[This is an English translation prepared for reference purpose only. Should there be any inconsistency between thetranslation and the original Japanese text, the latter shall prevail.]

Securities Code: 2914
March 1, 2022
To Our Shareholders
Masamichi Terabatake
Representative Director and President

Japan Tobacco Inc.
1-1, Toranomon 4-chome, Minato-ku, TokyoNOTICE OF CONVOCATION OF
THE 37TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
We are pleased to announce the 37th Ordinary General Meeting of Shareholders of Japan Tobacco Inc. (“JT” or
the “Company”), which will be held as set forth below.
In light of the impacts of the novel coronavirus disease (COVID-19), we are asking you to prioritize yoursafety and to refrain from attending the meeting. Please exercise your voting rights beforehand via theInternet or by mail instead, by 6:00 p.m. on Tuesday, March 22, 2022.
Particulars
1. Date and Time of the Meeting: Wednesday, March 23, 2022 at 10:00 a.m.
2. Place of the Meeting:

The Prince Park Tower Tokyo
Second basement, Ballroom
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 Independent Auditors’ Report and JT’s Audit & Supervisory
Board Report on the Consolidated Financial Statements for the 37th
Business Term (From January 1, 2021 to December 31, 2021)
2. Report on the Non-Consolidated Financial Statements for the 37th
Business Term (From January 1, 2021 to December 31, 2021)

Matters to be Resolved:
Item 1:
Item 2:Item 3:Item 4:Item 5:Item 6:

Appropriation of Surplus
Partial Amendment to the Articles of Incorporation (i)Partial Amendment to the Articles of Incorporation (ii)
Partial Amendment to the Articles of Incorporation (iii)Election of Ten (10) Members of the Board
Revision of Remuneration Amount for Outside Directors

1

Information on Matters Posted on JT’s Website
1. Among the documents to be provided upon release of this Notice of Convocation of this Ordinary General
Meeting of Shareholders, the items below are posted on our website (https://www.jti.co.jp/) in accordance withlaws and regulations, and the provision in Article 17 of the Articles of Incorporation. Therefore, they are notincluded in this Notice of Convocation of this Ordinary General Meeting of Shareholders.
 “Matters Concerning Subscription Rights to Shares” and “Overview of the Resolutions on theDevelopment of Systems Necessary to Ensure the Properness of Operations and the Operating Status of
the Systems” on the Business Report
 “Consolidated Statement of Changes in Equity” and “Notes to Consolidated Financial Statements” on
the Consolidated Financial Statements
 “Non-Consolidated Statement of Changes in Net Assets” and “Notes to Non-Consolidated Financial
Statements” on the Non-Consolidated Financial Statements
In addition, these items are included in the Consolidated and Non-Consolidated Financial Statements auditedby the Accounting Auditors in the course of preparing Accounting Auditors’ Report, and in the Business Report,
and Consolidated and Non-Consolidated Financial Statements audited by Audit & Supervisory Board Membersin the course of preparing Audit Report.
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 website (https://www.jti.co.jp/).

JT’s website

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

Measures to Prevent the Spread of COVID-19 at the General Meeting of Shareholders
Requests to Shareholders* In light of the impacts of COVID-19, we are asking you to prioritize your safety and to refrain from
attending the meeting in person.
* Exercise of voting rights at the Company’s General Meeting of Shareholders is shareholders’ importantright. Please exercise your voting rights beforehand via the Internet or by mail. Note that the deadline forexercising your voting rights is 6:00 p.m. on Tuesday, March 22, 2022. Please see pages 4 to 5 for details.
<Measures to be implemented at the venue> We ask shareholders attending in person to use alcohol disinfectant and wear face masks. Please beadvised that persons who do not comply with these requests may not be allowed to enter the venue.
 We will check the body temperature of the shareholders using thermography at the reception desk. Those
who appear to be unwell may be approached by organizing staff members and asked to refrain from entering
the venue.
 Even after the General Meeting of Shareholders has started, persons who appear to be feeling unwell may
be approached by organizing staff members or may be asked to leave the venue.
 Note that the number of available seats will be limited in order to increase the space between the seats. Please
be aware that even shareholders who come to the venue may not be allowed to enter.
 To ensure that the proceedings of the General Meeting of Shareholders progress smoothly and efficiently,
the Company plans to shorten the time. The Company asks for your understanding and cooperation in thismatter.
 Exhibits, such as those introducing the Company’s businesses and products, have been cancelled.
 Although beverages (plastic bottles) are usually provided, they will not be provided at this General Meetingof Shareholders.
Measures by the Company* Organizing staff members will be at the venue after confirming their physical condition, which includes taking
their temperature.
* Organizing staff members will wear face masks when interacting with shareholders.
* Alcohol disinfectant will be placed at the reception desk and multiple areas within the venue.
2Operational Arrangements for the General Meeting of Shareholders* If you are attending in person, please present the Voting Rights Excise Form at the reception desk on arrival at
the venue. In addition, please bring this Notice of Convocation of this Ordinary General Meeting of
Shareholders.
* 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 this Ordinary General Meetingof 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 thereception desk. It is also possible for us to arrange a Japanese sign language interpreter for you. If you are inneed of this service, please inquire us in writing by March 16 (Wednesday) (your letter of inquiry must reach
us by this date).
* Please note that gifts will not be provided to those attending the General Meeting of Shareholders. We ask foryour understanding in this matter.
* The General Meeting of Shareholders will be streamed live over the Internet so that shareholders will beable to watch the proceedings from their homes or other locations (only available in Japanese). We will
also take your enquiries in advance over the Internet. Please see pages 6 to 7 for details.
In the case of material changes on the operation of the General Meeting of Shareholders, you will be informed via
the Company’s website (https://www.jti.co.jp/).

3

Instructions for Exercising Your Voting Rights via the Internet or by Mail
When Exercise the Voting Rights via the Internet
Access the Voting Rights Exercise Website from your computer or smartphone as follows and indicate whether
you are for or against each of the items.

Exercise due dateNo later than 6:00 p.m., on Tuesday, March 22, 2022

Log in from your smartphone1.

Scan the QR Code at the lower right-hand side of the Voting Rights Exercise Form.
 It is not necessary to fill in or mail the usual form.
 It is not necessary to turn on your computer or type the Voting Rights Exercise Website address.
 It is not necessary to type a burdensome ID or password.

* You can exercise your voting rights only one time by scanning the QR Code to log in.
If exercising voting rights more than once, use the instructions in “Log in from your computer, etc.”* Depending on the smartphone model being used, it may not be possible to log in using the QR Code.
* Depending on the app used to scan the QR Code, some additional operations may be necessary.
* QR Code is a registered trademark of DENSO WAVE INCORPORATED.
2. Then, please indicate whether you are for or against each of the items following the directions on thewebsite.
Log in from your computer, etc.
Voting Rights Exercise Website: https://evote.tr.mufg.jp/
1. Access the Voting Rights Exercise Website.
2. Fill in the “Log-in ID” and the “Temporary Password” described on the lower right-hand side of the
Voting Rights Exercise Form, and click the “Log-in” button.
3. Register a new password.
4. Then, please indicate whether you are for or against each of the items following the directions on thewebsite.
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 andadministered by ICJ, Inc.

4

When Exercise the Voting Rights by Mail
Please indicate whether you are for or against each of the items on the Voting Rights Exercise Form and returnit to us. If there is no indication of for or against on each proposal, it shall be deemed that you have voted forthe proposal.

Exercise due date

To be returned to us no later than 6:00 p.m., on Tuesday,
March 22, 2022

Guide to filling in the Voting Rights Exercise Form
Please indicate for or against about each item.
Items 1, 2, 3, 4 and 6
When you are for the proposed item, mark ○ in the “for” box, and when you are against the item, mark○ in the “against” box.
Item 5
When you are for all of the proposed persons in the item, mark ○ in the “for” box, and when you areagainst all in the item, mark ○ in the “against” box.
If you are against certain candidates, mark ○ in the “for” box, and also write the candidate number foreach candidate you are against inside the parentheses.
* In the event voting rights are exercised more than once:(1) If the voting right is exercised both via the Internet and by mail, 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.

5

Information About Live Streaming Over the Internet and Acceptance of Enquiries in Advance
The General Meeting of Shareholders will be streamed live over the Internet so that shareholders will beable to watch the proceedings from their homes or other locations (only available in Japanese).
Please access the website for live streaming from your computer or smartphone as follows, and enter yourShareholder ID (= Shareholder Number) and password (= zip code) to watch.
1. Date and time of streaming
From 10:00 a.m. to the end time of the General Meeting of Shareholders on Wednesday, March 23, 2022
* The streaming page will be available from around 30 minutes before the start time of the General Meeting of
Shareholders (9:30 a.m.).
2. How to watch on the day
Prepare your Shareholder ID (= Shareholder Number) and password (= zip code), which are to be required on
the shareholder authentication screen (log-in screen), in advance before accessing to the following website forlive streaming.

Website for live streaming

https://www.virtual-sr.jp/users/jti2022/login.aspx

Shareholder
ID▶ “Shareholder Number” (eight digits) stated in the Voting Rights Exercise Form, etc.

Password▶

“Zip code” (as at the end of December) for the address registered on the shareholder registry(seven digits, with no hyphen)* Your viewing environment can be tested in advance from Monday, March 21 on the website for live streaming(https://www.virtual-sr.jp/users/jti2022/login.aspx).

6

Voting Rights Exercise Form
The “Shareholder ID (= Shareholder Number)” and “password (zip code)” mentioned on page 6 are provided inthe Voting Rights Exercise Form.
* When you post the Voting Rights Exercise Form, please make sure to write down your “Shareholder
Number” before posting. If you forget your Shareholder Number, please contact the “enquiries on log-in”
below[Cautions]
The “password (=zip code)” may be different from the zip code stated in the Voting Rights Exercise Form
(address change on or after the record date of the General Meeting of Shareholders and information in the casewhere the mailing address for the Voting Rights Exercise Form is designated, or any other cases, are notreflected). In addition, shareholders living outside Japan who have designated a standing proxy are asked toenter the zip code of the standing proxy.
3. Points of attention
・If you watch the General Meeting of Shareholders through live streaming over the Internet, this is not deemed
as attendance at the General Meeting of Shareholders under the Companies Act, and you can neither ask
questions nor exercise your voting rights on the day. Please exercise your voting rights via the Internet or by
mail in advance (for the method for exercising voting rights in advance, please refer to pages 4 to 5).
・Please note that any problem with video or sound may arise due to your computer environment or Internet
connection environment.
・Communication charges, etc. for viewing are each shareholder’s responsibility.
・If for any reason we become unable to conduct live streaming over the Internet on the day, you will be
informed via the Company’s website (https://www.jti.co.jp/).
4. Acceptance of enquiries over the Internet in advance・We accept enquiries on the purpose of the General Meeting of Shareholders from shareholders in advance.
Please log in to the website for live streaming by referring to “2. How to watch on the day,” and follow the
instructions on the screen to select a category and enter your enquiry in advance.
(1) Period for acceptance: until 5:00 p.m. on Wednesday, March 16, 2022
(2) Points of attention－ Enquiries received from shareholders will be answered on the day of the General Meeting of Shareholders.
Please note that we do not promise to respond to all enquiries received.
－ The enquiry form has a character limit of 300 characters.
－ Enquires should be about the purpose of the General Meeting of Shareholders, and one enquiry per person
can be made. The Company asks for your cooperation in this matter.
Mitsubishi UFJ Trust and Banking Corporation
Tel: 0120-262-545 (Toll-free) Japanese-language only
Friday, February 25 to Tuesday, March 22 (Business hours: 9:00 to
Enquiries on log-in
17:00 except Saturdays and Sundays)
Wednesday, March 23 (Business hours: 9:00 to the end of theGeneral Meeting of Shareholders)* For technical enquiries on watching live streaming, such as the streaming environment, information isprovided separately on the website for live streaming (https://www.virtual-sr.jp/users/jti2022/login.aspx).

7

REFERENCE DOCUMENTS
FOR THE GENERAL MEETING OF SHAREHOLDERS
Item 1: Appropriation of Surplus
The Company has adopted a resources allocation policy, under which the Company will continue to place ahigh priority on making business investments(Note 1) that contribute to sustainable mid- to long-term profit growth
as well as to value the balance between profit growth through business investments and shareholder returns. In
this context, the Company has been pursuing enhanced shareholder returns in proportion to the mid- to longterm profit growth, while maintaining a solid financial base(Note 2).
In accordance with these policies, year-end dividends for the 37th Business Term will be paid as described
below.
(Notes) 1. Investment towards the growth of the tobacco business is our highest priority. Pursue growth ofadjusted operating profit at constant FX through high-quality top-line growth.
2. Secure stability in case of changes in the business environment such as economic crises and flexibility
enabling expeditious responses to business investment opportunities

Year-end dividends(1) Type of assets to be paid as dividends:
Cash(2) Allotment of assets to be paid as dividends and their aggregate amount:¥75 per share of ordinary shares of JT

Aggregate amount: ¥133,089,352,425

Together with the interim dividends of ¥65 per share paid in September 2021, the annual dividends for the
37th Business Term will be ¥140 per share.
(3) Effective date for distribution of surplus:
March 24, 2022
Reference: Trends in dividend per share (yen) and payout ratio
Dividend per share (yen)Payout ratio(Notes) 1. For fiscal year 2015, due to the transfer of the Company’s shares, etc., held by a beverage vending8

machine operating subsidiary and the closure of its business of manufacture and sale of the Company’s
beverage products, the Beverage Business is categorized as non-continuing business. The payout ratio
including non-continuing business is 44%.
2. In fiscal year 2021, we set a new policy to target a payout ratio of 75% (to be in the range ofapproximately ±5%) as a competitive level in the capital markets.

9【Reference】Resources allocation policy of the Business Plan 2022

Due to strengthening investment in RRP(Note 1) in the Tobacco Business as set forth in the “Business Plan
2022,” the Group expects a mid-single-digit(Note 2) annual average growth rate in adjusted operating profit atconstant FX(Note 3) for the planned period. However, by leveraging the effect of said investment, the Group willcontinue to pursue mid- to high-single-digit(Note 4) annual average growth rate in adjusted operating profit atconstant FX over the medium to long term. The Group has adopted the following resources allocation policy:
Resources allocation policy
Allocate resources based on the “4S model” that underlies the Group’s management principles.
 Prioritize business investments for sustainable profit growth over the mid- to long term Strike a balance between profit growth through business investments and shareholder returns
Business investments- Aim for quality top-line growth by continuously providing new value and satisfaction to customers- Investment towards the growth of the tobacco business is of our highest priority
Shareholder returns- Aim to enhance shareholder returns by realizing the Company’s mid- to long-term profit growth, while
maintaining a solid financial base- Target a dividend payout ratio of about 75%(Note 5) as a competitive level in the capital markets(Note 6)- Consider implementing acquisitions of treasury shares, mainly taking into account the Company’s
financial positions for the respective year and the med-term capital needs(Notes) 1. Reduced-Risk Products (RRP) such as T-Vapor products and E-Vapor products are products withpotential to reduce the risks associated with smoking. T-Vapor products do use tobacco leaf, but insteadof burning the leaf, they use methods such as heating the leaf to generate tobacco vapor (which includes
compounds derived from the tobacco leaf) for the user to enjoy. Conversely, E-Vapor products do not use
tobacco leaf, instead using a liquid inside a device or a specialized cartridge which is electrically heatedto generate vapor for the user to enjoy.
2. mid-single digit: mid-single-digit percentage
3. Adjusted operating profit is calculated by deducting amortization cost of acquired intangibles andadjustment items (income and costs) from operating profit (loss). Adjustment items (income and costs)
are impairment losses on goodwill, restructuring income and costs, and other items. Adjusted operating
profit growth rate at constant FX is a financial measurement that excludes foreign exchange effects bytranslating and calculating adjusted operating profit for the current fiscal year in the International Tobacco
Business using the foreign exchange rates of the previous fiscal year.
4. mid- to high-single digit: mid- to high-single-digit percentage

105. To be in the range of approximately ±5%.
6. Monitor the shareholder return trends of global Fast-Moving Consumer Goods (FMCG) companies whichhave a stakeholder model similar to our “4S model” and have realized strong business growth.

11

Item 2: Partial Amendment to the Articles of Incorporation (i)1. Purpose of the Amendment
The Company proposes to amend an Article regarding the term of the Board of Directors to one year from thecurrent stipulated two-year term in order to build a management foundation to address the changes in thebusiness environment in a timely manner and to strengthen its corporate governance by clearly defining the
responsibilities of the directors and increasing opportunities to seek shareholders’ confidence.
2. Details of the Amendment
The details of the amendment are as follows.
(Underline indicates amended portions)
Current
Proposed Amendment
Article 22. (Term of Office of Members of the Board) Article 22. (Term of Office of Members of the Board)
1. The term of office of a Member of the Board shall 1. The term of office of a Member of the Board shall
expire at the close of the ordinary General Meeting
expire at the close of the ordinary General Meetingof Shareholders for the latest business year endingof Shareholders for the latest business year ending
within two years after his/her election.
within one year after his/her election.
2. The term of office of a Member of the Board who 2. (remains unchanged)
is elected to fill a vacancy or in addition to thosealready in office shall be conterminous with theremaining term of office of the other Members of
the Board in office.

12

Item 3: Partial Amendment to the Articles of Incorporation (ii)
1. Purpose of the Amendment
The Act for Partially Amending the Industrial Competitiveness Enhancement Act and Other Related Acts (Act No.
70 of 2021) was enforced on June 16, 2021, enabling listed companies to hold a general meeting of shareholders with
its venue undesignated (i.e., so-called “virtual-only” shareholders’ meeting) under certain conditions, if such isdefined in their articles of incorporation. Allowing for the event of large-scale disasters such as the spread of infectious
diseases and natural disasters as well as an increasingly digitized society, we believe that expanding choices for the
method of holding the General Meeting of Shareholders should contribute to the interests of our shareholders, andthus propose to amend Article 15 of the Articles of Incorporation to be able to hold the General Meeting of
Shareholders at an undesignated venue.
As to the amendment to the Articles of Incorporation proposed in this Item, it has been confirmed by the Minister of
Economy, Trade and Industry and the Minister of Justice pursuant to the Ordinance of the Ministry of Economy,
Trade and Industry and the Ordinance of the Ministry of Justice that the requirements as set forth in the Ordinances
as a case, which serves for strengthening industrial competitiveness while consideration is given to the interests ofshareholders, are met.

