[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 3, 2023
To Our Shareholders
Masamichi Terabatake
Representative Director and President

Japan Tobacco Inc.
1-1, Toranomon 4-chome, Minato-ku, TokyoNOTICE OF CONVOCATION OF
THE 38TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
We are pleased to announce the 38th Ordinary General Meeting of Shareholders of Japan Tobacco Inc. (“JT” or
the “Company”), which will be held as set forth below.
In convening the 38th Ordinary General Meeting of Shareholders, the Company has taken an electronic
provision measure for providing information that constitutes the content of the Reference Documents for the
General Meeting of Shareholders, etc. (matters for an electronic provision measure). To review the information,please access either of the following websites on which the information is posted.
[JT’s website]
https://www.jti.co.jp/investors/stock/meeting/index.html (Japanese)
https://www.jt.com/investors/shareholders/index.html (English)[Tokyo Stock Exchange (TSE) website (Listed Company Search)]https://www2.jpx.co.jp/tseHpFront/JJK010010Action.do?Show=Show (Japanese)
https://www2.jpx.co.jp/tseHpFront/JJK020010Action.do?Show=Show (English)(Please access the TSE website, and search by “Issue name” (Japan Tobacco) or “Code” (2914), select “Basic
information” and then “Documents for public inspection/PR information” to review filed information.)

Shareholders not attending the meeting in person are allowed to exercise their voting rights via the Internet
or by mail. Please exercise your voting rights beforehand via the Internet or by mail instead, by 6:00 p.m.
on Thursday, March 23, 2023. (For the method of exercising voting rights via the Internet or by mail, pleaserefer to pages 5 to 6 of this document.)

1

Particulars
1. Date and Time of the Meeting: Friday, March 24, 2023 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 38th
Business Term (From January 1, 2022 to December 31, 2022)
2. Report on the Non-Consolidated Financial Statements for the 38th
Business Term (From January 1, 2022 to December 31, 2022)

Matters to be Resolved:<Company proposals (Items from 1 to 4)>
Appropriation of Surplus
Item 1:
Electionof Nine (9) Members of the Board
Item 2:
Electionof Five (5) Audit & Supervisory Board Members
Item 3:
Revision of Remuneration for Members of the Board
Item 4:<Shareholder proposals (Items from 5 to 8)>
Partial Amendment to the Articles of Incorporation (Management of
Item 5:
Subsidiaries)
Partial Amendment to the Articles of Incorporation (Prohibition Against
Item 6:Former Directors and Employees Serving in Director Positions at Listed
Subsidiaries)
Partial Amendment to the Articles of Incorporation (Prohibition Against
Item 7:
Using the Cash Management System (CMS) for Financing with Listed
Subsidiaries)
Acquisition of Treasury Shares
Item 8:
Decisions on convening the meeting* If the voting right is exercised both via the Internet and by mail, only the exercise of the voting right via theInternet shall be valid. If the voting right is exercised more than once via the Internet, only the last exercise of
the voting right shall be valid.
* If there is no indication of for or against on each proposal in the returned form, it shall be deemed that you havevoted for a Company’s proposal and against a shareholder proposal.
* A change in matters for an electronic provision measure will be announced on the Company’s website and theTSE website with a comparison before and after the revision.
* Among matters for an electronic provision measure, under laws and regulations and the provision in Article 17,
paragraph 2 of the Articles of Incorporation of the Company, the Notice of Convocation of the 38th Ordinary
General Meeting of Shareholders does not include the following: “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

Measures to Prevent the Spread of COVID-19 at the General Meeting of Shareholders
Requests to Shareholders* The Company encourages shareholders to carefully take into consideration the state of COVID-19
pandemic and their own health conditions on the day of the General Meeting of Shareholders, and choose
to exercise the voting rights via the Internet or by mail in advance.
<Measures to be implemented at the venue> As the Japanese government’s “Basic Policies for Novel Coronavirus Disease Control” were recently
amended, the wearing of face masks depends on individuals’ judgment as of March 13, 2023. In lightof this amendment to the government’s policy, the Company will not be requesting the wearing of facemasks, so please decide whether or not you wish to wear a face mask while in the venue.
 As measures against infection at the venue, alcohol disinfectant will be placed at the venue, and 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 entering the venue, 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 continue to allow for a certain amount of
space between the seats. Please be aware that even shareholders who come to the venue may not be allowed
to enter.
 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.
 Organizing staff members will be at the venue after confirming their physical condition, which includes
taking their temperature, and will continue to wear face masks.

3

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 17 (Friday) (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 7 to 8 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.

4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 Thursday, March 23, 2023

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.

5

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 for
the Company proposal and against a shareholder proposal.

Exercise due date

To be returned to us no later than 6:00 p.m., on
Thursday, March 23, 2023

Guide to filling in the Voting Rights Exercise Form
Please indicate for or against about each item.
<Company Proposals>
Items 1 and 4
When you are for the proposed item, mark ○ in the “for” box, and when you are against the item, mark○ in the “against” box.
Items 2 and 3
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.
<Shareholder Proposals>
Items 5, 6, 7 and 8
When you are for the proposed item, mark ○ in the “for” box, and when you are against the item, mark○ in the “against” box.
Items 5 to 8 are proposals made by shareholders. The Board of Directors opposes each of the shareholder
proposals.
* 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.

6

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 online site of the General Meeting of Shareholders from your computer or smartphone asfollows, and enter your Log-in ID and password to watch.
1. Date and time of streaming
From 10:00 a.m. to the end time of the General Meeting of Shareholders on Friday, March 24, 2023
* 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 Log-in ID and password, which are to be required on the shareholder authentication screen (log-in
screen), in advance before accessing to the following online site of the General Meeting of Shareholders.
Online site of the General Meeting of
Shareholders
Log-in ID
Password

https://engagement-portal.tr.mufg.jp/▶ 3450 + Shareholder Number (eight digits)
Zip code for the address registered on the shareholder registry as at the end of December 31,▶
2022 (seven digits) + 2022

Please refer to the Voting Rights Exercise Form before logging in to the website.
On the log-in screen, fill in the (1) Log-in ID and (2) Temporary Password described on the Voting Rights
Exercise Form, confirm the user name is correct, and click the “Log-in” button. Click the “View live on the day”
button after log-in.
(1) Log-in ID: 3450 + Shareholder Number (eight digits)(2) Password: Zip code for the address registered on the shareholder registry as at the end of December 31,
2022 (seven digits) + 2022
* Enter the “Log-in ID” and “Password” with no hyphen.
The password may be different from the zip code stated in the Voting Rights Exercise Form (address change
on or after December 31, 2022 and information in the case where the mailing address for the Voting Rights
Exercise Form is designated, or any other cases, are not reflected). In addition, shareholders living outside
Japan who have designated a standing proxy are asked to enter the zip code of the standing proxy.
* Your viewing environment can be tested in advance on the online site of the General Meeting of Shareholders.

7

3. Points of attention
・The online site of the General Meeting of Shareholders will be available from 5:00 a.m. on Friday, March 3,2023 to 5:00 p.m. on Friday, March 24, 2023.
・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 5 to 6).
・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/investors/stock/meeting/index.html).
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 online site of the General Meeting of Shareholders by referring to “2. How to watch on theday,” 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 Friday, March 17, 2023
(2) Points of attention－ Of the enquiries received from shareholders, those that are of high interest to shareholders will be answeredon the day of the General Meeting of Shareholders. Enquiries to which we were unable to respond on the dayof the General Meeting of Shareholders will be answered on the Company’s website after the close of theGeneral Meeting of Shareholders. Please note that we do not promise to respond to all enquiries received.
－ The enquiry form has a character limit of 400 characters.
Mitsubishi UFJ Trust and Banking Corporation
Tel: 0120-676-808 (Toll-free) Japanese-language only
Business hours: 9:00 to 17:00 except weekends and national
Enquiries on log-in
holidays)(Business hours on the day of the General Meeting of Shareholders:
9:00 to the end of the General Meeting of Shareholders)* For technical enquiries on watching live streaming, such as the streaming environment, information isprovided separately on the online site of the General Meeting of Shareholders (https://engagementportal.tr.mufg.jp/).

8

REFERENCE DOCUMENTS
FOR THE GENERAL MEETING OF SHAREHOLDERS<Company proposals (Items from 1 to 4)><Company proposal>
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 38th 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:¥113 per share of ordinary shares of JT

Aggregate amount: ¥200,558,449,681

Together with the interim dividends of ¥75 per share paid in September 2022, the annual dividends for the
38th Business Term will be ¥188 per share.
(3) Effective date for distribution of surplus:
March 27, 2023

9

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 vending
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.

10【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 has
continued 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 in
the Business Plan 2022. (For the resources allocation policy of the Business Plan 2023, please refer to pages 67
to 68 of the Business Report.):Resources allocation policy
Allocate resources based on the “4S model” that underlies the Group’s management principles.
 Give the highest priority to business investments for sustainable profit growth over the mid- to longterm
 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 arising frombusiness acquisitions and adjustment items (income and costs) from operating profit (loss). Adjustment
items (income and costs) are impairment losses on goodwill, restructuring income and costs, and otheritems. Adjusted operating profit growth rate at constant FX is a financial measurement that excludes

11foreign exchange effects by translating 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
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.

12

<Company proposal>
Item 2: Election of Nine (9) Members of the Board
The terms of office of all ten (10) present Members of the Board will expire at the conclusion of this Ordinary
General Meeting of Shareholders. Accordingly, we propose the election of nine (9) Members of the Board.
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

3

7 years

10/13
(77%)

2

[Reappointed]

Shigeaki Okamoto

Deputy Chairperson of the Board

4

1 year9/9(100%)

3[Reappointed]

Masamichi Terabatake

Representative Director andPresident,
Chief Executive Officer-

1

5 years

13/13(100%)--

5 years

13/13(100%)-

1--

Outside Director3

10 years and9 months

13/13(100%)

Outside Director

34 years

13/13(100%)

Outside Director22 years

13/13(100%)

Outside Director

4

1 year9/9(100%)

4[Reappointed]

Kiyohide Hirowatari

5[Newly appointed]

Kei Nakano

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

Main Kohda
6[Reappointed]

7[Reappointed]

8[Reappointed]

9[Reappointed][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 Chairperson of the Advisory Panel on Nomination and Compensation shall be elected from among Independent Outside
Directors by the Panel members themselves.
3. The number of significant concurrent positions represent the number as of the date of sending this Notice of Convocation.
4. The numbers of years as Member of the Board at the conclusion of this Ordinary General Meeting of Shareholders are presented.

13

Candidate Number

1

Reappointed

Mutsuo Iwai

(Born October 29, 1960)

Number of the Company’s Shares Held

40,100Brief 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
June 2020
Outside Director of Benesse Holdings, Inc.
(Current Position)
June 2021
Outside Director of TDK Corporation(Current Position)
March 2022
Chairperson of the Board of the Company(Current Position)
January 2023
Outside Director of &Capital Inc.
(Current Position)(Significant Concurrent Positions outside the Company)
Outside Director of Benesse Holdings, Inc.
Outside Director of TDK Corporation
Outside Director of &Capital Inc.

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, and Chairperson of the Board in March 2022. He
has experience of driving the core Tobacco Business as Representative Director and Executive Vice President of the Company even in unclear anduncertain operating environments, with his forceful execution 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 this reason, 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.

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Candidate Number

2

Shigeaki Okamoto

Reappointed(Born February 20, 1961)

Number of the Company’s Shares Held300

Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1983
Entered Ministry of FinanceJuly 2006
Director for the Budget Bureau, Planning and Administration Division of Budget Bureau,
Ministry of FinanceJuly 2009
Head of Secretariat Division, Minister’s Secretariat, Ministry of Finance
August 2012
Deputy Director-General of the Budget Bureau, Ministry of FinanceJuly 2015
Deputy Vice Minister, Ministry of FinanceJuly 2017
Director-General of the Budget Bureau, Ministry of FinanceJuly 2018
Administrative Vice Minister, Ministry of Finance (Retired 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)
March 2022
Deputy Chairperson of the Board of the Company (Current Position)
June 2022
Outside Audit & Supervisory Board Member, The Yomiuri Shimbun Tokyo 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 OfficeOutside Audit & Supervisory Board Member, The Yomiuri Shimbun Tokyo Head Office

Reasons for nomination as a candidate for Director
Shigeaki Okamoto assumed the position of Deputy Chairperson of the Board of the Company in March 2022. 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. His broad outlook and high standing underpinned by his experience have contributed
to the strengthening of the supervisory function of the Group and relationships with stakeholders, which are essential to the enhancement of the corporate
governance of the Group going forward. For this reason, we propose his reelection as a Member of the Board.

15

Candidate Number

3

Masamichi Terabatake

Reappointed(Born November 26, 1965)

Number of the Company’s Shares Held

184,400

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 andPresident 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 executionof the business of the International Tobacco Business in his role as Executive Vice President of JT International S.A., and in doing so has been a driver ofthe growth of the Group. We judge that his extraordinary insights and wide-ranging outlook, together with his enhanced reforming capabilities, areindispensable 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.

16

Candidate Number

4

Kiyohide Hirowatari

Reappointed(Born November 11, 1965)

Number of the Company’s Shares Held

66,300Brief 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 his time 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 andto draw up strategy. We judge that his keen discernment and accurate decision-making, which is based on the knowledge and experience he has cultivatedin 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 ofthe Board.

17

Candidate Number

5

Newly
appointed

Kei Nakano(Born March 1, 1968)

Number of the Company’s Shares Held

31,100Brief Personal History, Positions and Responsibilities in the Company, and Significant Concurrent
Positions outside the Company
April 1991
Joined the Company
April 2011
Vice President, M&S Strategy Department, Tobacco Business Division
President and Chief Executive Officer, TS Network Co., Ltd.
June 2014
Senior Vice President, Communications of the Company
January 2016
Senior Vice President, Corporate Strategy
October 2019
Director, Japan Growth Investments Alliance, Inc.
March 2020
(Current Position)
Senior Vice President, Corporate Strategy of the Company
January 2022
Executive Vice President, Finance, Corporate Communications, Business Development
January 2023
and D-LAB(Current Position)(Significant Concurrent Positions outside the Company)
Director, Japan Growth Investments Alliance, Inc.

Reasons for nomination as a candidate for Director
After serving Vice President of M&S Strategy Department, Tobacco Business Division of the Company, and President and Chief Executive Officer of TS
Network Co., Ltd., the Company’s subsidiary, Kei Nakano assumed Senior Vice President, Communications in January 2016. Since October 2019, he hasserved Senior Vice President, Corporate Strategy, using his strong leadership focusing on promoting initiatives for strengthening and advancing the Company’s
corporate governance including the enhancement of effectiveness of the Board of Directors, and projects to enhance corporate capabilities. We judge that his
extensive and deep knowledge in relation to overall management strategies and business management, strategic thinking and accurate decision-making basedon his diverse experience will be indispensable in driving the Group’s management further forward, and hence we propose his election as a Member of theBoard.

18

Candidate Number

6

Reappointed
OutsideDirector
Independent
Director

Main Kohda

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

10 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. As the Chairperson of the Advisory Panel on Nomination
and Compensation, she also played a big role in supervising business execution from an independent and fair 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 contract concluded, 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 2022 came to less than 0.001% of NHK’s consolidated total operating income in the fiscal year ended March 2022, and less than 0.001%
of the Company’s consolidated revenue in fiscal year 2022, and was therefore negligible. Payment of the receiving fees is based on the Broadcast Act, andare non-negotiable, and are not therefore categorized as business 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. (hereinafter referred
to as “JPX”), where Main Kohda serves as an Outside Director. However, in fiscal year 2022 the amount paid in listing-related fees, etc. came to less than
0.005% of consolidated operating revenue for JPX in the fiscal year ended March 2022, and less than 0.001% of the Company’s consolidated revenue infiscal year 2022, 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 to designate her assuch again, should her election be approved.
- The Tokyo Stock Exchange (TSE), a subsidiary of JPX of which Main Kohda serves as an Outside Director, caused a system failure in the cash equity
trading system “arrowhead” in October 2020, resulting in a suspension of all transactions at TSE for the entire day. Following the system failure, the FSA
issued business improvement orders to JPX and TSE in November 2020 because the automatic switching function of the device where the failure occurred
was defective and the TSE’s rules for resuming trading were insufficient, among other reasons. Since before the occurrence of the system failure, she madeproposals to the Board of Directors of JPX as to what a stable and reliable market operation should be, when necessary. After the system failure occurred,
she fulfilled her duties as a member of the “System Failure Investigation Committee” established by JPX, evaluating and making recommendations
regarding matters pertaining to the causes of the system failure, reasonableness of JPX and TSE’s handling the situation before and after, and measures,etc. taken to prevent recurrence, in response to the opinions and fact-finding of JPX and TSE in relation to the course of events and the cause of theoccurrence. She also reported the progress and the results of the Committee’s survey at the Board of Directors meetings of JPX.

