiroshi Obayashi
Mitsubishi Electric Corporation
Board Member*
Outside Director
NIPPON STEEL & SUMITOMOMETAL CORPORATION
Outside Audit & Supervisory
Board Member(Notes) 1. Members of the Board Motoyuki Oka and Main Kohda are Outside Directors.

- 43 -

2. Audit & Supervisory Board Members Yoshinori Imai and Hiroshi Obayashi are Outside
Audit & Supervisory Board Members.
3. Members of the Board, Motoyuki Oka and Main Kohda, and Audit & Supervisory Board
Members, Yoshinori Imai and Hiroshi Obayashi, were designated as independent officers(directors and auditors) as prescribed by the Tokyo Stock Exchange, Inc.
4. Audit & Supervisory Board Member Futoshi Nakamura and Audit & Supervisory Board
Member Tomotaka Kojima have relevant knowledge about financing and accounting as they
were the Senior Manager of the Accounting Division of JT and Deputy Head of FinanceGroup of JT, respectively.
5. The Audit & Supervisory Board Member denoted with the asterisk * has assumed his officeon March 20, 2015.
6. Audit & Supervisory Board Member Koichi Ueda resigned on March 20, 2015.

Name
Mitsuomi Koizumi
Yasushi Shingai

Noriaki Okubo

Akira Saeki

2.

Positions and responsibilities in the Company, and significant concurrent
positions outside the Company
As of December 31, 2015
As of January 1, 2016
President and Representative Director President, Chief Executive Officer
and Representative Director
Executive Vice President andExecutive Vice President, Deputy
Representative Director
Chief Executive Officer andAssistant to CEO in Compliance,
Representative Director, Assistant toStrategy, HR, General
CEO in Compliance, General
Administration, Legal and
Administration, Legal, Strategy, IT,
Operational Review & BusinessBusiness Development, HR andAssurance
Operational Review & Business
Assurance
Recruit Holdings Co., Ltd.
Recruit Holdings Co., Ltd.
Outside Director
Outside Director
Executive Vice President andMember of the Board
Representative Director
Assistant to CEO in PharmaceuticalBusiness, Beverage Business andProcessed Food Business
Executive Vice President andMember of the Board
Representative Director
President, Tobacco Business
JT International Group Holding B.V.
ChairmanRemunerations for Members of the Board and Audit & Supervisory Board Members(1) Total remunerations for Members of the Board and Audit & Supervisory Board Members
Audit & Supervisory
Total
Board Members
Amount to
Amount to
Amount toCategory
Number to
Number to
Number to
be paidbe paidbe paidbe paidbe paidbe paid(Millions of(Millions of(Millions of(Person)(Person)(Person)
yen)
yen)
yen)
Basic remuneration
8
357
5
96
13
453
Directors’ bonus
5
189
5
189
Stock option grants
6
174
6
174
Total
720
96
816
(Notes) 1. For directors’ bonuses, the amounts planned to be paid are shown.
2. For stock option grants, the total amounts granted during this fiscal year are shown.
Members of the Board(2) Policy concerning the remuneration amount for Members of the Board and Audit &- 44 -

Supervisory Board Members or the remuneration calculation method thereof and the methodof determining the policy
The Company has the Compensation Advisory Panel in place as a non-statutory advisory body to theBoard of Directors in order to increase objectivity and transparency regarding the remuneration ofMembers of the Board and Audit & Supervisory Board Members. The Compensation Advisory Panel,
which holds meetings several times a year, holds deliberations and makes reports in accordance with its
advice on such matters as the Company’s policy, system and calculation method regarding remuneration
for its Members of the Board and Executive Officers (sikkoyakuin), and monitors the status of
remuneration for Members of the Board and Audit & Supervisory Board Members at the Company. The
Compensation Advisory Panel currently consists of five members: the Chairman of the Board, who has
the role of the panel’s chairman, and two Outside Directors and two Outside Audit & Supervisory Board
Members.
Outside members of Compensation Advisory Panel
Outside Director
Motoyuki Oka
Outside Director
Main Kohda
Outside Audit & Supervisory Board Member
Outside Audit & Supervisory Board Member

Yoshinori Imai
Hiroshi Obayashi

In light of reports by the Compensation Advisory Panel, JT’s basic concept of remuneration for Membersof the Board and Audit & Supervisory Board Members is as follows:

Setting the remuneration at a level sufficient to secure personnel with superior capabilities



Linking the remuneration to business performance so as to motivate Members of the Board and Audit& Supervisory Board Members to enhance performance

Linking the remuneration to mid- and long-term corporate valueEnsuring transparency based on an objective point of view and quantitative schemes

In accordance with the above concept, the remuneration for Members of the Board and Audit &Supervisory Board Members is made of three components. In addition to the monthly “basic
remuneration,” there is a “directors’ bonus,” which reflects the Company’s business performance in therelevant fiscal year, and a “stock option,” which is linked to the mid- and long- term corporate value of
JT. The said “stock option” was introduced in 2007 as remuneration that is linked to the mid- and longterm corporate value, thereby providing an incentive towards increasing shareholder value.
The composition of the remuneration for Members of the Board is as follows:
For Members of the Board who also serve as Executive Officers (sikkoyakuin), remuneration consists of
the “basic remuneration,” the “directors’ bonus,” and the “stock option” because they are required toachieve results by executing their duties on a daily basis. If the “directors’ bonus” is paid at the standard
amount, the sum of this bonus and the “stock option” is set to be equivalent to slightly less than 80% of
the “basic remuneration” for President and Executive Vice President, and approximately 70% for otherMembers of the Board.
Members of the Board (excluding Outside Directors) who do not serve as Executive Officers(sikkoyakuin) receive remuneration that consists of the “basic remuneration” and the “stock option” since
they are required to make decisions on company-wide management strategies and fulfill supervisory
functions to enhance corporate value.
Remuneration for Outside Directors, which is not linked to business performance with the purpose ofmaintaining their independence, is composed of “basic remuneration” only.
In the light of the role of Audit & Supervisory Board Members, which is primarily to conduct audits on
legal compliance, their remuneration consists solely of the “basic remuneration.”
The upper limit of remuneration for the Company’s Members of the Board and Audit & Supervisory
Board Members, which was approved at the 22nd Ordinary General Meeting of Shareholders (held in
June 2007), is ¥870 million per year for all Directors and ¥190 million per year for all Audit &Supervisory Board Members. In addition, the upper limit of “stock option” that may be granted toMembers of the Board separately to the remuneration mentioned above is 800 units and ¥200 million per- 45 -