2. Details of the Amendment
The contents of the amendment are as follows.
(Underline indicates amended portions)
Current
Proposed Amendment
Article 15. (Convocation)
Article 15. (Convocation)
1. The ordinary General Meeting of Shareholders of 1. (remains unchanged)
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 Member of the Board appointed pursuant to 2. (remains unchanged)
the preceding paragraph is prevented from so
acting, one of the other Members of the Board shallconvene the General Meeting of Shareholders in
his/her place in the order previously determined byresolution of the Board of Directors.
(deleted)
3. The General Meeting of Shareholders may be
convened at the location of the Company’s head
office or its neighborhood.
3. The General Meeting of Shareholders of the(newly established)
Company may be convened at an undesignatedlocation.
(Note) Some underlining does not coincide with the Japanese version because of translation adjustments.

13

Item 4: Partial Amendment to the Articles of Incorporation (iii)
1. Purpose of the Amendment
The amending provisions provided in the proviso to Article 1 of the Supplementary Provisions of the Act for Partially
Amending the Companies Act (Act No. 70 of 2019) will be enforced on September 1, 2022. To prepare for the
implementation of an electronic provision system for documents for the General Meeting of Shareholders, theCompany proposes to make the following amendments to the Articles of Incorporation of the Company.

(1) The clause on the deemed provision of the disclosure via the Internet of reference materials, etc., for the
General Meeting of Shareholders (current Article 17 of the Articles of Incorporation) is deleted as it will
become unnecessary under the electronic provision system.
(2) The proposed amendment in Paragraph 1, Article 17 defines an electronic provision measure to be taken
for information that constitutes the contents of reference materials, etc., for the General Meeting of
Shareholders(3) The proposed amendment in Paragraph 2, Article 17 is a new clause to place a restriction on the extent of
the contents of written documents to be delivered to shareholders who request the delivery of written
documents.
(4) As a result of the foregoing deletion and new clauses, supplementary provisions concerning the effective
date, etc., are created.
2. Details of the Amendment
The contents of the amendment are as follows.
(Underline indicates amended portions)
Proposed Amendment

Current
Article 17. (Deemed provision of the disclosure via
the Internet of reference materials, etc. for General
Meeting of Shareholders)
When convening the General Meeting of
Shareholders, the Company may be deemed to haveprovided shareholders with necessary informationthat should be described or presented in statutory
documents, including reference materials for the
General Meeting of Shareholders, business reports,
non-consolidated and consolidated financial
reports, if they are disclosed via the Internet inaccordance with the ministerial ordinance ofMinistry of Justice.
(newly established)(deleted)

Article 17. (Electronic provision measure, etc.)
1. When convening the General Meeting of
Shareholders, the Company shall take an electronic
provision measure as set forth in Article 325-2 of
the Companies Act for information that constitutes
the contents of reference materials, etc., for the
General Meeting of Shareholders.
2. The Company may not include all or part of thematters for an electronic provision measure as set
forth in the Ordinance of the Ministry of Justice indocuments to be delivered to shareholders who
submit a request for the delivery of written
documents under Article 325-5 of the Companies
Act by the record date for voting rights.

14Current
SUPPLEMENTARY PROVISIONS(newly established)

Proposed Amendment
SUPPLEMENTARY PROVISIONS
Article 5. (Transitional measures for electronic
provision measure, etc.)
1. The deletion of the current Article 17 (Deemed
provision of the disclosure via the Internet ofreference materials, etc., for the General Meeting of
Shareholders) of the Articles of Incorporation andthe creation of the proposed amendment in Article
17 (Electronic provision measure, etc.) shall beeffective from the date of enforcement of theamending provisions provided in the proviso to
Article 1 of the Supplementary Provisions of the
Act for Partially Amending the Companies Act (ActNo. 70 of 2019) (the “Enforcement Date”).
2. Notwithstanding the preceding paragraph, thecurrent Article 17 of the Articles of Incorporation
shall be still effective for the General Meeting of
Shareholders whose date falls within six months
from the Enforcement Date.
3. This article shall be deleted after the later of either
the date six months from the Enforcement Date or
the date three months from the date of the General
Meeting of Shareholders as set forth in thepreceding paragraph.

15

Item 5: Election of Ten (10) Members of the Board
The terms of office of all nine (9) present Members of the Board will expire at the conclusion of this Ordinary
General Meeting of Shareholders. Given business environments surrounding the Group, we propose the electionof ten (10) Members of the Board (including four (4) Outside Directors) with the addition of one (1) Outside
Director, to further enhance and strengthen corporate governance to continue the pursuit of sustainable profit
growth and corporate value over the mid to long term.
The candidates for the office of Member of the Board are as follows.
Candidate
NumberName

Positions and Responsibilities
in the Company

Advisory
Number of
Number of Attendance atPanel onsignificant
years asmeetings ofNomination
concurrent Member of the the Board ofandpositions
Board
Directors
Compensation

1[Reappointed]

Mutsuo Iwai

Chairperson of the Board2

6 years

13/13(100%)

2[Newly appointed]

Shigeaki Okamoto

Deputy Chairperson of the Board



3

-

-

3

[Reappointed]

Masamichi Terabatake

Representative Director andPresident,
Chief Executive Officer-

1

4 years

13/13(100%)

4[Reappointed]

Naohiro Minami-

1

4 years

13/13(100%)

5[Reappointed]

Kiyohide Hirowatari--

4 years

13/13(100%)

6[Reappointed]

Kazuhito Yamashita

Member of the Board andSenior Vice President,
Corporate Governance, Compliance--

3 years

13/13(100%)

Outside Director3

9 years and9 months

13/13(100%)

Outside Director

3

3 years

13/13(100%)

Outside Director2

1 year9/9(100%)

Outside Director



4

-

-

Representative Director andExecutive Vice President,
Finance and Corporate
Communications
Representative Director andExecutive Vice President,
Corporate Strategy, Sustainability,
People & Culture, Information
Technology, Legal, Operation
Review & Business Assurance,
Pharmaceutical Business and FoodBusiness

Main Kohda
7[Reappointed]

8[Reappointed]

9[Reappointed]

10[Newly appointed][Outside Director][Independent Director]
Yukiko Nagashima[Outside Director][Independent Director]
Masato Kitera[Outside Director][Independent Director]
Tetsuya Shoji(Notes)[Outside Director][Independent Director]

1. Positions and responsibilities in the Company and the Advisory Panel on Nomination and Compensation represent thoseplanned subject to approval of the election of each candidate.
2. The number of significant concurrent positions represent the number as of the date of sending this Notice of Convocation.
3. The numbers of years as Member of the Board at the conclusion of this Ordinary General Meeting of Shareholders are presented.

16

Candidate Number

1

Reappointed

Mutsuo Iwai

(Born October 29, 1960)

Number of the Company’s Shares Held36,000Brief 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)
June 2003
Vice President, Corporate Planning Division
July 2004
Vice President, Corporate Strategy Division
June 2005
Senior Vice President and Vice President, Food Business Division, Food Business
June 2006
Member of the Board and Executive Vice President, President, Food Business
June 2008
Executive Vice President, Chief Strategy Officer
June 2010
Member of the Board and Senior Vice President, Chief Strategy Officer and Assistant to
CEO in Food Business
June 2011
Member of the Board
Executive Vice President, JT International S.A.
June 2013
Senior Executive Vice President,
Chief Strategy Officer
January 2016
Executive Vice President,
President, Tobacco Business
March 2016
Representative Director and Executive Vice President, President, Tobacco Business
January 2020
Member of the Board
March 2020
Deputy Chairperson of the Board(Current Position)
June 2020
Outside Director of Benesse Holdings, Inc.
(Current Position)
June 2021
Outside Director of TDK Corporation(Current Position)(Significant Concurrent Positions outside the Company)
Outside Director of Benesse Holdings, Inc.
Outside Director of TDK Corporation

Reasons for nomination as a candidate for Director
Mutsuo Iwai assumed the position of Deputy Chairperson of the Board of the Company in March 2020. He has experience of driving the core Tobacco
Business as Representative Director and Executive Vice President of the Company even in unclear and uncertain operating environments, with his forcefulexecution of business backed by precise decision-making. In addition, his broad and deep knowledge and insights cultivated through diverse experience
both in Japan and overseas in areas such as the Food Business and Corporate Strategy have contributed to the strengthening of the supervisory function of
the Group and relationships with stakeholders, which are essential to the improvement of the corporate governance of the Group going forward. For thisreason, we propose his reelection as a Member of the Board.

* Mutsuo Iwai took office as Member of the Board without Representative rights from January 1, 2020.

17

Candidate Number

2

Shigeaki Okamoto

Newly
appointed(Born February 20, 1961)

Number of the Company’s Shares Held0

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1983
Entered Ministry of FinanceJuly 2001
Head of Management Office, General Coordination Division, Planning and Coordination
Bureau, Financial Services Agency
July 2002
Director for Supervisory and Financial Risk Stabilization Management, General
Coordination Division, Supervisory Bureau
July 2004
Director of Research Division, Budget Bureau, Ministry of FinanceJuly 2006
Director for the Budget Bureau, Planning and Administration Division of Budget Bureau
July 2009
Head of Secretariat Division, Minister’s Secretariat
August 2012
Deputy Director-General of the Budget Bureau
July 2015
Deputy Vice Minister
July 2017
Director-General of the Budget Bureau
July 2018
Administrative Vice Minister (Retired from the office in July 2020)
June 2021
Outside Audit & Supervisory Board Member, Yomiuri Land Co., Ltd. (Current Position)
December 2021 Outside Audit & Supervisory Board Member, The Yomiuri Shimbun Osaka Head Office(Current Position)
Outside Audit & Supervisory Board Member, The Yomiuri Shimbun Seibu Head Office(Current Position)(Significant Concurrent Positions outside the Company)
Outside Audit & Supervisory Board Member, Yomiuri Land Co., Ltd.
Outside Audit & Supervisory Board Member, The Yomiuri Shimbun Osaka Head OfficeOutside Audit & Supervisory Board Member, The Yomiuri Shimbun Seibu Head Office

Reasons for nomination as a candidate for Director
Having served important roles such as Administrative Vice Minister of the Ministry of Finance during his long years of service with ministries and bureaus,
Shigeaki Okamoto possesses considerable knowledge and experience in general national policies. We propose his election based on our view that his broad
outlook and high standing underpinned by his experience are essential to the further enhancement of the corporate governance of the Group.

18

Candidate Number

3

Masamichi Terabatake

Reappointed(Born November 26, 1965)

Number of the Company’s Shares Held132,700

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1989
Joined the Company
July 2005
Vice President, Secretary’s Office
July 2008
Vice President, Corporate Strategy Division
June 2011
Senior Vice President, Chief Strategy Officer and in charge of Food Business
June 2012
Senior Vice President, Chief Strategy Officer
June 2013
Member of the Board
Executive Vice President, JT International S.A.
January 2018
President and Chief Executive Officer
March 2018
Representative Director and President, Chief Executive Officer(Current Position)(Significant Concurrent Positions outside the Company)
Chairman and Managing Director, JT International Group Holding B.V.

Reasons for nomination as a candidate for Director
Masamichi Terabatake was appointed President and Chief Executive Officer of the Company in January 2018, and then Representative Director and President
in March of the same year. He has used the extensive experience and his knowledge and powerful leadership in relation to global business management,
accumulated in a range of duties such as the drawing up and execution of management strategy both in Japan and overseas, and the execution of the businessof the International Tobacco Business in his role as Executive Vice President of JT International S.A., and in doing so has been a driver of the growth of theGroup. We judge that his extraordinary insights and wide-ranging outlook, together with his enhanced reforming capabilities, are indispensable for the
management of the Group going forward, and hence we propose his reelection as a Member of the Board.

* Masamichi Terabatake has served concurrently as President, Tobacco Business since January 1, 2020.

19

Candidate Number

4

Naohiro Minami(Born January 21, 1964)

Number of the Company’s Shares Held48,300Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1986
Joined the Company
December 2005 Controller
July 2010
Deputy Financial Officer and Controller
June 2012
Senior Vice President, Chief Financial Officer and Controller
July 2012
Senior Vice President, Chief Financial Officer
January 2018
Executive Vice President, Chief Financial Officer and Communications
March 2018
Representative Director and Executive Vice President, Chief Financial Officer andCommunications
January 2022
Representative Director and Executive Vice President, Finance and Corporate
Communications (Current Position)

Reappointed(Significant Concurrent Positions outside the Company)
Supervisory Board member, JT International Holding B.V.

Reasons for nomination as a candidate for Director
Naohiro Minami was appointed Executive Vice President of the Company in January 2018, and then Representative Director and Executive Vice President
in March of the same year. He has fully leveraged the wide-ranging and deep knowledge that he cultivated during his service as Controller, and Senior Vice
President, Chief Financial Officer, particularly in the field of accounting and finance, to play a key role in the management of the Company and contribute toits growth. We judge that his accurate decision-making and strategic thinking, and the diverse experience on which they are based, make a contribution tomaintaining and broadening the management base that provides the support for the expansion of the Group’s business, and will be indispensable in driving
the Group’s management further forward, for which reason we propose his reelection as a Member of the Board.

20

Candidate Number

5

Kiyohide Hirowatari

Reappointed(Born November 11, 1965)

Number of the Company’s Shares Held

47,700Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1989
Joined the Company
July 2010
Vice President, Legal Division
June 2012
Senior Vice President, Chief Legal Officer and Vice President, Legal Division
July 2014
Senior Vice President, Chief Legal Officer
January 2015
Senior Vice President, Head of Tobacco Business Planning Division, Tobacco Business
January 2017
Senior Vice President, Human Resources
January 2018
Executive Vice President,
Compliance, General Affairs, Legal, Corporate Strategy, IT, CSR, Human Resources andOperation Review & Business Assurance
March 2018
Representative Director and Executive Vice President,
Compliance, General Affairs, Legal, Corporate Strategy, IT, CSR, Human Resources andOperation Review & Business Assurance
January 2019
Representative Director and Executive Vice President,
Legal, Corporate Strategy, Digitalization, Human Resources, Operation Review &Business Assurance, Pharmaceutical Business and Food Business
January 2022
Representative Director and Executive Vice President,
Corporate Strategy, Sustainability, People & Culture, Information Technology, Legal,
Operation Review & Business Assurance, Pharmaceutical Business and Food Business(Current Position)

Reasons for nomination as a candidate for Director
Kiyohide Hirowatari was appointed Executive Vice President of the Company in January 2018, and then Representative Director and Executive Vice President
in March of the same year. He has acquired leadership and wide-ranging knowledge in such areas of company law, business management and HR during histime serving in diverse and important roles, including Senior Vice President, Chief Legal Officer, Head of Tobacco Business Planning Division, Tobacco
Business, and Senior Vice President, Human Resources, and has utilized them to maintain a foundation for the Company’s sustainable growth and to draw up
strategy. We judge that his keen discernment and accurate decision-making, which is based on the knowledge and experience he has cultivated in a broad
range of fields, will prove indispensable in the Group’s management going forward, for which reason we propose his reelection as a Member of the Board.

21

Candidate Number

6

Kazuhito Yamashita

Reappointed(Born February 4, 1963)

Number of the Company’s Shares Held

33,100Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1986
Joined the Company
May 2007
Vice President, Corporate, Scientific & Regulatory Affairs Division, Tobacco Business
Headquarters
Vice President, Corporate Affairs Division, Tobacco Business Headquarters
July 2009
Senior Vice President, Chief Corporate, Scientific & Regulatory Affairs Officer, Tobacco
June 2010
Business
Senior Vice President, Head of China Division, Tobacco Business
January 2015
Senior Vice President, Chief Sustainability Officer, Compliance and General Affairs
January 2019
Member of the Board and Senior Vice President, Chief Sustainability Officer, Compliance
March 2019
and General Affairs
Member of the Board and Senior Vice President, Corporate Governance, Compliance
January 2022
(Current Position)

Reasons for nomination as a candidate for Director
Kazuhito Yamashita assumed the position of Member of the Board and Senior Vice President of the Company in March 2019. He has served in such roles as
Senior Vice President, Chief Corporate, Scientific & Regulatory Affairs Officer, and Head of China Division, focusing on promoting social and environmental
issues and on the expansion of the overseas business, and he has leveraged the wide-ranging experience and knowledge thus acquired to contribute toestablishing an environment conducive to the Company’s business. His leadership, and the broad knowledge he has cultivated, are indispensable to thecorporate governance that will form the foundation of the Group’s sustainable growth going forward, for which reason we propose his reelection as a Memberof the Board.