19

Candidate Number

7

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

4 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 & Supervisory Board Member, Recruit Holdings Co., Ltd.
(Current Position)
April 2018
Standing Audit & 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 & Supervisory Board Member, Recruit Holdings Co., Ltd.
Standing Audit & 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 & Supervisory Boards being reflected in the management of the Company. She also played a big role in supervising businessexecution from an independent and fair 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 of an 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 & Supervisory
Board Member, the value of the business in fiscal year 2022 was negligible, coming to less than 0.01% of consolidated revenue for Recruit Holdings Co.,
Ltd. in the fiscal year ended March 2022, and less than 0.01% of the Company’s consolidated revenue in fiscal year 2022.
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 2022 was negligible, coming to less than 0.001% of consolidated revenue for SUMITOMO CORPORATION in thefiscal year ended March 2022, and less than 0.001% of the Company’s consolidated revenue in fiscal year 2022.
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 & Supervisory Board Member, have received arecommendation 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-on of Consumption Tax, in relation to payment ofconsignment fees to the consignee company. In addition, at Recruit Career Co., Ltd., a subsidiary of Recruit Co., Ltd. where she serves as a standing Audit& Supervisory Board Member, and which had concluded a business outsourcing 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 arecommendation and directive in December 2019 from the Personal Information Protection Commission for alleged infringements of the Act on theProtection 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 the circumstancesin 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 oflegal compliance. After the above events came to light, in both cases she worked to gather information from the internal audit division, and to offer opinions
and confirmation in relation to measures to prevent the recurrence.

20

Candidate Number

Masato Kitera

8

Reappointed
OutsideDirector
Independent
Director

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

2 years

Number 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
Outside 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)
Outside 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, hehas played a big role in providing 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 Outside Director, the value of the business in fiscal year
2022 was negligible, coming to less than 0.001% of consolidated revenue for Marubeni Corporation in the fiscal year ended March 2022, and less than
0.001% of the Company’s consolidated revenue in fiscal year 2022.
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 apart-time advisory agreement with Masato Kitera, for the purpose of enabling him to gain an understanding of the state of management and of details of
the operations beforehand, and benefiting from his opinions with regard to management and the business from 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 millionprescribed 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 to designate him as
such again, should his election be approved.

21

Candidate Number

9

Reappointed
OutsideDirector
Independent
Director

Tetsuya Shoji

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 February 28, 1954)
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)
March 2022
Outside Director of the Company (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
Tetsuya Shoji assumed the position of Outside Director of the Company in March 2022. Having served as a president and representative director for atelecommunications company, Tetsuya Shoji has considerable experiences in business execution and corporate management and wide-ranging insights incorporate planning, human resources, global operations, and digitization promotion. With his such experiences and insights, he advised on the managementof the Group as it expands its business globally and regards IT/information security as one of the increasingly important management foundations in the
future. He also played a big role in supervising business execution from an independent and fair standpoint.
We believe his extensive experience and broad knowledge are essential for the Group management by the Company and expect he will continue contributing
to the improvement of the Group’s corporate governance through his active recommendations and advice as an Outside Director at the Board of Directors
and the Advisory Panel on Nomination and Compensation, etc., and hence we propose his reelection as an Outside Director.
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 this business in fiscal year
2022 was negligible, coming to less than 0.1% of consolidated revenue for NTT Communications in the fiscal year ended March 2022, and less than 0.05%
of the Company’s consolidated revenue in fiscal year 2022.
In addition, the Company has a business relationship with Mitsubishi Logistics Corporation, of which he is an Outside Director, the value of this businessin fiscal year 2022 was negligible, coming to less than 0.05% of consolidated revenue for Mitsubishi Logistics Corporation in the fiscal year ended March
2022, and less than 0.001% of the Company’s consolidated revenue in fiscal year 2022.
We judge that these relationships have no impact on his independence.
- The Company has designated Tetsuya Shoji as an independent director as prescribed by the Tokyo Stock Exchange, Inc. and intends to designate him as
such again, should his election be approved.

22

(Notes)

1. No conflict of interest exists between the Company and each candidate.
2. The Company has entered into an agreement with Mutsuo Iwai, Shigeaki Okamoto, Main Kohda, Yukiko Nagashima, Masato
Kitera and Tetsuya Shoji 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.
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.
If the reelection of the candidates for Members of the Board is approved, the Company intends to extend this agreement withthe candidates to be reelected. The Company will also enter into a liability agreement to the same effect with Kei Nakano
subject to the approval of his election.
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 2023. 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.

23

<Company proposal>
Item 3: Election of Five (5) Audit & Supervisory Board Members
The terms of office of all five (5) present Audit & Supervisory Board Members will expire at the conclusion ofthis Ordinary General Meeting of Shareholders. Accordingly, we propose the election of five (5) Audit &Supervisory Board Members.
The Audit & Supervisory Board has approved this proposition.
The candidates for the office of Audit & Supervisory Board Members are as follows.
Candidate
NumberName

Positions in the Company

Number of significant
concurrent positions

1[Newly appointed]

Hideaki KashiwakuraStanding Audit & Supervisory Board Member-

2[Newly appointed]

Tsutomu Hashimoto

Standing Audit & Supervisory Board Member-

Standing Audit & Supervisory Board Member
Outside Audit & Supervisory Board Member-

Outside Audit & Supervisory Board Member

2

Outside Audit & Supervisory Board Member

2

Shigeru Taniuchi
3[Newly appointed][Outside Audit & Supervisory Board
Member][Independent Audit & Supervisory Board
Member]Nobuo Inada

4[Newly appointed][Outside Audit & Supervisory Board
Member][Independent Audit & Supervisory Board
Member]Hiroko Yamashina

5(Notes)[Newly appointed][Outside Audit & Supervisory Board
Member][Independent Audit & Supervisory Board
Member]

1. Positions in the Company represent those planned 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.

24

Candidate Number

1

Hideaki Kashiwakura(Born February 28, 1969)

Number of the Company’s Shares Held0

Brief Personal History, Positions in the Company, and Significant Concurrent Positions outside theCompany
April 1991
Joined the Company
July 2012
Controller
Vice President, M&S Management Department, Tobacco Business Division
October 2014
Manager, Hokkaido branch, Tobacco Business Division
January 2017
Deputy Chief Financial Officer (Assistant to CFO)
January 2019
President, Chief Executive Officer, JT BusinessCom Inc.
January 2021
(Current Position)

Newly
appointed
Reasons for nomination as a candidate for Audit & Supervisory Board Member
Hideaki Kashiwakura has served as Controller, Vice President of the M&S Management Department of Tobacco Business Division, Deputy Chief Financial
Officer of the Company and President, Chief Executive Officer of JT BusinessCom Inc., having extensive experience and wide-ranging knowledge incorporate management, business development, finance and accounting, as well as business operation in Japan and overseas. Because of his detailed, deep andwide-ranging knowledge and experience across all business operations and internal departments, we expect him to fulfill his duty as an Audit & Supervisory
Board Member in relation to the effective auditing of the Group, and therefore propose his election as Audit & Supervisory Board Member.

25

Candidate Number

2

Tsutomu Hashimoto(Born May 31, 1967)

Number of the Company’s Shares Held200

Brief Personal History, Positions in the Company, and Significant Concurrent Positions outside theCompany
April 1991
Joined the Company
March 2019
Vice President, Operational Review and Business Assurance(Current Position)

Newly
appointed
Reasons for nomination as a candidate for Audit & Supervisory Board Member
Tsutomu Hashimoto has served as Vice President, Operational Review and Business Assurance, having extensive experience and wide-ranging knowledge inrisk management and information securities through audit operation in Japan and overseas, and has contributed to the improvement of corporate governancein the Group’s business operations. Because of his detailed, deep and wide-ranging knowledge and experience across all business operations and internal
departments, we expect him to fulfill his duty as an Audit & Supervisory Board Member in relation to the effective auditing of the Group, and therefore
propose his election as Audit & Supervisory Board Member. In addition, he is knowledgeable in the area of finance and accounting.

26

Candidate Number

3

Shigeru Taniuchi

Newly
appointed
Outside Audit& Supervisory
Board Member
Independent
Audit &
Supervisory
Board Member(Born September 7, 1962)

Number of the Company’s Shares Held0

Brief Personal History, Positions in the Company, and Significant Concurrent Positions outside theCompany
April 1986
Entered Ministry of FinanceJuly 2008
Director, Allowance Control and Mutual Assistance Insurance, Budget Bureau, Ministry of
Finance
July 2009
Director , Agriculture, Forestry and Fisheries Section Budget Bureau, Ministry of FinanceJuly 2010
Director, Treasury, Financial Bureau, Ministry of FinanceJuly 2011
Director, National Property Policy Planning, Financial Bureau, Ministry of FinanceJuly 2012
Director-General, Policy-based Finance, Financial Bureau, Ministry of Finance
June 2013
Director of Co-ordination Division, Financial Bureau, Ministry of Finance(Retired from the office in July 2014)
July 2014
Deputy Director-General of Minister’s Secretariat, Social Welfare and War Victims’ Relief
Bureau, Ministry of Health, Labour and Welfare
October 2015
Deputy Director-General of Minister’s Secretariat, Medical Insurance, Ministry of Health,Labour and Welfare
July 2017
Deputy Director-General of Minister’s Secretariat, Elderly Health Care, Ministry of Health,Labour and Welfare
July 2018
Director, Social Welfare and War Victims’ Relief Bureau, Ministry of Health, Labour andWelfareAugust 2020
Director-General, Secretariat of Headquarters for Overcoming Population Decline andVitalizing Local Economy in Japan, Cabinet Secretariat Director, Social Security Reform,
Cabinet Secretariat
February 2021
Concurrently serving as Director of Loneliness and Isolation Office, Cabinet Secretariat
November 2021 Deputy Director-General, Secretariat of the Digital Garden City Initiative Panel, Cabinet
Secretariat
December 2021 Concurrently serving as Head of Preparation Work Group for Bill of Establishing Children
and Families’ Agency, Cabinet Secretariat
June 2022
Concurrently serving as Head of preparation Work Group for Establishment of Children
and Families’ Agency, Cabinet Secretariat(Retired in June 2022)

Reasons for nomination as a candidate for Outside Audit & Supervisory Board Member
Shigeru Taniuchi has extensive experience over many years of serving in a wide range of important positions in ministries and agencies, and through this has
acquired extensive experience and deep knowledge of such fields as finance and legal affairs. He did not engage in corporate management previously.
Nevertheless, we judge that his broad outlook and high standing underpinned by his wide-ranging experience will enable him to make a significant contribution
to the effective auditing of the Group in this highly uncertain business environment. In addition, we believe his roles as Standing Audit & Supervisory Board
Member and Outside Audit & Supervisory Board Member facilitate improvements to auditing from a third party perspective and will lead to a strengtheningof the Group’s corporate governance, for which reason we propose his election as Outside Audit & Supervisory Board Member.
Independence- Shigeru Taniuchi has work experience in the Ministry of Finance in the past, but we judge there is no concern about independence because a certain periodof time has passed since he retired from the Ministry of Finance. In addition, he satisfies the Criteria for Evaluating the Independence of Outside Executivesof the Company (retrospective period: the past five years) and the requirements of an independent auditor prescribed by the Tokyo Stock Exchange, Inc.
- The Company intends to designate Shigeru Taniuchi as an independent auditor as prescribed by the Tokyo Stock Exchange, Inc., should his election beapproved.

27

Candidate Number

4

Nobuo Inada

Newly
appointed(Born August 14, 1956)

Number of the Company’s Shares Held0

Brief Personal History, Positions in the Company, and Significant Concurrent Positions outside theCompany
April 1981
Appointed as Public Prosecutor
October 2008
Deputy Vice-Minister of Justice, Ministry of Justice
August 2011
Director-General, Criminal Affairs Bureau, Ministry of Justice
January 2014
Vice-Minister of Justice, Ministry of Justice
September 2016 Superintending Prosecutor, Sendai High Public Prosecutors’ Office
September 2017 Superintending Prosecutor, Tokyo High Public Prosecutors Office
July 2018
Prosecutor-General(Retired in July 2020)
October 2020
Registered as Attorney at Law (Current position)
June 2021
Outside Director, an Audit & Supervisory Board Member, Nomura Securities Co., Ltd.
(Current position)(Significant Concurrent Positions outside the Company)
Attorney at Law, Inada Law Firm
Outside Director, an Audit & Supervisory Board Member, Nomura Securities Co., Ltd.

Outside Audit& Supervisory
Board Member
Independent
Audit &
Supervisory
Board Member
Reasons for nomination as a candidate for Outside Audit & Supervisory Board Member
Nobuo Inada did not engage in corporate management previously other than serving as an Outside Director or an Outside Auditor. Nevertheless, he has servedin a wide range of important positions in the legal circles, ministries and agencies, and possesses extensive experience and broad and deep knowledge of legal
affairs and compliance, etc. We judge that his broad outlook and high standing underpinned by his wide-ranging experience will enable him to make asignificant contribution to the effective auditing of the Group in this highly uncertain business environment and will lead to a strengthening of the Group’s
corporate governance, for which reason we propose his election as Outside Audit & Supervisory Board Member.
Independence- Nobuo Inada satisfies the Criteria for Evaluating the Independence of Outside Executives of the Company and the requirements of an independent auditor
prescribed by the Tokyo Stock Exchange, Inc. Nomura Securities Co., Ltd., of which he is an Outside Director, holds shares of the Company, but thisconstitutes less than 0.04% of the total shares. In addition, although the Company has a business relationship with Nomura Securities Co., Ltd., the valueof the business in fiscal year 2022 was negligible, coming to less than 0.001% of consolidated revenue for Nomura Securities Co., Ltd. in the fiscal year
ended March 2022, and less than 0.001% of the Company’s consolidated revenue in fiscal year 2022.
We judge that this relationship has no impact on his independence.
- The Company intends to designate Nobuo Inada as an independent auditor as prescribed by the Tokyo Stock Exchange, Inc., should his election beapproved.

28

Candidate Number

5

Hiroko Yamashina

Newly
appointed(Born May 20, 1963)

Number of the Company’s Shares Held0

Brief Personal History, Positions in the Company, and Significant Concurrent Positions outside theCompany
April 1986
Joined Orient Leasing Co., Ltd.
(Present ORIX Corporation)
March 2007
Head of Office of Internal Controls, ORIX Corporation
May 2010
Executive Officer, ORIX Life Insurance Corporation
January 2013
Managing Executive Officer, ORIX Life Insurance Corporation
January 2014
Corporate Officer, ORIX Corporation
January 2016
Group Executive, ORIX Corporation (Current position)
President, ORIX Credit Corporation
January 2021
Chairman, ORIX Credit Corporation (Current position)(Significant Concurrent Positions outside the Company)
Group Executive, ORIX Corporation
Chairman, ORIX Credit Corporation

Outside Audit& Supervisory
Board Member
Independent
Audit &
Supervisory
Board Member
Reasons for nomination as a candidate for Outside Audit & Supervisory Board Member
Having served important roles such as Corporate Officer of a general financial service provider and President of a subsidiary of the company, Hiroko
Yamashina possesses considerable knowledge and broad and deep insights in corporate management and business operation, etc. We judge that her broad
outlook and high standing underpinned by her wide-ranging experience will enable her to make a significant contribution to the effective auditing of theGroup in this highly uncertain business environment and will lead to a strengthening of the Group’s corporate governance, for which reason we propose herelection as Outside Audit & Supervisory Board Member.
Independence- Hiroko Yamashina satisfies the Criteria for Evaluating the Independence of Outside Executives of the Company and the requirements of an independent
auditor prescribed by the Tokyo Stock Exchange, Inc.
- The Company intends to designate Hiroko Yamashina as an independent auditor as prescribed by the Tokyo Stock Exchange, Inc., should her election beapproved.

29

(Notes)

1. No conflict of interest exists between the Company and each candidate.
2. The Company will enter into an agreement with Hideaki Kashiwakura, Tsutomu Hashimoto, Shigeru Taniuchi, Nobuo Inada,and Hiroko Yamashina to limit their liabilities stipulated in Article 423, paragraph 1 of the Companies Act to the extent
permitted by the laws and regulations subject to the approval of their election.
3. The Company has entered into a liability agreement with each of its Audit & Supervisory Board Members as stipulated in
Article 430-2, paragraph 1 of the Companies Act, whereby the Company shall compensate them for expenses incurred underitem (i) of the same paragraph, and any losses incurred under item (ii) of the same paragraph, to the extent permitted by laws
and regulations. The Company will enter into the respective agreement with each candidate 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 2023. 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. Each candidate will be covered as the insured by the insurance agreement subject to the approval of
their election.