year. This was also approved at the 22nd Ordinary General Meeting of Shareholders. The number ofunits allocated for each term, including the number allocated to Executive Officers (sikkoyakuin) who are
not also Members of the Board, is decided by resolution of the Board of Directors.
The amounts of remunerations for Directors and Audit & Supervisory Board Members are determined byresolution of the Board of Directors in the case of remuneration for Members of the Board, and throughdiscussions among Audit & Supervisory Board Members in the case of remunerations for Audit &Supervisory Board Members, within the approved upper limits, in light of deliberations by theCompensation Advisory Panel. These processes are carried out after benchmarking of levels of
remuneration at major Japanese manufacturers that operate globally, and whose size and profits are atsimilar levels to those of the Company, is undertaken based on third-party research into remuneration forcorporate executives.

3.

Matters concerning Outside Directors and Outside Audit & Supervisory Board Members(1) Significant concurrent positions outside the Company

Category
Member of the
Board

Audit &
Supervisory Board
MemberName
Motoyuki Oka
Main Kohda

Hiroshi Obayashi

Organizations whereconcurrent positions are held
NEC Corporation
Novelist
LIXIL Group Corporation
Obayashi Law OfficeDaiwa Securities Co., Ltd.

Mitsubishi Electric
Corporation
NIPPON STEEL &SUMITOMO METALCORPORATION

Position
Outside Director
Outside Director
Attorney at Law
Outside Audit &Supervisory Board
MemberOutside Director
Outside Audit &Supervisory Board
Member(Note) There are no special relationships to be mentioned between the above organizations in which
concurrent positions are held and JT.
(2) Major activities during this fiscal year

Category

Name
Motoyuki Oka

Member of the
Board
Main Kohda

Yoshinori Imai
Audit &
Supervisory Board
MemberHiroshi Obayashi

Status of main activities
Attended 16 out of 18 meetings of the Board of Directors
held during this fiscal year. Mr. Oka asked questions andmade remarks where necessary at these meetings, as a
Member of the Board.
Attended all 18 meetings of the Board of Directors held
during this fiscal year. Ms. Kohda asked questions andmade remarks where necessary at these meetings, as a
Member of the Board.
Attended 17 out of 18 meetings of the Board of Directors,
as well as all 16 meetings of the Audit & Supervisory
Board held during this fiscal year. Mr. Imai asked
questions and made remarks where necessary at thesemeetings, as an Audit & Supervisory Board Member.
Attended 13 out of 14 meetings of the Board of Directors,
as well as all 12 meetings of the Audit & Supervisory
Board, held during this fiscal year since he assumed
office on March 20, 2015. Mr. Obayashi asked questions
and made remarks where necessary at these meetings, as
an Audit & Supervisory Board Member.

- 46 -

(3) Outline of limited liability agreements
The Company has entered into agreements with each of its Outside Directors and Outside Audit &Supervisory Board Members with respect to the liability set forth in Article 423, paragraph 1 of theCompanies Act, by which the liability for damages of each of them is limited to the minimum amount set
forth in Article 425, paragraph 1 of the same Act, provided they perform their duties without knowledgeof such damages and without gross negligence.

(4) Total amount of remunerations
Outside Audit &Total
Supervisory Board
MemberAmount to
Amount to
Amount to
Number to
Number to
be paidbe paidbe paidbe paidbe paid(Millions of(Millions of(Millions of(Person)(Person)
yen)
yen)
yen)
30
3
24
5
54

Outside Director
Category

Basic remuneration

Number to
be paid(Person)2- 47 -

V.

Matters Relating to Independent Auditor

1.

Name of Independent Auditor: Deloitte Touche Tohmatsu LLC

2.

Fees for Independent Auditor relating to this fiscal year

(1) Fees for Independent Auditor relating to this fiscal year of JTi)ii)

Fees for audit attestation based on Article 2, paragraph 1 of
the Certified Public Accountants Act:
Fees for tasks other than audit attestation based on Article
2, paragraph 1 of the Certified Public Accountants Act:

¥325 million¥4 million(2) Amount of cash and other financial benefits to be paid by JT and its subsidiaries:¥468 million(3) Reasons for approval of the Independent Auditor’s remuneration by the Audit & Supervisory
Board:
When the Company concluded an audit contract with Independent Auditor, the Audit & Supervisory Board
Members obtained necessary materials and received reports from the Members of the Board, relevant internal
departments, and the Independent Auditor, and performed verification to confirm that the amount of
remuneration to be paid to the Independent Auditor, the persons in charge of the audits, and other details of
the audit contract were appropriate.
Based upon this verification, the Audit & Supervisory Board checked and examined matters including thecontent of the Independent Auditor’s accounting plan, the status of the performance of the auditing duties, andthe basis for calculation of the remuneration estimate, and, as a result, determined that approval was fair andreasonable.
(Notes) 1. Fees paid under the terms of the audit contract concluded between Deloitte Touche
Tohmatsu LLC and JT in relation to audit attestation based on the Companies Act and the
Financial Instruments and Exchange Act are not clearly classified and, since they cannot beeffectively classified, their total is indicated in the amount in “i)” above.
2. JT retain Deloitte Touche Tohmatsu LLC for tasks other than audit attestation based on
Article 2, Paragraph 1 of the Certified Public Accountants Act, which consist of the
preparation of comfort letters, and for which a consideration is paid to the same.
3. Among the important subsidiaries of JT, JT International S.A. and Gallaher Ltd. are auditedby Deloitte & Touche LLP. None of these subsidiaries are audited by Deloitte Touche
Tohmatsu LLC, the Independent Auditor of JT.
3.

Policy on dismissal or non-reappointment of Independent Auditor
In the case that an Independent Auditor is adjudged to fall within any of the items listed in Article 340,
paragraph 1 of the Companies Act, with the agreement of all of the Audit & Supervisory Board
Members, the Company shall dismiss the Independent Auditor. Additionally, apart from the above,should an incident occur casting serious doubt on the ability of the Independent Auditor to continue toperform its duties, the Audit & Supervisory Board shall decide the content of proposal and submit suchproposal to the General Meeting of Shareholders that the Independent Auditor should be dismissed orshould not be reappointed.
* In accordance with the enactment of the Act Partially Amending the Companies Act (Act No. 90 of
2014) on May 1, 2015, the Company has changed the body that makes decisions on proposals for
dismissal or non-reappointment of Independent Auditor from the Board of Directors to the Audit &Supervisory Board.