22

Candidate Number

7

Reappointed
OutsideDirector
Independent
Director

Main Kohda

Number of years as Outside Director(at the conclusion of this Ordinary General Meeting of Shareholders)

9 years and9 months

Number of the Company’s Shares Held0
(Born April 25, 1951)
Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
September 1995 Started independently as Novelist(Current Position)
January 2003
Member of Financial System Council, Ministry of Finance Japan
April 2004
Visiting professor, Faculty of Economics, Shiga University
March 2005
Member of the Council for Transport Policy, Ministry of Land, Infrastructure, Transport
and Tourism
November 2006 Member of the Tax Commission, Cabinet Office, Government of Japan
June 2010
Member of the Board of Governors, Japan Broadcasting Corporation
June 2012
Outside Director of the Company(Current Position)
June 2013
Outside Director, LIXIL Group Corporation
June 2016
Outside Director, Japan Exchange Group, Inc.
(Current Position)
June 2018
Outside Director, MITSUBISHI MOTORS CORPORATION(Current Position)(Significant Concurrent Positions outside the Company)
Novelist
Outside Director, Japan Exchange Group, Inc.
Outside Director, MITSUBISHI MOTORS CORPORATION

Reasons for nomination as a candidate for Outside Director and summary of expected roles
Main Kohda assumed the position of Outside Director of the Company in June 2012. She did not engage in corporate management previously other thanserving as an Outside Director or an Outside Auditor. Nevertheless, we have benefited from her in-depth knowledge of international finance, her broad
experience gained from serving on government examination committees and similar positions, and her deep insight and objective point of view that she has
demonstrated through her activities as a novelist being reflected in the management of the Company and she has worked tirelessly to supervise businessexecution from a fair and independent standpoint.
We believe her wide-ranging experience and broad knowledge are essential for the Group management by the Company, and thus propose her reelection in
expectation of her continuous contribution as Outside Director of the Company to improving corporate governance in the Group through her proactive
recommendations and advice provided at the meetings of the Board of Directors and the Advisory Panel on Nomination and Compensation.
Independence- Main Kohda satisfies 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.
The Company pays a certain level of receiving fees to Japan Broadcasting Corporation (“NHK”) under a broadcast receiving contractconcluded, pursuant to the Broadcast Act, with NHK, where Main Kohda was assigned as a Member of the Board of Governors until June
2013, but the amount paid in receiving fees in fiscal year 2021 came to less than 0.001% of NHK’s consolidated total operating incomein the fiscal year ended March 2021, and less than 0.001% of the Company’s consolidated revenue in fiscal year 2021, and was therefore
negligible. Payment of the receiving fees is based on the Broadcast Act, and are non-negotiable, and are not therefore categorized asbusiness transactions. Excluding payment of the receiving fees, the Company has no transactional business relationship with NHK.
In addition, the Company pays listing-related fees, etc. to Tokyo Stock Exchange, Inc., a subsidiary of Japan Exchange Group, Inc., where
Main Kohda serves as an Outside Director. However, in fiscal year 2021 the amount paid in listing-related fees, etc. came to less than
0.005% of consolidated operating revenue for Japan Exchange Group, Inc. in the fiscal year ended March 2021, and less than 0.001% of
the Company’s consolidated revenue in fiscal year 2021, and was therefore negligible.
We judge that this relationship has no impact on her independence.
- The Company has designated Main Kohda as an independent director as prescribed by the Tokyo Stock Exchange, Inc. and intends todesignate her as such again, should her election be approved.

23Candidate Number

8

Yukiko Nagashima

Number of years as Outside Director(at the conclusion of this Ordinary General Meeting of Shareholders)(Born April 4, 1961)

Number of the Company’s Shares Held

3 years0

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1985
Joined Recruit Co., Ltd. (Current Recruit Holdings Co., Ltd.)
April 2006
Corporate Executive Officer, Recruit Co., Ltd.
January 2008
President and Representative Director, Recruit Staffing Co., Ltd.
October 2012
Corporate Executive Officer, Recruit Holdings Co., Ltd.
June 2016

Reappointed
OutsideDirector
Independent
DirectorStanding Audit and Supervisory Board Member, Recruit Holdings Co., Ltd.
(Current Position)
April 2018
Standing Audit and Supervisory Board Member, Recruit Co., Ltd.
(Current Position)
March 2019
Outside Director of the Company(Current Position)
June 2021
Outside Audit & Supervisory Board Member, Sumitomo Corporation(Current Position)(Significant Concurrent Positions outside the Company)
Standing Audit and Supervisory Board Member, Recruit Holdings Co., Ltd.
Standing Audit and Supervisory Board Member, Recruit Co., Ltd.
Outside Audit & Supervisory Board Member, Sumitomo Corporation

Reasons for nomination as a candidate for Outside Director and summary of expected roles
Yukiko Nagashima assumed the position of Outside Director of the Company in March 2019. We have benefited from her experience in corporate management
and execution of business in a wide range of fields, such as emerging businesses and temporary staffing and objective point of view based on her experience
as a Member of the Audit and Supervisory Boards being reflected in the management of the Company and she has worked tirelessly to supervise businessexecution from a fair and independent standpoint.
We judge that her experience from the perspectives of both management and audit and a high degree of knowledge cultivated thereby will be essential in theGroup’s management. For this reason, we propose her reelection in expectation of her continuous contribution as Outside Director of the Company toimproving corporate governance in the Group through her proactive recommendations and advice provided at the meetings of the Board of Directors and theAdvisory Panel on Nomination and Compensation.
Independence- Yukiko Nagashima satisfies the Criteria for Evaluating the Independence of Outside Executives of the Company and the requirements ofan independent director prescribed by the Tokyo Stock Exchange, Inc.
Although the Company has business relationships with both Recruit Holdings Co., Ltd. and Recruit Co., Ltd., of which she is Standing
Audit and Supervisory Board Member, the value of the business in fiscal year 2021 was negligible, coming to less than 0.01% ofconsolidated revenue for Recruit Holdings Co., Ltd. in the fiscal year ended March 2021, and less than 0.01% of the Company’s
consolidated revenue in fiscal year 2021.
In addition, the Company has business relationships with Sumitomo Corporation of which she is Outside Audit & Supervisory Board
Member, the value of the business in fiscal year 2021 was negligible, coming to less than 0.001% of consolidated revenue for Sumitomo
Corporation in the fiscal year ended March 2021, and less than 0.001% of the Company’s consolidated revenue in fiscal year 2021.
We judge that these relationships have no impact on her independence.
- The Company has designated Yukiko Nagashima as an independent director as prescribed by the Tokyo Stock Exchange, Inc. and intends
to designate her as such again, should her election be approved.
- Recruit Holdings Co., Ltd. and Recruit Co., Ltd., where Yukiko Nagashima serves as a standing Audit and Supervisory Board Member,have received a recommendation in May 2019 from the Japan Fair Trade Commission for actions alleged to infringe the Act Concerning
Special Measures for Correcting Practices Impeding Consumption Tax Pass-on, etc. with the Aim to Ensure Smooth and Proper Pass-onof Consumption Tax, in relation to payment of consignment fees to the consignee company. In addition, at Recruit Career Co., Ltd., asubsidiary of Recruit Co., Ltd. where she serves as a standing Audit and Supervisory Board Member, and which had concluded a businessoutsourcing contract with Recruit Co., Ltd., a service called “Rikunabi DMP Follow,” which indicated the possibility of students
withdrawing from their selections or provisional agreement to join companies, was the subject of a recommendation and directive in
December 2019 from the Personal Information Protection Commission for alleged infringements of the Act on the Protection of Personal
Information, etc., while in December 2019 the Tokyo Labour Bureau issued an administrative directive on the basis that there had been
an infringement of the Employment Security Act and the guidelines of said Act. In both cases Yukiko Nagashima was unaware of thecircumstances in question until the above events came to light, but at meetings of the Board of Directors she has frequently shared her
opinions from the viewpoint of legal compliance. After the above events came to light, in both cases she worked to gather informationfrom the internal audit division, and to offer opinions and confirmation in relation to measures to prevent the recurrence.

24

Candidate Number

Masato Kitera

9

Reappointed
OutsideDirector
Independent
Director

Number of years as Outside Director(at the conclusion of this Ordinary General Meeting of Shareholders)

1 yearNumber of the Company’s Shares Held0
(Born October 10, 1952)
Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1976
Joined the Ministry of Foreign Affairs
January 2008
Director-General for Sub-Saharan African Affairs, Middle Eastern and African Affairs
Bureau, and Secretary-General, TICAD IV, Ministry of Foreign Affairs
July 2008
Director-General, International Cooperation Bureau, Ministry of Foreign Affairs
January 2010
Deputy Minister, Ministry of Foreign Affairs
September 2012 Assistant Chief Cabinet Secretary
November 2012 Ambassador of Japan to the People’s Republic of China
April 2016
Ambassador of Japan to the Republic of France
June 2016
Ambassador of Japan to the Republic of France, Andorra and Monaco(Retired in December 2019)
April 2020
Advisor of the Company
June 2020
External Director, Marubeni Corporation(Current Position)
Outside Director, NIPPON STEEL CORPORATION(Current Position)
March 2021
Outside Director of the Company(Current Position)(Significant Concurrent Positions outside the Company)
External Director, Marubeni Corporation
Outside Director, NIPPON STEEL CORPORATION

Reasons for nomination as a candidate for Outside Director and summary of expected roles
Masato Kitera assumed the position of Outside Director of the Company in March 2021. He did not engage in corporate management previously other thanserving as an outside director or an outside auditor. However, he held important positions over many years of service with the government, primarily in the
Ministry of Foreign Affairs. With his extensive international experience and a high level of knowledge of international affairs cultivated during his diplomaticand other activities reflected in the management of the Group as it expands its business outside Japan at a time of globally increasing geopolitical risks, he
has worked tirelessly to provide advice and oversight which contribute to the further enhancement of corporate governance.
We believe his high level of international experience and broad knowledge are essential for the Group management by the Company, and thus propose hisreelection in expectation of his continuous contribution as Outside Director of the Company to improving corporate governance in the Group through his
proactive recommendations and advice provided at the meetings of the Board of Directors and the Advisory Panel on Nomination and Compensation.
Independence- Masato Kitera satisfies 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.
Although the Company has a business relationship with Marubeni Corporation, of which he is an External Director, the value of thebusiness in fiscal year 2021 was negligible, coming to less than 0.001% of consolidated revenue for Marubeni Corporation in the fiscal
year ended March 2021, and less than 0.001% of the Company’s consolidated revenue in fiscal year 2021.
In addition, given that he might be appointed an Outside Director of the Company at some point in the future, in April 2020 the Company
entered into a part-time advisory agreement with Masato Kitera, for the purpose of enabling him to gain an understanding of the state ofmanagement and of details of the operations beforehand, and benefiting from his opinions with regard to management and the businessfrom an independent standpoint. Remuneration related to this agreement is paid as consideration for this advice, and the consideration
paid to Masato Kitera hitherto were not more than ¥10 million prescribed in the Criteria for Evaluating the Independence of Outside
Executives established by the Company. The part-time advisory agreement with Masato Kitera was canceled as at the point when his
election was approved at the 36th Ordinary General Meeting of Shareholders held on March 24, 2021.
We judge that this relationship has no impact on his independence.
- The Company has designated Masato Kitera as an independent director as prescribed by the Tokyo Stock Exchange, Inc. and intends todesignate his as such again, should his election be approved.

25

Candidate Number

10

Newly
appointed
OutsideDirector
Independent
Director

Tetsuya Shoji(Born February 28, 1954)

Number of the Company’s Shares Held0

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1977
Joined Nippon Telegraph and Telephone Public Corporation
June 2006
Senior Vice President, General Manager of the Personnel Department, Nippon Telegraphand Telephone West Corporation
June 2009
Senior Vice President, Head of General Affairs, Nippon Telegraph and Telephone
Corporation
June 2012
Senior Executive Vice President, Representative Member of the Board, NTT
Communications Corporation
June 2015
President & CEO, Representative Member of the Board, NTT Communications
Corporation
October 2018
Representative Member of the Board, NTT, Inc.
June 2020
Corporate Advisor, NTT Communications Corporation (Current Position)
March 2021
Outside Director, Sapporo Holdings Limited (Current Position)
June 2021
Outside Director, Hitachi Zosen Corporation (Current Position)
Outside Director, Mitsubishi Logistics Corporation (Current Position)(Significant Concurrent Positions outside the Company)
Corporate Advisor, NTT Communications Corporation
Outside Director, Sapporo Holdings Limited
Outside Director, Hitachi Zosen Corporation
Outside Director, Mitsubishi Logistics Corporation

Reasons for nomination as a candidate for Outside Director and summary of expected roles
Having served as a president and representative director for a telecommunications company, Tetsuya Shoji has considerable experience, track record, andinsight into corporate management. We expect he, as Outside Director, will utilize his wide experience in areas such as corporate planning, human resources,
global operations, and digitization promotion in the management of the Group as it expands its business outside Japan and regards IT/information security as
one of the increasingly important management foundations in the future, and properly offer advice and oversight that contribute to the further enhancementof corporate governance of the Company. For this reason, we propose his election.
Independence- Tetsuya Shoji satisfies 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.
Although the Company has a business relationship with NTT Communications, of which he is a Corporate Advisor, the value of thisbusiness in fiscal year 2021 was negligible, coming to less than 0.2% of consolidated revenue for NTT Communications in the fiscal year
ended March 2021, and less than 0.05% of the Company’s consolidated revenue in fiscal year 2021.
In addition, the Company has a business relationship with Mitsubishi Logistics Corporation, of which he is an Outside Director, the valueof this business in fiscal year 2021 was negligible, coming to less than 0.05% of consolidated revenue for Mitsubishi Logistics Corporationin the fiscal year ended March 2021, and less than 0.002% of the Company’s consolidated revenue in fiscal year 2021.
We judge that these relationships have no impact on his independence.
- The Company intends to designate Tetsuya Shoji as an independent director as prescribed by the Tokyo Stock Exchange, Inc., should hiselection be approved.

26

(Notes)

1. No conflict of interest exists between the Company and each candidate.
2. The Company has entered into an agreement with Mutsuo Iwai, Main Kohda, Yukiko Nagashima and Masato Kitera to limit
their liabilities stipulated in Article 423, paragraph 1 of the Companies Act to the extent permitted by the laws and regulations.
The Company intends to extend the respective agreement if their reelection is approved. The Company will also enter into anagreement to the same effect with Shigeaki Okamoto and Tetsuya Shoji, respectively, to limit their liabilities, subject to theapproval of their election.
3. The Company has entered into a liability agreement with each of its Members of the Board as stipulated in Article 430-2,
paragraph 1 of the Companies Act, whereby the Company shall compensate them for expenses incurred under item (i) of thesame paragraph, and any losses incurred under item (ii) of the same paragraph, to the extent permitted by laws and regulations.
The Company intends to extend the respective agreement if their reelection is approved. The Company will also enter into aliability agreement to the same effect with Shigeaki Okamoto and Tetsuya Shoji, respectively, subject to the approval of theirelection.
4. The Company has entered into a liability insurance agreement for executive officers, etc. with an insurance company as
stipulated in Article 430-3, paragraph 1 of the Companies Act, and intends to renew this agreement in April 2022. Under theterms of this insurance agreement, litigation expenses and compensation for damages arising from legal action against theinsured by third parties, shareholders or companies shall be supplemented, and a premium for the insurance agreement is fully
borne by the Company. Among the candidates for Members of the Board, those to be reelected are already covered as theinsured by the insurance agreement and remain so subject to the approval of their reelection. Those to be newly elected will becovered as the insured by the insurance agreement subject to the approval of their election.

27

Reference: Skills Matrix of Members of the Board and Audit & Supervisory Board Members after theOrdinary General Meeting of Shareholders (Planned)
The concept of skills necessary for the Board of Directors
JT aims to achieve sustainable profit growth and enhance the corporate value over the mid to long term by pursuingthe “4S model,” which is JT’s management principle. Based on our 4S model, our vision is to continue to be a
growing global company that provides diverse value, unique to the JT Group.
JT has adopted the following composition of the Board of Directors to enable the Members of the Board to identify
the JT Group management strategies and make decisions on important matters, as well as to effectively supervise
all operations. The Advisory Panel on Nomination and Compensation has repeatedly engaged in discussions on
the composition of the Board of Directors:
 The Board shall have as many members as necessary and appropriate, up to a maximum of 15. It comprises
diverse professionals with a high sense of ethics and integrity as well as knowledge, experience and skills,
taking into consideration such factors as gender, international experience, work experience, race, ethnicity,
cultural background, and other aspects of diversity, along with necessary skills for the Members of theBoard.
The
Board shall include at least one-third of independent outside directors with qualifications conducive tothe Company’s sustainable profit growth and enhancement of corporate value over the mid to long term, inorder to strengthen the supervisory functions and transparency of management.
JT particularly expects each Member of the Board to demonstrate skills based on their knowledge and experiencein the following areas, in light of the Group’s management principle, vision and business plan, in order for the
Board of Directors to properly fulfill its roles and responsibilities. JT believes that the Board of Directors as awhole has the necessary skills.
Areas in which the skills are expected to be particularly effective
 “Corporate Management,” including the JT Group’s management strategy, operations, and businessstrategy based on the 4S model, our management principle.
 “Global Management,” which is essential for the JT Group, which operates globally.
 “Corporate Finance, Accounting and Capital Policy” and “Legal, Compliance and Risk Management,”
which are the basis of decision-making for effective management and business activities.
 “IT / Information Security,” which is one of the important management foundations for strengthening thecompetitiveness of the JT Group.
 “Corporate Governance,” which is the foundation of our corporate activities in order to maximize
stakeholder value, pursue sustainable profit growth, and grow our corporate value over the long term.
 “Sustainability / Environment and Society,” which we consider to be the core to our management initiatives
and for which we formulate strategies based on the 4S model and materiality analysis.
 “D&I / Organizational Behavior and Human Resource Management,” which is one of our focus areas andis being promoted so that all employees of the JT Group can feel motivated in their work and maximize
their abilities.
 “Business Development / M&A” to formulate strategies and carry out measures for the further development
and business growth.
In addition, in light of the roles and responsibilities of Members of the Audit & Supervisory Board to oversee
the job performance of Members of the Board, we are particularly expecting Members of the Audit &Supervisory Board to demonstrate their skills in the areas of “Corporate Finance, Accounting and Capital Policy,”“Legal, Compliance and Risk Management,” and “Corporate Governance.” We believe that the entire Audit &Supervisory Board has the necessary skills.

28

Areas in which the skills are expected to be particularly effective

Mutsuo Iwai

PositionsShigeaki Okamoto

Masamichi
Terabatake

Representative
DeputyChairperson of the
Chairperson of the Director and
Board
President
Board

Naohiro Minami

Kiyohide
Hirowatari

Kazuhito
Yamashita

Representative
Director andExecutive Vice
President

Representative
Director andExecutive Vice
President

Member of theBoard and SeniorVice President

Corporate Management







Global Management







Corporate Finance,
Accounting andCapital PolicyLegal, Complianceand Risk ManagementIT / Information Security

Corporate Governance

Sustainability /Environment and Society
D&I /Organizational Behavior
and Human Resource
Management





























Business Development /
M&A



29

















Main Kohda

YukikoNagashima

Masato Kitera

Tetsuya

Ryoko

Shoji

NagataHiroshi
Yamamoto

Toru Mimura Hiroshi Obayashi Koji Yoshikuni

Standing Audit &Supervisory
Independent
IndependentStanding Audit & Standing Audit & Board Member
Outside Audit & Outside Audit &Outside Director Outside Director Outside Director Outside Director Supervisory
Supervisory
Supervisory
Supervisory
Board Member Board Member Outside Audit &Board Member Board Member
Supervisory
Board Member




































































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30



【Reference】Corporate GovernanceFundamental 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 “4Smodel.” Specifically, the “4S model” aims “to fulfill our responsibilities to our valued consumers,
shareholders, employees and the wider society, carefully considering the respective interests of these four
key stakeholder groups, and exceeding their expectations wherever we can.”We have set out the “JT Corporate Governance Policies” on February 4, 2016, and continuously strive
to make enhancements based on our belief that it will enable us to achieve mid- to long-term sustainableprofit growth and increase company value, which will contribute to the development of our group’s
stakeholders and eventually the economic society as a whole.
We will continue to strive to make the enhancement of corporate governance one of the key challenges
for our management.
JT’s Corporate Governance System (as of December 31, 2021)“JT Corporate Governance Policies” is posted on our website (https://www.jti.co.jp/).