30

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 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, JT Group Purpose and business plan, in orderfor the Board of Directors to properly fulfill its roles and responsibilities. JT believes that the Board of Directors
as a whole 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 (Diversity & Inclusion) / Organizational Behavior and Human Resource Management,” which is oneof our focus areas and is being promoted so that all employees of the JT Group can feel motivated in theirwork 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.

31

Areas in which the skills are expected to be particularly effective

Mutsuo Iwai

PositionsShigeaki Okamoto

Masamichi
Terabatake

Representative
DeputyDirector andChairperson of the
Chairperson of the
President
Board
Board
Chief Executive
Officer

Corporate Management

Global ManagementCorporate Finance,
Accounting andCapital Policy

Kei Nakano

Representative
Director andExecutive Vice
President

Representative
Director andExecutive Vice
President

Legal, Complianceand Risk ManagementIT / Information Security

Corporate Governance

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

Kiyohide
Hirowatari





































Business Development /
M&A

32







Main Kohda

YukikoNagashima

Masato Kitera

Tetsuya
Shoji

Hideaki
Kashiwakura

Tsutomu
Hashimoto

Shigeru
TaniuchiNobuo Inada

HirokoYamashina

Standing Audit &Supervisory
Standing 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






















































































33



【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, 2022)“JT Corporate Governance Policies” is posted on our website (https://www.jt.com/about/index.html).

34

(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 ten (10) Members of the Board (including four (4) Independent Outside Directors).
Conditional on approval by this Ordinary General Meeting of Shareholders, it is planned that it be composed ofnine (9) Members of the Board (including four (4) Independent Outside Directors).
[Operation during the period under review]
In year ended December 31, 2022, we had thirteen (13) board meetings to discuss important issues including themanagement plan and nomination of Executive Officers. In addition, there was one resolution in writing that wasdeemed to have been resolved at the Board of Directors under the provisions of Article 370 of the Companies Act
and Article 24-4 of the Company’s Articles of Incorporation.
(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). Conditional on approval by this Ordinary General Meeting of Shareholders,
it is planned that it continues to be 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, 2022, 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, as an optional advisory body to the Board of Directors,
further enhances the objectivity and transparency of the Board of Directors’ decision making and improves thesupervisory functions of the Board of Directors by supporting the development of a group of executive candidates,deliberating on the nomination of Member of the Board and Audit & Supervisory Board Member candidates,deliberating on dismissal of Members of the Board who also serve as Executive Officers, and deliberating on
matters regarding remuneration for Members of the Board and Executive Officers, then reporting 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, and the Chairperson of the Panel shall be elected fromamong Independent Outside Directors by the Panel members themselves. The Panel consists of the Chairpersonof the Board, Deputy Chairperson of 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, 2022, seven (7) meetings were held to discuss the change that the
Chairperson of the Panel shall be elected from among Independent Outside Directors by the Panel members
themselves, confirm the level of remuneration, confirm the pool of executive candidates, discuss the nomination35

of the planned Member of the Board candidates and Audit & Supervisory Board Member candidates, and theirskills matrix, discuss the revision of the Director remuneration, etc., and review the key performance indicators(KPIs) for the executive bonuses and performance share units for the fiscal year 2023.
(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, 2022, 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 2023.

36

【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.

37

【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 shall be less than 2%, in cases where consideration for services in which such professionals are
directly involved exceeds ¥10 million, it shall be considered a large amount.
38

•

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.

39【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.
In fiscal year 2022, the questionnaire was conducted as follows.
In preparing and analyzing the results of the questionnaire, we have received advice from external institutions inorder to ensure objectivity and further improving the evaluation of effectiveness.
－Questionnaire preparation period：From September to November 2022
－Period of evaluation：Year 2022 (January 2022 to December 2022)－Response period: November 25, 2022 - December 9, 2022
－Target respondents：Total of 15 Members of the Board and Audit & Supervisory Board Members－Summary: Rating for each question (on a scale of 5) and filling out the free form
－Consultation by the Board of Directors：February 22, 2023
The major items evaluated were as follows.
1.

Roles, Functions and Composition of the Board of Directors(6 questions)

2.

Business operation of the Board of Directors(8 questions)3.

Cooperation with audit institutions and risk management(3 questions)

4.

Relationship with shareholders and investors(3 questions)5.

Voluntary committee(2 questions)6.

Issues to be discussed and shared(1 question)

The items evaluated are also reviewed, and questions are designed to confirm improvements to the issues identified
in fiscal year 2021 in addition to items that should be continually checked.
In fiscal year 2022, we took the following actions to address the issues identified in the effectiveness evaluation
for fiscal year 2021.
Main issuesActions/initiatives for further improvements in thequality of deliberation and discussions
Enhancement of discussions based on long-term
perspectives

Details of actions
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.

In the evaluation of effectiveness conducted for fiscal year 2022, the items undergoing evaluation obtained goodresults on the whole as continuing from fiscal year 2021, allowing the Company to confirm that the effectivenessof the Board of Directors is improving, and the Board of Directors is functioning effectively. In particular, we
believe that the strength of our company’s Board of Directors is that the 4S model has become prevalent as a
guideline to which the Board of Directors should adhere. In terms of improvements from fiscal year 2021, the40Group was particularly commended for strengthening the sharing of information on the progress of mid- to longterm strategies and key measures, in order to exchange views with the executive and improve businessunderstanding.
In order to make an enhanced effectiveness, the Company will target continuous improvements from fiscal year
2023 onwards, focusing on the following newly identified issues.
Main issues

Further strengthening the supervisory function of
the Board of Directors
Strengthening the effectiveness and efficiency of 
the Board of Directors

Policy for improvements going forward
Further enhance opportunities to share mid- andlong-term strategies, major issues, and the status of
discussions in voluntary committees
Continual improvement of the management of theBoard of Directors, including the facilitation ofproceedings

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

41

<Company proposal>
Item 4: Revision of Remuneration for Members of the Board
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 at the 35th Ordinary General Meeting of
Shareholders held on March 19, 2020. At the 37th Ordinary General Meeting of Shareholders held on March 23,
2022, the amount of remuneration for Outside Directors was approved at a level not exceeding ¥100 million
annually, with the amount for the total number of Members of the Board (not exceeding ¥1.1 billion annually)unchanged. In addition, the amount of restricted stock remuneration and monetary remuneration claims or cash
under the performance share units to be delivered to the Company’s Members of the Board who also serve as
Executive Officers (“Eligible Directors”) was approved at a level “not exceeding ¥210 million (or 115,200 shares)
annually” for the restricted stock remuneration and “not exceeding ¥130 million (or 76,800 shares) annually” forthe performance share units respectively, at the 35th Ordinary General Meeting of Shareholders held on March 19,
2020.
On the back of growing geopolitical risks and other factors in recent years, the business environment is assumed
to change more rapidly and increase uncertainty. Amid more challenging situation for corporate management, theroles and responsibilities of Members of the Board are increasing. Moreover, due mainly to the advance inglobalization and introduction of a new incentive-based remuneration scheme, the remuneration levels, etc. of ourbenchmarking companies that we refer in consideration of company sizes and financial scales, etc. (“benchmark
companies”) is rising. In these conditions, in order to retain personnel with superior capabilities who may achievesustainable profit growth and enhance the corporate value over the mid- to long- term by pursuing the “4S model,”which is JT’s management principle, and reward their contributions appropriately, the Company has recognized
the necessity to maintain a fully competitive level of remuneration for Members of the Board (including Outside
Directors), and make the remuneration system more functional as an incentive to realize an aggressive
management from both short- and mid- to long-term perspectives, specifically to further increase the ratio of
performance-linked remuneration and stock remuneration for Members of the Board who also serve as Executive
Officers in the whole remuneration composition.
With this understanding, the Company would like to separate the short-term remuneration for Members of theBoard into base salary and executive bonus, and revise the amount of base salary at a level of not exceeding ¥800
million annually (including ¥160 million annually for Outside Directors). As for the Executive bonus which ispaid based on a certain ratio of profit (profit attributable to the parent company), the Company would like to revise
the percentage to profit (profit attributable to the parent company) which constitutes the source of shareholder
distribution, up to 0.3% of profit (profit attributable to owners of the parent company), seeking to further promote
the shared value with the shareholders through the improvement of the link to the Company’s performance.
In addition, as for the mid- to long-term incentives that constitute of restricted stock remuneration and performance
share units, the Company would like to increase the ratio of mid- to long-term incentives further in the executive
remuneration composition, as stated above, seeking to further promote the aggressive management from a mid- tolong-term perspective. (The illustration in the next page shows specific ratios after revision.)42

[Revision in the ratio of Executive Remuneration Composition](Notes)1. The composition ratios vary depending on the duties of Members of the Board and the ranges are indicated in theillustration.
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 shows the ratio of remuneration composition if the “executive bonus” and “performance shareunit remuneration” are paid at the standard amount. The above ratios could fluctuate depending on the Company’s
performance, share price, remuneration levels of benchmark companies, etc.

To realize this, the Company proposes to revise the total amount of monetary remuneration claims and the total
number of shares allotted under restricted stock remuneration to not exceed ¥600 million (or 300,000 shares)
annually, and revise the ceiling of the total amount of monetary remuneration claims and cash for the purpose ofpaying taxes under the performance share units to “fixed number of base share units(Note 1) not exceeding 200,000
x share price at delivery(Note 2) (with the number of shares 100,000).”(Notes)1. Number of base share units (determined by the Board of Directors based on the duties, etc., of respective eligible
Members of the Board) x Offering ratio/percentage (within a range of 0-200% based on the degree of achievementof targets)
2. After the Performance Evaluation Period ends, based on the closing price of the ordinary shares of the Company on
the TSE on the preceding business day of the date of the resolution by the Board of Directors concerning the allotmentof the ordinary shares of the Company under the plan (or the closing price on the immediately preceding businessday, if transactions are not executed on that day), the amount shall be determined by the Board of Directors of theCompany within the range not particularly favorable to eligible Members of the Board.

The illustration below is the outline of revisions described above. Items indicated in red are those to be approvedin this proposition. Among remuneration for Members of the Board, the amount and the number of shares of basic
salary, restricted stock remuneration, and performance share units after revision will apply to each remuneration
granted in fiscal 2023. The amount of Executive bonus after revision will apply to that granted in fiscal 2024 forthe performance evaluation period of fiscal 2023. (Details of each remuneration, etc. are presented from pages 82
to 85 of the Business Report.)

43

[Amount of remuneration for Members of the Board and number of allotted shares thereto - comparison of
before/after revision]
Before revision
Basic salary
Executive bonus

Restricted stock
remuneration

Performance
share units(Notes)Total amount of monetary
remuneration claims to
Eligible Directors
Number of shares
distributed to Eligible
Directors
Total amount of monetary
remuneration claims to
Eligible Directors andcash for the purpose ofpaying taxes
Number of shares
distributed to Eligible
Directors

After revision

Up to ¥ 1.1 billion(of which, ¥100 million for
Outside Directors)

Up to ¥ 800 million(of which, ¥160 million for Outside Directors)
Up to 0.3% of profit (profit attributable to owners of the parent
company)

Up to ¥210 million

Up to ¥600 million

Up to 115,200 shares

Up to 300,000 shares

Up to ¥130 million

Up to the amount obtained by multiplying fixed number ofbase share units(Note 1) (up to 200,000 shares) withshare price at offering(Note 2)

Up to 76,800 shares

Up to 100,000 shares

1. Number of base share units (determined by the Board of Directors based on the duties, etc., of respective eligible
Members of the Board) x Offering ratio/percentage (within a range of 0-200% based on the degree of achievementof targets)
2. After the Performance Evaluation Period ends, based on the closing price of the ordinary shares of the Company on
the TSE on the preceding business day of the date of the resolution by the Board of Directors concerning the allotmentof the ordinary shares of the Company under the plan (or the closing price on the immediately preceding businessday, if transactions are not executed on that day), the amount shall be determined by the Board of Directors of theCompany within the range not particularly favorable to eligible Members of the Board.

This Item is on the revision of the ceiling of remunerations, and there is no change in the detailed system of theexisting policies and determination methods, etc. for Executive remunerations. In addition, the amount of
remuneration for individual Members of the Board will be determined, based on the remuneration levels ofbenchmark companies, after the deliberation by the Advisory Panel on Nomination and Compensation(Note), in an
amount not exceeding the remuneration amount approved at the General Meeting of Shareholders in accordancewith various calculation methods described in the internal rules. 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 79 to 85.
(Note)

An advisory panel to the Board of Directors, which is chaired by an Independent Outside Director, and who do notconcurrently serve as an Executive Officer and a majority of them are Independent Outside Directors.

In addition, in order to secure appropriateness of the Executive remuneration and transparency of the decisionmaking process, the Item has been reviewed by the Advisory Panel on Nomination and Compensation of theCompany; the Advisory Panel, given the foregoing circumstances, judges it appropriate as it is consistent with thepolicies on Executive remuneration including the methodology on determination of each Director’s remuneration,and necessary and reasonable against the criteria for calculation of individual remuneration, the level of ratio of
the whole remuneration composition, and the level of the number of eligible Members of the Board, etc. Based on
the above, the Company believes the details of the revision of remuneration for Members of the Board proposedin this Item are necessary and reasonable.
The number of the current Members of the Board is ten (10) (including four (4) Independent Outside Directors);
upon the approval of Item 2, Election of Nine (9) Members of the Board, we will have nine (9) Members of theBoard (including four (4) Independent Outside Directors).

44

<Shareholder’s Proposals (from Proposal Item 5 to Proposal Item 8)>
Proposals Item 5 to 8 (hereinafter referred to as the “Shareholder’s Proposals”) are based on proposals from one
shareholder (300 voting rights) (hereinafter referred to as the “Proposing Shareholder”).
< Overarching Opinion of the Board of Directors of the Company on the Shareholder’s Proposals >The Board of Directors of the Company is against all of the Shareholder’s Proposal Items 5 to 8.
As stated at the beginning of the reasons of the proposal in the Shareholder’s Proposal Item 5, a series of proposals from the Proposing
Shareholder seek to dissolve the parent-subsidiary listing, status of the Company’s listed subsidiary, TORII PHARMACEUTICAL CO., LTD.
(hereinafter referred to as “TORII”). The Company’s Board of Directors’ views on the foregoing is as follows:
Our Pharmaceutical Business complements the Group’s profit growth target which consists of average annual mid to high single digit growthin operating profit (adjusted on a constant currency basis and over the medium to long term). To fulfill this role, we have set goals for researchand development of strategic next-generation products and for the maximization of the value of each product. We are working relentlessly on
the pursuit of improving drug discovery capabilities, maximizing the value of individual products, and on reducing costs by optimizing thebusiness’ foundations over the medium to long term.
Regarding the profitability of our Pharmaceutical Business, we have continued to generate operating profits since the fiscal year ended
December 2016, through aggressive out- and in-licensing activities, not sticking to launching in-house developed products on our own. Despite
the termination of the contract with Gilead Sciences, Inc. for the sale of anti-HIV drugs in Japan, the Company achieved an operating profit in
the fiscal year ended December 2022 at a level comparable to the previous year.
We have plans to increase profits for the fiscal year ending 2023, and will continue to accelerate the aforementioned initiatives so that thePharmaceutical Business can continue to play an accretive role to our Group’s profit.
TORII has announced a medium-/long-term business vision in February 2022, called “VISION2030.” In the vision, it has set goals for achieving
record-high sales and achieving record-high operating profit by 2030 through strengthening in-licensing activities and creating a framework to
maximize product value.
In order for the Group’s Pharmaceutical Business, including TORII, to fulfill these goals and their roles, we believe it is important to maintainand strengthen the efficient corporative structure in which both companies establish an integrated value chain, where the Company conducts
research and development while TORII is responsible for manufacturing, sales, and promotional activities.
In order to maintain and strengthen the corporative structure, it is necessary to improve our competitive advantage by securing excellent humancapital and acquiring trust, etc., which are important in the Pharmaceutical Business. In addition, we also comprehensively consider the
management advantages of the subsidiary, such as discipline in the capital market, and the enhancement of engagement of human capital byutilizing stock remuneration. From these viewpoints, the Company believes that it is significant importance to have TORII as a listed subsidiary.
In fact, the brand and name recognition of TORII, with its over 150 years of history, has contributed to the acquisition of a wide range of otherhighly specialized important resources including industry specific insight, experience, and human resources, which are not always available
within the Group alone. We believe that the acquisition of these is enabled because of the high level of trust that TORII has earned as a listedcompany.
Since the acquisition of a majority stake in TORII in 1998, its existing structure has never been held in a desultory manner. On the contrary,
we are continuing to build an optimal business execution system at Group level, including the centralization of R&D and clinical development
functions within the Company. We will continue to strengthen intra-group collaboration with the aim of enhancing the Group corporate value.
While it is true that TORII’s Price to Book Value Ratio (PBR) is below 1x. On the other hand, in TORII’s earnings announcement dated
February 10, 2023, in addition to an explanation concerning the progress of major initiatives of the medium-term management plan forachieving the targets of the medium-/long-term business vision “VISION2030,” TORII clarified its initiatives to enhance corporate value. In
particular, regarding shareholder returns the company will propose to increase its annual dividend per share for FY2022 at its annual general
meeting of shareholders. TORII will also announce that the company will maintain its basic policy of continuous and stable dividends whilefurther enhancing shareholder returns. We, the board, support these announcements and will continue to strengthen our businesses’ cooperation,
and at the same time, we would like to fulfill our responsibility as a shareholder of a majority stake in a listed company in an appropriatemanner.
These are our views on the dissolution of the parent-subsidiary listing, which the Proposing Shareholder has.
The opinions of the Board of Directors on each Shareholder’s Proposal are stated after each proposal.