- 48 -

VI. Overview of the Resolutions on the Development of Systems Necessary to Ensure the Properness of
Operations and the Operating Status of the Systems
The Board of Directors has resolved with regard to the development of systems necessary to ensure thatthe execution of the duties by the Members of the Board complies with the laws and regulations and the
Articles of Incorporation, and other systems necessary to ensure the properness of operations of a stockcompany as follows:
Note that in accordance with the enactment of the Act Partially Amending the Companies Act (Act No.
90 of 2014) and the Ministerial Ordinance Partially Amending the Ordinance for Enforcement of theCompanies Act, etc. (Ordinance of the Ministry of Justice No. 6 of 2015) on May 1, 2015 during the
fiscal year, the Company partially amended the "Decision Concerning the Preparation of Basic Policies
and Systems Concerning the Construction of Internal Control Systems" at the Board of Directors
meeting held on April 30, 2015.
(1) Systems to ensure that the performance of duties by the Members of the Board and employees of
the Company, as well as by Directors, etc. (meaning "Directors, etc." as provided for in Article 100,
Paragraph 1, Item 5 (i) of the Ordinance for Enforcement of the Companies Act) and employees(with Directors, etc. and employees hereafter collectively referred to as "Directors andemployees") of subsidiaries, conforms to laws, regulations, and the Articles of Incorporationi) Compliance system
The Company shall establish Code of Conduct based on regulations concerning the compliancesystem in order to ensure that officers and employees of the Company and its subsidiaries to comply
with laws and regulations, Company’s Articles of Incorporation, the social norms, etc., and set up a
JT Group Compliance Committee as an organization responsible for ensuring thorough compliance.
This committee, headed by Company’s Chairman of the Board, includes outside experts among its
members and reports directly to the Board of Directors.
The Company appoints an Executive Officer (sikkoyakuin) in charge of compliance withoverseeing the Compliance Office in an effort to establish and promote a group-wide, crosssectional system and shed light on issues.
The compliance promotion departments of the Company and its subsidiaries (meaning theCompliance Office within the Company, and corresponding departments within subsidiaries)
distribute materials including the "JT Group Code of Conduct," which explains the Code of Conduct,
etc., to Members of the Board and employees, and work to enhance the effectiveness of thecompliance system by enlightening Directors and employees about compliance through training andother programs, etc.
(Internal reporting system)
In preparation for cases in which employees or other parties detect activities, etc. suspected ofviolating laws and regulations, the Company and its subsidiaries maintain consultation andreporting desks as internal whistleblower systems. Compliance promotion departments that receivea report or request for consultation investigate the details and take necessary action, while working
to prevent recurrence of the issue.
The Company will bring matters of particular importance involving the JT Group to the JT Group
Compliance Committee, and will request deliberation or will report on the issue.
(System for excluding anti-social elements)
The Company and its subsidiaries are resolved to fight against, not to comply with, an unreasonable
demand and not to have any relations with anti-social elements.
The General Administration Division shall be the JT Group’s headquarters assuming the
responsibility for supervising efforts to exclude anti-social elements, the Company cooperates with
police, lawyers and other relevant organizations and parties to gather and share information in orderto deal with such elements in an organized way.
In addition, the Company and its subsidiaries shall prohibit involving with anti-social elements andfully communicated to all officers and employees of the Company and its subsidiaries. At the sametime, an awareness raising program for excluding antisocial elements is to be consistently
administered for all officers and employees, by providing relevant training, etc. as necessary.

- 49 -

ii)

System to ensure the reliability of financial reporting
The Company has in place and operates an internal control system relating to financial reporting of
JT Group in accordance with the Financial Instruments and Exchange Act. The Company strives tomaintain and improve the reliability of its financial reporting by allocating a sufficient level of staff
to the task of evaluating and reporting financial results.

iii) Internal audit system
The Operational Review and Business Assurance Division of the Company oversees the internal
audit system and examines and evaluates systems for supervising and managing the overall
operations and the status of business execution from the viewpoints of legality and rationality, inorder to protect the Company’s assets and improve management efficiency. In coordination with theinternal audit functions of all subsidiaries, the Operational Review and Business Assurance Divisionalso undertakes the planning and performance of the JT Group's internal audit systems and policies,
and supplements the internal audit functions of subsidiaries.

(2) Procedures and arrangements for storage and management of information on the performance of
duties by the Members of the Board of the Companyi)

Storage and management of minutes
The Company makes sure to properly stores and manages the minutes of General Meetings ofShareholders and meetings of the Board of Directors, in line with laws and regulations.

ii)

Storage and management of other information
The Company makes sure that the information on important matters relating to business execution
and decision-making are stored and managed by the relevant departments and divisions as specified
by the “Responsibilities/Authorities Allocation Rules”, in accordance with rules on the supervisionof the processes of decision-making, procurement and accounting.

(3) System for reporting matters concerning the performance of duties by Directors, etc. of
subsidiaries to the Company
The Company will require subsidiaries to regularly report important information to the Company
departments and divisions that are in charge of the subsidiaries.
(4) Rules on management of risk of loss of the Company and its subsidiaries, andprocedures/arrangements for other mattersi)

System to evaluate and manage risk of loss under normal circumstances
The Company has established internal policies, rules and manuals relating to JT Group for the
management of risk of loss relating to monetary and financial affairs, and ensures that relevant
reports are made to the President and the Board of Directors on a quarterly basis via Chief Financial
Officer.
With regard to the risk of loss relating to other affairs, in accordance with authority delegated toeach department and division as per the Responsibilities/Authorities Allocation Rules, responsible
departments and divisions take on a supervisory role creating all types of committees to conduct
proper management and, depending on the level of importance, report risks to the President andobtain approval for countermeasures.
In cooperation with the internal audit functions of subsidiaries, the Operational Review andBusiness Assurance Division of the Company examines and evaluates the internal control systems,
etc. of the JT Group companies in light of the level of importance and the risks involved, and froman objective standpoint that is independent of organizations responsible for business execution. It
provides reports and counsel to the President and also reports to the Board of Directors.

