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

MATERIALS CONCERNINGNOTICE OF CONVOCATION OF
THE 39TH ORDINARY GENERAL MEETING OF SHAREHOLDERS
Matters not Included in Delivered Documents Upon Request for Delivery of Documents
Pursuant to Laws and Regulations and the Articles of Incorporation
Among the Matters for Which Electronic Provision Measure are Taken

Business Report
Matters Concerning Subscription Rights to Shares
Overview of the Resolutions on the Development of Systems Necessary to Ensure the Properness of
Operations and the Operating Status of the Systems

Consolidated Financial Statements
Consolidated Statement of Changes in Equity
Notes to Consolidated Financial Statements

Nonconsolidated Financial Statements
Nonconsolidated Statement of Changes in Net Assets
Notes to Nonconsolidated Financial Statements
For the 39th Business Term (For the fiscal year from January 1, 2023 to December 31, 2023)

Japan Tobacco Inc.
Pursuant to laws and regulations and Paragraph 2, Article 17 of the Company’s Articles of Incorporation, the above
matters are not included in documents delivered to shareholders who requested the delivery of documents.

-1-

Business Report
Matters Concerning Subscription Rights to Shares
1.

2.

Total number and others of subscription rights to shares as of December 31, 2023
(1) Total number of subscription rights to shares

1,757 units(2) Class and number of shares to be delivered
upon exercise of subscription rights to shares

Ordinary shares 351,400 shares(200 shares per subscription right to shares)

Status of subscription rights to shares held by Members of the Board and Audit & Supervisory Board
Members of JT as of December 31, 2023
(1) Class and number of shares to be delivered
upon exercise of subscription rights to shares

Ordinary shares 211,800 shares(200 shares per subscription right to shares)(2) Value of property to be contributed whensubscription rights to shares are exercised¥1 per share(3) Assignment of subscription rights to shares

The approval of the Board of Directors is
required for the assignment of subscription rights
to shares.

(4) Conditions for exercising subscription rights
to shares

Subscription rights to shares holder may exercise
his/her subscription rights to shares only if he/sheloses his/her all position as Member of the Board,
Audit & Supervisory Board Member andExecutive Officer.

-2-

The status of ownership by Members of the Board and Audit & Supervisory Board Members of JT is asfollows.
Year
grantedPayment due
upon allotment ofsubscription
rights to shares

FY2007¥581,269 per unit

FY2008¥285,904 per unit

FY2009¥197,517 per unit

FY2010¥198,386 per unit

FY2011¥277,947 per unit

FY2012¥320,000 per unit

FY2013¥513,400 per unit

FY2014¥483,200 per unit

FY2015¥711,200 per unit

FY2016¥572,600 per unit

FY2017¥482,200 per unit

FY2018¥300,000 per unit

FY2019¥188,000 per unit

(Notes)1.
2.

Exercise period of
subscription rights tosharesMembers of the Board

Audit & Supervisory
Board Members

Numberof units

Number ofshareholders

Numberof units

Number ofshareholders

16

1

-

-

18

1

-

-

40

1

-

-

42

1

-

-

9

1

-

-

28

2

-

-

35

2

-

-

20

2

-

-

41

2

-

-

56

3

-

-

87

3

-

-

250

4

-

-

417

4

-

-

From January 9, 2008
to January 8, 2038
From October 7, 2008
to October 6, 2038
From October 14, 2009
to October 13, 2039
From October 5, 2010
to October 4, 2040
From October 4, 2011
to October 3, 2041
From October 10, 2012
to October 9, 2042
From October 8, 2013
to October 7, 2043
From October 7, 2014
to October 6, 2044
From August 4, 2015
to August 3, 2045
From July 5, 2016
to July 4, 2046
From July 4, 2017
to July 3, 2047
From July 3, 2018
to July 2, 2048
From July 2, 2019
to July 1, 2049

Outside Directors are not included in the above category of “Members of the Board.”
Based on the resolution of the 35th Ordinary General Meeting of Shareholders held on March 19,
2020, the stock option plan was abolished. Therefore, the Company did not issue any new
subscription rights as stock options during the fiscal year ended December 31, 2023.