45

The following contents of the proposal (summary of the proposal) and the reasons for the proposal are the English
translation text of the relevant sections of the Shareholder’s Proposal submitted by the Proposing Shareholder.
These are prepared for reference purpose only. Should there be any inconsistency between the translation and theoriginal Japanese text, the latter shall prevail.
<Shareholder’s Proposal>
Item 5: Partial Amendment to the Articles of Incorporation (Management of Subsidiaries)(1) Summary of the Proposal
The following chapter and article are newly incorporated in the Articles of Incorporation of the Company. In theevent that a formality adjustment (including, but not limited to, amendment of the number of article) is required
to be made to any of the provisions set forth in this proposal as a result of the passage of another proposal at thisOrdinary General Meeting of Shareholders (including a proposal relating to a company proposal), the provisions
pertaining to this proposal shall be deemed to be replaced with the provisions after the necessary adjustments havebeen made.
(Underlined indicates amended portions)
Current

Proposed Amendment(Newly established)

Chapter 7 Management of Subsidiaries(Management of Subsidiaries)
Article 35 The Company shall examine the following mattersat the Board of Directors and shall specifically disclose thedetails of the examination, etc. (including the policy, etc. of
converting a company into a wholly owned subsidiary or sale,etc.) in the report on corporate governance submitted by theCompany to the Tokyo Stock Exchange.
(1) Whether the effectiveness of group-wide governance(management and oversight of subsidiaries for this purpose)is compatible with flexible decision-making at subsidiaries(2) Whether listed subsidiaries have a reasonable reason tomaintain listing from the viewpoint of maximizing
corporate value as a group(3) Approach to appropriate exercise of the authority to
appoint and dismiss directors to ensure effective
governance systems for listed subsidiaries while giving due
consideration to the interests of general shareholders oflisted subsidiaries46

(2) Reason of the Proposal
A series of proposals by the proposing shareholder is aimed at seeking to dissolve the parent-subsidiary listing. In
December 1998, the Company acquired a majority stake in Torii Pharmaceutical Co., Ltd. (hereinafter referred toas “Torii”), which is listed on the Tokyo Stock Exchange, and in October 1999, the Company concentrated theresearch and development functions of the group’s pharmaceuticals business within the Company and integrated
the promotional functions, such as the sales and marketing of prescription drugs, into Torii. Today, Torii, the solelisted subsidiary of the Company, and the research and development division of the Company, which has the officein the Torii headquarters building, are the core of the Company’s pharmaceutical business.
However, the market value of Torii’s shares held by the Company has changed little since the time of theacquisition. Originally, the Company aimed to sell the prescription drugs it developed independently through Torii,
but it is only CORECTIM® Ointment for treatment of atopic dermatitis, which the company began to sell in June
2020, and for which the Company received domestic manufacturing and marketing approval and for which a
certain amount of sales has been recorded even when more than 20 years have passed since the acquisition. There
was little mention regarding Torii in the Business Plan which was announced by the Company in February 2022
and it can be reasonably assumed that this was because the prospects around the time of the acquisition havedisappeared and that synergies between parent and subsidiary are no longer be expected.
In the first place, a parent-subsidiary listing is likely to cause “deadweight loss” in economics. If the allocation ofmanagement resources within the group is incorrect, the profits of the minority shareholders of listed subsidiaries,
which are disciplined by their own cost of capital, are impaired, and the profits of the shareholders of the parent
company are also impaired by the decrease in value of the listed subsidiary, and the economic efficiency of bothparent and subsidiary is damaged.
In fact, Torii’s share price is consistently below a Price Book-value Ratio (PBR) of 1, which is the dissolution
value. Torii has assets under management comparable to its market capitalization, such as cash and deposits, cash
management systems (CMS) deposits, and investment securities, and as of January 18, 2023, the enterprise value(EV) excluding assets under management that do not contribute to the core business was negative. This is anextremely low share price at which, if one acquired Torii without a premium, its business could be obtained at no
expense and one would even receive some change. Given such a situation, it can be said that Torii is no longer alisted company.
Even if EV is calculated including investment securities, Torii’s EV/EBITDA multiple (dividing EV by earnings
before interest, taxes, and depreciation) is around four times, which is well below the EV/EBITDA multiple ofabout 10 times for similar-sized pharmaceutical companies, meaning that the spread is narrowing to the level of
the Company. Taking into account the indices to evaluate Torii’s share price, which has decreased substantially, it
is clear that the Company has failed for a long time to improve the value of Torii and has not fulfilled
responsibilities as a major shareholder. Therefore, strategic decisions such as the delisting or the sale of Torii
would contribute to enhancing the shareholder value of the Company.
In the first place, tobacco, the core business of the Company and a pharmaceutical business have little affinity.
The Company aims to collaborate with domestic and overseas companies, healthcare professionals, and academia,
but because it has a tobacco business as its core business, there are constraints concerning drug discovery andmarketing activities. Last year, some media critically reported the rewards the Company and Torii paid tohealthcare professionals for lecturers, writing, and consulting services.
The “Practical Guidelines on Group Governance Systems (Group Guidelines)” formulated by the Ministry of
Economy, Trade and Industry on June 28, 2019 requires the parent company to “regularly inspect whether it is
optimal to maintain it as a listed subsidiary from the viewpoint of enhancing the corporate value and capitalefficiency of the group as a whole” (p. 124). In addition, if the parent company maintains a subsidiary’s listing,the Board of Directors is required to deliberate on “reasonable grounds for maintaining it as a listed subsidiary”
and “ensuring the effectiveness of the governance structure of the listed subsidiary” and to fulfill sufficientaccountability to investors through information disclosure (p. 126).
Furthermore, the “Practical Guidelines for Business Transformations – Toward Changes to Business Portfolios
and Organizations - (Business Transformations Guidelines)” formulated by the Ministry of Economy, Trade andIndustry on July 31, 2020 pointed out that “the form of a listed subsidiary structurally causes a risk of conflict ofinterest to minority shareholders, and it is not necessarily desirable to maintain a listed subsidiary aimlessly as it
has been seen in some Japanese companies in the past” and that “it is desirable that the conversion to a listed
subsidiary is regarded as a “transitional form” and... that policies are shown such that the purpose is to eventually
make it as a non-subsidiary or the period in which it is made as a non-subsidiary” (p. 97-98).
Based on the above, in view of the background that the Company has failed for a long time to enhance the valueof Torii, it is doubtful that the Board of Directors of the Company has deliberated on “reasonable grounds formaintaining it as a listed subsidiary” and or has been “ensuring the effectiveness of the governance structure of
the listed subsidiary” in good faith and that the Company has not maintained the listed subsidiary aimlessly, andtherefore, it is proposed that a provision is included in the Articles of Incorporation requiring the Board of
Directors of the Company to fulfill sufficient accountability through these deliberations and information disclosure.
47

<Opinion of the Board of Directors of the Company on the Shareholder’s Proposal Item 5>
The Board of Directors of the Company is against this Proposal.
In accordance with the “Enforcement Rules for Securities Listing Regulations” of the Tokyo Stock Exchange, Inc., the Company discloses
the “Corporate Governance Report” specifying our views on the group management and the significance of owning a listed subsidiary. We
believe that disclosing our group management policy to listed subsidiaries is a given responsibility and a step that a listed company should
naturally comply with, and we will continue to constantly examine ways to enhance disclosure to better engage in a dialogue with the capital
market. However, we believe that it is NOT appropriate to uniformly and fixedly stipulate in the Articles of Incorporation, which is thefundamental norm of the organization, that specific details regarding the acquisition of 100% ownership or sale of a subsidiary must be
disclosed even at the stage of consideration, as this may cause unnecessary speculation in the capital market. We believe that the Board of
Directors should carefully consider the content, timing, method, etc., of the announcement of specific details regarding the 100% acquisitionor sale of a subsidiary, taking into account the dialogue with shareholders and investors, and then announce such details in a timely andappropriate manner once it has reached a conclusion that should be informed of. Therefore, we believe that it is NOT appropriate to establish
a provision in the Articles of Incorporation in accordance with this Shareholder Proposal.
As below, we reinforce the Company’s approach to group management and the purpose of owning a listed subsidiary, focusing on the specificmatters to be considered and disclosed in the Shareholder Proposals.
The Company aims to achieve sustainable profit growth and increase corporate value of the Group over the medium to long term by sharing
and implementing the pursuit of the 4S model management philosophy throughout the Group. Based on the recognition that enhanced corporate
governance will contribute to achieving the aforementioned goals, the Company is working to optimize the entire Group by defining functions,rules, etc. common to the Group and by conducting the Group management. In addition, the Company has established a compliance system(including a reporting system), an internal audit system, and a financial management system, in cooperation with its subsidiaries.
With regard to TORII, a listed subsidiary, we believe that ensuring its independence and appropriately protecting the interests of minority
shareholders are essential to improving the corporate value of the Company and TORII. Based on this, we are striving to establish an
appropriate governance system as a listed company. The Company has established company-wide rules of responsibility and authority as
internal rules for decision-making, but TORII ensures its independence as a listed subsidiary by selectively applying these rules and by holding
discretionary powers. In addition, at the general shareholders’ meeting held on March 26, 2020, a resolution was passed to shift to a board of
directors structure in which the majority of directors are independent outside directors, and the company is further strengthening its effective
governance system where independent outside directors are utilized.
As for the significance of owning a listed subsidiary, as mentioned above, we have TORII as a listed subsidiary, taking into consideration
comprehensively the managerial advantages of the subsidiary, such as discipline in the capital market, the enhancement of engagement of
human capital by utilizing stock-based remuneration and so forth, in addition to the competitive advantage by securing excellent human capitaland obtaining trust, which are important in the Pharmaceutical Business.
With regard to the exercise of appointing and removing directors appropriately to ensure an effective governance structure for a listed
subsidiary, we believe that, if it is stipulated in the Articles of Incorporation that such exercise be stated uniformly in the “Corporate
Governance Report,” that there then is a possibility to practically impede TORII’s independent judgment, given that the Company holds amajority of the voting rights in TORII. Given the business environment in uncertain social and economic conditions surrounding the Company
and TORII, the required image of directors can change in parallel with the corporate image to be aimed at and the business environment.
Therefore, the Company believes that decisions should be made from the standpoint of shareholders, comprehensively considering the various
factors at different times. From this perspective, we believe that it is NOT appropriate to stipulate in the Articles of Incorporation, which is thefundamental norm of the company, that such a policy decision be uniformly stated in the “Corporate Governance Report.” Of course, we
believe that it is our important responsibility to ensure effective governance of listed subsidiaries, paying attention to the interests of generalshareholders in such subsidiaries, and we will continue to discuss the appropriate exercise of the voting power of appointment and removal
In the Reasons for the Proposal, the so-called Business Transformation Guideline formulated by the Ministry of Economy, Trade and Industry
was cited. However, in the quote “It is desirable to place the listing of subsidiary as a ‘transitional form,’ and then (omission) indicate thepolicy that the subsidiary is aimed to eventually be a non-subsidiary, and what time frame is set to be a non-subsidiary, and so forth” theaforementioned is a guideline for the case where a listed subsidiary is temporarily established when the parent company conducts an equity
carve-out as part of its restructuring for the purpose of divesting its business. It therefore does not require parent companies with listed
subsidiaries in general to indicate such a policy (or to take such actions). Another part of the guideline stating that “it is not necessarily
undesirable to maintain a listed subsidiary in a desultory manner as has been observed in some Japanese companies” also implies that if therisks associated with parent-subsidiary listings can be reduced through appropriate governance, etc., and the interests of the entire group canbe secured, then the form of the listed subsidiary is not necessarily denied. In light of the above, we believe that at least the quoted wording in
the Reasons for the Proposal can NOT be a direct basis for the Proposal.

48

<Shareholder’s Proposal>
Item 6: Partial Amendment to the Articles of Incorporation (Prohibition Against Former Directors and Employees
Serving in Director Positions at Listed Subsidiaries)(1) Summary of the Proposal
The following chapter and article are newly incorporated in the Articles of Incorporation of the Company. In theevent that a formality adjustment (including, but not limited to, amendment of the number of article) is required
to be made to any of the provisions set forth in this proposal as a result of the passage of another proposal at thisOrdinary General Meeting of Shareholders (including a proposal relating to a company proposal), the provisions
pertaining to this proposal shall be deemed to be replaced with the provisions after the necessary adjustments havebeen made.
(Underlined indicates amended portions)
Current

Proposed Amendment(Newly established)

Chapter 8 Prohibition Against Former Directors andEmployees Serving in Director Positions at Listed
Subsidiaries(Prohibition Against Former Directors and Employees Serving
in Director Positions at Listed Subsidiaries)
Article 36 The Company shall not exercise its voting rights infavor of the proposal if a listed subsidiary of the Company
submits a proposal for the election of Members of the Board
to the General Meeting of Shareholders as a company
proposal in which a person who has worked as an officer or an
employee for five years or more at the Company or any of its
subsidiaries or affiliates is a candidate for the Member of theBoard.

(2) Reason of the Proposal
Since the Company acquired a majority stake in Torii in December 1998, the Company has continued to send
those who retired from the Company to Torii as representative directors and directors, but the “Amakudari” by
persons who retire from the Company who are not experts in the pharmaceutical business cannot be said to be an
appropriate selection from the viewpoint of increasing the value of the investee. The representative directors fromthe Company such as Mr. Norihiko Matsuo, Mr. Shoichiro Takagi and Mr. Goichi Matsuda do not seem to have a
wealth of knowledge on the pharmaceutical business. Therefore the value of shares of Torii held by the Company
has been significantly discounted in terms of share prices and financial indicators such as PBR and EV/EBITDA
for long time and as a result the shareholder value of the Company being a major shareholder of Torii has been
impaired.
Mr. Goichi Matsuda, the only internal director of Torii who is a former officer or employee of the Company andtook the representative director position, had been engaged in the work of a clearly different field when at theCompany, for example, by serving as Vice President of the Planning Department, Senior Manager and Head of
Beverage Business etc. of Beverage business division for many years and therefore, it cannot be acknowledgedthat he has a wealth of knowledge concerning the pharmaceutical business. Nevertheless, he suddenly assumed
the position of Deputy President of the Pharmaceutical Business Division of the Company, perhaps as a steppingstone to taking position at Torii, and only one year later became Corporate Advisor of that Division, and twomonths later, he became Deputy Head of the Pharmaceutical Marketing and Promotion Group and Vice Presidentof the Marketing Planning Department of Torii. After only two years of work in such business, he assumed theposition of Representative Director, President and Chief Executive Officer of Torii.
As mentioned above, a parent-subsidiary listing is likely to cause deadweight losses in economics. If the personnel
practices of the parent company, where not the right person is in the right place are also applied to listed
subsidiaries, the profits of minority shareholders of listed subsidiaries that require their own management knowhow are impaired, and the interests of shareholders of the parent company are also impaired due to decrease invalue of the listed subsidiaries, and the economic efficiency of both parent and subsidiary is damaged.
The practice of persons from the Company becoming the president implies that Torii’s proper employees areunable to become president. This will hinder motivation of Torii employees, which will lead to a decline in Torii’s
49

shareholder value, which in turn will undermine the shareholder value of the Company as a major shareholder ofTorii.
Therefore, in order to correct the personnel practices in the Company and Torii, it is proposed that a provision is
included in the Articles of Incorporation preventing a person who has worked as an officer or an employee for five
years or more at the Company or any of its subsidiaries or affiliates from being appointed as a director of Torii.