31

(1) Board of Directors[Roles]The Board of Directors assumes responsibility in making decisions for important issues including the JT Groupmanagement strategies as well as supervising all the activities of the Group.
[Composition]
From the point of view that the Board of Directors determines company-wide management strategy and important
issues and effectively assumes roles and responsibilities as the body exercising supervision over all businessactivities, the concept concerning the composition of the Board of Directors shall be set forth as follows.
 The Board shall have as many members as necessary and appropriate, up to a maximum of fifteen (15). It
comprises diverse professionals with a high sense of ethics and integrity as well as knowledge, experienceand skills, taking into consideration such factors as gender, international experience, work experience, race,
ethnicity, cultural background, and other aspects of diversity, along with necessary skills for the Membersof the Board as laid down separately by the Board of Directors.
 The Board shall include at least one-third of Independent Outside Directors with qualifications conduciveto the Company’s sustainable profit growth and enhancement of corporate value over the mid to long term,in order to strengthen the supervisory functions and transparency of management.
It is currently composed of nine (9) Members of the Board (including three (3) Independent Outside Directors).
Conditional on approval by this Ordinary General Meeting of Shareholders, it is planned that it be composed often (10) Members of the Board (including four (4) Independent Outside Directors).
[Operation during the period under review]
In year ended December 31, 2021, we had thirteen (13) board meetings to discuss important issues including themanagement plan and nomination of Executive Officers.
(2) Audit & Supervisory Board[Roles]The Audit & Supervisory Board shall be composed of persons with proven experience in business, law, financial
affairs and accounting, etc. Audit & Supervisory Board Members, in addition to participating in the Board of
Directors meetings and other important meetings and making remarks as an independent body mandated by theshareholders, shall actively exercise his/her authority such as by proactively inspecting business bases, etc., aswell as appropriately conduct an audit from an objective position corresponding to the nature of duties of
independent outside Audit & Supervisory Board Members or standing Audit & Supervisory Board Members.
[Composition]
It is currently composed of five (5) Audit & Supervisory Board Members (including three (3) Independent Outside
Audit & Supervisory Board Members).
[Operation during the period under review]
In year ended December 31, 2021, we had fifteen (15) board meetings to discuss issues including the auditing
policies and preparing of Audit Report.
(3) Advisory Panel on Nomination and Compensation[Roles]The Advisory Panel on Nomination and Compensation was established as an optional advisory body to the Boardof Directors and integrates the functions of the previous Meeting for Talent Development and Compensation
Advisory Panel. The purpose of establishing the panel is to further enhance the objectivity and transparency of theBoard of Directors’ decision making and to improve the supervisory functions of the Board of Directors by having
the panel support the development of a group of executive candidates, deliberate on the nomination of Member ofthe Board and Audit & Supervisory Board Member candidates, deliberate on dismissal of Members of the Board
who also serve as Executive Officers, and deliberate on matters regarding remuneration for Members of the Board
and Executive Officers, then report to the Board of Directors.
[Composition]
The Panel is composed of Members of the Board all of whom do not concurrently serve as an Executive Officer,
and a majority of them are Independent Outside Directors. Chaired by the Chairperson of the Board, it has a totalof five (5) members. From this Ordinary General Meeting of Shareholders, the Panel shall be chaired by an
Independent Outside Director, which was resolved at the Board of Directors of the Company held on February 14,2022. The number of the current Members of the Board is nine (9) (including three (3) Independent Outside
Directors); upon the approval of Item 5, we will have ten (10) Members of the Board (including four (4)Independent Outside Directors), with the Panel consisting of the Chairperson of the Board, Deputy Chairpersonof the Board, and four (4) Independent Outside Directors, a total of six (6) members.
[Operation during the period under review]
During the fiscal year ended December 31, 2021, five (5) meetings were held to specify the skills required of theBoard of Directors of the Company and discuss the development of a skills matrix, confirm the level of
remuneration, confirm the pool of executive candidates, discuss the nomination of Member of the Board
32

candidates, and review the key performance indicators (KPIs) for the bonuses and performance share units for the
fiscal year 2022.
(4) JT Group Compliance Committee[Roles]The JT Group Compliance Committee was established as part of the Company’s efforts to ensure that complianceis practiced fairly and effectively.
[Composition]
It is headed by the Chairperson of the Board, with the majority of the members consisting of external members.
[Operation during the period under review]
In year ended December 31, 2021, we had three (3) meetings to discuss initiatives, etc. to further promotecompliance. Its conclusions have been reflected in the Compliance Action Plan for the fiscal year 2022.

33

【Reference】Nomination of Member of the Board Candidates
In “JT Corporate Governance Policy,” the Company prescribes the following.
Nomination of Member of the Board candidates and Audit & Supervisory Board Member candidates, the dismissalof Executive Directors and Members of the Board also serving as Executive Officers and related matters shall be
conducted under the appropriate supervision of the Board of Directors, according to the following policies andprocedures.
 JT shall work on expanding, in terms of quality and quantity, the group of executive candidates with qualities
for assuming sustainable profit growth and increase of company value in the mid- to long-term by pursuingthe “4S model.”Specifically, JT aspires to enhance the development of a group of executive candidates and improve thesubstance of succession plans, along with the process for formulating such plans, while referring to opinionsfrom outside at the Advisory Panel on Nomination and Compensation comprised entirely of Members of theBoard who do not serve as Executive Officers, in which more than half of whose members being Independent
Directors.
 Member of the Board candidates shall be nominated by resolution of the Board of Directors. The resolution
shall be made after securing opportunities for receiving appropriate advice from Independent Outside Director
by having the Advisory Panel on Nomination and Compensation deliberate on a candidate proposal formed by
the President and report the content and results of its deliberations to the Board of Directors.
Audit & Supervisory Board Member candidates shall be nominated by resolution of the Board of Directors as
persons who is expected to perform their duties appropriately from a position independent of the Board of
Directors. The resolution shall be made after securing opportunities for receiving appropriate advice fromIndependent Outside Director by having the Advisory Panel on Nomination and Compensation deliberate on a
candidate proposal formed by the President and report the content and results of its deliberations to the Boardof Directors, and receiving prior consent from the Audit & Supervisory Board.
 Dismissal of Executive Directors and Members of the Board also serving as Executive Officers in the cases
where they do not meet the required qualifications or have become unable to perform their duties shall bemade by resolution of the Board of Directors after securing opportunities for receiving appropriate advice
from Independent Outside Director by having those Members of the Board who are not subject to dismissal
request the Advisory Panel on Nomination and Compensation to deliberate on the proposal for dismissal andthen having the panel report the content and results of its deliberations to the Board of Directors.
Further, when bringing up the agenda item on the appointment of Member of the Board candidates and Audit &Supervisory Board Member candidates at the shareholders’ meeting, and when the Board of Directors has resolved
to dismiss Executive Directors and Members of the Board also serving as Executive Officers, JT shall disclose thereasons for the appointment of individual candidates and for the dismissal.

34

【Reference】Criteria for Evaluating the Independence of Outside Executives
The Company has established a Criteria for Evaluating the Independence of Outside Executives and Independent
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 other formof 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 for legal,financial and tax affairs or business consulting services (if the recipient of such fee is a company or any otherform 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
(Note)•

A company or any other form of organization of which JT is a major shareholder
A company or any other form of organization, in which JT holds more than 10% of all shares issued•

A major shareholder of JT, or a company or any other form of organization which is a major shareholder ofJT
A person, or a company or any other form of organization, that holds more than 10% of all shares of JT
issued•A major supplier or customer of JT
A person whose business with JT accounts for more than 2% of the consolidated revenue of JT, or a person
whose business with JT accounts for more than 2% of the consolidated revenue of the person•

A major creditor of JT including a major loan lender
A financial institution listed in the “Major Lenders” section of JT’s Business Report, and a financial
institution listed as a lender or a lead managing underwriter in materials released at the time of major M&A
deals in the past, and at other times•

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
A person who receives fees of more than ¥10 million in a fiscal year from JT in exchange for providing
professional services for legal, financial and tax affairs or business consulting services. For a company or
any other form of organization, this shall be 2% or more of total income in a fiscal year. However, even if
the fees do not exceed 2%, in cases where consideration for services in which such professionals are directly
involved exceeds ¥10 million, it shall be considered a large amount.
35•

A person who receives a large amount of donation from JT
A person who receives a donation of more than ¥10 million in a fiscal year from JT. In cases where therecipient is a company or any other form of organization, a person belonging to an organization that receives
a donation of ¥10 million in a fiscal year or the equivalent to 2% of the organization’s total annual income
or consolidated revenue, whichever is the greater amount.

•

A close relative
A spouse or a relative within the second degree of kinship•

A person who performs important duties
A person of head of division or executive rank•

Retrospective measure (criteria for judging “in the recent past”)
The retrospective period shall be the past five years.

Notwithstanding the above mentioned notes, as a result of investigations into the past and present state of
employment of a candidate, it is judged that the person is in effect independent, that person may become an Outside
Member of the Board or an Outside Audit & Supervisory Board Member after receiving the approval of the Boardof Directors. In such cases, the grounds for the decision shall be disclosed publicly.

36【Reference】Evaluation of Effectiveness of the Board of Directors of the Company
With regard to the effectiveness of the Board of Directors, in addition to annual questionnaire-based selfevaluations by Members of the Board and Audit & Supervisory Board Members from the standpoint of suchthemes as business operation systems and supervisory functions of the Board of Directors, and dialogue withshareholders and investors, before compiling the results the Board of Directors Secretariat also conducts individualinterviews if needed with the aim of supplementing the results of the evaluations. The results of the selfevaluations are assessed and analyzed at the Board of Directors, leading to further improvements in its
effectiveness. Furthermore, we take advice from external institutions when creating the questionnaire andanalyzing the results, in order to ensure objectivity and further improve the evaluation of effectiveness.
The major items evaluated were as follows.
Composition (internal/external ratio, diversity); status of operations (frequency ofholding meetings, appropriateness of topics of discussion, advance explanations);
Business operation
systems for support and cooperation (cooperation between Members of the Board
systems of the Board ofand Audit & Supervisory Board Members / internal audits, etc., utilization of
Directors
committees, sharing of information outside the Board of Directors); status of
discussions (fair and prompt decision-making that follows the management
principles of the Company, free and open-minded discussion), etc.
Systems for reporting the status of business execution, risk management systems,
Supervisory functions ofpenetration of compliance awareness, decision-making process for executive
the Board of Directors
remuneration, succession planning, etc.
Dialogue with
Sharing of shareholder and investor views, status of development of system forshareholders and investors engaging in dialogue, etc.
In the evaluation of effectiveness conducted for fiscal year 2020, the items undergoing evaluation obtained goodresults on the whole as continuing from fiscal year 2019, allowing the Company to confirm that the effectivenessof the Board of Directors is improving and the Board of Directors is functioning effectively.
Conversely, in addition to identifying issues related to the operation of the Board of Directors aimed at further
improving its effectiveness, those related to deepening discussions on corporate governance and better information
sharing that could contribute to further enhancements in the quality of decision-making were identified. Given theimpact of ongoing COVID-19 pandemic in addition to these issues, the following actions were taken in fiscal year2021:

Effective and efficient operation of the Board of Directors aimed at further enhancements in discussions- Continuing more detailed advance explanations for critical matters- Securing sufficient deliberation time by allocating appropriate time for each agenda- Continuing remote hosting of meetings of the Board of Directors, and improving meeting operation
capabilities in a remote environment

 Better discussions and sharing of information that could contribute to further enhancements in the quality ofdecision-making- Enhanced discussions and sharing of information in relation to the following matters• Details and status of investigations into important policies related to mid- to long-term strategy• Verifying the progress of important measures/policies and their effects• Status and future policies on corporate governance• Status of dialogue with shareholders/investors• The impacts of COVID-19 on employees and individual businesses, measures taken in response, andstatus of the same
The fiscal year 2021 effectiveness evaluation recognized that there had been improvements focusing on the main
initiatives for the year, in addition to which the items undergoing evaluation again achieved good results, on thewhole.
On the other hand, in order to make an enhanced effectiveness, the Company will target continuous improvementsfrom fiscal year 2022 onwards, focusing on the following newly identified issues.
37

Main issuesActions/initiatives for further improvements in thequality of deliberation and discussions
Enhancement of discussions based on long-term
perspectives

Policy for improvements going forward
Continual improvements in the Board of Directors
operation
Further expansion of opportunities to discuss midto long-term strategies, etc.
Further expansion of progress reporting andinformation sharing on key measures/policies, etc.

The Company will continue to implement improvements required to further enhance effectiveness, including theabove-mentioned activities.

38

Item 6: Revision of Remuneration Amount for Outside Directors
The amount of remuneration for Members of the Board of the Company was approved at a level not exceeding¥1.1 billion annually for the total number of Members of the Board (including ¥80 million annually for Outside
Directors) at the 35th Ordinary General Meeting of Shareholders held on March 19, 2020. It has since remained
unchanged to the present. Today we propose an addition of one (1) Outside Director for the purpose of further
enhancing and strengthening corporate governance, as stated in Item 5. If Item 5 “Election of Ten (10) Membersof the Board” is approved as proposed, we will have ten (10) Members of the Board (including four (4) Outside
Directors).
In this regard, we propose to increase only the amount of remuneration for Outside Directors to an amount notexceeding ¥100 million annually, without making any change in the total amount of remuneration for Membersof the Board (up to ¥1.1 billion annually).
We deem this Item necessary, reasonable, and adequate because it increases only the ceiling of remuneration for
Outside Directors as a result of an addition of Outside Director, while making no change in the ceiling of
remuneration for Members of the Board. In order to secure appropriateness of the remuneration for Members of
the Board and transparency of the decision-making process, the Item has been reviewed by the Advisory Panel on
Nomination and Compensation of the Company, which is comprised solely of Directors who do not concurrently
serve as an Executive Officer and a majority of them are Independent Outside Directors; the Advisory Panel, given
the foregoing circumstances, judges it appropriate as it is consistent with the policies on executive remuneration
including the methodology on determination of each Director’s remuneration. The outline of the Company’s
policies on executive remuneration including the methodology on determination of each Director’s remuneration
is as listed in the Business Report on pages 66 to 70.

39[For your reference, we have included various graphs and photographs.][Attached Documents]

Business Report(From January 1, 2021 to December 31, 2021)
I.

Matters Concerning Present State of the Corporate Group1.

Overview and Results of Operations
General summary

Revenue
Revenue increased by 11.1% from the previous fiscal year to ¥2,324.8 billion, with a decline in theProcessed Food Business being offset by a significant increase in the International Tobacco Business,driven by robust pricing gains and volume growth, as well as increases in the Japanese Domestic
Tobacco Business and the Pharmaceutical Business.

Adjusted operating profit, operating profit and profit attributable to owners of the parent
company

Adjusted operating profit at constant FX, which is one of the Group’s management benchmarks, increased
by 22.9% from the previous fiscal year, despite a decrease in the Pharmaceutical Business. This was driven
by an increase in the Processed Food Business and also, despite the unprecedented environment resulting
from the COVID-19 pandemic, by the strength shown throughout the year by the Japanese Domestic Tobacco
Business and the International Tobacco Business. Adjusted operating profit increased by 25.4% from theprevious fiscal year to ¥610.4 billion, due mainly to favorable foreign exchange effects in the International
Tobacco Business.
Despite one-time costs related to initiatives to strengthen competitiveness in the Japanese Domestic Tobacco
Business, and the implementation of measures to adjust the surface area of tobacco leaf under cultivation,
the rise in adjusted operating profit led to an increase in operating profit of 6.4% from the previous fiscal
year, to ¥499.0 billion.
Profit attributable to owners of the parent company increased by 9.1% from the previous fiscal year to ¥338.5
billion, mainly due to an increase in operating profit and an improvement in financing costs despite higher
corporate income tax.
JT Group Management Benchmarks
Adjusted operating profit(at constant FX)(Note 1)+22.9% year on year

Consolidated performance[Billions of yen]

Year-On-Year
Change [%]2,324.8

11.1

Adjusted operating profit(Note 2)

610.4

25.4

Profit attributable to owners of
the parent company

338.5

9.1

Revenue40

(Notes)

1. Adjusted operating profit (at constant FX) is a financial measurement that excludes foreignexchange effects calculated and translated using the foreign exchange rates of the same periodof the previous fiscal year and the increase in revenue or profit caused by inflation in somemarkets calculated using certain methods from core revenue from the tobacco business or fromadjusted operating profit for the current period in the International Tobacco Business. The Groupmakes accounting adjustments to the financial statements of subsidiaries that operate in
hyperinflationary economies according to the requirements stipulated in IAS 29 “Financial
Reporting in Hyperinflationary Economies” (hereinafter referred to as “IAS 29”). However, theimpact of IAS 29 is not included in the core revenue from the tobacco business and adjusted
operating profit at constant FX.
2. Adjusted operating profit is calculated by deducting amortization cost of acquired intangibles
arising from business acquisitions and adjustment items (income and costs) from operating profit(loss). Adjustment items (income and costs) are impairment losses on goodwill, restructuringincome and costs, and other items.