-3-

Overview of the Resolutions on the Development of Systems Necessary to Ensure theProperness of Operations and the Operating Status of the Systems
The Board of Directors has resolved with regard to the development of systems necessary to ensure that theexecution of the duties by the Members of the Board complies with the laws, regulations and the Articles ofIncorporation, and other systems necessary to ensure the properness of operations of a stock company asfollows:(1) Systems to ensure that the performance of duties by the Members of the Board and employees of theCompany, as well as by Directors, etc. (meaning “Directors, etc.” as provided for in Paragraph 1,
Article 100, item 5 (i) of the Ordinance for Enforcement of the Companies Act) and employees (withDirectors, etc. and employees hereafter collectively referred to as “directors and employees”) of
subsidiaries, conforms to laws, regulations and the Articles of Incorporation
A.

Compliance system
The Company shall establish Code of Conduct based on regulations concerning the compliance system
in order to ensure that directors and employees of the Company and its subsidiaries comply with laws
and regulations, Company’s Articles of Incorporation, the social norms, etc., and set up a JT Group
Compliance Committee as an organization responsible for ensuring thorough compliance. This
committee, headed by Company’s Chairman of the Board, mainly consists of outside members andreports directly to the Board of Directors.
The Company appoints an Executive Officer in charge of compliance with overseeing the Legal andCompliance Division in an effort to establish and promote a group-wide, cross-sectional system and shedlight on issues.
The compliance promotion departments of the Company and its subsidiaries (meaning the Legal andCompliance Division within the Company, and corresponding departments within subsidiaries)
distribute materials including the “JT Group Code of Conduct,” which explains the Code of Conduct,
etc., to directors and employees, and work to enhance the effectiveness of the compliance system byenlightening directors and employees about compliance through training and other programs, etc.
(Note) Effective January 2024, the Company has changed its compliance system.
(Internal reporting system)
In preparation for cases in which employees or other parties detect activities, etc. suspected of violatinglaws and regulations, the Company and its subsidiaries maintain consultation and reporting desks asinternal whistleblower systems. Compliance promotion departments that receive a report or request for
consultation investigate the details and take necessary action, while working to prevent recurrence of theissue. In addition, separate from the consultation and reporting desks that are handled by the Legal andCompliance Division, the Company has established consultation and reporting desks that are
independent of business operations and are handled by Audit & Supervisory Board Members. An Audit& Supervisory Board Member who receives a consultation or a report investigates its content, and theCompany carries out necessary measures and tries to prevent the recurrence.
The Company will bring matters of particular importance involving the JT Group to the JT Group
Compliance Committee, and will request deliberation or will report on the issue.
(System for excluding anti-social forces)
The Company and its subsidiaries are resolved to fight against, not to comply with, an unreasonable
demand and not to have any relations with anti-social forces.
The Corporate Governance Division shall be the JT Group’s headquarters assuming the responsibility
for supervising efforts to exclude anti-social forces, the Company cooperates with police, lawyers andother relevant organizations and parties to gather and share information in order to deal with suchelements in an organized way.
In addition, the Company and its subsidiaries shall prohibit involving with anti-social forces and fullycommunicate to all directors and employees of the Company and its subsidiaries. At the same time, anawareness raising program for excluding anti-social forces is to be consistently administered for all
directors and employees, by providing relevant training, etc. as necessary.

-4-

B.

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

C.

Internal audit system
The Operational Review and Business Assurance Division of the Company oversees the internal audit
system and examines and evaluates systems for supervising and managing the overall operations and thestatus of business execution from the viewpoints of legality and rationality, in order to protect theCompany’s assets and improve management efficiency. In coordination with the internal audit functionsof all subsidiaries, the Operational Review and Business Assurance Division also undertakes theplanning and performance of the JT Group’s internal audit systems and policies, and supplements theinternal audit functions of subsidiaries.

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

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

B.

Storage and management of other information
The Company makes sure that the information on important matters relating to business execution anddecision-making including the conclusion of corporate contracts is stored and managed by the relevant
departments and divisions as specified by the Responsibilities/Authorities Allocation Rules, andestablishes rules on managing the processes of decision-making, procurement and accounting.

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

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

-5-

B.