50

<Opinion of the Board of Directors of the Company on the Shareholder’s Proposal Item 6>
The Board of Directors of the Company is against this Proposal.
The appointment of directors at TORII is conducted through a proper and transparent process by the company from a position
that is independent to that of the Company (the Parent), and we believe that it is NOT appropriate to impede TORII’s
judgment as a listed company solely because a director is a former officer or employee of the Company. Rather, by having aperson who has gained diverse experience at the Company return the know-how backed by its broad experience to TORII,
such person can contribute to the invigoration of TORII and promote smooth cooperation throughout the Group.
In fact, each of TORII’s directors who were appointed through a process whose objectivity and transparency were entirely
ensured, received a high approval rate in the region of 94% to 97% for their election at the company’s general shareholders’meeting, and the vast majority of shareholders not related to the Company also approved their election.
Considering the above effects of the appointment of directors from the Company and the objective figures of the approvalrate at the general meeting of shareholders of TORII, we believe that establishing a provision in the Articles of Incorporationthat effectively limits the appointment of directors to TORII solely because they are from the Company may damage theopportunity for the optimal appointment of directors at TORII, and may also damage the corporate value of TORII andfurthermore the corporate value of the Company.
The issue of how to exercise voting rights on proposals for the election of directors at subsidiaries should be considered andimplemented in a timely manner as a specific exercise of business execution authority to be administered precisely by the
directors. We believe that it is NOT appropriate to stipulate this in the Articles of Incorporation in a fixed and uniform
manner, as it would conflict with the basic concept of the distribution of authority under the Companies Act (of Japan). In
addition, if the Articles of Incorporation restrain the exercise of voting rights for the election of directors, it could lead topractically impeding TORII’s independent judgment, since the Company holds a majority of the voting rights in TORII.
Therefore, we believe that such changes are NOT appropriate.

51

<Shareholder’s Proposal>
Item 7: Partial Amendment to the Articles of Incorporation (Prohibition Against Using the Cash Management
System (CMS) for Financing with Listed Subsidiaries)(1) Summary of the Proposal
The following chapters and articles are newly incorporated in the Articles of Incorporation of the Company. In theevent that a formal adjustment (including, but not limited to, amendment of the number of articles) is required tobe made to any of the provisions set forth in this proposal as a result of the passage of another proposal at thisOrdinary General Meeting of Shareholders (including a proposal relating to a company proposal), the provisions
pertaining to this proposal shall be deemed to be replaced with the provisions after the necessary adjustments havebeen made.
(Underlined indicates amended portions)
Current

Proposed Amendment(Newly established)

Chapter 9 Prohibition Against Using the Cash Management
System (CMS) for Financing with Listed Subsidiaries(Prohibition Against Using the Cash Management System(CMS) for Financing with Listed Subsidiaries)
Article 37 The Company shall not borrow or lend funds bymeans of a cash management system (CMS) with any listed
subsidiary of the Company.

(2) Reason of the Proposal
As of September 30, 2022, Torii had deposited the amount of 14.171 billion yen with the Company in the cash
management system (CMS), through which the parent company centrally manages the group’s funds. In 2019,
Torii acquired more than 40 billion yen and its assets under management are expanded, as contracts for exclusive
sales rights to HIV drugs manufactured by Gilliard Sciences, Inc. in the U.S. were terminated. Judging from theoperational status of the CMS within the Company’s group, the presence of the CMS means that opportunities toutilize this enormous amount of cash appropriately are taken away from Torii from the perspective of capital
allocation. In view of the fact that the value of Torii shares held by the Company has been significantly discounted
for a prolonged period in terms of share price and financial indicators such as PBR and EV/EBITDA, the value ofTorii to its shareholders, and the value of the Company as the major shareholder of Torii are also impaired.
If one argues that “the CMS exists for the purpose of reallocating funds through the parent company because theprofitability of other group businesses is higher than that of the pharmaceutical business,” then in the first place,
Torii and other medical businesses should be targeted for sale and the proceeds thereof should be reinvested inother businesses.
As mentioned above, a parent-subsidiary listing is likely to cause deadweight losses in economic terms. If theallocation of capital focused only on the parent company is also applied to listed subsidiaries, which are disciplinedby their own cost of capital, the profits of minority shareholders of listed subsidiaries are impaired and the interestsof shareholders of the parent company are also impaired due to decrease in value of listed subsidiaries, and theeconomic efficiency of both parent and subsidiary is damaged.
As stated above, the CMS in the Company’s group is detrimental to the shareholder value of the Company, and it
is proposed that a provision is established in the Articles of Incorporation prohibiting lending and borrowing
through the CMS between the Company and its listed subsidiaries.

52

<Opinion of the Board of Directors of the Company on the Shareholder’s Proposal Item 7>
The Board of Directors of the Company is against this Proposal.
The CMS operates as a mechanism for more efficient fund management for the entire Group by concentrating surplus funds
in each Group company temporarily into the Company, which is the parent of the Group, and by reallocating them to otherGroup companies that are in at that time temporarily short of funds.
As a benefit for each subsidiary, we can cite an example that the CMS offers an interest rate at a level comparable to or
higher than that at general financial institutions. In addition, the CMS funds can be recovered in a very short period of time
like ordinary bank deposits, and therefore we recognize that CMS is used by companies as a temporary storage facility forvery short-term surplus funds when they arise.
On the other hand, the Company never forces the subsidiaries to use the CMS, and each subsidiary decides on its own
whether to use the CMS based on the aforementioned conditions that the Company offers to them. We recognize that TORII
decides whether to manage its funds through our Group CMS by taking into consideration such factors as the convenience
regarding fee payment and settlement of funds.
With regard to the future direction of TORII’s financial management through our Group CMS, TORII has indicated a policy
to reduce the amount of funds managed through the CMS to the amount necessary for the purpose of using it as a settlement
account by the end of FY2023, and the Company respects this policy. We do not believe that it is particularly reasonable tolimit the use of our Group CMS only to listed subsidiaries, as the use of our Group CMS is not mandatory and is voluntary
after considering various conditions at each subsidiary.
The way in which such group-wide management of funds should be considered and implemented in a timely manner as a
specific exercise of business execution authority by the directors. We do not believe that it is appropriate to provide for this ina fixed and uniform manner in the Articles of Incorporation., as it would conflict with the basic concept of the distribution of
authority under the Companies Act (of Japan).

53

<Shareholder’s Proposal>
Item 8: Acquisition of Treasury Shares(1) Summary of the Proposal
Pursuant to the provisions of Article 156, Paragraph 1 of the Companies Act, the Company will acquire its ordinary
shares within one year from the conclusion of this Ordinary General Meeting of Shareholders up to a total numberof 96,357,680 shares and a total acquisition price of 250 billion yen in exchange for cash (provided, however, that
if the total acquisition price permitted by the Companies Act (the “Distributable Amount” as set forth in Article
461 of the Companies Act) is less than said amount, the maximum total acquisition price will be the one permitted
by the Companies Act)
(2) Reason of the Proposal
Tobacco business that is the core business of the Company and pharmaceutical business have low affinity. The
reason why PBR of Torii, the core of the pharmaceuticals business, falls below 1, which is the dissolution value,and EV/EBITDA multiple is also lower than that of other companies in the same industry, is that synergies between
the parent and subsidiary cannot be expected. Therefore, the proposing shareholder believes that the sale of theentire pharmaceutical business, including Torii, embodies the potential value of the business and contributes tothe shareholder value of the Company.
Taking into account the earning power of the pharmaceutical business, such as EBITDA, EV/EBITDA multiple
based on a reference to similar companies when this business is separated, and the value of assets undermanagement and the buildings of Torii, it is considered that the value of the pharmaceutical business is well over
250 billion yen.
The total acquisition price of 250 billion yen proposed corresponds to the value described above, and the total
number of shares of 96,357,680 is the number obtained by dividing such total acquisition price by the closing
share price on January 18, 2023.
<Opinion of the Board of Directors of the Company on the Shareholder’s Proposal Item 8>
The Board of Directors of the Company is against this Proposal.
We believe that the Pharmaceutical Business will complement the Group’s sustainable profit growth over the medium to longterm and contribute to further growth in the future precisely because of its different business characteristics from the Tobacco
Business, such as profitability and investment period.
There is no change in the role of the Pharmaceutical Business, which complements the profit growth of the Group, and there
are no plans to sell this business currently.
Therefore, the acquisition of treasury shares using the funds obtained from this sale as a basis must be seen as a leap of logic
based on a variety of assumptions, and we believe that the rationale for deciding to implement it is significantly lacking
strength.
Our policy on shareholder returns is to maintain a globally competitive dividend payout ratio of about 75% while
maintaining a strong financial foundation. There is no change to the Company’s essential policy of considering theappropriateness of the acquisition of treasury shares based on the Company’s financial condition for the relevant fiscal year,
medium to long term capital needs and so forth.

54

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

Business Report(From January 1, 2022 to December 31, 2022)
I.

Matters Concerning Present State of the Corporate Group1.

Overview and Results of Operations
General summary
The Group achieved record highs from revenue to profit(Note 1) for the current fiscal year.


RevenueCore revenue(Note 2) at constant FX (Note 3), which is one of the Group’s management benchmarks, rose by
4.8% from the previous fiscal year. Revenue increased by 14.3% to ¥ 2,657.8 billion from the previous fiscal
year due to a revenue increase in all the businesses.
Adjusted operating profit, operating profit and profit attributable to owners of the parent
company

Adjusted operating profit(Note 4) at constant FX, which is one of the Group’s management benchmarks,
increased by 9% from the previous fiscal year, despite a decrease in the Processed Food Business. This was
driven by increases in the Tobacco Business and the Pharmaceutical Business. Adjusted operating profit
increased by 19.2% from the previous fiscal year to ¥727.8 billion, due mainly to favorable foreign exchange
effects in the Tobacco Business.
In addition to the absence of costs related to initiatives to strengthen competitiveness in the Tobacco Business,the rise in adjusted operating profit led to an increase in operating profit of 31.0% from the previous fiscal
year, to ¥653.6 billion.
Profit attributable to owners of the parent company increased by 30.8% from the previous fiscal year to¥442.7 billion, with an increase in operating profit exceeding an increase in financing costs.
JT Group Management Benchmarks
Core revenue
at constant FX+4.8% year on year

Adjusted operating profit
at constant FX+9.0% year on year

Consolidated performance[Billions of yen]

Year-On-Year
Change [%]2,657.8

14.3

Adjusted operating profit

727.8

19.2

Profit attributable to owners of
the parent company

442.7

30.8

Revenue(Notes)1. The Group record high revenue, adjusted operating profit, operating profit in continuingbusinesses, and profit attributable to owners of the parent company in continuing businesses.
2. Core revenue is the sum of revenues in the pharmaceutical business, processed food business,and others, as well as the core revenue in the tobacco business.
55

3. Constant FX is a financial measurement that excludes foreign exchange effects calculated andtranslated using the foreign exchange rates of the same period of the previous fiscal year and theincrease in revenue or profit caused by inflation in some markets calculated using certain
methods from adjusted operating profit for the current period in the Tobacco Business, core
revenue, or from core revenue from the Tobacco Business.
4. Adjusted operating profit is calculated by totaling operating profit, amortization cost of acquired
intangibles arising from business acquisitions, and adjustment items (income and costs).
Adjustment items (income and costs) are impairment losses on goodwill, restructuring income
and costs, and other items.
Revenue breakdown by business segment

Revenue

Adjusted operating profit

Profit(Attributable to owners of the parent company)

56

Tobacco Business

The Group made a new start in fiscal year 2022 as a result of unifying its Japanese Domestic Tobacco
Business and International Tobacco Business. Under the new business structure, the Group will be committed
to pursuit sustainable mid- to long-term profit growth with a clear and accurate strategy. In addition, amid
the prolonged and complicated Russia-Ukraine War, the Group is fully committed to complying with allapplicable sanctions while continuing business operations in the Russian market. The Group will work tocope with these difficult circumstances by making necessary decisions based on the “4S model,” ourmanagement principles, in response to situation changes.
In the current fiscal year, the continued market share expansion and an increase in sales volume in EMA(Notemostly offset the impact of lower industry volume in major markets of Asia(Note 1) and Western Europe(Note1). As a result, total sales volume(Note 2) fell by 0.5%, from the previous fiscal year to 527.3 billion units. For
EMA, sales volume increased mainly in Brazil, Global Travel Retail(Note 3), Iran, Poland, and the United States.
In addition, despite combustible sales volume(Note 4) fell by 0.7% from the previous fiscal year to 519.4 billion
units, RRP sales volume(Note 5) increased by 10.3% to 7.9 billion cigarette equivalent units due to the
expansion of Ploom X sales and share in Japan.
1)Core revenue from the Tobacco Business(Note 6) and adjusted operating profit increased from the previous
fiscal year, due to positive price variance emerged in all of the clusters including the key markets of Japan,
Philippines, Rumania, Russia, Spain, Taiwan, Turkey, and the U.K., a resilient industry volume, the continued
market share expansion, an increase in RRP-related revenue, and positive currency headwinds due to theweak yen.
Core revenue from the Tobacco Business on a financial reporting basis increased by 15.6% from the previous
fiscal year (up 4.8% from the previous fiscal year at constant FX) to ¥2,315.2 billion, driven by solid
price/mix contribution, more than offsetting a negative volume variance. RRP-related revenue(Note 7) increased
by 4.4% from the previous fiscal year to ¥75.4 billion.
Adjusted operating profit on a financial reporting basis increased by 18.0% (up 8.2% from the previous fiscal
year at constant FX) from the previous fiscal year to ¥754 billion, driven by core revenue growth, whichmore than offset higher input costs within the supply chain.
Owing to the contribution of Ploom X, the Group’s share in the HTS(Note 8) category in Japan market has
grown steadily to 8.1% (as of the fourth quarter of the current fiscal year.) The Group began to sell Ploom X
in the U.K. from the current fiscal year, and plans to expand to the global market aggressively from 2023. In
addition, for the purpose of commercializing the HTS products in the U.S., the Group and Altria Group, Inc.
reached an agreement to establish a joint venture, and signed a long-term, non-binding global memorandumof understanding to explore commercial opportunities for a wide range of RRP. The Group will continue to
implement measures in pursuit of future growth.
(Notes)1. The JT Group’s tobacco markets are divided into three distinctive clusters: Asia as the whole
Asian region including Japan; Western Europe as Western Europe region; and EMA as Eastern
Europe, Middle East, Africa, Turkey, Northern and Southern America and Global Travel Retail,for providing insight into the Group’s business for guidance purposes.
2. Total volume is the volume of tobacco-based products which excludes contract-manufactured
products, waterpipe, RRP devices and related accessories.
3. Global Travel Retail is the new denomination reflecting the combination of the duty-free markets
from the previous Japanese-domestic tobacco and international tobacco businesses.
57

4. Combustible volume is the shipment volume of combustibles which excludes contractmanufactured products, oral tobacco (snus and nicotine pouches), waterpipe, heated tobacco
products and E-Vapor.
5. Reduced-Risk Products (RRP) are products with the potential to reduce the risks associated withsmoking. In the Group’s portfolio, these products include heated tobacco sticks (HTS), infusedtobacco capsules (Infused), E-Vapor and Oral.
6. Core revenue from the tobacco business excludes revenue from distribution, contract
manufacturing and other peripheral businesses.
7. Revenue associated with RRP is a part of core revenue from the tobacco business and represents
all the sale of RRP, principally consumables, devices and the related accessories.
8. HTS (Heated tobacco sticks) is high temperature heated tobacco products.
Breakdown by cluster(Unit: JPY billion)
Account

Jan-Dec 2021

Jan-Dec 2022

Percent changeCore revenue

792.2

804.9

+1.6%

Adjusted operating profit

269.3

267.5

-0.6%

Core revenue

503.1

538.8

+7.1%

Adjusted operating profit

208.0

219.3

+5.4%

Core revenue

706.6

971.5

+37.5%

Adjusted operating profit

162.0

267.1

+64.9%

Asia

Western Europe

EMA

Progress of Ploom X- JT’s share has been on a steady rise in the HTS category since the nationwide release in Japan market inAugust 2021.
- Plans to expand the market presence globally, using insights gained in Japan.
Japan market: JT’s share* in the HTS category* JT’s market share estimates by shipment

58

Pharmaceutical BusinessIn the Pharmaceutical Business, the Company has been striving to make a contribution to the Group’s profits
by focusing R&D investments towards next-generation strategic products and by maximizing the value ofeach product.
In the area of product development, six compounds are in clinical development.
We received positive preliminary results from phase 3 clinical trials performed in Japan for JTE-061(tapinarof), in relation to atopic dermatitis patients and in relation to plaque psoriasis patients, in July and
September 2022, respectively. We currently aim to submit a manufacturing and marketing application for
JTE-061 in Japan, based on result of other clinical trials currently being conducted.
As for enarodustat, JW Pharmaceutical Corporation (JWP), a licensee of enarodustat, issued a statement that
ENAROY® tablets (generic name: enarodustat) was approved by Ministry of Food and Drug Safety of the
Republic of Korea for the treatment of anemia in chronic kidney disease patients on hemodialysis on
November 17, 2022.
For CORECTIM® Ointment 0.25% and 0.5% for an indication of atopic dermatitis, based on the result of
the clinical trials in relation to atopic dermatitis for infants, we received approval for the expanded use ininfants (aged 6 months to under 2 years) on January 30, 2023.
Revenue for the current fiscal year increased by 3.1% from the previous fiscal year to ¥82.9 billion, due toan increased revenue of Group company Torii Pharmaceutical Co., Ltd. (Torii), despite the absence of onetime income pertaining to licensed compounds in the previous fiscal year and a decrease in overseas royalty
revenue.
Adjusted operating profit increased by 0.5% from the previous fiscal year to ¥11.1 billion due to an increase
in revenue offsetting an increase in R&D expenditures of Torii.