- 50 -

ii)

Preparedness for possible emergencies
The Company has produced a manual for crisis management and disaster response. In the event ofan emergency or a disaster, JT is ready to establish an emergency project system, and make prompt
and proper responses under the leadership of senior management and through close cooperation
between the relevant departments and divisions. Events to which a response has been made and thedetails of such events shall be reported to the Board of Directors.

- 51 -

(5) System to ensure that Members of the Board of the Company and Directors, etc. of its subsidiaries
can perform their duties efficientlyi)

Board of Directors of the Company
The Board of Directors of the Company meets once a month in principle and on more occasions asnecessary, in order to make decisions with regard to the matters specified by laws and regulations
and other important matters and to supervise business execution.
The Board of Directors of the Company receives reports from Members of the Board of theCompany on the status of business execution at least once every three months.

ii)

Proper delegation of authority and system of responsibilities of the Company
For important management issues, particularly management policy and basic plans regarding overallbusiness operations of the Company, in addition to matters to be referred to the Board of Directorsof the Company, a clear decision-making process is stipulated in rules on the allocation of
responsibilities and authorities to have a system that enables swift decision making.
Executive Officers (sikkoyakuin) appointed by the Board of Directors execute business properly by
exercising the authority delegated to them in their respective areas in accordance with a companywide business strategy decided by the Board.
In order to manage business operations in ways that contribute to the business efficiency andflexibility of the Company, basic matters concerning the Company’s organization and allocation ofduties are specified by internal rules on and the roles of each department are specified.

iii) Formulation, etc. of rules and policies that apply to the JT GroupThe Company will construct an efficient system for business execution within the JT Group throughthe formulation, etc. of rules and policies that apply to the JT Group.

(6) Systems necessary to ensure the properness of operations in the Company and the business groupwhich consists of the Company and its subsidiaries
i)

Mission of the JT GroupThe JT Group has set itself the mission of creating, developing and nurturing its unique brands to
win consumer trust, while understanding and respecting the environment and the diversity ofsocieties and individuals, and there is a group-wide consensus on the mission.

ii)

Group management
The JT Group shall specify the functions and rules common for all group companies to effectuategroup management that optimizes the operations of the entire JT Group as a whole.
The Company has put in place systems for compliance (including the internal reporting system),internal audits, financial affairs management, etc. in cooperation with its subsidiaries.

(7) Matters for employees assisting Audit & Supervisory Board Members of the Company in theirduties in the event such employees were requested by Audit & Supervisory Board Membersi)Establishment of Auditor’s Office
The Company has established an Auditor's Office as an organization to assist the duties of theCompany's Audit & Supervisory Board Members (hereinafter simply "Audit & Supervisory Board
Members," with the terms "Audit & Supervisory Board," "Auditor's Office," and "Manager of the
Auditor's Office" also referring to those items within the Company).

- 52 -

ii)

Allocation of staff
The Company has allocated sufficient staff to the Auditor’s Office. In addition, the Company makes
sure to review and reform the staffing structure as necessary based on consultations with the Audit& Supervisory Board.

(8) Matters relating to the independence of employees belonging to the Auditor's Office from theCompany's Members of the Board, and matters relating to the assurance of the effectiveness of
instruction by Audit & Supervisory Board Members to those employeesi)Management of employees affiliated with the Auditor’s Office
The evaluation of the Manager of the Auditor’s Office is made by the Audit & Supervisory Boardand the evaluation of the other employees assigned to the Auditor’s Office is made by the Managerof the Auditor’s Office based on the advice of the Audit & Supervisory Board. The transfer anddiscipline of employees assigned to the Auditor’s Office is to be deliberated in advance with the
Audit & Supervisory Board.

ii)

Duties of employees belonging to the Auditor's Office
Employees belonging to the Auditor's Office will follow the direction and orders of Audit &Supervisory Board Members in assisting the duties of the latter, and will not be assigned to otherconcurrent positions relating to the business execution of the Company.

(9) System for reporting by directors and employees of the Company and its subsidiaries or persons
reported by directors and employees of its subsidiaries to the Audit & Supervisory Board andAudit & Supervisory Board Membersi)Reporting to the Audit & Supervisory Board
When directors and employees of the Company and its subsidiaries detect any evidence ofmalfeasance in financial documents or serious breaches of laws or regulations or the Company’s
Articles of Incorporation, they are due to report them to the Audit & Supervisory Board, along withother relevant matters that could affect the Company’s management.

ii)

Appropriate reporting in response to requests by Audit & Supervisory Board Members
Directors and employees of the Company and its subsidiaries shall respond in a prompt andappropriate manner when they are asked by Audit & Supervisory Board Members to compile
important documents for their perusal, to accept field audits and to submit reports.

iii) Reporting on the status of whistleblowing
The Compliance Office will report regularly to Audit & Supervisory Board Members on the statusof whistleblowing involving the JT Group, and will make non-regular reports as necessary.
(10) System to ensure that persons reporting to Audit & Supervisory Board Members are not subject
to disadvantageous treatment due to having reported
The Company will thoroughly communicate within the JT Group that persons engaging in
consultation or whistleblowing are not to be subject to any disadvantageous treatment for reason of
those actions.
(11) Matters concerning policies for the prepayment of expenses involving the performance of duties by
Audit & Supervisory Board Members, procedures for reimbursement, and the handling of otherexpenses or debts involving the performance of those dutiesi) Handling of expenses or debts in accordance with Article 388 of the Companies Act
When an Audit & Supervisory Board Member has made claim to the Company for the prepayment- 53 -

of expenses, etc. in accordance with Article 388 of the Companies Act, the Company will promptly
handle the relevant expenses or debt, with the exception of cases in which the Company deems theclaimed expenses or debt to be unnecessary to the performance of the duties of the Audit &Supervisory Board Member.
ii)

Setting of budgets, etc.
With regard to miscellaneous expenses for audits by Audit & Supervisory Board Members, theCompany will set a budget in order to secure the effectiveness of the audits. The Company will also
bear the portion of miscellaneous expenses for audits by Audit & Supervisory Board Members thatare in excess of budget, with the exception of cases in which the Company deems the expenses to beunnecessary to the performance of duties.