41

Revenue breakdown by business segment

Revenue

Adjusted operating profit

Profit(Attributable to owners of the parent company)

42

Japanese Domestic Tobacco BusinessIn the current fiscal year, combustible sales volume(Note 1) was negatively impacted by a decline in combustible
industry volume(Note 2) caused by the category’s natural decline trend, growth in the RRP(Note 3) category andprice revisions, as well as combustible market share(Note 2) losses. As a result, combustible sales volume fell
by 9.5% from the previous fiscal year, to 62.2 billion units. The Company’s RRP sales volume(Note 4) increased
by 0.7 billion to 4.6 billion cigarette equivalent units.
Core revenue from the tobacco business(Note 5) increased by 0.8% from the previous fiscal year to ¥519.8
billion, mainly due to favorable pricing effects in combustible products and an increase in RRP-related
revenue, which more than offset the impact of lower combustible sales volume. RRP-related revenue
increased by ¥4.0 billion over the previous fiscal year to ¥59.8 billion due to an increase in RRP sales volume.
Despite the impact of lower combustible sales volume, adjusted operating profit increased by 8.6% from theprevious fiscal year to ¥182.4 billion, driven by favorable pricing effects in combustible products and RRPrelated revenue growth.
In fiscal year 2022, the Group will change the previous two reportable segments of “Japanese Domestic
Tobacco Business” and “International Tobacco Business” to a single reportable segment of “Tobacco
Business,” as a result of unifying the business management structure of the tobacco business.
(Notes)1. Combustible sales volume includes combustible tobacco products but excludes contract
manufacturing products, waterpipe tobacco, T-Vapor products, oral tobacco and E-Vapor
products. In addition to the figure stated above for sales volume, during the fiscal year ended
December 31, 2021, 1.7 billion units 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 the Company’s China Division(1.8 billion units in the previous fiscal year).
2. Combustible industry volume and combustible market share includes combustible tobacco
products but excludes contract manufacturing products, waterpipe tobacco, T-Vapor products,
oral tobacco and E-Vapor products.
3. Reduced-Risk Products (RRP) are products with potential to reduce the risks associated withsmoking such as T-Vapor products and E-Vapor products. T-Vapor products use tobacco leaf,
but instead of burning the leaf, they use methods such as heating the leaf to generate vapor (which
includes compounds derived from the tobacco leaf) for the user to enjoy. Conversely, E-Vapor
products do not use tobacco leaf, instead using electrical heating of a liquid inside a device or
specialized cartridge to generate vapor for the user to enjoy.
4. RRP sales volume is converted at the equivalent of 20 cigarettes per pack. The figure statedabove does not include sales volume sold at duty-free shops in Japan. Also, RRP-related revenue
includes revenue from duty-free shops in Japan and revenue from devices and associatedaccessories, etc.
5. Core revenue in the Japanese Domestic Tobacco Business includes revenue from the domestic
duty-free market as well as from markets in China, Hong Kong and Macau that are under thecontrol of the Company’s China Division, in addition to revenue related to RRP, little cigars andso on, but it excludes revenue related to imported tobacco delivery charges, among others.

43International Tobacco BusinessIn the current fiscal year, market share gains, increases in domestic demand in several markets as a result of
the decline in the number of travelers, particularly in the first half, and reductions in illicit trade resulted in
total shipment volume(Note 1) increasing by 5.6% from the previous fiscal year to 460.2 billion cigarettes.
GFB(Note 2) shipment volume rose by 10.5% from the previous year to 311.7 billion cigarettes, driven by
Winston and Camel.
On a JPY basis, core revenue from the tobacco business(Note 3) rose 18.5% from the previous fiscal year to¥1,482.1 billion, driven by a favorable price/mix variance and volume contribution, and further aided bypositive currency headwinds. Adjusted operating profit on a JPY basis rose by 33.3% from the previous fiscal
year to ¥454.4 billion.
On a USD basis, a favorable price/mix variance and a positive volume contribution in certain major markets
resulted in core revenue from the tobacco business rising by 14.9% from the previous fiscal year, to $13,468
million (up 10.6% from the previous fiscal year at constant FX). In addition, due to a positive price/mix
variance and volume contribution, adjusted operating profit on a USD basis rose by 30.7% from the previous
fiscal year to $4,157 million (up 29.6% from the previous fiscal year at constant FX).
(Notes)

1. Includes fine cut tobacco, cigars, pipe tobacco, snus, kretek and T-Vapor products, except forcontract manufacturing products, waterpipe tobacco products and E-Vapor products.
2. GFBs (Global Flagship Brands) consist of four brands, which serve as flagships of the Group’s
brand portfolio - Winston, Camel, MEVIUS, and LD.
3. Core revenue in the International Tobacco Business includes revenue related to waterpipe
tobacco products and RRP, but excludes revenue related to the distribution business and contract
manufacturing, among others.

44Core revenue (USD basis)

Adjusted operating profit (USD basis)

Exchange rate per US dollar
Foreign exchange rate
per US dollar

FY2020

FY2021

Japanese yen

106.76109.90Russian ruble

72.07

73.66

British pound

0.78

0.73

Euro

0.88

0.85

Swiss franc

0.94

0.91

Taiwanese dollar

29.47

27.94

Turkish lira

7.01

8.84

Iranian rial(Note)

258,747
247,776(Note) In accordance with IAS 29, the closing currency rates for the month ended December 2020 and 2021
have been applied when converting financial statements of subsidiaries located in hyperinflationary
economies to the US dollar. When converting US dollars to Japanese yen, the rate applied is derived by
the same method (As of December 31, 2020, US dollars to Japanese yen: 103.50; As of December 31,
2021, US dollars to Japanese yen: 115.02). For other rates, the average rate during the fiscal year isapplied.

Main market shares (12-month rolling average)
December 2020(Note 1)

December 2021

France

27.1%

28.9%

1.8 percentage points

Italy

25.7%

26.7%

0.9 percentage points

Russia(Note 2)

36.3%

36.7%

0.4 percentage points

Spain

26.7%

27.8%

1.1 percentage points

Taiwan

47.8%

48.1%

0.3 percentage points

Turkey

26.6%

27.7%

1.1 percentage points

U.K.

45.0%

45.8%

0.8 percentage points

Variance

Source: IRI, Nielsen, Logista and Panel Strator(Notes) 1. Market shares for 2020 have also been updated based on data from the end of December 2021.
2. From 2021 onwards, market share data for Russia reflects total tobacco figures, i.e. combustibles
and heated tobacco sticks. 2020 data has been adjusted accordingly.

45

Pharmaceutical BusinessIn the Pharmaceutical Business, the Company has been striving to make a contribution to the Group’s profitsby promoting R&D on next-generation strategic products and by maximizing the value of each product.
In the area of product development, seven compounds are in clinical development.
In March 2021, having previously received manufacturing and marketing approval for CORECTIM®
Ointment 0.5% (generic name: delgocitinib) for an indication of atopic dermatitis, we received approval for
additional pediatric dosage and administration. We also received manufacturing and marketing approval for
CORECTIM® Ointment 0.25% for an indication of pediatric atopic dermatitis in Japan. CORECTIM®
Ointment 0.25% was listed on the Japanese National Health Insurance drug price list on May 26, 2021, andGroup company Torii Pharmaceutical Co., Ltd. (“Torii”) began selling it on June 21, 2021.
In addition, in December 2021 we received preliminary results from phase 3 clinical trials performed in Japanfor delgocitinib in relation to atopic dermatitis for infants. These preliminary results demonstrated beneficial
effects of delgocitinib ointment on dermatitis among infant sufferers from atopic dermatitis, and also
confirmed its safety. Going forward, we aim to submit an application for Japan based on all results for thesetrials and for result of other clinical trials.
Furthermore, the Company received approval for an additional indication of iron deficiency anemia (IDA)
for Riona® Tablets 250mg. The Company already has obtained manufacturing and marketing approval for
Riona® which is being distributed as a treatment for improvement of hyperphosphatemia in patients withchronic kidney disease.
In the current fiscal year, revenue increased by 1.8% from the previous fiscal year to ¥80.4 billion, mainly
due to top-line growth at Torii, which was partially offset by a decrease in overseas royalty income.
Adjusted operating profit decreased by 35.4% from the previous fiscal year to ¥11.1 billion due to an increasein R&D expenditures and SG&A expenses at Torii.

46

【Reference】
Pharmaceutical Business
Clinical Development as of February 14, 2022
＜In-house development＞
Code(Generic
Name)

JTE-052(delgocitinib)

JTE-051

Potential
Indication/Dosage
form
Atopic dermatitis(infant)/TopicalAutoimmune/allergic
diseases/Oral, Topical

Autoimmune/allergic
diseases/Oral

JTE-451

Autoimmune/allergic
diseases/TopicalJTT-251

Type 2 diabetes
mellitus/Oral

JTT-662

Type 2 diabetes
mellitus/Oral

JTT-861

Chronic heart failure/Oral

Mechanism

Phase (Region)

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

Phase3 (Japan)

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

RORγ
antagonist

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

JTE-061(Tapinarof)

Torii
In-house

Phase1 (Japan)

Phase2 (Japan)
In-house
Phase2 (Overseas)

In-house

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

Phase1 (Overseas)

In-house

Suppresses postprandial
hyperglycemia and normalizes
blood glucose level via
inhibition of SGLT1.

Phase1 (Overseas)

In-house

Improves cardiac function by
activation of pyruvate
Phase1 (Overseas)
dehydrogenase (PDH) related tocarbohydrate metabolism.

In-house

SGLT1
inhibitor

PDHK inhibitor

Phase3 (Japan)
Suppresses skin inflammation via
AhR modulator activation of the arylhydrocarbon receptor (AhR)

Note・ Co-development with

Phase2 (Japan)

Atopic dermatitis/TopicalPlaque psoriasis/TopicalOriginPhase3 (Japan)

Atopic dermatitis(pediatric)
Phase2 (Japan)/TopicalClinical trial phase presented above is based on the first dose.
We are also conducting additional studies to examine the potential for use in additional dosage forms.

・ In-license fromIn-license

Dermavant Sciences
GmbH・ Co-development with

Torii

＜Licensed compounds＞
Compound(JT’s code)
trametinib

Mechanism

LicenseeNovartis

Anti-ICOS
monoclonal antibody AstraZeneca

MEK inhibitor

Inhibits cellular growth by specificallyinhibiting the activity of MAPK/ERK
pathway.

ICOS antagonist

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

delgocitinib

LEO Pharma ROHTO
JAK inhibitor
Pharmaceutical

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

enarodustat

JW Pharmaceutical
Salubris

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

HIF-PH inhibitor

Updates since the previous announcement on October 29, 2021:
・ JTE-061 (pediatric atopic dermatitis /Topical): advanced to Phase2 in Japan

47

Note

Processed Food BusinessIn the Processed Food Business, we concentrate on frozen and ambient foods business, seasonings business,and bakery business, while at the same time making efforts to strengthen cost competitiveness and working
on initiatives to improve profitability.
In the frozen and ambient foods business in the current fiscal year, we maintained high market shares in thedomestic market for our focus areas including frozen noodles, packed rice and okonomiyaki, while also
launching 27 new household products, such as the “No Plate Required” series designed to meet demand forsimplified meals, and renewing a further 25 products.
With opportunities for cooking at home increasing as a result of stay-at-home demand amid the COVID-19
pandemic, we are appealing to customers on the basis of the convenience of cooking, and the ability to arrange
products to form a variety of menus. By actively developing and strengthening web-centric sales promotion
activities via the website and social media, we are aiming to further raise awareness of our products amongcustomers.
Revenue in the current fiscal year was affected by a relative decline in sales of household products in frozen
and ambient foods business, which experienced a temporary increase in the previous year. In addition,
declines in sales of food-service products within frozen and ambient foods business, as well as in theseasonings business, led to a decrease of 1.4% from the previous fiscal year, to ¥147.2 billion.
Adjusted operating profit was affected by the decline in revenue, but combined with reductions in SG&A
expenses, the absence of the impairment losses posted in the bakery business in the previous fiscal year
helped drive an increase of ¥4.7 billion from the previous fiscal year.

48

2.

Status of Capital Expenditures
In this fiscal year, we made capital expenditures totaling ¥100.9 billion.
In the Japanese Domestic Tobacco Business, we spent ¥20.0 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 ¥62.5 billion in improvement, maintenance and renewals of production capability, increased
production of RRP (Reduced-Risk Products) and product development, etc. In the Pharmaceutical Business,
we spent ¥6.0 billion on enhancing and strengthening research and development structures and the like. In
the Processed Food Business, we invested ¥10.7 billion in improvement, maintenance and renewals of
production capability.
(Note) 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.

3.

Status of Financing
For the overseas subsidiary JT International Financial Services B.V., we issued foreign currency denominatedstraight bonds totaling $1,025 million (approximately ¥117.9 billion) on September 14, 2021, with the aimof allocating funds for the repurchase and prepayment of outstanding foreign currency denominated straightbonds of the Group.
(Note) For US dollars to Japanese yen translation purposes, the exchange rate as of the end of December
2021 is used ($= ¥115.02).

4.

Business Transfers, Absorption-Type Company Split or Incorporation-Type Company Split
No items to report.

5.

Business Transfers From Other Companies
No items to report.

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
No items to report.

49

8.

Trends in Assets and Operating Results(1) Trends in assets and operating results of the JT Group [Consolidated]
34th term
From January 1,
2018 toDecember 31,
2018

35th term
From January 1,
2019 toDecember 31,
2019

36th term
From January 1,
2020 toDecember 31,
2020

37th term
From January 1,
2021 toDecember 31,
2021

Revenue(Millions of yen)

2,215,962

2,175,626

2,092,561

2,324,838

Profit before income
taxes(Millions of yen)

531,486

465,232

420,063472,390

Profit attributable toowners of the parent
company(Millions of yen)

385,677

348,190

310,253

338,490

Basic earnings per
share
(Yen)

215.31

195.97174.88190.76

Total assets(Millions of yen)

5,461,400

5,553,071

5,381,382

5,774,209

Total equity(Millions of yen)

2,700,445

2,743,611

2,599,495

2,886,081(Note) Consolidated financial statements of the JT Group are prepared based on IFRS.

50

(2) Trends in assets and non-consolidated operating results of JT [Non-consolidated]
34th term
From January 1,
2018 toDecember 31,
2018

35th term
From January 1,
2019 toDecember 31,
2019

36th term
From January 1,
2020 toDecember 31,
2020

37th term
From January 1,
2021 toDecember 31,
2021

Net sales(Millions of yen)

696,250

660,805

596,887

592,220

Ordinary income(Millions of yen)

190,343

278,968

240,491

278,809

Net income(Millions of yen)

164,595

262,469

241,752

216,896

Net income per share
(Yen)

91.89

147.72

136.27122.23

Total assets(Millions of yen)

2,670,883

2,614,357

2,597,930

2,487,979

Net assets(Millions of yen)

1,493,562

1,417,365

1,390,011

1,344,696(Notes)1. Non-consolidated financial statements of the Company are prepared based on Japanese GAAP.
2. The Company has applied the “Partial Amendments to Accounting Standard for Tax EffectAccounting” (ASBJ Statement No. 28, February 16, 2018) and relevant Guidances effectivefrom the 35th term.
As a result of this change, amounts presented for the 34th term are those after retrospective
application.

51

Trends in assets and operating results of the JT Group [Consolidated]

52

9.

Issues to Be Addressed(1) Basic management policy
Our management principles are based on the pursuit of the “4S model.” The model requires us to fulfill our
responsibilities to our valued consumers, shareholders, employees and the wider society, carefully
considering the respective interests of these four key stakeholder groups, and exceeding their expectations
wherever we can.
We created our vision and mission based on the “4S model.” Our vision is to continue to be a growing global
company that provides diverse value, unique to JT Group. Our mission is to create, develop and nurture ourunique brands to win consumer trust, while understanding and respecting the environment and the diversityof societies and individuals.
We have also adopted “The JT Group Way” as a code of conduct which all members of the Group 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, and leverage diversity across theGroup.
The Group has attained sustainable profit growth and will continue to do so through the pursuit of the “4Smodel.” 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 mid- tolong-term profit growth.
We believe that the pursuit of the “4S model” will lead to a consistent increase in corporate value in the midto long-term and therefore that it is the best approach to serve the interests of all stakeholders.

53(2) Mid- to long-term management strategy and issues
The Group’s mid- to long-term resources allocation policy is to give the highest priority to business
investments for sustainable profit growth over the mid- to long-term, under its management principles.
With the tobacco business as its core business and profit growth engine, the Group’s strategic focus acrossall businesses will be on business investments for sustainable profit growth in the tobacco business. On theother hand, we will focus on the restructuring of the business foundation for the Pharmaceutical Businessand the Processed Food Business to supplement profit growth for the Group as a whole, making investments
necessary to this end. Going forward there is no change in the resources allocation policy, under which wewill continue to place the highest priority on executing business investments that contribute to sustainable
mid- to long-term profit growth (Note 1) as well as on valuing the balance between profit growth throughbusiness investments and shareholder returns.
The mid- to long-term targets 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 Group

Pharmaceutical Business

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

Processed Food Business

Aim to achieve mid- to long-term sustainable profit growth centered
on top-line growth54

The Group formulates its three-year business plan by renewing it each year on a rolling basis to assess theincreasingly uncertain business environment accurately and speed up reinforcing its competitive edge andhas set group-wide profit targets and the mid- to long-term direction in shareholder returns in the “Business
Plan 2022.”
Under the “Business Plan 2022,” the Group will continue to pursue a mid- to high- single digit(Note 2) annual
average growth rate over the mid- to long-term in adjusted operating profit at constant FX.
In terms of “giving the highest priority to business investments for sustainable profit growth over the midto long-term” under the resources allocation policy based on the “4S model” and “valuing the balance
between profit growth through business investments and shareholder returns,” our shareholder returns policy
is set as follows:
・Pursue improvements in shareholder returns by realizing the mid- to long-term profit growth while
maintaining a solid financial base(Note 3)
・Target a payout ratio of about 75%(Note 4) as a competitive level in the capital markets(Note 5)
・ Consider implementing acquisitions of treasury shares, mainly taking into account the Company’s
financial positions for the respective year and the med-term capital needs
In 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. For each business, ourstrategic focus is to improve cost competitiveness and business foundations that support these efforts, thereby
achieving sustainable profit growth.
The Group will implement a new operating model for the tobacco business by unifying the organization
structure of the domestic and international tobacco businesses, boosting competitiveness by reforming thedomestic sales organization structure, consolidating manufacturing and leaf procurement locations, andoptimizing the workforce.
The business environment in which the Group operates is characterized by an increasing degree of
uncertainty, such as changes in the international political situation, and foreign exchange risks associatedwith declines in value for the currencies of emerging countries. Because of changes in consumer andcorporate activities stemming from the spread of COVID-19 and risks of global economic activities downturn
posed by emerging COVID-19 variants, etc., our outlook remains uncertain. Enhancing adaptability to sucha changing environment is critical to achieve sustainable profit growth by overcoming the uncertain businessenvironment and adequately executing business on a global scale. “Adaptability” refers to the ability toassume a wider range of contingencies than in the past, during the planning phase, and to quickly and flexibly
respond to changes and events that surpass the assumptions so that the Group can deal with uncertainty overthe future. The Group believes that how well and how quickly companies can overcome uncertainties willcontinue as the key to determine their competitiveness. Moreover, in view of the forward march of digitaltechnology, changes in the consciousness and behavior of consumers, and the shift towards greater awarenessof ESG and sustainability, the Group believes that, rather than merely responding passively while enhancing
its adaptability to such a changing environment, the Group should initiate transformation itself and accelerate
evolution to an organization that will lead this revolution through the unification of the organization structureof the tobacco business and the evolution of the corporate division.
(Notes)

1. Aiming for growth in adjusted operating profit at constant FX through high-quality top-line
growth, with a prime importance on growth investment for the tobacco business2. mid- to high-single digit: mid- to high-single-digit percentage
Outlook 2022-2024: Annual average growth of a mid-single digit rate despite significant
investments towards RRP
3. The Company will maintain a solid financial base that secures stability in case of changes inbusiness environment such as economic crises and flexibility enabling expeditious responses tobusiness investment opportunities.
4. To be in the range of approximately ±5%.
5. Monitor the shareholder return trends of global Fast-Moving Consumer Goods (FMCG)
companies which have a stakeholder model similar to our “4S model” and have realized strong
business growth.
55

【Reference】Our Approach to Sustainability
In order for the Group to achieve sustainable growth, it is essential for our business to contribute to the sustainable
development of our society. Sustainability is at the heart of managing our business. Our sustainability strategy isformulated based on the 4S model, our management principles, and encompasses our materiality analyses.