59

【Reference】
Pharmaceutical Business
Clinical Development as of February 14, 2023
＜In-house development＞
Code(Generic
Name)

Potential
Indication/Dosageform

JTE-052(delgocitinib)

Autoimmune/allergic
diseases/Oral, Topical

JAK inhibitor

JTE-051

Autoimmune/allergic
diseases/Oral

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

JTT-662

Type 2 diabetes
mellitus/Oral

JTT-861

Chronic heart failure/Oral

Mechanism

SGLT1
inhibitor

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

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

JTE-061(Tapinarof)

OriginPhase1 (Japan)

In-house

In-house
Phase2 (Overseas)

In-house

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

In-house

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

Note

Phase2 (Japan)

Phase1 (Overseas)

Atopic dermatitis/TopicalPlaque psoriasis/TopicalPhase (Region)

Phase3 (Japan)

Atopic dermatitis(pediatric)
Phase2 (Japan)/Topical
Neurodegenerative
Improves metabolic
JTC-064
diseasePDHK inhibitor abnormalities by activation of
Phase1 (Overseas)/Oralpyruvate dehydrogenase (PDH)(Notes) 1. Clinical trial phase presented above is based on the first dose.
2. 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

In-house＜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

60

Note

Processed Food BusinessIn the Processed Food Business, we concentrate on frozen and ambient foods business and seasonings
business, while at the same time strengthening sales of high value-added products 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 31 new household products, such as the “No Plate Required” series designed to be easily cooked
and “Served with Only One Plate”, and renewing 21 products for further competitiveness.
Raw material costs and energy costs, etc. continues to rise sharply mainly due to acute fluctuations in
exchange and a rise in oil prices, adversely affecting the business. In this difficult business environment, wehave exerted the upmost efforts to create profits, by revising shipment prices twice, in addition to
implementing continued initiatives to improve productivity and reducing costs, etc.
Revenue in the current fiscal year increased by 5.6% from the previous fiscal year to ¥155.5 billion mainly
because of price revision in the frozen and ambient foods business.
Adjusted operating profit decreased by 11.3% from the previous fiscal year to ¥3.5 billion due to a rise in
raw material costs and negative foreign exchange effect, as well as the rebound from a one-time fire insurance
claim received in the previous fiscal year.
As of December 1, 2022, the Group transferred all its shares in Saint-Germain Co., Ltd., which is running abakery business, to “create restaurants holdings inc.”

61

2.

Status of Capital Expenditures
In this fiscal year, we made capital expenditures totaling ¥101.0 billion.
For the tobacco business, the Group made business investments of ¥83.8 billion, for the purpose of renovation,
maintenance and renewal, and capability improvement of manufacturing equipment. In the pharmaceuticalbusiness, we spent ¥2.4 billion on enhancing and strengthening research and development structures and thelike. In the processed food business, we invested ¥8.2 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
JT International Financial Services B.V., an overseas subsidiary of the Company, raised $500 million(equivalent to ¥66.4 billion) in total through a foreign-currency-denominated straight bond issue on October24, 2022 to use the proceeds to finance general business operations.
(Note) For US dollars to Japanese yen translation purposes, the exchange rate as of the end of December
2022 is used ($= ¥132.70).

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.

62

8.

Trends in Assets and Operating Results(1) Trends in assets and operating results of the JT Group [Consolidated]
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

38th term
From January 1,
2022 toDecember 31,
2022

Revenue(Millions of yen)

2,175,626

2,092,561

2,324,838

2,657,832

Profit before income
taxes(Millions of yen)

465,232

420,063472,390

593,450

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

348,190

310,253

338,490442,716

Basic earnings per
share
(Yen)

195.97174.88190.76249.45

Total assets(Millions of yen)

5,553,071

5,381,382

5,774,209

6,548,078

Total equity(Millions of yen)

2,743,611

2,599,495

2,886,081

3,616,761(Note) Consolidated financial statements of the JT Group are prepared based on IFRS.

63

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

38th term
From January 1,
2022 toDecember 31,
2022

Net sales(Millions of yen)

660,805

596,887

592,220542,181

Ordinary income(Millions of yen)

278,968

240,491

278,809273,734

Net income(Millions of yen)

262,469

241,752

216,896

283,461

Basic earnings per
share
(Yen)

147.72

136.27122.23159.72

Total assets(Millions of yen)

2,614,357

2,597,930

2,487,979

2,363,267

Net assets(Millions of yen)

1,417,365

1,390,011

1,344,696

1,368,643(Notes)1. Non-consolidated financial statements of the Company are prepared based on Japanese GAAP.
2. The Company has applied the “Accounting Standard for Revenue Recognition” (ASBJ
Statement No. 29, March 31, 2020) and relevant Guidances effective from the 38th term.

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

65

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.
The Group intends to attain sustainable profit growth over the mid- to long-term through the pursuit of the“4S model.” Since attaining sustainable profit growth requires us to continue to provide new value andsatisfaction to consumers, we believe it is essential to steadily make business investments for future 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 mid
to long term and therefore that it is the best approach to serve the interests of our four stakeholders, including
shareholders.

The Group operates in a business environment that has ever increasing levels of uncertainty and complexity
due to discontinuous changes occurring on a wide range of scales, be it the nature, society or the individual.
In response to this, the JT Group has formulated the JT Group Purpose to clarify the direction for being asustained entity. Specifically, we identified the area in which we will be needed by the society for the futureand in which we should provide value over the long term as “human enrichment” and defined “Fulfilling
Moments, Enriching Life” as the JT Group Purpose based on the idea that we want to continue to be entrustedwith and contribute to the area. Moreover, so that we can realize the JT Group Purpose, we have formulated
our Business Purposes for each business in line with this.
Business Purpose● Tobacco Business: Creating fulfilling moments. Creating a better future.
● Pharmaceutical Business: Respecting science, technology and people, we will contribute topatients’ lives.
● Processed Food Business: Bringing Joy to Meals and Fun to the Table.
The area of “human enrichment” undergo changes in various ways with the times and the people, and the JT
Group strives to evolve constantly so that we can continue to be entrusted by society and make valuable
contributions to the area in the future.
66

(2) Mid- to long-term management strategy and issues
The Group’s mid- to long-term resources allocation policy is to prioritize business investments forsustainable profit growth(Note 1) in the mid- to long-term, while striking a balance between profit growththrough business investments and shareholder returns, under the “4S model” and the JT Group Purpose.
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.
The mid- to long-term targets for each business are as follows.
Tobacco Business

Aim for a profit level that achieves adjusted operating profit growthof mid- to high-single-digit rate per annum over the mid- to longterm 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

Strive to make profit contribution to the Group through mid- to longterm profit growth with high-quality top-line growth

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 2023” in line with its management principles and resources allocation policy.
Under the “Business Plan 2023,” 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 “prioritize business investments for sustainable profit growth in the mid- to long-term” and of“strike a balance between profit growth through business investments and shareholder returns” under the
resources allocation policy based on the “4S model” and the JT Group Purpose, our shareholder returns
policy is set as follows:
・Aim to enhance shareholder returns by realizing the mid- to long-term profit growth, while maintaining astrong financial base(Note 3)
・Target a dividend payout ratio of about 75%(Note 4) as a competitive level in the capital markets(Note 5)・Consider implementing share buy-back program, mainly taking into account the Company’s financial
outlook of the respective year and the mid-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 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. Enhancing adaptability to such a 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 over67

the 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.
(Notes)

1. Investment towards the growth of the tobacco business is our highest priority. Pursue growth ofadjusted operating profit at constant FX through quality top-line growth through the continuous
provision of new values and satisfaction to our customers and society.
2. mid- to high-single digit: mid- to high-single-digit percentage
3. The Company will maintain a strong 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.

68

【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 the JT Group Purpose, and it encompasses
our materiality analyses.
In terms of our sustainability strategy, we have set the three essentials for business continuity common to the entire
Group: respect for human rights, an improved social and environmental impact, and good governance and businessstandards, while each business has set out its own focus areas and targets. The progress of each business in meetingthese targets will be reported in the next Integrated Report 2022 and on our website.

<Respect for human rights><An improved social andenvironmental impact><Good governance and businessstandards>

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. In addition, in
working toward the realization of the recently formulated JT Group Purpose, we will strive to achieve results
through group-wide activities that contribute to making society and the future fulfilling and enriching, filled withpeople feeling: “today is another good day.”69

Respecting human rights
To comprehensively communicate our approach to due diligence on human rights
based on our Group Human Rights Policy, our commitment to respecting humanrights, and our past and current initiatives, we use various means, including our
website and JT Group Human Rights Report.
Investing in people
One of our commitments is to promote gender equality in the workplace. Specifically,
our Group-wide target for representation of women in leadership, is to reach 25% by2030. We believe that this should be more than 40% over time.
Improving our environmental impact
The Group has set out the JT Group Environment Plan 2030, with three focus areas: “Energy and Emissions,”“Natural Resources,” and “Waste.” In February 2022, we updated our targets for “Energy and Emissions” in thecurrent “JT Group Environment Plan 2030.” We will further enhance and expand our initiatives to achieve carbon
neutrality by 2030, and net zero for the entire value chain by 2050. JT Group’s 2030 Greenhouse Gas (GHG)
reduction targets have been deemed to be in conformance with the criteria set by the Science Based Targets
Initiative (SBTi). Details will be reported in the next Integrated Report 2022 and on our website.
JT is one of 283 companies in the world and 74 companies in Japan that were included
on the “Climate Change A List,” out of more than 15,000 companies participating in
the CDP environmental disclosure program in 2022. This marks JT’s fifth recognition
for climate change following 2016, 2019, 2020 and 2021.
Improving our social impact
We have long-term partnerships with local and international organizations, with various community investment
programs in many countries. These programs help communities to become more inclusive, sustainable, andresilient. In response to the COVID-19 pandemic, we put in place precautionary measures, while still continuing
to provide opportunities for our employees to engage with their communities.
GovernanceCorporate governance is one of the priority agendas for the JT Group and we work proactively to fulfill thisrequirement. To ensure sustainable profit growth, we believe it is essential to further secure a strong commitment
from the Group’s management. In this light, we are introducing an ESG-related index for director remuneration,
starting from FY2022.

- 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.

7010. Main Business Contents

Business segment

Main business
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,
etc.

Tobacco BusinessPharmaceutical Business
Processed Food Business11. 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, 2022, there were 223 consolidated
subsidiaries, including 6 above-mentioned important subsidiaries, as well as 14 affiliates
accounted for by the equity method.
3. On the last day of the fiscal year ended December 31, 2022, there were no specified wholly
owned subsidiaries as stipulated in Article 118, item 4 of the Regulation for Enforcement of theCompanies Act.

71

12. Major Lenders
LenderOutstanding balance(Millions of yen)

Subordinated syndicated loan
(Note)

100,000

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

Sales offices:
Hokkaido (Hokkaido), Miyagi (Miyagi), Tokyo (Tokyo), Aichi (Aichi), Osaka (Osaka),
Hiroshima (Hiroshima), Kagawa (Kagawa), Fukuoka (Fukuoka), and other 39 sales offices
Factories:

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

Laboratories:

Tobacco Science Research Center (Kanagawa),
Leaf Tobacco Research Center (Tochigi),
and Central Pharmaceutical Research Institute (Osaka)(Note) The Company’s Kyushu Tobacco Factory was closed at the end of March 2022. Furthermore, in
April 2022, the Company switched 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.

72

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

46,163

Pharmaceutical Business

1,331

Processed Food BusinessCommon company-wide services
within JT

4,297

Total

52,640849(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)
4,656(1,256)

42.2

Average years ofservice(Year)
16.5

Average age(Year old)

Female

1,163

(79)

36.8

11.0

Total or average

5,819(1,335)

41.1

15.4

(Notes) 1. The above number of employees indicates the number of working employees.
2. The decrease in the number of employees by 1,335 is mainly due to the implementation ofvoluntary retirement program.

73

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

225,146,463 shares)

3. Number of shareholders:

4.

722,051

Major shareholders
Number of shares held
(Share)Name of shareholders
Minister of Finance

Equity ownership (%)

666,925,200

37.58

176,102,300

9.92

64,286,400

3.62

SMBC Nikko Securities Inc.

46,559,021

2.62

STATE STREET BANK WEST CLIENT TREATY 505234

23,290,941

1.31

SSBTC CLIENT OMNIBUS ACCOUNT

20,568,543

1.16JAPAN SECURITIES FINANCE CO.,LTD.

18,279,700

1.03

Barclays Securities Japan Limited BNYM

18,088,600

1.02

11,665,343

0.66

11,211,542

0.63

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

JT Group Employees’ Shareholding
Association
Mitsubishi UFJ Morgan Stanley Securities
Co., Ltd.

(Note) Equity ownership is calculated after deducting treasury shares (225,146,463 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
88,600 shares

4

Outside Directors––

Audit & Supervisory Board
Members––(Notes) 1. The Company’s stock remuneration system is comprised of two kinds of stock remuneration:
restricted stock remuneration and performance share units. For details, please refer to pages 82
to 85 of the Business Report.
74

2. All the above shares are shares granted as restricted stock remuneration. The Company disposedof 210,200 treasury shares (including the above-stated 88,600 shares granted to Members of theBoard) on May 24, 2022, for the allotment of restricted stock remuneration to four Members of
the Board who also serve as Executive Officers, and to 17 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.

75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 theBoard

Mutsuo Iwai

Deputy Chairperson of
the Board

Shigeaki Okamoto

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

Responsibility

Chief Executive
Officer

Significant concurrent positions
outside the Company
Outside Director, Benesse
Holdings, Inc.
Outside Director, TDK
Corporation
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 OfficeOutside Audit & Supervisory
Board Member, The Yomiuri
Shimbun Tokyo Head Office
Chairman and Managing
Director, JT International Group
Holding B.V.

Finance andCorporate
Communications
Corporate Strategy,
Sustainability,
People & Culture,
Information
Technology, Legal,
Operation Review &Business Assurance,
PharmaceuticalBusiness and FoodBusiness
Corporate
Governance andCompliance
Novelist
Outside Director, Japan
Exchange Group, Inc.
Outside Director, MITSUBISHI
MOTORS CORPORATION
Standing Audit & Supervisory
Board Member, Recruit
Holdings Co., Ltd.
Standing Audit & Supervisory
Board Member, Recruit Co.,Ltd.
Outside Audit & Supervisory
Board Member, SUMITOMOCORPORATION

76

Position

Name

Member of the Board

Masato Kitera

Member of the Board

Tetsuya Shoji

Standing Audit &Supervisory Board
MemberStanding Audit &Supervisory Board
MemberStanding Audit &Supervisory Board
MemberResponsibility

Significant concurrent positions
outside the Company
Outside Director, Marubeni
Corporation
Outside Director, NIPPONSTEEL CORPORATION
Corporate Advisor, NTT
Communications Corporation
Outside Director, Sapporo
Holdings Limited
Outside Director, Hitachi Zosen
Corporation
Outside Director, Mitsubishi
Logistics Corporation
Outside Director, Honda MotorCo., Ltd.