(12) Other systems to ensure effective auditing by Audit & Supervisory Board Membersi)

Attendance at important meetings
Audit & Supervisory Board Members are allowed to attend not only meetings of the Board of
Directors of the Company but also other important meetings of the Company.

ii)

Coordination between the Operational Review and Business Assurance Division andCompliance Office and the Audit & Supervisory Board Members
The Operational Review and Business Assurance Division and the Compliance Office maintaincooperation with Audit & Supervisory Board Members by exchanging information.

The status of systems necessary to ensure the properness of operationsi)

Status of initiatives concerning compliance・The JT Group has set itself the mission of creating, developing, and nurturing its unique brands to win
consumer trust, while understanding and respecting the environment and the diversity of societies andindividuals. The Company communicates this mission throughout the JT Group by means including its
inclusion in the "JT Group Code of Conduct" booklet, which is distributed to the directors andemployees of the Company and its subsidiaries.
・In accordance with the JT Group Compliance Rules, the Company performs appropriate reporting to
the Board of Directors on the performance of the annual Compliance Plan, the occurrence of serious
compliance violations, actions taken in response to these, and other matters of importance.
・In order to improve awareness of compliance and prevent improper actions, the Company conducts
regular training for the directors and employees of the Company and its subsidiaries.
・With regard to whistleblowing systems, the Company thoroughly communicates to employees of theCompany and its subsidiaries that persons who engage in consultation or whistleblowing are not to be
subject to any disadvantageous treatment for reason of those actions. In addition, the content ofconsultations and whistleblowing are regularly reported within the JT Group Compliance Committee.
・With regard to the handling of anti-social elements, the Company continues to collect related
declarations and pledges from suppliers, and conducts regular training and other programs for the
directors and employees of the Company and its subsidiaries.

ii)

Status of initiatives to manage the risk of loss
・With regard to the monetary and financial risks, the Company makes quarterly reports to the President
and the Board of Directors in accordance with the Basic Rules on Financial Work of the Group.
・With regard to the evaluation and examination of internal management systems, the Operational
Review and Business Assurance Division provides reports and counsel to the President and also
reports to the Board of Directors, in accordance with the Rules for Internal Audits.

- 54 -

・With regard to crises and disasters, the Company makes quarterly reports to the Board of Directors
concerning events to which responses were made and the details of the events, in accordance with the"Decision Concerning the Preparation of Basic Policies and Systems Concerning the Construction ofInternal Control Systems."iii) Status of initiatives concerning the properness and efficiency of the execution of duties
・Meetings of the Board of Directors are held every month and as appropriate, in accordance with theRegulations of the Board of Directors. The Members of the Board in charge of businesses makequarterly reports to the Board of Directors on the status of work execution within each business,
including within JT Group companies.
・With regard to decision-making, etc. on execution of important work, etc., the Company is converting
resolution procedures to electronic methods and is constructing a fast and efficient management
system. The Company also accurately records and creates minutes of meetings of the Board of
Directors, and performs appropriate storage and management of the information.
iv) Securing the effectiveness of audits by Audit & Supervisory Board Members
・Audit & Supervisory Board Members receive reports as appropriate from directors and employees of
the Company and its subsidiaries, regarding necessary information for audits. In addition to attending
important conferences, Audit & Supervisory Board Members also perform appropriate checks of thecontent of electronic resolutions concerning decision-making on the execution of work. The
Operational Review and Business Assurance Division and the Compliance Office also coordinate on
conducting regular exchanges of information with Audit & Supervisory Board Members.
・In order to assist the duties of Audit & Supervisory Board Members, the Company has established an
Auditor's Office that is independent of divisions responsible for execution, and has assigned necessary
personnel to the Office. In addition, through consultation with Audit & Supervisory Board Members,
the Company records a budget for expenses expected to be necessary for the duties of the Audit &Supervisory Board Members.

- 55 -

【Reference】＜Fundamental Policy Concerning Corporate Governance＞
We have enhanced our corporate governance, based on our belief that it is the means for conducting
transparent, fair, timely and decisive decision-making for pursuing JT's management principle, the ''4S
model''. Specifically the 4S model aims ''to balance the interests of consumers, shareholders,
employees and the wider society, and fulfill our responsibilities towards them, aiming to exceed their
expectations.''
We have set out the ''JT Corporate Governance Policies'' on 4 February, 2016, and continuously
strive to make enhancements based on our belief that it will enable us to achieve mid- to long-termsustainable profit growth and increase corporate value, which will contribute to the development ofour group’s stakeholders and eventually the economic society as a whole.
''JT Corporate Governance Policies'' was published on our web-site (https://www.jti.co.jp/).
＜JT's Corporate Governance System＞* All figures contained in this Business Report are rounded to the nearest unit.

- 56 -

Consolidated Statement of Financial Position(As of December 31, 2015)(Millions of yen)Account title

AmountCurrent assets

Account title

AmountCurrent liabilities

Cash and cash equivalents

526,765

Trade and other payables

373,032

Trade and other receivables

406,387

Bonds and borrowings

30,980Inventories

563,820

Income tax payables

106,391

Other financial assets

17,849Other financial liabilities

6,459

Other current assets

280,493

Provisions

19,297

1,795,313

Other current liabilities

729,761

2,904

Total current liabilities

1,265,920

Subtotal
Non-current assets held-for-sale
Total current assets

1,798,217

Non-current liabilities
Non-current assets
Property, plant and equipment
Goodwill

681,865

Bonds and borrowings

215,938

1,429,287

Other financial liabilities

10,143
333,562

Intangible assets

332,478

Retirement benefit liabilities

Investment property

23,614

Provisions

Retirement benefit assets

38,954

Other non-current liabilities

113,958

Investments accounted for using theequity method

59,523

Deferred tax liabilities

87,979Other financial assets

101,727

Total non-current liabilities

770,790

Deferred tax assets

92,570Total non-current assets

2,760,017

Total liabilities

4,558,235

2,036,710

EquityShare capital

100,000

Capital surplus

736,400

Treasury shares(444,333)

Other components of equity(137,122)

Retained earnings

2,196,651

Equity attributable to owners of theparent company

2,451,596

Non-controlling interests

Total assets

9,210

69,929Total equity

2,521,524

Total liabilities and equity

4,558,235- 57 -

Consolidated Statement of Income(Year ended December 31, 2015)(Millions of yen)Account title