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

(5) System to ensure that Members of the Board of the Company and Directors, etc. of its subsidiaries canperform their duties efficiently
A.

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

B.

Proper delegation of authority and system of responsibilities of the Company
For important management issues, particularly management policy and basic plans regarding overallbusiness operations of the Company, in addition to matters to be referred to the Board of Directors of theCompany, a clear decision-making process is stipulated in the Responsibilities/Authorities Allocation
Rules to have a system that enables to realize swift decision-making and high-quality businessexecution.
Executive Officers appointed by the Board of Directors execute business properly by exercising theauthority delegated to them in their respective areas in accordance with the JT Group management
strategies decided by the Board of Directors. In order to manage business operations in ways that
contribute to the business efficiency and flexibility of the Company, basic matters concerning theCompany’s organization, allocation of duties to officers and staff and the roles of individual divisions
are specified by the relevant internal rules.

C.

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

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

Purpose of the JT GroupThe JT Group has set “Fulfilling Moments, Enriching Life” as its purpose, and there is a group-wide
consensus on this purpose.

B.

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

-6-(7) Matters for employees assisting Audit & Supervisory Board Members of the Company in their duties inthe event such employees were requested by Audit & Supervisory Board Members
A.

Establishment of Audit & Supervisory Board Member’s Office
The Company has established an Audit & Supervisory Board Member’s Office as an organization toassist the duties of the Company’s Audit & Supervisory Board Members (hereinafter simply “Audit &Supervisory Board Members,” with the terms “Audit & Supervisory Board,” “Audit & Supervisory
Board Member’s Office,” and “Manager of the Audit & Supervisory Board Member’s Office” also
referring to those items within the Company).

B.

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

(8) Matters relating to the independence of employees belonging to the Audit & Supervisory Board
Member’s Office from the Company’s Members of the Board, and matters relating to the assurance ofthe effectiveness of instruction by Audit & Supervisory Board Members to those employees
A.

Management of employees affiliated with the Audit & Supervisory Board Member’s Office
The evaluation of the Manager of the Audit & Supervisory Board Member’s Office is made by the Audit& Supervisory Board and the evaluation of the other employees assigned to the Audit & Supervisory
Board Member’s Office is made by the Manager of the Audit & Supervisory Board Member’s Officebased on the advice of the Audit & Supervisory Board. The transfer and discipline of employees
assigned to the Audit & Supervisory Board Member’s Office is to be deliberated in advance with the
Audit & Supervisory Board.

B.

Duties of employees belonging to the Audit & Supervisory Board Member’s Office
Employees belonging to the Audit & Supervisory Board Member’s Office will follow the direction andorders of Audit & Supervisory Board Members in assisting the duties of the latter, and will not be
assigned to other concurrent positions relating to the business execution of the Company.

(9) System for reporting by directors and employees of the Company and its subsidiaries or persons
reported by directors and employees of its subsidiaries to the Audit & Supervisory Board and Audit &Supervisory Board Members
A.

Reporting to the Audit & Supervisory Board
When directors and employees of the Company and its subsidiaries detect any evidence of malfeasancein financial documents or serious breaches of laws or regulations or the Company’s Articles ofIncorporation, they are due to report them to the Audit & Supervisory Board, along with other relevant
matters that could affect the Company’s management.

B.

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

C.

Reporting on the status of whistleblowing
The Legal and Compliance Division will report regularly to Audit & Supervisory Board Members on thestatus of whistleblowing involving the JT Group, and will make non-regular reports as necessary.

-7-(10) System to ensure that persons reporting to Audit & Supervisory Board Members are not subject todisadvantageous treatment due to having reported
The Company will thoroughly communicate within the JT Group that persons engaging in consultation orwhistleblowing are not to be subject to any disadvantageous treatment for reason of those actions.
(11) Matters concerning policies for the prepayment of expenses involving the performance of duties by
Audit & Supervisory Board Members, procedures for reimbursement, and the handling of otherexpenses or debts involving the performance of those duties
A.