Ryoko Nagata
Hiroshi Yamamoto
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

Audit & Supervisory
Board Member

Koji Yoshikuni(Notes)1. Members of the Board Main Kohda, Yukiko Nagashima, Masato Kitera and Tetsuya Shoji 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, Masato Kitera and Tetsuya Shoji, andAudit & 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. Deputy Chairperson of the Board Shigeaki Okamoto and Member of the Board Tetsuya Shoji
assumed their office on March 23, 2022.
6. Chairperson of the Board Yasutake Tango retired on March 23, 2022.
7. As of March 23, 2022, Mutsuo Iwai resigned as Deputy Chairperson of the Board and assumed
the office of Chairperson of the Board.
8. As of January 1, 2023, after the closing of the fiscal year under review, we had changes in the
responsibilities of the Members of the Board who also serve as an Executive Officer: Naohiro
Minami and Kazuhito Yamashita are now Directors who do not serve as Executive Officers.

779. As of April 11, 2022, Representative Director and Executive Vice President Naohiro Minami
retired from the position of Supervisory Board member of JT International Holding B.V.
10. As of June 23, 2022, Audit & Supervisory Board Member Hiroshi Obayashi retired from theposition of Outside Director, Audit & Supervisory Committee Member of NIPPON STEELCORPORATION.
11. 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
forth in Article 425, paragraph 1 of the same Act, provided they perform their duties without
knowledge of such damages and without gross negligence.
12. 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 incurredunder item (ii) of the same paragraph, measures have been put into place to ensure that theproper 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 theCompany 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.
13. 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
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 theexecution of duties by the insured.

78

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)

1,472
(73)

584
(73)

514
(-)

194
(-)

180
(-)

11
(4)

157
(75)

157
(75)

(-)

(-)

(-)

5
(3)

1,629
(148)

741
(148)

514
(-)

194
(-)

180
(-)

16
(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 retired on March 23, 2022.

(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.
2. Executive Remuneration Composition
The remuneration for Members of the Board and Audit & Supervisory Board Members is made of four
components. In addition to the monthly “base salary,” there is an “executive bonus,” which reflects theCompany’s business performance in the relevant fiscal year, a “restricted stock remuneration” and“performance share units,” which are linked to the mid- to long-term company value of the Company. The
Restricted Stock Remuneration Plan and the Performance Share Unit Plan were introduced in 2020 in orderto strengthen the efforts to enhance the mid- to long-term company value and to further promote shared value
with shareholders.
79The composition of remuneration by member category is as follows: 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 figure above shows the composition ratio of remuneration if executive bonus andperformance share units are paid at the standard amount. The ratio may fluctuate depending on
performance and share price of the Company, and the remuneration levels of our benchmark
companies, among other things.
Reference: As an agenda related to the upper limit of remuneration for Members of the Board, Item 4“Revision of Remuneration for Members of the Board” was submitted to this Ordinary General Meeting of
Shareholders as described on pages 42 to 44 of this document. In the event that Item 4 is approved in its
original form, the Company plans to increase the ratio of remuneration composition of the mid- to long-term
incentives that are composed of “restricted stock remuneration” and “performance share units.”
 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 the meeting of the Advisory
Panel on Nomination and Compensation held on March 23, 2022, the Chairperson shall be elected fromamong 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 the dutyof the Chairperson 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.

80

<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 applicable

3. Ceiling of the Total Executive Remuneration and Approval Process
Regarding the amount of remuneration for Members of the Board of the Company (ten (10) Members as ofDecember 31, 2022), at the 35th Ordinary General Meeting of Shareholders held on March 19, 2020,
approval was obtained for an upper limit to remuneration, consisting of base salary and executive bonuses,of ¥1.1 billion per year for all Members of the Board (including ¥80 million per year for Outside Directors)(nine (9) Members of the Board was subject to this rule at the time of the resolution, including three (3)Outside Directors). In addition, at the 37th Ordinary General Meeting of Shareholders held on March 23,
2022, following an increase of one in the number of Outside Directors, approval was obtained for an increasein the upper limit to remuneration of ¥100 million for all Outside Directors (four (4) Outside Directors were
subject to this rule at the time of the resolution). In addition to this remuneration, at the 35th Ordinary General
Meeting of Shareholders held on March 19, 2020, approval was obtained for restricted stock remuneration
to the Members of the Board who also serve as an Executive Officer (four (4) members as of December 31,2022) not exceeding ¥210 million (or 115,200 shares) annually and performance share units not exceeding¥130 million (or 76,800 shares) annually (four (4) Members of the Board were subject to this rule at the timeof the resolution).
Further, the maximum amount of the annual aggregate remuneration for all Audit & Supervisory Board
Members (five (5) persons as of December 31, 2022) 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).
As an agenda related to the upper limit of Director remuneration, Item 4 “Revision of Remuneration for
Members of the Board” was submitted to this Ordinary General Meeting of Shareholders as described on
pages 42 to 44 of this document.
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 (benchmark companies).
To be more specific, after benchmarking the level of base salary and the percentage of variable remunerationin annual bonuses and mid- to long-term incentives, we decide the amount of remuneration for Members of
the Board based on the results of the review by the Advisory Panel on Nomination and Compensation, in linewith the methods of calculation as set forth in the internal rules, and within the maximum remuneration
approved at the General Meeting of Shareholders. At this point, because the Representative Director andPresident is judged suitable for overviewing the Company’s management and consolidated performance todecide the amount of remuneration for Members of the Board by considering the evaluation of their executionof duties, the Representative Director and President is delegated to 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, executive 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 forthin the internal rules; and the Board of Directors judges that its details are in compliance with thedetermination policy.
81

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. Core revenue at constant FX, adjusted operating
profit (AOP) at constant FX, adjusted operating profit on a reported basis, profit results, and an RRP-related
index (Note) and will be the key performance indicators (KPI) for the calculation of executive bonuses, which
will be used to measure the performance of the business itself, which is the foundation of sustainable profit
growth, as well as the achievement rate of profit growth, from the viewpoint of providing shared value withthe shareholders and setting indices conducive to sustainable profit growth over the mid to long term. In
calculating the amounts of executive bonuses, 15% accounts for core revenue at constant FX, 35% for AOP
at constant FX, 25% for adjusted operating profit on a reported basis and 25% for profit. The ratio that
performance on a reported basis accounts for on the KPIs used to determine executive bonuses has been set
to 50%. Performance-linked payout is based on the KPI achievement in the range of 0% to 190% and either-10%, 0% or +10% is added/deducted to results depending on evaluations of the RRP-related index. In a casewhere a Member of the Board who is 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.
(Note)

Qualitative evaluation indicators pertaining to the implementation of strategies and level of achievement related to
RRP (Reduced-Risk Products), which is a focus area.

Consolidated performance indicators and actual results related to executive bonus for the fiscal year underreview are as follows:
Fiscal year ended December 31, 2022
Performance indicator (Consolidated)
TargetActual(Billions of yen)(Billions of yen)Core revenue at constant FX
2,229.0
2,338.5
Adjusted operating profit at constant
635.0
665.7
FX
Adjusted operating profit on a
611.0
727.8
reported basis
Profit(Profit attributable to owners of the
356.0
442.7
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 (“Eligible Directors”) are eligible to receive monetary remuneration claims every fiscal year towards
restricted stock and the 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 is made by means of disposal of treasury shares). In disposal of ordinary shares of the Company
due to this Plan, a restricted stock allotment agreement shall be concluded between the Company and each
Eligible Director.
82

The monetary compensation towards the purchase of the Company’s restricted stock will be decided basedon the closing price of the Company’s share at the Tokyo Stock Exchange as of the business day immediately
preceding the resolution by the Board of Directors. However, if the Company share does not trade at theTokyo Stock Exchange on the day prior to the resolution of the Company’s Board of Directors, the closing
price of the immediately preceding trading day will be used. This price of share will be decided by theCompany’s Board of Directors within a scope that is not particularly advantageous to the Eligible Directors
who will receive the restricted stock.
In addition, the allocation of monetary remuneration claims to the Eligible Directors, assumes that suchdirector accepts the compensation as contribution in kind and enters into the restricted stock allotment
agreement.
The specific details of the Plan are as follows. Any other matters regarding the Plan shall be determined by
the Company’s Board of Directors.
i

The total amount of monetary remuneration claims and number of shares
The total amount of monetary remuneration claims for all Eligible Directors together shall not exceed¥210 million per year or the total number of ordinary shares allotted by the Company shall not exceed
115,200 shares per year. If there is a stock split, stock consolidation, or any other event requiring
adjustment to the total number of shares to be allocated after this Restricted Stock Remuneration Plan has
been approved in the 35th Ordinary General Meeting of Shareholders held on March 19, 2020, the relevant
total number shall be adjusted accordingly within a reasonable range.
As an agenda related to the upper limit of Director remuneration, Item 4 “Revision of Remuneration for
Members of the Board” was submitted to this Ordinary General Meeting of Shareholders as described on
pages 42 to 44 of this document.
ii Transfer restriction period and details
The restriction period will be 30 years (“Restriction Period”). During this period restrictions will beapplied on the allotted shares (“Allotted Shares”), so that each Eligible Director is prohibited to transfer
the Allotted Shares, pledge them, mortgage them, or use any arrangement to dispose them.
iii Removal of transfer restrictions
In case any Eligible Director retires due to expiration of the term or resigns due to reasons deemed
reasonable by the Company’s Board of Directors, from a position as Member of the Board or any otherpositions separately specified by the Company’s Board of Directors during the Restriction Period, thetransfer restrictions will be removed on all the Allotted Shares.
iv Revocation of Allotted Shares without any compensation
Allotted Shares will be revoked by the Company if an Eligible Director violates any laws and regulations
or falls under any other event specified by the Company’s Board of Directors during the Restriction Period,
the Company retains the right to acquire all or part of the Allotted Shares without any compensation.
v Handling in the case of reorganization
During the Restriction Period, if the Company becomes defunct due to merger or organization
restructuring, the transfer restrictions for Allotted Shares will be removed following the resolution of theCompany’s Board of Directors before the effective date of such reorganization.
 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(“Performance Evaluation Period”) (Note), which is comprised of three fiscal years starting from the fiscal year
subject to provision, in accordance with the rate of achievement of performance and other multi-year
performance targets during the Performance Evaluation Period. The Advisory Panel on Nomination andCompensation deliberates and decides on the achievement rate of such targets for performance and otheritems 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 allocationof Company’s ordinary shares by paying all of the monetary remuneration claims in kind (the allotment ismade by means of disposal of treasury shares).
83

The monetary compensation towards the purchase of the Company’s ordinary shares will be decided basedon the closing price of the Company’s share at the Tokyo Stock Exchange as of the business day immediately
preceding the resolution by the Board of Directors. However, if the Company share does not trade at theTokyo Stock Exchange on the day prior to the resolution of the Company’s Board of Directors, the closing
price of the immediately preceding trading day will be used. This price of share will be decided by theCompany’s Board of Directors within a scope that is not particularly advantageous to the Eligible Directors
who will receive the performance share units. In addition, since monetary remuneration claims and cash todeliver the Company’s ordinary shares are granted according to the above achievement rate of performance,
the allocation of the monetary remuneration claims and cash to the Eligible Directors, the amount of theclaims and cash to deliver the Company’s ordinary shares, and the number of shares delivered are not decided
by the expiration of the Performance Evaluation Period.
(Note)The initial year for offering was set as 2020, with a Performance Evaluation Period of three fiscal years, from thefiscal year ended December 31, 2020, to the fiscal year ended December 31, 2022. For 2021, Performance Evaluation
Period is three fiscal years, from the fiscal year ended December 31, 2021, to the fiscal year ending December 31,
2023. For 2022, Performance Evaluation Period is three fiscal years, from the fiscal year ended December 31, 2022,
to the fiscal year ending December 31, 2024. From the fiscal year 2023 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.

The specific details of the Plan are as follows. Any other matters regarding the Plan shall be determined by
the Company’s Board of Directors.
i The total amount of monetary remuneration claims and cash and number of shares
The total amount of monetary remuneration claims and cash for all Eligible Directors together shall not
exceed ¥130 million annually. The total number of ordinary shares allotted annually for all Eligible
Directors together shall not exceed 76,800 shares. If a stock split, stock consolidation, or any other event
requiring adjustment to the total number of shares to be allocated arises after the 35th Ordinary General
Meeting of Shareholders held on March 19, 2020, the relevant total number shall be adjusted accordingly
within a reasonable range.
As an agenda related to the upper limit of Director remuneration, Item 4 “Revision of Remuneration for
Members of the Board” was submitted to this Ordinary General Meeting of Shareholders as described on
pages 42 to 44 of this document.
ii Share allotment and cash calculation methodology
The Company determines performance indicators and others such as performance-linked figures for thePlan which are necessary to specifically calculate the number of shares to be distributed, reviewed by theAdvisory Panel on Nomination and Compensation of the Company. Profit has been set as the KPI for the
Performance Evaluation Period that began from fiscal 2020 and fiscal 2021 from the perspective ofproviding shared value with shareholders. For the evaluation period starting in fiscal 2022, the Company
introduced an ESG-related index on top of profit, in order for the Company and shareholders to seek anagreement on a mutual perspective of evaluating and being evaluated. In fiscal 2022, the Company has
adopted its progress on initiatives to realize net zero as an ESG-related index, specifically the target
attainment rates to reduce Greenhouse Gas emissions.
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 thatany fractions less than one share shall be rounded off). Further, in the event of retirement or appointment
during the Performance Evaluation Period, reasonable adjustments may be made in the number of theordinary shares of the Company or the amount to be offered to the eligible Member of the Board or his/her
inheritors, in accordance with the provisions set by the Board of Directors of the Company. If the numberof the ordinary shares of the Company allotted to eligible Members of the Board calculated by the formula(1) is greater than the maximum aggregate number of the ordinary shares of the Company to be allottedto eligible Members of the Board, it shall be deducted in a reasonable manner, such as a proportional84

distribution, as laid down by the Board of Directors of the Company, within the range not exceeding 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 (i)) 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. Performance-linked payout is set to be in the range of 0% to 200% based on the KPI (i.e., profit) achievement
in both 2020 and 2021. For the Performance Evaluation Period stating from 2022, performance-linked payout
is set to be in the range of 0% to 190% based on the KPI (i.e., profit) achievement and either -10%, 0% or +10%
is added/deducted to results depending on evaluations of the ESG-related index.
3. After the Performance Evaluation Period ends, based on the closing price of the ordinary shares of the Company
on the TSE on the preceding business day of the date of the resolution by the Board of Directors concerning
the allotment of the ordinary shares of the Company under the plan (or the closing price on the immediately
preceding business day, if transactions are not executed on that day), the amount shall be determined by the
Board of Directors of the Company within the range not particularly favorable to eligible Members of the Board.

iii Pre-requisites for distribution
The Company shall provide the monetary remuneration claims and cash to Eligible Directors, and Eligible
Directors are required to purchase the Company’s ordinary shares with all the monetary remuneration
claims received as contribution in kind, after the Performance Evaluation Period expires and the following
conditions for distribution of Company’s ordinary shares are met.
(i) Remaining in his/her term of office as Member of the Board, Executive Officer or any other positions
separately specified by the Board of Directors during the fiscal year subject to provision(ii) Non-existence of certain illegal acts(iii) Other requirements considered necessary, which are stipulated by the Board of Directors
iv Handling in the case of reorganization
During the Performance Evaluation Period, if the Company becomes defunct due to merger ororganization restructuring, the Company’s Board of Directors may, prior to the effective date of the saidorganizational restructuring, decide to pay towards performance share units in accordance with theduration from the commencement date of the Performance Evaluation Period to the date of approval forthe said organizational restructuring. However, in lieu of the aforementioned allocation of the Company’s
ordinary shares, cash will be reasonably calculated by the Company’s Board of Directors as the amountequivalent to the said ordinary shares, within the limit of the remuneration for the Performance Share
Unit Plan.

85

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.

YukikoNagashima
Member of theBoard
Masato Kitera

Tetsuya Shoji

Toru Mimura
Audit &
Supervisory
Board Member

Hiroshi Obayashi

Recruit Co., Ltd.
SUMITOMOCORPORATION
Marubeni Corporation
NIPPON STEELCORPORATIONNTT Communications
Corporation
Sapporo Holdings Limited
Hitachi Zosen Corporation
Mitsubishi Logistics
Corporation
Shiba International Law
Offices
Obayashi Law OfficeDaiwa Securities Co. Ltd.
Mitsubishi Electric
Corporation

Position
Outside Director
Outside Director
Standing Audit &Supervisory Board Member
Standing Audit &Supervisory Board Member
Outside Audit & Supervisory
Board Member
Outside Director
Outside Director
Corporate Advisor
Outside Director
Outside Director
Outside Director
Attorney at Law
Attorney at Law
Outside Audit & Supervisory
Board Member
Outside Director(Notes) 1. There are no special relationships to be mentioned between the above organizations in which
concurrent positions are held and JT.
2. As of June 23, 2022, Audit & Supervisory Board Member Hiroshi Obayashi retired from theposition of Outside Director, Audit & Supervisory Committee Member of NIPPON STEELCORPORATION.