AmountContinuing operations
Revenue

2,252,884

Cost of sales(920,056)

Gross profit

1,332,828

Other operating income

15,367

Share of profit in investments accounted for using the equity method

6,381

Selling, general and administrative expenses(789,346)

Operating profit

565,229

Financial income

15,016

Financial costs(15,132)

Profit before income taxes

565,113

Income taxes(162,386)

Profit for the period from continuing operations

402,727

Discontinued operations
Profit for the period from discontinued operations

87,515

Profit for the period

490,242

Attributable to:
Owners of the parent company

485,691

Non-controlling interests

4,551- 58 -

Consolidated Statement of Changes in Equity(Year ended December 31, 2015)(Millions of yen)
Equity attributable to owners of the parent company
Other components of equity
Net gain (loss)

SharecapitalCapitalsurplusTreasurysharesNet gainon revaluation
Exchangeof financial(loss) on
Subscription differences
derivatives assets measured
rights toon translation designatedas at fair value
sharesof foreign
through other
cash
flow
operations
comprehensive
hedgesincomeAs of January 1, 2015

100,000

736,400(344,447)

1,631

116,421

1,215

23,156

Profit for the period

－

－

－

－

－

－

－

Other comprehensive
income (loss)

－

－

－

－

(288,894)

233

10,500Comprehensive income(loss) for the period

－

－

－

－

(288,894)

233

10,500－－(100,000)

－

－

－

－

－

－

114

(85)

－

－

－

Share-based payments

－

－

－

395

－

－

－

Dividends

－

－

－

－

－

－

－

Changes in the scope of
consolidation

－

－

－

－

－

－

(140)

－

－

－

－

－

－

－

－

－

－

－

－

－

(232)

－

－

－

－

－

(1,324)－－－(99,886)

310－(1,324)(372)

100,000

736,400(444,333)

1,941(172,473)

125

33,284

Acquisition of treasury
shares
Disposal of treasury
sharesChanges in theownership interest in a
subsidiary without aloss of control
Transfer from othercomponents of equity
to retained earnings
Other increase(decrease)
Total transactions withthe owners
As of December 31, 2015

- 59 -

(Millions of yen)
Equity attributable to owners of the parent company
Other components of equity
RemeasureRetained
ments of
Total
earnings
definedTotal
benefitplans

Noncontrollinginterests

Total equity

As of January 1, 2015－

142,425

1,902,460

2,536,838

85,6652,622,503

Profit for the period－－

485,691

485,691

4,551

490,242

Other comprehensive
income (loss)(4,272)(282,433)－(282,433)(101)(282,534)

Comprehensive income(loss) for the period(4,272)(282,433)

485,691

203,257

4,450

207,708

Acquisition of treasury
shares－－－(100,000)－(100,000)

Disposal of treasury
shares

－

(85)

(29)

0

－

0

Share-based payments

－

395

－

395

－

395

Dividends－－(187,574)(187,574)(13,809)(201,383)

－

(140)

140

－

(6,044)(6,044)

－

－

4

4

(321)

(318)

4,272

4,040

(4,040)

－

－

－

－

(1,324)－(1,324)(13)(1,337)

Total transactions with theowners

4,272

2,886

(191,500)(288,500)(20,187)(308,686)

As of December 31, 2015－

(137,122)

2,196,651

2,451,596

69,9292,521,524

Changes in the scope of
consolidation
Changes in theownership interest in a
subsidiary without aloss of control
Transfer from othercomponents of equity
to retained earnings
Other increase(decrease)- 60 -

Nonconsolidated Balance Sheet(As of December 31, 2015)
Account title
ASSETS
Current assets
Cash and deposits
Accounts receivable–trade
Securities
Merchandise and finished goods
Semi-finished goods
Work in process
Raw materials and supplies
Advance payments–trade
Prepaid expenses
Deferred tax assets
Short-term loans receivable fromsubsidiaries and affiliates
Other
Allowance for doubtful accounts
Noncurrent assets
Property, plant and equipment
Buildings
Structures
Machinery and equipment
VehiclesTools, furniture and fixtures
Land
Construction in progress
Intangible assets
Patent right
Right of trademark
Software
Other
Investments and other assets
Investment securities
Shares of subsidiaries and affiliates
Investments in capital of subsidiaries andaffiliates
Long-term loans receivable fromsubsidiaries and affiliates
Long-term prepaid expenses
Deferred tax assets
Other
Allowance for doubtful accounts
Total assets

Amount527,980
154,666
52,269110,000
21,69952,954
3,205
42,3181,849
5,729
24,02045,797
13,502(26)
2,228,805
259,374
89,584
3,151

Account title
LIABILITIESCurrent liabilities
Accounts payable–trade
Lease obligations
Accounts payable–other
National tobacco excise taxes payable
National tobacco special excise taxes payable
Local tobacco excise taxes payable
Income taxes payable
Accrued consumption taxes
Cash management system deposits received
Provision for bonuses
Other
Noncurrent liabilities
Bonds payable
Lease obligations
Provision for retirement benefits
Other
Total liabilities

62,7691,746
21,30078,383
2,440
21,566418
3,424
16,0381,687
1,947,865
61,982

Shareholders’ equity
Capital stock
Capital surplus
Legal capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
Reserve for reduction entry
Special account for reduction entry
General reserve

6,689
8,821

Subscription rights to shares

782
5,430

10,339(315)
2,756,785

Amount690,416
8,604
4,303
82,212
94,095
14,548108,856
82,16932,212
251,8275,290
6,298
353,301
211,604
7,681
130,530
3,486
1,043,717

NET ASSETS

Retained earnings brought forward
Treasury shares
Valuation and translation adjustments
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges

1,854,137(Millions of yen)

1,694,250
100,000
736,400
736,400
1,302,183
18,776
1,283,407
47,587
2,582
955,300
277,938(444,333)
16,877
29,791(12,914)
1,941

Total net assets

1,713,068

Total liabilities and net assets

2,756,785- 61 -

Nonconsolidated Statement of Income(Year ended December 31, 2015)(Millions of yen)Account title