Handling of expenses or debts in accordance with Article 388 of the Companies Act
When an Audit & Supervisory Board Member has made claim to the Company for the prepayment ofexpenses, etc. in accordance with Article 388 of the Companies Act, the Company will promptly handle
the relevant expenses or debt, with the exception of cases in which the Company deems the claimed
expenses or debt to be unnecessary to the performance of the duties of the Audit & Supervisory Board
Member.

B.

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

(12) Other systems to ensure effective auditing by Audit & Supervisory Board Members
A.

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

B.

Coordination between the Operational Review and Business Assurance Division, Legal andCompliance Division and the Audit & Supervisory Board Members
The Operational Review and Business Assurance Division and the Legal and Compliance Division
maintain cooperation with Audit & Supervisory Board Members by exchanging information.

The status of systems necessary to ensure the properness of operations
A.

Status of initiatives concerning compliance

The JT Group has established the Code of Conduct in order to ensure compliance with the Company’s
Articles of Incorporation, social norms, etc., and communicates this throughout the JT Group, such as by
distributing the “JT Group Code of Conduct” booklet, which explains the Code of Conduct, and othermaterials to the directors and employees of the Company and its subsidiaries.

In accordance with the JT Group Compliance Rules, the Company performs appropriate reporting to theBoard of Directors on the performance of the annual Compliance Plan, the occurrence of serious
compliance violations, actions taken in response to these, and other matters of importance.

In order to improve awareness of compliance and prevent improper actions, the Company conducts regulartraining for the directors and employees of the Company and its subsidiaries.

With regard to whistleblowing systems, the Company maintains consultation and reporting desks insideand outside the Company, and thoroughly communicates to directors and employees of the Company andits subsidiaries that persons who engage in consultation or whistleblowing are not to be subject to any
disadvantageous treatment for reason of those actions. In addition, the content of consultations andwhistleblowing are regularly reported within the JT Group Compliance Committee.

With regard to the handling of anti-social forces, the Company continues to collect related declarations-8-and pledges from suppliers, and conducts regular training and other programs for the directors andemployees of the Company and its subsidiaries.
B.

C.

D.

Status of initiatives to manage the risk of lossWith regard to the monetary and financial risks, the Company makes quarterly reports to the President,
Chief Executive Officer and the Board of Directors in accordance with the Group Treasury Principle.

With regard to the evaluation and examination of internal management systems, the Operational Review
and Business Assurance Division provides reports and counsel to the President and Chief Executive
Officer and also reports to the Board of Directors, in accordance with the Rules for Internal Audits.

With regard to crises and disasters, the Company makes reports to the Board of Directors concerning
events to which responses were made and the details of the events, in accordance with the “Decision
Concerning the Preparation of Basic Policies and Systems Concerning the Construction of Internal Control
Systems.”

Status of initiatives concerning the properness and efficiency of the execution of duties


Meetings of the Board of Directors are held every month and as appropriate, in accordance with theRegulations of the Board of Directors. The Members of the Board in charge of businesses make quarterly
reports to the Board of Directors on the status of business execution within each business, including within
its subsidiaries.

With regard to decision-making, etc. on execution of important business, etc., the Company is converting
resolution procedures to electronic methods and is constructing a fast and efficient management system.
The Company also accurately records and creates minutes of meetings of the Board of Directors, andperforms appropriate storage and management of the information.

Securing the effectiveness of audits by Audit & Supervisory Board Members


Audit & Supervisory Board Members receive reports as appropriate from directors and employees of theCompany and its subsidiaries, regarding necessary information for audits. In addition to attending
important conferences, Audit & Supervisory Board Members also perform appropriate checks of thecontent of electronic resolutions concerning decision-making on the execution of business. In addition,
Audit & Supervisory Board Members regularly exchange opinions and otherwise communicate with eachsubsidiary’s own Audit & Supervisory Board Members to enhance audits performed by all Audit &Supervisory Board Members inside the JT Group.



The Operational Review and Business Assurance Division and the Legal and Compliance Division also
coordinate on conducting regular exchanges of information with Audit & Supervisory Board Members.



In order to assist the duties of Audit & Supervisory Board Members, the Company has established an
Audit & Supervisory Board Member’s Office that is independent of divisions responsible for execution,and has assigned necessary personnel to the Office. In addition, through consultation with Audit &Supervisory Board Members, the Company records a budget for expenses expected to be necessary for theduties of the Audit & Supervisory Board Members.