We have set out three absolute requirements for sustainability which apply across the Group, while each businesshas set out its own focus areas. The progress of each business in meeting these targets will be reported in the next
Integrated Report 2021 and on our website.
The Group supports the Sustainable Development Goals (SDGs) adopted by the United Nations, and we will
mainly contribute to the following related goals through our business activities and initiatives.

Respect for human rights, Diversity and inclusion
The Group has published the JT
Group Human Rights Report,
showcasing the Group’scommitment to the principles ofhuman rights and its initiatives
put into practice so far.

56

One of our commitments is topromote gender equality in theworkplace. Our new Group-widetarget, specifically representationof women in leadership, is to reach
25% by 2030. We find it desirable
that this should be more than 40%
over time.

Reducing Our Environmental Impacts (Case study)
The Group set out the JT Group Environment Plan 2030, with three focus areas; “Energy and Emissions,”“Natural Resources,” and “Waste.” We will work on the transition to renewable energy, reductions in greenhousegas emissions, addressing water-related risks or sustainable forest management, and reducing the impact on theenvironment of waste, including plastics.
Among them, the Group recognizes its vital responsibility to contribute to the transition to a decarbonized society,given the ever-increasing global environmental concerns. To drive this, the Group has updated its targets for“Energy and Emissions” in the current “JT Group Environment Plan 2030” in February 2022 and aims to be
Carbon Neutral for its own operations by 2030. Among other initiatives, the Group plans to achieve this byincreasing the proportion of renewable electricity that it uses. Moreover, by 2050, the Group is aiming to realize
carbon neutrality for the Group’s entire value chain by further strengthening and expanding such efforts.
The revised targets for GHG emission reduction by 2030 are in line with science-based thinking and the Group is
currently preparing to obtain validation of its targets from the Science Based Targets initiative.
The Group has always been proactive in reducing its environmental impact in accordance with “JT Group
Environment Plan 2030” and we will continue to make relentless efforts to be trusted by our stakeholders andreduce environmental impact, which ensure a sustainable environment for the long-term.
In 2020, the Group has endorsed the recommendations of the “Task Force on
Climate-related Financial Disclosures (TCFD).” We have been doing scenario
analyses on climate change, and in accordance with these recommendations, wewill further seek to understand and disclosure of the risks and opportunities thatclimate change impacts on its business.
Our continued efforts to reduce our environmental footprint and ourtransparency in disclosing information have been highly evaluated, and we wererecognized as a global leader in tackling climate change and water security by
CDP, which is the leading international non-profit organization that assesses
environmental disclosure. As a result, we were listed on the CDP’s “Climate A
List” and “Water A List” for the third consecutive year. The Company is one ofapproximately 56 companies in the world and 18 companies in Japan that
achieved “Climate A List” and “Water A List,” out of more than 13,000
companies participating in the CDP environmental disclosure program in 2020.

- Please visit “Sustainability” on the Company’s website (https://www.jt.com/sustainability/) to find out more
about our approach to sustainability.
- With regard to the Company’s corporate governance, please refer to “【Reference】Fundamental Policy
Concerning Corporate Governance” at the end of the Reference Documents for the General Meeting of
Shareholders.

5710. Main Business Contents

Business segment

Main businessJapanese Domestic Tobacco Business
International Tobacco BusinessPharmaceutical Business
Processed Food Business

Manufacture and sale of tobacco products, mainly MEVIUS andSeven Stars
Manufacture and sale of tobacco products, mainly Winston and
Camel
Research and development, manufacture and sale ofprescription drugs
Manufacture and sale of frozen and ambient foods, seasonings,
bakery products, etc.

11. Status of Important Subsidiaries

Company name
TS Network Co., Ltd.
Japan Filter Technology
Co., Ltd.
JT International S.A.
Gallaher Ltd.
Torii PharmaceuticalCo., Ltd.
TableMark Co., Ltd.
(Notes)Equityownership(%)

Capital(Millions of yen)

460
(Millions of yen)

461
(Thousands of CHF)

923,723(Thousands of GBP)

172,495(Millions of yen)

5,190(Millions of yen)

22,500Main business

74.5

Distribution of tobacco products

100.0

Manufacture and sale of filters for
tobacco products(100.0)

Manufacture and sale of tobacco
products(100.0)

Manufacture and sale of tobacco
products

53.5

Manufacture
andprescription drugs

sale

of

100.0

Manufacture and sale of processedfoods

1. Figures in parentheses in the “Equity ownership” column indicate indirect holding rates.
2. On the last day of the fiscal year ended December 31, 2021, there were 235 consolidated
subsidiaries, including 6 above-mentioned important subsidiaries, as well as 13 affiliates
accounted for by the equity method.
3. On the last day of the fiscal year ended December 31, 2021, there were no specified wholly
owned subsidiaries as stipulated in Article 118, item 4 of the Regulation for Enforcement of theCompanies Act.

58

12. Major Lenders
LenderOutstanding balance(Millions of yen)

Subordinated syndicated loan

100,000

The Norinchukin Bank

40,000Shinkin Central Bank

30,000(Note)The subordinated syndicated loan was financed jointly by four banks, with Mizuho Bank, Ltd.
acting as the arranger and agent.

13. Major Sales Offices and Factories(1) JT
Headquarters:

1-1, Toranomon 4-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), and Minami-Kyushu (Kagoshima)
Factories:

Kita-Kanto (Tochigi), Tokai (Shizuoka), Kansai (Kyoto), Kyushu (Fukuoka),
and Tomobe (Ibaraki)

Laboratories:

Tobacco Science Research Center (Kanagawa),
Leaf Tobacco Research Center (Tochigi),
and Central Pharmaceutical Research Institute (Osaka)(Note) As announced on February 9, 2021 in “JT Group Announces New Operating Model - Company
Aims to Strengthen its Tobacco Business,” the Company’s Kyushu Tobacco Factory will be closed
at the end of March 2022. Furthermore, in April 2022, the Company plans to switch from 15 sales
offices to a new sales organizational structure comprising 47 sales offices.
(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.

59

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

9,940International Tobacco Business

38,236

Pharmaceutical Business

1,354

Processed Food BusinessCommon company-wide services
within JT

4,878

Total

55,381

973(Note) The above number of employees indicates the number of working employees.
(2) Employees of JT [Non-consolidated]

Male/Female
MaleYear-on-year
Number ofincrease (decrease)
employees(Person)(Person)
5,912
(229)

44.6

Average years ofservice(Year)
19.5

Average age(Year old)

Female

1,242

17

37.6

12.4

Total or average

7,154

(212)

43.4

18.3

(Note) The above number of employees indicates the number of working employees.

60

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

225,475,301 shares)

3. Number of shareholders:

4.

691,779

Major shareholders
Name of shareholders

Number of shares held
(Share)Equity ownership (%)

Minister of Finance

666,925,200

37.58

The Master Trust Bank of Japan, Ltd.
(Trust Account)

161,020,700

9.07

SMBC Nikko Securities Inc.

42,916,800

2.42

41,665,100

2.35

21,441,841

1.21

18,443,300

1.04

17,641,100

0.99

17,428,100

0.98

JPMorgan Chase Bank 385771

12,397,794

0.70

Mitsubishi UFJ Morgan Stanley Securities
Co., Ltd.

12,056,526

0.68

Custody Bank of Japan, Ltd.
(Trust Account)
State Street Bank West Client - Treaty
505234
Barclays Securities Japan Limited
JAPAN SECURITIES FINANCE CO.,LTD.
Custody Bank of Japan, Ltd. as trustee forMizuho Bank, Ltd. Retirement Benefit
Trust Account re-entrusted by
Mizuho Trust & Banking Co., Ltd.

(Note) Equity ownership is calculated after deducting treasury shares (225,475,301 shares).
5.

Status of shares granted to Members of the Board and Audit & Supervisory Board Members of theCompany as consideration for execution of duties during the current fiscal year
Persons eligible for the
granting
Members of the Board(excluding Outside Directors)

Number of persons eligible forthe granting

Number of shares
92,500 shares

4

Outside Directors––

Audit & Supervisory Board
Members––(Notes) 1. The Company’s stock remuneration system is comprised of two kinds of stock remuneration:
61

restricted stock remuneration and performance share units. For details, please refer to pages 69
to 70 of the Business Report.
2. All the above shares are shares granted as restricted stock remuneration. The Company disposedof 238,400 treasury shares (including the above-stated 92,500 shares granted to Members of theBoard) on May 25, 2021, for the allotment of restricted stock remuneration to four Members of
the Board who also serve as Executive Officers, and to 20 Executive Officers. There were noshares granted as performance share unit remuneration in the current fiscal year.
6.

Other significant matters concerning shares
No items to report.

62

III. 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

Chairperson of the
Board

Yasutake Tango

Deputy Chairperson of
the Board

Mutsuo Iwai

Representative
Director and President

Masamichi
Terabatake

Representative
Director and Executive
Vice President

Naohiro Minami

Representative
Director and Executive
Vice President

Kiyohide Hirowatari

Member of the Board
and Senior Vice
President

Kazuhito Yamashita

Member of the Board

Main Kohda

Member of the Board

Yukiko Nagashima

Member of the Board

Masato Kitera

Standing Audit &Supervisory Board
MemberStanding Audit &Supervisory Board
MemberResponsibility

Chief Executive
Officer
Chief Financial
Officer andCommunications
Legal, Corporate
Strategy,
Digitalization,
Human Resources,
Operation Review &Business Assurance,
PharmaceuticalBusiness and FoodBusiness
Chief Sustainability
Officer, Complianceand General Affairs

Significant concurrent positions
outside the Company
Outside Director, The Ogaki
Kyoritsu Bank, Ltd.
Outside Director, Audit andSupervisory Committee
Member, Mitsubishi UFJ Trustand Banking Corporation
Outside Director, Benesse
Holdings, Inc.
Outside Director, TDK
Corporation
Chairman and Managing
Director, JT International Group
Holding B.V.
Supervisory Board member, JT
International Holding B.V.

Novelist
Outside Director, Japan
Exchange Group, Inc.
Outside Director, MITSUBISHI
MOTORS CORPORATION
Standing Audit and Supervisory
Board Member, Recruit
Holdings Co., Ltd.
Standing Audit and Supervisory
Board Member, Recruit Co.,Ltd.
Outside Audit & Supervisory
Board Member, Sumitomo
Corporation
External Director, Marubeni
Corporation
Outside Director, NIPPONSTEEL CORPORATION
Outside Director, Honda MotorCo., Ltd.

Ryoko Nagata
Hiroshi Yamamoto
63

Position
Standing Audit &Supervisory Board
MemberName

Responsibility

Significant concurrent positions
outside the Company

Toru Mimura

Attorney at Law, Shiba
International Law Offices

Audit & Supervisory
Board Member

Hiroshi Obayashi

Attorney at Law, Obayashi Law
OfficeOutside Audit & Supervisory
Board Member, Daiwa
Securities Co., Ltd.
Outside Director, Mitsubishi
Electric Corporation
Outside Director, Audit &Supervisory Committee
Member, NIPPON STEELCORPORATION

Audit & Supervisory
Board Member

Koji Yoshikuni(Notes)1.Members of the Board Main Kohda, Yukiko Nagashima and Masato Kitera are Outside Directors.
2. Audit & Supervisory Board Members Toru Mimura, Hiroshi Obayashi and Koji Yoshikuni are
Outside Audit & Supervisory Board Members.
3. Members of the Board, Main Kohda, Yukiko Nagashima and Masato Kitera, and Audit &Supervisory Board Members, Toru Mimura, Hiroshi Obayashi and Koji Yoshikuni, were
designated as independent officers (directors and auditors) as prescribed by the Tokyo Stock
Exchange, Inc.
4. Audit & Supervisory Board Members Hiroshi Yamamoto and Koji Yoshikuni have relevant
knowledge about financing and accounting as they were Vice President of the Operational
Review and Business Assurance Division of the Company and Auditor of Hosei University,
respectively.
5. Members of the Board Masato Kitera assumed his office on March 24, 2021.
6. Members of the Board Koichiro Watanabe resigned on March 24, 2021.
7. The Company has entered into agreements with each of its Members of the Board (excluding
Members of the Board who also serve as Executive Officers) and Audit & Supervisory Board
Members with respect to the liability set forth in Article 423, paragraph 1 of the Companies Act,by which the liability for damages of each of them is limited to the minimum amount set forthin Article 425, paragraph 1 of the same Act, provided they perform their duties without
knowledge of such damages and without gross negligence.
8. The Company has entered into liability agreements with each of its Members of the Board andAudit & Supervisory Board Members above as stipulated in Article 430-2, paragraph 1 of theCompanies Act, whereby the Company shall compensate them for expenses incurred under item(i) of the same paragraph, and any losses incurred under item (ii) of the same paragraph, to theextent permitted by laws and regulations. However, to provide coverage for losses incurred underitem (ii) of the same paragraph, measures have been put into place to ensure that the proper
performance of duties of insureds is not impaired, by making such coverage premised upon a
final judgment or the reaching of a judicial settlement (including cases where the Company
recognizes there is a due process that is equivalent to this) and requiring a resolution by the
Board of Directors of the matter after it has been deliberated by the Advisory Panel on
Nomination and Compensation of the Company.
9. The Company has entered into a liability insurance agreement for executive officers, etc. withan insurance company as stipulated in Article 430-3, paragraph 1 of the Companies Act, underwhich all Members of the Board, Audit & Supervisory Board Members, and Executive Officers
64are the insured. Under the terms of this insurance agreement, litigation expenses andcompensation for damages arising from legal action against the insured by third parties,
shareholders or companies shall be supplemented, and its premium is fully borne by theCompany. Note that any damages, etc., incurred by the insured in association with his/hercriminal act or violation of laws and regulations while he/she is aware of that are not subject tothe coverage; as such, a measure is taken to ensure/maintain the appropriateness in the executionof duties by the insured.
10. After the closing of the fiscal year under review, we had changes in the responsibilities of theMembers of the Board who also serve as an Executive Officer (as of January 1, 2022): Naohiro
Minami is now in charge of Finance and Corporate Communications, Kiyohide Hirowatari is incharge of Corporate Strategy, Sustainability, People & Culture, Information Technology, Legal,
Operation Review & Business Assurance, Pharmaceutical Business and Food Business, andKazuto Yamashita is in charge of Corporate Governance and Compliance.

65

2.

Remunerations for Members of the Board and Audit & Supervisory Board Members(1) Total remunerations for Members of the Board and Audit & Supervisory Board Members

Category
Members of the
Board(Outside Directors)
Audit &
Supervisory Board
Members(Outside Audit &Supervisory Board
Members)
Total(Outside Director
and Outside Audit& Supervisory
Board Members)(Notes)Total
remunerations(Millions ofyen)

Total remuneration by type (Millions of yen)
Base salary

Executive bonus

Restricted stock
remuneration

Performance
share units

Number of
eligible
officers(Person)

1,462
(58)

540
(58)

549
(-)

191
(-)

183
(-)

10
(4)

158
(76)

158
(76)

(-)

(-)

(-)

5
(3)

1,621
(133)

698
(133)

549
(-)

191
(-)

183
(-)

15
(7)

1. For executive bonuses, the amounts planned to be paid are shown.
2. For performance share units, the amount to be recorded as expenses for the fiscal year underreview is listed.
3. Executive bonus and performance share units of the above fall under performance-linked
remuneration and others.
4. Restricted stock remuneration and performance share units of the above fall under non-monetary
remuneration and others.
5. The above list includes one Member of the Board who resigned on March 24, 2021.

(2) Policy concerning the remuneration amount for Members of the Board and Audit & Supervisory
Board Members or the remuneration calculation method thereof and the method of determining thepolicy1. Executive Remuneration Policy
The Board of Directors determines the policies on executive remuneration including the methodology on
determination of each Director’s remuneration. These policies are determined after being deliberated andreported by the Advisory Panel on Nomination and Compensation comprised entirely of the Directors who
do not serve as Executive Officers, in which more than half of whose members being independent Outside
Directors, in order to ensure independence and objectivity.
Based on these policies, the Company’s basic concept on executive remuneration is as follows: Set the remuneration at an adequate level to retain personnel with superior capabilities.
 Link the remuneration to the Company’s performance so as to motivate executives to achieve theirperformance targets.
 Link the remuneration to the Company’s value in the mid to long term.
 Ensure transparency by implementing objective and quantitative frameworks.