AmountNet sales

732,483

Cost of sales

229,551

Gross profit

502,931

Selling, general and administrative expenses

271,227

Operating income

231,704

Non-operating income
Interest income

318

Dividends income

139,238

Other

5,142

144,697

Non-operating expenses
Interest expenses

951

Interest on bonds

1,703

Other

1,759

4,413
371,989

Ordinary income
Extraordinary income
Gain on sales of noncurrent assets

7,300

Gain on sales of shares of subsidiaries

116,259

Other

408

123,967

Extraordinary losses
Loss on sales of noncurrent assets

158

Loss on retirement of noncurrent assets

15,740

Impairment loss

3,707

Business restructuring costs

3,333

Loss on liquidation of business

12,902

Other

1,711

37,552458,404

Income before income taxes
Income taxes–current

104,829

Income taxes–deferred

8,566

113,395
345,009

Net income- 62 -

Nonconsolidated Statement of Changes in Net Assets(Year ended December 31, 2015)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings
Generalreserve

Retainedearnings
brought
forwardTotal
retainedearnings

TreasurysharesTotalshareholders’equity17,043

955,300

109,126

1,144,777(344,447)

1,636,730

10,169－－(10,169)

－

－

－

－

(9,493)

－

－

9,493

－

－

－

－

－

2,380

－

－

(2,380)

－

－

－

－

－

－

－

2,453

－

(2,453)

－

－

－

－

－

－

－

－

(17,043)－

17,043－－－Adjustment tospecial accountdue to change
in tax rate

－

－

－

－

－

129

－

(129)

－

－

－

Dividends fromsurplus

－

－

－

－

－

－

－

(187,574)(187,574)－(187,574)

Net income

－

－

－

－

－

－

－

345,009

345,009－

345,009

Purchase oftreasury shares

－

－

－

－

－

－

－

－

－

(100,000)(100,000)

Disposal oftreasury shares

－

－

－

－

－

－

－

(29)

(29)

114

85

Net changes of
items other thanshareholders’equity

－

－

－

－

－

－

－

－

－

－

－

Total changes of
items during theperiod

－

－

－

－

3,056

(14,461)－

168,811

157,406(99,886)

57,520

As of December
31, 2015

100,000

736,400

736,400

18,77647,587

2,582

955,300

277,938

1,302,183(444,333)

1,694,250

Capital
stock

Legal
capitalsurplusTotal
capitalsurplusLegalretainedearnings

100,000

736,400

736,400

18,77644,531

Provision ofreserve for
reduction entry

－

－

－

－

Reversal ofreserve for
reduction entry

－

－

－

Adjustment toreserve due tochange in tax
rate

－

－

Provision of
special accountfor reduction
entry

－

Reversal of
special accountfor reduction
entry

As of January 1,
2015

SpecialReserve foraccount for
reduction
reduction
entry
entry

Changes of items
during the period- 63 -

(Millions of yen)
Valuation and translation adjustments

Subscription

Total net assets

Valuation difference on
available-for-sale securities

Deferred gains orlosses on hedges

Total valuation andtranslation adjustments

rights to shares

21,087(10,298)

10,7901,631

1,649,151

Provision of reserve for
reduction entry

–

–

–

–

–

Reversal of reserve for
reduction entry

–

–

–

–

–

Adjustment to reserve due
to change in tax rate

–

–

–

–

–

Provision of special
account for reduction entry

–

–

–

–

–

Reversal of special
account for reduction entry

–

–

–

–

–

Adjustment to special
account due to change intax rate

–

–

–

–

–

Dividends from surplus

–

–

–

–

(187,574)

Net income

–

–

–

–

345,009

Purchase of treasury shares

–

–

–

–

(100,000)

Disposal of treasury shares

–

–

–

–

85

Net changes of items otherthan shareholders’ equity

8,704(2,617)

6,087

310

6,397

Total changes of items
during the period

8,704(2,617)

6,087

310

63,917

As of December 31, 2015

29,791(12,914)

16,877

1,941

1,713,068

As of January 1, 2015
Changes of items during
the period- 64 -

(TRANSLATION)
INDEPENDENT AUDITOR'S REPORT

February 5, 2016

To the Board of Directors ofJapan Tobacco Inc.:

Deloitte Touche Tohmatsu LLC

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Yasuyuki Miyasaka (Seal)

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Koji Ishikawa(Seal)

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Takenao Ohashi(Seal)

Pursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited the consolidated financial
statements, namely, the consolidated statement of financial position as of December 31, 2015 of Japan Tobacco Inc.
(the "Company") and its consolidated subsidiaries, and the related consolidated statements of income and changes inequity for the fiscal year from January 1, 2015 to December 31, 2015, and the related notes of significant matters for
preparing consolidated financial statements and other related notes to consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements
pursuant to the provisions of the second sentence of the first paragraph of Article 120 of the Ordinance on Company
Accounting which allows companies to prepare consolidated financial statements with the omission of a part of thedisclosures required under International Financial Reporting Standards ("IFRS"), and for such internal control as
management determines is necessary to enable the preparation of consolidated financial statements that are free frommaterial misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements arefree from material misstatement.

- 65 -

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessmentof the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentationof the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above, prepared with the omission of a part of thedisclosures required under IFRS pursuant to the provisions of the second sentence of the first paragraph of Article 120of the Ordinance on Company Accounting, present fairly, in all material respects, the financial position of Japan
Tobacco Inc. and its consolidated subsidiaries as of December 31, 2015, and the results of their operations for the year
then ended.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under
the provisions of the Certified Public Accountants Act.

The above represents a translation, for convenience only, of the original report issued in the Japanese language.

- 66 -

INDEPENDENT AUDITOR'S REPORT

February 5, 2016

To the Board of Directors ofJapan Tobacco Inc.:

Deloitte Touche Tohmatsu LLC

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Yasuyuki Miyasaka (Seal)

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Koji Ishikawa(Seal)

Designated Unlimited Liability Partner,
Engagement Partner,
Certified Public Accountant:

Takenao Ohashi(Seal)

Pursuant to the first item, second paragraph of Article 436 of the Companies Act, we have audited thenonconsolidated financial statements, namely, the nonconsolidated balance sheet as of December 31, 2015 of Japan
Tobacco Inc. (the "Company"), and the related nonconsolidated statements of income and changes in net assets for the
31st fiscal year from January 1, 2015 to December 31, 2015, and the related notes of significant accounting policies
and other related notes to nonconsolidated financial statements, and the accompanying supplemental schedules.
Management's Responsibility for the Nonconsolidated Financial Statements
Management is responsible for the preparation and fair presentation of these nonconsolidated financial statements andthe accompanying supplemental schedules in accordance with accounting principles generally accepted in Japan, andfor such internal control as management determines is necessary to enable the preparation of nonconsolidated
financial statements and the accompanying supplemental schedules that are free from material misstatement, whether
due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these nonconsolidated financial statements and the accompanying
supplemental schedules based on our audit. We conducted our audit in accordance with auditing standards generally
accepted in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the nonconsolidated financial statements and the accompanying supplemental schedules are free frommaterial misstatement.