-9-

Consolidated Statement of Changes in Equity(Year ended December 31, 2023)(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
hedgesHedge costs

As of January 1, 2023

100,000

736,400(490,183)

1,001

85,796

8,546－

Profit for the period

－

－

－

－

－

－

－

Other comprehensive income(loss)－－－－

185,014

4,749

(17)

Comprehensive income (loss) forthe period

－

－

－

－

185,014

4,749

(17)

Acquisition of treasury shares

－

－

(1)

－

－

－

－

Disposal of treasury shares

－

78

990

(444)

－

－

－

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

－

－

－

－

－

－

－

Other increase (decrease)

－

－

－

－

－

(4,150)

－

－

78

989

(444)

－

(4,150)－100,000

736,478(489,194)557

270,810

9,145

(17)

Total transactions with the owners
As of December 31, 2023

- 10 -

(Millions of yen)
Equity attributable to owners of the parent company
Other components of equity
Net gain (loss)
on revaluationof financial
assets measured
at fair value
through othercomprehensive
incomeRemeasurements ofdefinedbenefitplans

As of January 1, 2023

8,966

－

Profit for the period－

Other comprehensive income(loss)

Noncontrollinginterests

Total equity

3,540,435

76,326

3,616,761

482,288482,288

3,021

485,310

178,375－

178,375

4,533

182,908(13,571)

178,375

482,288660,6637,554

668,217

－

－

－

－

(1)

－

(1)

Disposal of treasury shares

－

－

(444)

(505)

119

－

119

Share-based payments

－

－

－

505

505

22

526

Dividends－－－(367,415)(367,415)(2,945)(370,360)

Changes in the scope of
consolidation

－

－

－

－

－

(33)

(33)

Changes in the ownership interestin a subsidiary without a loss ofcontrol

－

－

－

(0)

(0)

1,413

1,413

Transfer from other componentsof equity to retained earnings(1,111)

13,571

12,460(12,460)

－

－

－

－

－

(4,150)－(4,150)－(4,150)Total transactions with the owners(1,111)

13,571

7,866(379,875)(370,942)(1,544)(372,486)

As of December 31, 2023

10,054－

290,550

3,192,323

3,830,156

82,336

3,912,491

Retainedearnings

Total

104,3093,089,909

－

－

2,199

(13,571)

Comprehensive income (loss) forthe period

2,199

Acquisition of treasury shares

Other increase (decrease)Total- 11 -

Notes to Consolidated Financial Statements
1. Significant matters for preparing consolidated financial statements(1) Accounting principles for preparing consolidated financial statements
The consolidated financial statements of Japan Tobacco Inc. (hereinafter referred to as the “Company”) and its subsidiaries(hereinafter collectively referred to as the “Group”) are prepared in accordance with International Financial Reporting Standards(hereinafter referred to as “IFRS”) pursuant to the provisions of Article 120, Paragraph 1 of the Ordinance on Accounting ofCompanies. Pursuant to the provisions of the second sentence of the same paragraph of the same Ordinance, some disclosure
items required under IFRS are omitted.
(2) Scope of consolidation
Number of consolidated subsidiaries: 221 companies
Major consolidated subsidiaries: TS Network Co., Ltd., Japan Filter Technology, Ltd., JT International S.A., Gallaher Ltd., Torii
Pharmaceutical Co., Ltd., and TableMark Co., Ltd.
(3) Scope of equity method
Number of affiliates accounted for using the equity method: 18 companies
Major affiliates accounted for using the equity method: Megapolis Distribution B.V.
Joint ventures are accounted for using the equity method.
(4) Accounting policies
A. Basis and method of valuation for financial assets other than derivativesi) Initial recognition and measurement
Financial assets are classified into financial assets measured at fair value through profit or loss, fair value through othercomprehensive income, and amortized cost. The Group determines the classification at initial recognition.
Financial assets are classified as financial assets measured at amortized cost if both of the following conditions are met.
Otherwise, they are classified as financial assets measured at fair value.
• The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows.
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding.
For financial assets measured at fair value, each equity instrument is designated as measured at fair value through profit orloss or as measured at fair value through other comprehensive income, except for equity instruments held for trading
purposes that must be measured at fair value through profit or loss. Such designations are applied consistently.
All financial assets are measured at fair value plus transaction costs that are attributable to the financial assets, except for thecase of being classified in the category of financial assets measured at fair value through profit or loss.
ii) Subsequent measurement
After initial recognition, financial assets are measured based on the classification as follows:(a) Financial assets measured at amortized cost
Financial assets measured at amortized cost are measured at amortized cost using the effective interest method.
(b) Other financial assets
Financial assets other than those measured at amortized cost are measured at fair value.
Changes in the fair value of financial assets measured at fair value are recognized as profit or loss.
However, changes in the fair value of equity instruments designated as measured at fair value through othercomprehensive income are recognized as other comprehensive income and the amount in other comprehensive income istransferred to retained earnings when equity instruments are derecognized or the decline in its fair value compared to its
acquisition cost is significant. Dividends on the financial assets are recognized in profit or loss for the year.
iii) Derecognition
Financial assets are derecognized when the rights to receive benefits from them expire or are transferred, or whensubstantially all the risks and rewards of the ownership are transferred.