66

2. Executive Remuneration Composition
 Members of the Board who also serve as Executive Officers
Remuneration for the Members of the Board who also serve as Executive Officers comprises “base salary,”“executive bonus,” “restricted stock remuneration” and “performance share unit remuneration” as they
are required to achieve results by executing their duties on a daily basis.
If the “executive bonus” and “performance share unit remuneration” are paid at the standard amount, thecomposition ratio for each type of remuneration is as follows.

(Notes)1. The composition ratios vary depending on the duties of Members of the Board and the ranges
are indicated in the illustration.
2. The ratio of restricted stock remuneration and performance share units is about 3 to 1.
3. Under performance share unit, 50% is paid as cash towards tax payment.
4. The above illustration is based on certain assumptions of the Company’s performance and theshare price. The above ratios could fluctuate depending on the company performance and theshare price.
 Members of the Board (excluding Outside Directors) who do not serve as Executive Officers
For Members of the Board (excluding Outside Directors) who do not serve as Executive Officers,
remuneration is not linked to business performance but is composed of “base salary” only, as they are
required to make decisions on the JT Group management strategies aimed at enhancing corporate value
and to fulfill supervisory functions including monitoring the implementation of mid- to long-term growthstrategies, etc.
 Outside Directors
Remuneration for Outside Directors, which is not linked to business performance with the purpose ofmaintaining their independence, is composed of “base salary” only. At the Board of Directors of theCompany held on February 14, 2022, a resolution was adopted that from this Ordinary General Meetingof Shareholders, the Chairperson of the Advisory Panel on Nomination and Compensation shall be electedfrom among Independent Outside Directors by themselves, and that the Outside Director who serves as
the Chairperson of the Panel shall receive the remuneration at a level of the amount corresponding to theduty of the Chairman of the Panel, in addition to the remuneration other Outside Directors receive.
Audit& Supervisory Board Members
In the light of the role of Audit & Supervisory Board Members, which is primarily to conduct audits on
legal compliance, their remuneration is composed of “base salary” only.

<Remuneration structure for Members of the Board and Audit & Supervisory Board Members>

Members of the
Executive Officer
Board(excluding
Not an Executive
OutsideOfficer
Directors)
Outside Directors
Audit & Supervisory Board Members

Base salary

Executive bonus

Restricted stock
remuneration /Performance shareunits

Applicable

Applicable

Applicable

ApplicableNot applicableNot applicable

Applicable
ApplicableNot applicableNot applicableNot applicableNot applicable67

3. Ceiling of the Total Executive Remuneration and Approval Process
The amount of remuneration for Members of the Board of the Company (nine (9) members as of December
31, 2021) was approved at the 35th Ordinary General Meeting of Shareholders held on March 19, 2020, notexceeding ¥1.1 billion annually (including ¥80 million annually for Outside Directors) as the base salary andexecutive bonus for the total number of Members of the Board (nine (9) Members of the Board was subject
to this rule at the time of the resolution, including three (3) Outside Directors). In addition to thisremuneration, to the Members of the Board who also serve as an Executive Officer (four (4) members as ofDecember 31, 2021), restricted stock remuneration not exceeding ¥210 million (or 115,200 shares) annuallyand performance share units not exceeding ¥130 million (or 76,800 shares) annually shall be granted (four(4) Members of the Board were subject to this rule at the time of the resolution).
Further, the maximum amount of the annual aggregate remuneration for all Audit & Supervisory Board
Members (five (5) persons as of December 31, 2021) was approved at our 34th Ordinary General Meetingof Shareholders held on March 20, 2019 and shall not exceed ¥240 million. (five (5) Audit & Supervisory
Board Members were subject to this rule at the time of the resolution).
Determination of the amount of remuneration for each Member of the Board is benchmarked based on asurvey of remuneration of directors conducted by third parties, based on the remuneration levels of majordomestic manufacturers that are expanding overseas with the similar size and profits. To be more specific,
after benchmarking the level of base salary and the percentage of variable remuneration in annual bonuses
and mid- and long-term incentives, we decide the amount of remuneration for Members of the Board basedon the results of the review by the Advisory Panel on Nomination and Compensation, in line with the methodsof calculation as set forth in the internal rules, and within the maximum remuneration approved by theGeneral Meeting of Shareholders. At this point, judged suitable for overviewing the Company’s management
and consolidated performance to decide the amount of remuneration for Members of the Board byconsidering the evaluation of their execution of duties, the Representative Director and President is delegatedto make such decisions.
As to the remuneration for the fiscal year under review, based on the details of the review by the Advisory
Panel on Nomination and Compensation, Representative Director and President Masamichi Terabatake has
decided the amount of remuneration for Members of the Board relating to base salary, bonuses, the monetary
remuneration claim toward the allotment of restricted stock, and the monetary remuneration claim toward
the allotment of performance share units, by following the methods of calculation as set forth in the internal
rules; and the Board of Directors judges its details in compliance with the determination policy as stated in
1 above.
The remuneration of Audit & Supervisory Board Members is also benchmarked in the same way, and isdetermined by deliberation among the Audit & Supervisory Board Members within the maximum
remuneration approved at the General Meeting of Shareholders.
4. Executive Remuneration Details
 Base salary
Executives will be remunerated with monthly base salary as per their responsibilities. Members of the Board
who also serve as Executive Officers will be individually evaluated for achievement of their performancetargets through execution of their duties that will lead to the Company’s sustainable profit growth.
Performance targets are set through interviews with the Company’s President and Chief Executive Officer atthe beginning of the fiscal year and evaluated at the end of year. The base salary for the following fiscal year
will be set within certain range reflecting the individual performance evaluations. However, an individual
performance evaluation will not be applicable for the Company’s President and Chief Executive Officer.
 Executive bonus
Executive bonus for Members of the Board who also serve as Executive Officers will be paid as monetary
remuneration reflecting the performance of a fiscal year. Adjusted operating profit at constant FX and profit
for the year will be the performance indicators (KPI) to measure the performance of the business itself, whichis the foundation for sustainable growth, as well as the achievement rate of profit growth, from the viewpointof providing shared value with the shareholders. Executive bonus will be comprised of adjusted operating
profit at constant FX and profit in the ratio of 75% and 25%, respectively. Performance-linked payout will
be based on the KPI achievement in the range of 0% - 200%. In a case where a Member of the Board who is68

a recipient of executive bonus has carried out certain wrongful behavior, the officer involved will be required
to refund a part of the executive bonus already paid.
Consolidated performance indicators and actual results related to executive bonus for the fiscal year underreview are as follows:
Fiscal year ended December 31, 2021
Performance indicator (Consolidated)
TargetActual(Billions of yen)(Billions of yen)
Adjusted operating profit at constant
512.0
598.4
FX
Profit(Profit attributable to owners of the
240.0
338.5
parent company) Restricted stock remuneration
The Restricted Stock Remuneration Plan is designed to strengthen the shared value with shareholders and toenhance the corporate value over the mid- to long- term. Members of the Board who also serve as Executive
Officers are eligible to receive monetary remuneration claims every fiscal year towards restricted stock andthe eligible Directors will receive the allocation of Company’s ordinary shares by paying all of the monetary
remuneration claims in kind in accordance with the resolution of the Board of Directors (the allotment ismade by means of disposal of treasury shares). The restriction period will be 30 years, but even during thisperiod, the transfer restrictions on the allotted shares will be removed upon resignation of such eligible
Director from a position as Member of the Board or any other positions separately specified by theCompany’s Board of Directors. The amount of individual remuneration is determined after the roles, basesalary amount, etc., of Members of the Board are comprehensively considered.
 Performance share units
The Performance Share Unit Plan is a performance-linked stock compensation system that aims to strengthen
the shared value with shareholders, to enhance the corporate value over the mid- to long- term and to commit
to achieving business results over the mid-term.
Members of the Board who also serve as Executive Officers are eligible to receive monetary remuneration
claims and cash towards the acquisition of ordinary shares after the performance evaluation period(Note),
which is comprised of three fiscal years starting from the fiscal year subject to provision, in accordance withthe rate of achievement of performance and other multi-year performance targets during the performance
evaluation period. The Advisory Panel on Nomination and Compensation deliberates and decides on theachievement rate of such targets for performance and other items during the performance evaluation period.
The remuneration for the performance share units will be disbursed after the performance evaluation period
expires, in principle, as monetary remuneration claims and cash towards the acquisition of ordinary shares.
Each of the eligible Directors will receive the allocation of Company’s ordinary shares by paying all of themonetary remuneration claims in kind (the allotment is made by means of disposal of treasury shares). In
performance evaluation, indicators linked to the Company’s mid-term growth have been set. In theperformance evaluation period starting from the fiscal year 2020 and the fiscal year 2021, profit for thefollowing three years will be set as a KPI with the aim of providing shared value with shareholders.

69

(Note)

The initial year for offering was set as 2020, with a performance evaluation period of three fiscal
years, from the fiscal year ended December 31, 2020, to the fiscal year ending December 31, 2022.
From the fiscal year 2021 forward, to the extent approved by the General Meeting of Shareholders,we will implement the performance-linked stock compensation plan, with respective years set as
the year for offering with a new (performance evaluation) period of three consecutive fiscal years
starting thereof.

For the details of calculations, the number of the ordinary shares of the Company to be issued to eligible
Members of the Board and the amount of cash to be paid to eligible Members of the Board as funds toward
tax payment shall be calculated based on the formula (1) and (2) below, respectively (Note that any fractions
less than one share shall be rounded off). Further, in the event of retirement or appointment during theperformance evaluation period, reasonable adjustments may be made in the number of the ordinary sharesof the Company or the amount to be offered to the eligible Member of the Board or his/her inheritors, inaccordance with the provisions set by the Board of Directors of the Company. If the number of the ordinary
shares of the Company allotted to eligible Members of the Board calculated by the formula (1) is greater thanthe maximum aggregate number of the ordinary shares of the Company to be allotted to eligible Members of
the Board (not exceeding 76,800 shares annually), it shall be deducted in a reasonable manner, such as aproportional distribution, as laid down by the Board of Directors of the Company, within the range notexceeding the maximum aggregate number.
(i) Number of the ordinary shares of the Company to be issued to eligible Members of the Board
Number of base share units(Note 1) x Offering ratio/percentage(Note 2) x 50%(ii) Amount of cash to be paid to eligible Members of the Board(Number of base share units(Note 1) x Offering ratio/percentage(Note 2) – Number of ordinary shares of
the Company calculated in (1)) x Share price at the time of issue(Note 3)(Notes)1. It is determined by the Board of Directors based on the duties, etc., of respective eligible
Members of the Board.
2. It is calculated as a range of 0 – 200% based on the percentage of achievement of targets, etc.,
during the performance evaluation period.
3. After the performance evaluation period ends, based on the closing price of the ordinary sharesof the Company on the TSE on the preceding business day of the date of the resolution by the
Board of Directors concerning the allotment of the ordinary shares of the Company under theplan (or the closing price on the immediately preceding business day, if transactions are notexecuted on that day), the amount shall be determined by the Board of Directors of the Company
within the range not particularly favorable to eligible Members of the Board.

70

3.

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

Name
Main Kohda

Organizations whereconcurrent positions are held
Novelist
Japan Exchange Group, Inc.
MITSUBISHI MOTORSCORPORATION
Recruit Holdings Co., Ltd.

Member of the
Board

YukikoNagashima

Recruit Co., Ltd.
Sumitomo Corporation

Masato Kitera
Toru Mimura
Audit &
Supervisory
Board Member

Marubeni Corporation
NIPPON STEELCORPORATION
Shiba International Law
Offices
Obayashi Law OfficeDaiwa Securities Co., Ltd.

Hiroshi Obayashi

Position
Outside Director
Outside Director
Standing Audit andSupervisory Board Member
Standing Audit andSupervisory Board Member
Outside Audit & Supervisory
Board Member
External Director
Outside Director
Attorney at Law
Attorney at Law
Outside Audit & Supervisory
Board Member

Mitsubishi Electric
Corporation

Outside Director

NIPPON STEELCORPORATION

Outside Director, Audit &Supervisory Committee
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

Main Kohda

Member of the
Board

Yukiko Nagashima

Status of main activities
Main Kohda attended all 13 Board of Directors meetings
held during this fiscal year. Her contribution toward
improving the Group corporate governance was expectedbased on her extensive knowledge in international
finance, wide experience of serving on government
examination committees and similar positions, and deep
insight and objective point of view demonstrated throughher activities as an author; she fulfilled her duties
adequately as an Outside Director by providing advice
and recommendations on finance, IR, and other areas.
Yukiko Nagashima attended all 13 Board of Directors
meetings held during this fiscal year. Her contribution
toward improving the Group corporate governance was
expected based on her experience in corporate
management and execution of business in a wide range offields, such as emerging businesses and temporary
staffing and objective point of view based on her
experience as a Member of the Audit and Supervisory
Boards, she fulfilled her duties adequately as an Outside
Director by providing advice and recommendations on
business strategy, the operating model, and other areas.

71

Category

Name

Masato Kitera

Toru Mimura

Audit &
Supervisory Board
MemberHiroshi Obayashi

Koji Yoshikuni

Status of main activities
Masato Kitera attended all 9 Board of Directors meetings
held during this fiscal year since he assumed office on
March 24, 2021. His contribution toward improving theGroup corporate governance was expected based on his
extensive international experience and a high level ofknowledge of international affairs cultivated during his
diplomatic and other activities, and he held important
positions over many years of service with thegovernment, primarily in the Ministry of Foreign Affairs,
he fulfilled his duties adequately as an Outside Director
by providing advice and recommendations on country
risk in the International Tobacco business and other areas.
Toru Mimura attended all 13 Board of Directors
meetings, as well as all 15 meetings of the Audit &Supervisory Board, held during this fiscal year. Based on
his deep insight into finance, global risk management,
geopolitics, company law, etc., he has fulfilled his duties
as an Audit & Supervisory Board Member, providing
advice and recommendations on the Company’s
governance system, including crisis management system,
etc.
Hiroshi Obayashi attended all 13 Board of Directors
meetings, as well as all 15 meetings of the Audit &Supervisory Board, held during this fiscal year. Based on
his extensive experience and broad insight in the judicial
world, he has fulfilled his duties as an Audit &Supervisory Board Member, providing advice andrecommendations on the Company’s governance system
including internal reporting system, etc.
Koji Yoshikuni attended all 13 Board of Directors
meetings, as well as all 15 meetings of the Audit &Supervisory Board, held during this fiscal year. Based on
his extensive experience and broad insight inmanagement across all operational businesses andinternal departments, he has fulfilled his duties as an
Audit & Supervisory Board Member, providing advice
and recommendations on the Company’s governancesystem including corporate culture, etc.

(3) Total amount of remunerations
Outside Audit &Supervisory Board
Total
MemberCategory
Amount to
Amount to
Amount to
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)
Base salary
4
58
3
76
7
133
(Note) The above list includes one Member of the Board who resigned on March 24, 2021.
Outside Director72IV. 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)

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

ii)

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

¥330 million¥33 million(2) Amount of cash and other financial benefits to be paid by JT and its subsidiaries:¥480 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 the content
of the Independent Auditor’s accounting plan, the status of the performance of the auditing duties, and the basis
for calculation of the remuneration estimate, and, as a result, determined that approval was fair and reasonable.
(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 be effectively
classified, their total is indicated in the amount in “(1), i)” above.
2. JT retains 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 advisory services
relating to sustainability management and the issuance of the comfort letter in relation to thebond issuing, 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 audited by
Deloitte & Touche LLP.

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 to perform its duties, theAudit & Supervisory Board shall decide the content of proposal and submit such proposal to the General
Meeting of Shareholders that the Independent Auditor should be dismissed or should not be reappointed.

* All figures contained in this Business Report are rounded to the nearest unit.