- 67 -

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thenonconsolidated financial statements and the accompanying supplemental schedules. The procedures selected dependon the auditor's judgment, including the assessment of the risks of material misstatement of the nonconsolidated
financial statements and the accompanying supplemental schedules, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of thenonconsolidated financial statements and the accompanying supplemental schedules in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the nonconsolidated financial statements and the accompanying supplemental schedules.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the nonconsolidated financial statements and the accompanying supplemental schedules referred toabove present fairly, in all material respects, the nonconsolidated financial position of Japan Tobacco Inc. as ofDecember 31, 2015, and the results of its operations for the year then ended in accordance with accounting principles
generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required under
the provisions of the Certified Public Accountants Act.

The above represents a translation, for convenience only, of the original report issued in the Japanese language and"the accompanying supplemental schedules" referred to in this report are not included in the attached financial
documents.

- 68 -

[The following represents a translation, for convenience only, of the original report issued in the Japanese
language.]
Audit Report of the Audit & Supervisory Board

AUDIT REPORTRegarding the performance of duties by the Members of the Board for the 31st fiscal year from January 1,
2015 to December 31, 2015, the Audit & Supervisory Board hereby submits its audit report, which has been
prepared through discussions based on the audit report prepared by each Audit & Supervisory Board Member.

1. Auditing Methods Employed by Audit & Supervisory Board Members and the Audit & Supervisory Board
and Details of Such Methods(1) The Audit & Supervisory Board established auditing policies, allocation of duties, and other relevant
matters, and received reports from each Audit & Supervisory Board Member regarding his or her audits andresults thereof, as well as received reports from the Members of the Board, other relevant personnel, andIndependent Auditors regarding performance of their duties, and sought explanations as necessary.

(2) Each Audit & Supervisory Board Member complied with the auditing standards of Audit & Supervisory
Board Members established by the Audit & Supervisory Board, followed the auditing policies, allocation ofduties, and other relevant matters, communicated with the Members of the Board, and any other relevant
personnel, and made efforts to optimize the environment for information collection and audit, and conducted
his or her audits in the following methods:i) We participated in the Board of Directors’ meetings and other important meetings, received reports from theMembers of the Board, and other relevant personnel regarding performance of their duties, sought
explanations as necessary, examined important documents, and studied the operations and financial positions
at the head office and principal offices. With respect to subsidiaries, we communicated and exchanged
information with Members of the Board, Audit & Supervisory Board Members, and other relevant personnelof the subsidiaries, and received business reports from subsidiaries as necessary.
ii) We monitored and verified the details of the resolution of the Board of Directors related to the system that
ensures Members of the Boards are carrying out their duties in compliance with laws and regulations and the
Articles of Incorporation, and other systems that ensure the propriety of the operations of the corporate group
comprised of a stock company and its subsidiaries, which are described in paragraphs 1 and 3 of Article 100of the Ordinance for Enforcement of the Companies Act. We also monitored and verified the condition of thesystem (internal control system) put in place in accordance with the aforesaid resolution.
iii) We monitored and verified whether the Independent Auditors maintained their independence andimplemented appropriate audits, and we received reports from the Independent Auditors regarding theperformance of their duties and sought explanations as necessary. In addition, we received notice from the
Independent Auditors that “the system for ensuring that duties are performed properly” (matters set forth ineach item of Article 131 of the Ordinance on Accounting of Companies) is organized in accordance with the“Quality Management Standards Regarding Audits” (Business Accounting Council, October 28, 2005) andother relevant regulations, and sought explanations as necessary.
Based on the above methods, we examined the business report and the accompanying supplemental schedules,
the non-consolidated financial statements (non-consolidated balance sheet, non-consolidated statement of- 69 -

income, and non-consolidated statement of changes in net assets) and the accompanying supplemental
schedules, as well as consolidated financial statements (consolidated statement of financial position,
consolidated statement of income, and consolidated statement of changes in equity, which omit somedisclosure items required under International Financial Reporting Standards (IFRS) in accordance withthe provision of the second sentence of Article 120, paragraph 1 of the Ordinance on Accounting ofCompanies) related to the relevant business year.

2. Audit Results(1) Results of Audit of Business Report and Other Relevant Documents
1. In our opinion, the business report and the accompanying supplemental schedules are inaccordance with the related laws and regulations and Articles of Incorporation, and fairly
represent JT’s condition.
2. With regard to the performance of duties by the Members of the Board, we have found noevidence of wrongful action or material violation of related laws and regulations, nor of any
violation with respect to the Articles of Incorporation.
3. In our opinion, the contents of the resolutions of the Board of Directors regarding the internal
controls system are fair and reasonable, and, furthermore, the development, implementation andmaintenance of the internal controls system are appropriate.

(2) Results of Audit of Non-Consolidated Financial Statements and the accompanying supplemental schedules
In our opinion, the methods and results employed and rendered by the Accounting Auditors, Deloitte
Touche Tohmatsu LLC, are fair and reasonable.

(3) Results of Audit of Consolidated Financial Statements
In our opinion, the methods and results employed and rendered by the Independent Auditors, Deloitte
Touche Tohmatsu LLC, are fair and reasonable.

February 10, 2016

The Audit & Supervisory Board, Japan Tobacco Inc.
Standing Audit & Supervisory Board Member

Futoshi Nakamura(seal)

Standing Audit & Supervisory Board Member

Tomotaka Kojima(seal)

Audit & Supervisory Board Member

Yoshinori Imai(seal)

Audit & Supervisory Board Member

Hiroshi Obayashi(seal)(Note) Audit & Supervisory Board Members Yoshinori Imai and Hiroshi Obayashi are Outside Audit &Supervisory Board Members provided for by Article 2, item 16 and Article 335, paragraph 3 of theCompanies Act.

- 70 -