86

(2) Major activities during this fiscal year
Category

Name

Main Kohda

Yukiko Nagashima

Member of theBoard

Masato Kitera

Tetsuya Shoji

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 & Supervisory
Boards, she fulfilled her duties adequately as an Outside
Director by providing advice and recommendations on
business strategy, sustainability strategy, and other areas.
Masato Kitera attended all 13 Board of Directors
meetings held during this fiscal year. His contribution
toward improving the Group corporate governance was
expected based on his extensive international experienceand a high level of knowledge of international affairs
cultivated during his diplomatic and other activities, andhe held important positions over many years of service
with the government, primarily in the Ministry of Foreign
Affairs, he fulfilled his duties adequately as an Outside
Director by providing advice and recommendations on
country risk and other areas.
Tetsuya Shoji attended all 9 Board of Directors meetings
held during this fiscal year since he assumed office on
March 23, 2022. He has considerable experience, trackrecord, and insight into corporate management. His
contribution toward improving the Group corporate
governance was expected based on his wide experience inareas such as corporate planning, human resources, global
operations, and digitization promotion, he fulfilled his
duties adequately as an Outside Director by providing
recommendations and advice on business strategy, theoperating model, and other areas.

87Category

Name

Toru Mimura

Audit &
Supervisory Board
MemberHiroshi Obayashi

Koji Yoshikuni

Status of main activities
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.

(Note) In addition to the above number of meetings of the Board of Directors held, a written resolution was
adopted for which a resolution of the Board of Directors meeting was deemed to have been madeunder Article 370 of the Companies Act and paragraph 4 of Article 24 of the Company’s Articles ofIncorporation.
(3) Total amount of remunerations
Outside Audit &Supervisory Board
Total
MemberAmount to
Amount to
Amount to
Number to
Number to
be paidbe paidbe paidbe paidbe paid(Millions of(Millions of(Millions of(Person)(Person)
yen)
yen)
yen)
73
3
75
7
148

Outside Director
Category

Base salary

Number to
be paid(Person)4

88

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:

¥350 million¥85 million(2) Amount of cash and other financial benefits to be paid by JT and its subsidiaries:¥553 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 IT field, and the issuance of the comfort letter in
relation to the bond 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.

89

Consolidated Statement of Financial Position(As of December 31, 2022)(Millions of yen)Account title

AmountAccount title

Current assets

AmountCurrent liabilities

Cash and cash equivalents

866,885

Trade and other payables

540,089

Trade and other receivables

477,239

Bonds and borrowings

137,308

Inventories

691,906

Income tax payables

37,470

Other financial assets

37,677

Other financial liabilities

40,065

Other current assets

649,181

Provisions

26,6102,722,889

Other current liabilities

781,093

Assets held for sale

702

Subtotal

1,562,635

Total current assets

2,723,591

Subtotal

Liabilities directly associated withassets held for sale
Total current liabilities

29
1,562,664

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

775,957

Non-current liabilities

2,446,063

Bonds and borrowings

821,003

246,442

Other financial liabilities

41,735Investment property

9,495

Retirement benefit liabilities

244,116

Retirement benefit assets

57,792

Provisions

26,490Investments accounted for using theequity method

56,943

Other non-current liabilities

195,248

Other financial assets

140,366

Deferred tax liabilities

40,061

Deferred tax assets

91,430Total non-current liabilities

Total non-current assets

3,824,487

Total liabilities

1,368,653
2,931,317

EquityShare capital

100,000

Capital surplus

736,400

Treasury shares(490,183)

Other components of equity

104,309

Retained earnings

3,089,909

Equity attributable to owners of theparent company

3,540,435

Non-controlling interests

Total assets

6,548,078

90

76,326

Total equity

3,616,761

Total liabilities and equity

6,548,078

Consolidated Statement of Income(Year ended December 31, 2022)(Millions of yen)Account title

AmountRevenue

2,657,832

Cost of sales(1,090,989)

Gross profit

1,566,843

Other operating income

20,262

Share of profit in investments accounted for using the equity method

8,009

Selling, general and administrative expenses(941,538)

Operating profit

653,575

Financial income

31,147

Financial costs(91,272)

Profit before income taxes

593,450

Income taxes(149,277)

Profit for the period

444,174

Attributable to:
Owners of the parent company

442,716

Non-controlling interests

1,458

91

Consolidated Statement of Changes in Equity(Year ended December 31, 2022)(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, 2022

100,000

736,400(490,899)

1,202(408,175)

(274)

7,161

Profit for the period

－

－

－

－

－

－

－

Other comprehensive income(loss)－－－－

493,971

8,584

1,880

Comprehensive income (loss) forthe period

－

－

－

－

493,971

8,584

1,880

Acquisition of treasury shares

－

－

(1)

－

－

－

－

Disposal of treasury shares

－

－

717

(200)

－

－

－

Share-based payments

－

－

－

－

－

－

－

Dividends

－

－

－

－

－

－

－

Changes in the scope of
consolidation

－

－

－

－

－

－

－

Changes in the ownership interestin a subsidiary without a loss ofcontrol

－

－

－

－

－

－

－

Transfer from other componentsof equity to retained earnings

－

－

－

－

－

－

(75)

Other increase (decrease)

－

－

－

－

－

236

－

－

－

716

(200)

－

236

(75)

100,000

736,400(490,183)

1,001

85,796

8,546

8,966

Total transactions with the owners
As of December 31, 2022

92

(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, 2022－

(400,086)

2,863,843

2,809,258

76,8232,886,081

Profit for the period－－

442,716

442,716

1,458

444,174

Other comprehensive income(loss)

49,535553,970－

553,97085554,055

Comprehensive income (loss) forthe period

49,535553,970

442,716

996,687

1,542

998,229

Acquisition of treasury shares

－

－

－

(1)

－

(1)

Disposal of treasury shares

－

(200)

(516)

0

－

0

Share-based payments

－

－

460

460

21

481

Dividends－－(266,203)(266,203)(1,631)(267,834)

Changes in the scope of
consolidation

－

－

－

－

(429)

(429)

Changes in the ownership interestin a subsidiary without a loss ofcontrol

－

－

(1)

(1)

(0)

(1)

Transfer from other componentsof equity to retained earnings(49,535)(49,610)

49,610

－

－

－

－

236

－

236

－

236

(49,535)(49,575)(216,650)(265,510)(2,039)(267,548)－

104,3093,089,909

3,540,435

76,326

3,616,761

Other increase (decrease)
Total transactions with the owners
As of December 31, 2022

93

Nonconsolidated Balance Sheet(As of December 31, 2022)(Millions of yen)Account title

AmountAccount title

ASSETS
Current assets

AmountLIABILITIES
459,260

Current liabilities

682,250

Cash and deposits

193,376

Accounts payable–trade

10,445

Accounts receivable–trade

31,739Securities

18,000Current portion of bonds

60,000

Merchandise and finished goods

25,424

Lease obligations

Semi-finished goods

84,534

Accounts payable–other

72,620230

Work in process

1,815

National tobacco excise taxes payable

72,925

Raw materials and supplies

32,017National tobacco special excise taxes payable

8,791

Advance payments–trade

2,440

Local tobacco excise taxes payable

82,013

Prepaid expenses

5,040

Income taxes payable

1,863

Short-term loans receivable from subsidiaries
and affiliates

38,649Other

26,255

Allowance for doubtful accounts
Noncurrent assets(29)
1,904,007

Accrued consumption taxes

28,711

Cash management system deposits received

318,412

Provision for bonuses

5,675

Other

20,565

Noncurrent liabilities

312,374

Bonds payable

65,000140,000

Property, plant and equipment

165,044

Long-term borrowings

Buildings

69,893

Lease obligations

Structures

2,066

Provision for retirement benefits

Machinery and equipment

34,722

Other

Vehicles536

Tools, furniture and fixtures

9,996

Land

47,298Construction in progress
Intangible assets
Patent right533
175,692
194

152
101,4215,800
994,623

Total liabilities
NET ASSETS
Shareholders’ equity

1,357,011

Capital stock

100,000

Capital surplus

736,400

Legal capital surplus

736,400

Retained earnings

1,010,794

Right of trademark

49,196

Legal retained earnings

18,776

Software

11,652Other retained earnings

992,018

Goodwill

107,313

Reserve for investment loss on developing
new business

Other
Investments and other assets
Investment securities
Shares of subsidiaries and affiliates

7,337
1,563,271
22,3581,495,647

Long-term loans receivable from subsidiaries
and affiliates

6,069

Long-term prepaid expenses

7,335

Deferred tax assets

16,987

Other

15,030Allowance for doubtful accounts
Total assets(154)
2,363,267

94

Reserve for reduction entry
Special account for reduction entry
Retained earnings brought forward
Treasury shares
Valuation and translation adjustments

331
34,780574
956,333(490,183)
10,631

Valuation difference on available-for-salesecurities

6,903

Deferred gains or losses on hedges

3,728

Subscription rights to shares

1,001

Total net assets

1,368,643

Total liabilities and net assets

2,363,267

Nonconsolidated Statement of Income(Year ended December 31, 2022)(Millions of yen)Account title

AmountNet sales

542,181

Cost of sales

173,609

Gross profit

368,572

Selling, general and administrative expenses

303,998

Operating income

64,574Non-operating income
Interest income

78

Dividends income

204,825

Other

8,205

213,108

Non-operating expenses
Interest expenses

1,686Interest on bonds

456

Other

1,806

3,948
273,734

Ordinary income
Extraordinary income
Gain on sales of noncurrent assets

6,459

Gain on sales of businesses

39,005

Other

5,504

50,968Extraordinary losses
Loss on sales of noncurrent assets

478

Loss on retirement of noncurrent assets

3,857

Impairment loss

4,381

Business restructuring costs

1,642

Other

4,290

14,647
310,055

Income before income taxes
Income taxes-current

17,701

Income taxes-deferred

8,893

26,594283,461

Net income

95Nonconsolidated Statement of Changes in Net Assets(Year ended December 31, 2022)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capitalstock

As of January 1, 2022

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

18,776356

37,715425

935,204

992,476

－

－

－

－

－

－

－

1,117

1,117

100,000

736,400

736,400

18,776356

37,715425

936,321993,593

Provision of reservefor investment loss
on developing new
business

－

－

－

－

331

－

－

(331)

－

Reversal of reservefor investment loss
on developing new
business

－

－

－

－

(356)

－

－

356

－

Provision of reserve
for reduction entry

－

－

－

－

－

690

－

(690)

－

Reversal of reserve
for reduction entry

－

－

－

－

－

(3,624)

－

3,624

－

Provision of special
account for reduction
entry

－

－

－

－

－

－

574

(574)

－

Reversal of special
account for reduction
entry

－

－

－

－

－

－

(425)

425

－

Dividends fromsurplus

－

－

－

－

－

－

－

(266,203)(266,203)

Net income

－

－

－

－

－

－

－

283,461

283,461

Purchase of treasury
shares

－

－

－

－

－

－

－

－

－

Disposal of treasury
shares

－

－

－

－

－

－

－

(57)

(57)

Net changes of items
other thanshareholders’ equity

－

－

－

－

－

－

－

－

－

Total changes of items
during the period

－

－

－

－

(25)

(2,934)149

20,012

17,201

100,000

736,400

736,400

18,776331

34,780574

956,333

1,010,794

Cumulative effects ofchanges inaccounting policies
Restated balance
Changes of items
during the period

As of December 31,
2022

96

(Millions of yen)
Shareholders’ equity

Valuation and translation adjustments
Subscription
rights tosharesTotal net
assets

5,517

1,202

1,344,696

－

－

－

1,117

5,833

(316)

5,517

1,202

1,345,813

－

－

－

－

－

－

－

－

－

－

－

－

－

Provision of reserve
for reduction entry

－

－

－

－

－

－

－

Reversal of reserve
for reduction entry

－

－

－

－

－

－

－

Provision of special
account for reduction
entry

－

－

－

－

－

－

－

Reversal of special
account for reduction
entry

－

－

－

－

－

－

－

Dividends fromsurplus－(266,203)

－

－

－

－

(266,203)

Net income－

283,461

－

－

－

－

283,461

Purchase of treasury
shares

(1)

(1)

－

－

－

－

(1)

Disposal of treasury
shares

717

660

－

－

－

－

660

Net changes of items
other thanshareholders’ equity

－

－

1,070

4,045

5,114

(200)

4,914

Total changes of items
during the period

716

17,917

1,070

4,045

5,114

(200)

22,831(490,183)

1,357,011

6,903

3,728

10,631

1,001

1,368,643

Treasury shares

Total
shareholders’equityValuationdifference on
available-forsale securities(490,899)

1,337,977

5,833

(316)

－

1,117

－

(490,899)

1,339,094

Provision of reservefor investment loss
on developing new
business－

Reversal of reservefor investment loss
on developing new
business

As of January 1, 2022
Cumulative effects ofchanges inaccounting policies
Restated balance

Deferred
gains orlosses onhedgesTotalvaluation andtranslation
adjustments

Changes of items
during the period

As of December 31,
2022

97

(TRANSLATION)
INDEPENDENT AUDITOR'S REPORT
February 14, 2023
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, 2022, and the consolidated statement ofincome and consolidated statement of changes in equity for the fiscal year from January 1, 2022 to
December 31, 2022, 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 present fairly, in all material respects,
the consolidated financial position of the Group as of December 31, 2022, and its consolidated financial
performance for the year then ended in accordance with accounting standards prescribed pursuant to theprovisions of the second sentence of the first paragraph of Article 120 of the Ordinance on Company
Accounting that omit a part of the disclosures required under International Financial Reporting Standards.
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.
Other Information
Management is responsible for the other information. Audit & Supervisory Board members and the Audit &Supervisory Board are responsible for overseeing the Directors' execution of duties relating to the designand operating effectiveness of the controls over the other information. The other information comprises theinformation included in the Business Report and the accompanying supplemental schedules.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.

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In connection with our audit of the consolidated financial statements, our responsibility is to read the otherinformation and, in doing so, consider whether the other information is materially inconsistent with theconsolidated financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.
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 in accordance with accounting standards prescribed pursuant to the provisions of the second
sentence of the first paragraph of Article 120 of the Ordinance on Company Accounting that omit a part ofthe 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 thatare free from material misstatement, whether due to fraud or error.
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 inaccordance with accounting standards prescribed pursuant to the provisions of the second sentence of thefirst paragraph of Article 120 of the Ordinance on Company Accounting that omit a part of the disclosuresrequired 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.

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(TRANSLATION)• Evaluate whether the overall presentation and disclosures of the consolidated financial statements are inaccordance with accounting standards prescribed pursuant to the provisions of the second sentence ofthe first paragraph of Article 120 of the Ordinance on Company Accounting that omit a part of thedisclosures required under International Financial Reporting Standards, as well as the overall
presentation, structure and content of the consolidated financial statements, including the disclosures,and whether the consolidated financial statements represent the underlying transactions and events in amanner 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.
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.

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(TRANSLATION)
INDEPENDENT AUDITOR'S REPORT
February 14, 2023
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, 2022, and the nonconsolidated statement of income andnonconsolidated statement of changes in net assets for the 38th fiscal year from January 1, 2022 to
December 31, 2022, 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, 2022, 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.
Other Information
Management is responsible for the other information. Audit & Supervisory Board members and the Audit &Supervisory Board are responsible for overseeing the Directors' execution of duties relating to the designand operating effectiveness of the controls over the other information. The other information comprises theinformation included in the Business Report and the accompanying supplemental schedules.
Our opinion on the nonconsolidated financial statements does not cover the other information and we do
not express any form of assurance conclusion thereon.

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In connection with our audit of the nonconsolidated financial statements, our responsibility is to read theother information and, in doing so, consider whether the other information is materially inconsistent with thenonconsolidated financial statements or our knowledge obtained in the audit or otherwise appears to bematerially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.
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.
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.

102• 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.
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 the"Opinion" section of this English translation are not included in the attached financial documents. In
addition, the other information in "the accompanying supplemental schedules" referred to in the "Other
Information" section of this English translation is not translated.

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[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 38th fiscal year from January 1, 2022
to December 31, 2022, 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 Board 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,104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 17, 2023
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.

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