73Consolidated Statement of Financial Position(As of December 31, 2021)(Millions of yen)Account title

AmountAccount title

Current assets

AmountCurrent liabilities

Cash and cash equivalents

721,731

Trade and other payables

555,777

Trade and other receivables

456,587

Bonds and borrowings

142,901

Inventories

563,182

Income tax payables

30,794

Other financial assets

17,254

Other financial liabilities

28,342Other current assets

562,034

Provisions

24,8582,320,789

Other current liabilities

717,653500

Total current liabilities

1,500,326

Subtotal
Non-current assets held for sale
Total current assets

2,321,289

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

Non-current liabilities
755,843

Bonds and borrowings

775,7212,060,965

Other financial liabilities

43,885Retirement benefit liabilities

296,176

307,152

Investment property

4,985

Provisions

22,867Retirement benefit assets

53,177

Other non-current liabilities

179,195

Investments accounted for using theequity method

41,721

Deferred tax liabilities

69,959Other financial assets

108,658

Total non-current liabilities

Deferred tax assets

120,419

Total non-current assets

3,452,920

Total liabilities

5,774,209

74

2,888,128

EquityShare capital

100,000

Capital surplus

736,400

Treasury shares(490,899)

Other components of equity(400,086)

Retained earnings

2,863,843

Equity attributable to owners of theparent company

2,809,258

Non-controlling interests

Total assets

1,387,803

76,823

Total equity

2,886,081

Total liabilities and equity

5,774,209

Consolidated Statement of Income(Year ended December 31, 2021)(Millions of yen)Account title

AmountRevenue

2,324,838

Cost of sales(956,861)

Gross profit

1,367,976

Other operating income

15,622

Share of profit in investments accounted for using the equity method

3,997

Selling, general and administrative expenses(888,574)

Operating profit

499,021

Financial income

19,013Financial costs(45,645)

Profit before income taxes

472,390

Income taxes(132,208)

Profit for the period

340,181

Attributable to:
Owners of the parent company

338,490

Non-controlling interests

1,691

75

Consolidated Statement of Changes in Equity(Year ended December 31, 2021)(Millions of yen)
Equity attributable to owners of the parent company
Other components of equity

Share capital

Capital surplus Treasury shares

Subscription
rights tosharesExchangedifferenceson translationof foreign
operations

Net gain(loss) on
derivatives
designated as
cash flow
hedgesNet gain (loss)
on revaluationof financial
assets measured
at fair value
through othercomprehensive
incomeAs of January 1, 2021

100,000

736,400(491,507)

1,252(614,374)

122

7,224

Profit for the period

－

－

－

－

－

－

－

Other comprehensive income(loss)－－－－

206,199

(68)

(65)

Comprehensive income (loss) forthe period

－

－

－

－

206,199

(68)

(65)

Acquisition of treasury shares

－

－

(0)

－

－

－

－

Disposal of treasury shares

－

－

609

(51)

－

－

－

Share-based payments

－

－

－

－

－

－

－

Dividends

－

－

－

－

－

－

－

Changes in the ownership interestin a subsidiary without a loss ofcontrol

－

－

－

－

－

－

－

Transfer from other componentsof equity to retained earnings

－

－

－

－

－

－

1

Other increase (decrease)

－

－

－

－

－

(327)

－

－

－

608

(51)

－

(327)

1

100,000

736,400(490,899)

1,202(408,175)

(274)

7,161

Total transactions with the owners
As of December 31, 2021

76

(Millions of yen)
Equity attributable to owners of the parent company
Other components of equity
Remeasurements ofdefinedbenefit
plans

Total

Retainedearnings

Total

Noncontrollinginterests

Total equity

As of January 1, 2021－

(605,776)

2,783,718

2,522,834

76,6602,599,495

Profit for the period－－

338,490

338,490

1,691

340,181

Other comprehensive income(loss)(6,350)199,716－

199,716361

200,077

Comprehensive income (loss) forthe period(6,350)199,716

338,490538,206

2,052

540,258

Acquisition of treasury shares

－

－

－

(0)

－

(0)

Disposal of treasury shares

－

(51)

(558)

0

－

0

Share-based payments

－

－

479

479

33

512

Dividends－－(251,961)(251,961)(1,941)(253,902)

Changes in the ownership interestin a subsidiary without a loss ofcontrol

－

－

27

27

18

45

Transfer from other componentsof equity to retained earnings

6,350

6,351

(6,351)

－

－

－

－

(327)

－

(327)

－

(327)

6,350

5,973

(258,364)(251,782)(1,890)(253,672)－(400,086)

2,863,843

2,809,258

76,8232,886,081

Other increase (decrease)
Total transactions with the owners
As of December 31, 2021

77

Nonconsolidated Balance Sheet(As of December 31, 2021)(Millions of yen)Account title

AmountAccount title

ASSETS
Current assets

AmountLIABILITIES
468,113

Current liabilities

767,305

Cash and deposits

238,127

Accounts payable–trade

5,675

Accounts receivable–trade37,61430,000

Securities

20,000Current portion of bonds
Current portion of long-term

Merchandise and finished goods

26,768

Lease obligations

Semi-finished goods

83,612

Accounts payable–other124,329Work in process

1,725

National tobacco excise taxes payable

69,066

Raw materials and supplies

29,364

National tobacco special excise taxes payable

8,298

Advance payments–trade

1,714

Local tobacco excise taxes payable

78,114

Prepaid expenses

5,669

Income taxes payable

10,910Accrued consumption taxes

30,596

Cash management system deposits received

360,786

Short-term loans receivable from subsidiaries
and affiliates
Other
Allowance for doubtful accounts

4,967

18,579(24)

30,0002,050

Provision for bonuses

5,898

Other

11,584

Noncurrent liabilities

375,978

Bonds payable

125,000

Property, plant and equipment

182,690

Long-term borrowings

140,000

Buildings

77,170

Lease obligations

Structures

2,404

Provision for retirement benefits

Machinery and equipment

41,889

Other

Noncurrent assets

Vehicles

2,019,866

borrowings

832

Tools, furniture and fixtures

11,898Land

48,113

Construction in progress
Intangible assets
Patent right384
226,457
91

4,957

Total liabilities
NET ASSETS
Shareholders’ equity

100,000

Capital surplus

736,400

Legal capital surplus

736,400

Retained earnings

992,476
18,776

Legal retained earnings

Software

14,818Other retained earnings

Goodwill

143,084

Investments and other assets
Investment securities
Shares of subsidiaries and affiliates
Long-term loans receivable from subsidiaries
and affiliates

1,610,719
19,136
1,492,833
51,299Reserve for investment loss on developing
new businessReserve for reduction entry
Special account for reduction entry
Retained earnings brought forward
Treasury shares
Valuation and translation adjustments
Valuation difference on available-for-saleLong-term prepaid expenses

7,881

Deferred tax assets

28,751Other

14,998 Subscription rights to shares

Allowance for doubtful accounts(4,179)Total assets

2,487,979

78

1,337,977

Capital stock

65,6292,834

102,960
1,143,283

Right of trademark

Other

3,061

securities
Deferred gains or losses on hedges

356
37,715425
935,204(490,899)
5,517
5,833
(316)
1,202

Total net assets

1,344,696

Total liabilities and net assets

2,487,979

Nonconsolidated Statement of Income(Year ended December 31, 2021)(Millions of yen)Account title

AmountNet sales

592,220

Cost of sales

154,227

Gross profit

437,993

Selling, general and administrative expenses

344,154

Operating income

93,839Non-operating income
Interest income

91

Dividends income

182,091

Other

8,660

190,842

Non-operating expenses
Interest expenses

1,697Interest on bonds

2,188

Other

1,986

5,871
278,809

Ordinary income
Extraordinary income
Gain on sales of noncurrent assets

6,688

Other

101

6,789

Extraordinary losses
Loss on sales of noncurrent assets

103

Loss on retirement of noncurrent assets

3,263

Impairment loss

1,402

Business restructuring costs

31,592

Cooperation fee for terminating leaf tobacco farming

6,560

Loss on redemption of bonds

4,105

Other

2,371

49,397236,202

Income before income taxes
Income taxes-current

30,996

Income taxes-deferred(11,690)

19,306
216,896

Net income

79Nonconsolidated Statement of Changes in Net Assets(Year ended December 31, 2021)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capitalstock

As of January 1, 2021

Reserve forLegal capital Total capital Legal retained investment
surplussurplusearnings
loss ondeveloping
newbusiness

Reserve for
reduction
entry

Specialaccount for
reduction
entry

Retainedearnings
brought
forward

Total retained
earnings

100,000

736,400

736,400

18,776377

41,711

327

966,416

1,027,608

Provision of reservefor investment loss
on developing new
business

－

－

－

－

356

－

－

(356)

－

Reversal of reservefor investment loss
on developing new
business

－

－

－

－

(377)

－

－

377

－

Provision of reserve
for reduction entry

－

－

－

－

－

764

－

(764)

－

Reversal of reserve
for reduction entry

－

－

－

－

－

(4,761)

－

4,761

－

Provision of special
account for reduction
entry

－

－

－

－

－

－

425

(425)

－

Reversal of special
account for reduction
entry

－

－

－

－

－

－

(327)

327

－

Dividends fromsurplus

－

－

－

－

－

－

－

(251,961)(251,961)

Net income

－

－

－

－

－

－

－

216,896

216,896

Purchase of treasury
shares

－

－

－

－

－

－

－

－

－

Disposal of treasury
shares

－

－

－

－

－

－

－

(67)

(67)

Net changes of items
other thanshareholders’ equity

－

－

－

－

－

－

－

－

－

Total changes of items
during the period

－

－

－

－

(22)

(3,997)98(31,212)(35,132)

100,000

736,400

736,400

18,776356

37,715425

935,204

992,476

Changes of items
during the period

As of December 31,
2021

80

(Millions of yen)
Shareholders’ equity

Valuation and translation adjustments
Subscription
rights tosharesTotal net
assets

16,2591,252

1,390,011

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

－

Provision of special
account for reduction
entry

－

－

－

－

－

－

－

Reversal of special
account for reduction
entry

－

－

－

－

－

－

－

Dividends fromsurplus－(251,961)

－

－

－

－

(251,961)

Net income－

216,896

－

－

－

－

216,896

Purchase of treasury
shares

(0)

(0)

－

－

－

－

(0)

Disposal of treasury
shares

609

542

－

－

－

－

542

Net changes of items
other thanshareholders’ equity

－

－

1,764

(12,505)(10,742)(51)(10,792)

Total changes of items
during the period

608(34,524)

1,764(12,505)(10,742)(51)(45,316)(490,899)

1,337,977

5,833

(316)

5,517

1,202

1,344,696

Treasury shares

Total
shareholders’equityValuationdifference on
available-forsale securities(491,507)

1,372,501

4,069

12,189Provision of reservefor investment loss
on developing new
business－－－

Reversal of reservefor investment loss
on developing new
business－－

Provision of reserve
for reduction entry－

Reversal of reserve
for reduction entry

As of January 1, 2021

Deferred
gains orlosses onhedgesTotalvaluation andtranslation
adjustments

Changes of items
during the period

As of December 31,
2021

81

(TRANSLATION)
INDEPENDENT AUDITOR'S REPORT
February 15, 2022
To the Board of Directors ofJapan Tobacco Inc.:
Deloitte Touche Tohmatsu LLC
Tokyo office
Designated Engagement Partner,
Certified Public Accountant:

Yukitaka Maruchi

Designated Engagement Partner,
Certified Public Accountant:

Koji Ishikawa

Designated Engagement Partner,
Certified Public Accountant:

Yoichi Matsushita

OpinionPursuant to the fourth paragraph of Article 444 of the Companies Act, we have audited the consolidated
financial statements of Japan Tobacco Inc. and its consolidated subsidiaries (the "Group"), namely, theconsolidated statement of financial position as of December 31, 2021, and the consolidated statement ofincome and consolidated statement of changes in equity for the fiscal year from January 1, 2021 to
December 31, 2021, and the related notes of significant matters for preparing the consolidated financial
statements and other related notes to the consolidated financial statements.
In our opinion, the accompanying consolidated financial statements, prepared with the omission of a part ofthe disclosures required under International Financial Reporting Standards pursuant to the provisions of thesecond sentence of the first paragraph of Article 120 of the Ordinance on Company Accounting, present
fairly, in all material respects, the consolidated financial position of the Group as of December 31, 2021,
and its consolidated financial performance for the year then ended.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of
the Consolidated Financial Statements section of our report. We are independent of the Group inaccordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our otherethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Responsibilities of Management and Audit & Supervisory Board Members and the Audit &Supervisory Board for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements pursuant to the provisions of the second sentence of the first paragraph of Article 120 of theOrdinance on Company Accounting which allows companies to prepare consolidated financial statementswith the omission of a part of the disclosures required under International Financial Reporting Standards,
and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

82

In preparing the consolidated financial statements, management is responsible for assessing the Group's
ability to continue as a going concern, disclosing, as applicable, matters related to going concern 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 apart of the disclosures required under International Financial Reporting Standards.
Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the
Directors' execution of duties relating to the design and operating effectiveness of the controls over theGroup's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these consolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks. The procedures
selected depend on the auditor's judgment. In addition, we obtain audit evidence that is sufficient andappropriate to provide a basis for our opinion.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant tothe audit 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 Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Group's ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor's report to therelated disclosures in the consolidated financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Group to cease to continue as agoing concern.
• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are
pursuant to the provisions of the second sentence of the first paragraph of Article 120 of the Ordinanceon Company Accounting which allows companies to prepare consolidated financial statements with theomission of a part of the disclosures required under International Financial Reporting Standards, as wellas the overall presentation, structure and content of the consolidated financial statements, including thedisclosures, and whether the consolidated financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or businessactivities within the Group to express an opinion on the consolidated financial statements. We areresponsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding,among other matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.

83

We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statementthat we have complied with relevant ethical requirements regarding independence, and communicate withthem all relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.
Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Group which is required tobe disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

Notes to the Readers of Independent Auditor's Report
This is an English translation of the independent auditor's report as required by the Companies Act ofJapan for the conveniences of the reader.

84

(TRANSLATION)
INDEPENDENT AUDITOR'S REPORT
February 15, 2022
To the Board of Directors ofJapan Tobacco Inc.:
Deloitte Touche Tohmatsu LLC
Tokyo office
Designated Engagement Partner,
Certified Public Accountant:

Yukitaka Maruchi

Designated Engagement Partner,
Certified Public Accountant:

Koji Ishikawa

Designated Engagement Partner,
Certified Public Accountant:

Yoichi Matsushita

OpinionPursuant to the first item, second paragraph of Article 436 of the Companies Act, we have audited thenonconsolidated financial statements of Japan Tobacco Inc. (the "Company"), namely, the nonconsolidatedbalance sheet as of December 31, 2021, and the nonconsolidated statement of income andnonconsolidated statement of changes in net assets for the 37th fiscal year from January 1, 2021 to
December 31, 2021, and the related notes of significant accounting policies and other related notes to thenonconsolidated financial statements, and the accompanying supplemental schedules.
In our opinion, the accompanying nonconsolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2021, and its financial performance forthe year then ended in accordance with accounting principles generally accepted in Japan.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in Japan. Our
responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of
the Nonconsolidated Financial Statements section of our report. We are independent of the Company inaccordance with the provisions of the Code of Professional Ethics in Japan, and we have fulfilled our otherethical responsibilities as auditors. We believe that the audit evidence we have obtained is sufficient andappropriate to provide a basis for our opinion.
Responsibilities of Management and Audit & Supervisory Board Members and the Audit &Supervisory Board for the Nonconsolidated Financial Statements
Management is responsible for the preparation and fair presentation of the nonconsolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of nonconsolidated financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the nonconsolidated financial statements, management is responsible for assessing theCompany's ability to continue as a going concern, disclosing, as applicable, matters related to going
concern in accordance with accounting principles generally accepted in Japan.

85

Audit & Supervisory Board members and the Audit & Supervisory Board are responsible for overseeing the
Directors' execution of duties relating to the design and operating effectiveness of the controls over theCompany's financial reporting process.
Auditor's Responsibilities for the Audit of the Nonconsolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the nonconsolidated financial statements
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor'sreport that includes our opinion. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions ofusers taken on the basis of these nonconsolidated financial statements.
As part of an audit in accordance with auditing standards generally accepted in Japan, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:• Identify and assess the risks of material misstatement of the nonconsolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks. The
procedures selected depend on the auditor's judgment. In addition, we obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
• Obtain, when performing risk assessment procedures, an understanding of internal control relevant tothe audit 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 Company's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management's use of the going concern basis of accounting and,based on the audit evidence obtained, whether a material uncertainty exists related to events orconditions that may cast significant doubt on the Company's ability to continue as a going concern. If weconclude that a material uncertainty exists, we are required to draw attention in our auditor's report to therelated disclosures in the nonconsolidated financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor's report. However, future events or conditions may cause the Company to cease to continue as agoing concern.
• Evaluate whether the overall presentation and disclosures of the nonconsolidated financial statements
are in accordance with accounting principles generally accepted in Japan, as well as the overall
presentation, structure and content of the nonconsolidated financial statements, including thedisclosures, and whether the nonconsolidated financial statements represent the underlying transactions
and events in a manner that achieves fair presentation.
We communicate with Audit & Supervisory Board members and the Audit & Supervisory Board regarding,among other matters, the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
We also provide Audit & Supervisory Board members and the Audit & Supervisory Board with a statementthat we have complied with relevant ethical requirements regarding independence, and communicate withthem all relationships and other matters that may reasonably be thought to bear on our independence, andwhere applicable, related safeguards.

86Interest Required to Be Disclosed by the Certified Public Accountants Act of Japan
Our firm and its designated engagement partners do not have any interest in the Company which is
required to be disclosed pursuant to the provisions of the Certified Public Accountants Act of Japan.

Notes to the Readers of Independent Auditor's Report
This is an English translation of the independent auditor's report as required by the Companies Act ofJapan for the conveniences of the reader. "The accompanying supplemental schedules" referred to in thisreport are not included in the attached financial documents.

87

[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 37th fiscal year from January 1, 2021
to December 31, 2021, the Audit & Supervisory Board hereby submits its audit report, which has been preparedthrough 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 and results thereof,
as well as received reports from the Members of the Board, other relevant personnel, and Independent 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 of duties, andother relevant matters, communicated with the Members of the Board, and any other relevant personnel, and madeefforts to optimize the environment for information collection and audit, and conducted his or her audits in thefollowing 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 officeand principal offices. With respect to subsidiaries, we communicated and exchanged information with Membersof the Board, Audit & Supervisory Board Members, and other relevant personnel of 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 100 of
the Regulation for Enforcement of the Companies Act. We also monitored and verified the condition of the system(internal control system) put in place in accordance with the aforesaid resolution.
iii) We monitored and verified whether the Independent Auditors maintained their independence and implemented
appropriate audits, and we received reports from the Independent Auditors regarding the performance of theirduties 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 in each item of Article 131 of theRegulation on Corporate Accounting) is organized in accordance with the “Quality Management Standards
Regarding Audits” (Business Accounting Council, October 28, 2005) and other relevant regulations, and sought
explanations as necessary.
Based on the above methods, we examined the business report and the accompanying supplemental schedules, thenon-consolidated financial statements (non-consolidated balance sheet, non-consolidated statement of income,88and non-consolidated statement of changes in net assets) and the accompanying supplemental schedules, as wellas consolidated financial statements (consolidated statement of financial position, consolidated statement ofincome, and consolidated statement of changes in equity, which omit some disclosure items required underInternational Financial Reporting Standards (IFRS) in accordance with the provision of the second sentence ofArticle 120, paragraph 1 of the Regulation on Corporate Accounting) 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 in accordancewith 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 no evidenceof wrongful action or material violation of related laws and regulations, nor of any violation withrespect 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 Independent 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 16, 2022
The Audit & Supervisory Board, Japan Tobacco Inc.

Standing Audit & Supervisory Board Member

Ryoko Nagata(seal)

Standing Audit & Supervisory Board Member

Hiroshi Yamamoto(seal)

Standing Audit & Supervisory Board Member

Toru Mimura(seal)

Audit & Supervisory Board Member

Hiroshi Obayashi(seal)

Audit & Supervisory Board Member

Koji Yoshikuni(seal)(Note) Standing Audit & Supervisory Board Member Toru Mimura and Audit & Supervisory Board Members
Hiroshi Obayashi and Koji Yoshikuni are Outside Audit & Supervisory Board Members provided for by
Article 2, item 16 and Article 335, paragraph 3 of the Companies Act.

89