- 12 -

iv) Impairment of financial assets
With respect to financial assets measured at amortized cost, the Group recognizes an allowance for doubtful accounts for
expected credit losses. The expected credit losses are calculated based on historical loss experience or future recoverable
amounts.
An allowance for doubtful accounts for trade receivables is always recognized at an amount equal to the lifetime expectedcredit losses. In principle, with respect to financial assets except for trade receivables, an allowance for doubtful accounts ismeasured at an amount equal to the 12-month expected credit losses. However, the allowance for doubtful accounts ismeasured at an amount equal to the lifetime expected credit losses if a credit risk on the financial asset has increased
significantly since initial recognition.
The Group assesses whether a credit risk on a financial asset has increased significantly based on a change of the default risk
considering the past due information, financial difficulties of obligors or downgrades of the internal credit rating.
The Group assesses a whole or part of the financial asset which is deemed extremely difficult to be collected as a default andrecognizes it as a credit-impaired financial asset. If the Group reasonably determines that a whole or part of the financial
asset is uncollectible, the carrying amounts of the financial assets are written-off directly.
The expected credit losses on trade receivables which are not assessed as credit-impaired financial assets are measured
collectively by an asset group consisting of a number of homogeneous counterparties.
An allowance for doubtful accounts for financial assets is recognized in profit or loss. If an event which causes a reduction in
the allowance for doubtful accounts occurs, a reversal of an allowance for doubtful accounts is recognized in profit or loss.
B. Basis and method of valuation for derivatives
The Group utilizes derivatives, including forward foreign exchange contracts and interest rate swap contracts, to hedge foreignexchange and interest rate risks. These derivatives are initially measured at fair value when the contract is entered into, and aresubsequently remeasured at fair value. Changes in the fair value of derivatives are recognized as profit or loss in the
consolidated statement of income. However, the gains or losses on the hedging instrument relating to the effective portion of
cash flow hedges and hedges of net investment in foreign operations are recognized as other comprehensive income.
C. Basis and method of valuation for inventories
The cost of inventories includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories
to their present location and condition.
Inventories are measured at the lower of cost or net realizable value, and the costs are determined by using the weightedaverage method. Net realizable value is determined as the estimated selling price in the ordinary course of business less theestimated costs of completion and estimated costs necessary to make the sale.
Leaf tobacco which is stored for more than 12 months before being used for production is included in current assets since it isheld within the normal operating cycle.
D. Depreciation methods for significant depreciable assetsi) Property, plant and equipment and investment property (excluding right-of-use assets)
Property, plant and equipment is measured by using the cost model and is stated at cost less accumulated depreciation andaccumulated impairment losses.
The acquisition cost includes any costs directly attributable to the acquisition of the asset and dismantlement, removal andrestoration costs, as well as borrowing costs eligible for capitalization.
Except for assets that are not subject to depreciation such as land, assets are depreciated using the straight-line method overtheir estimated useful lives.
Investment property is property held to earn rentals or for capital appreciation or both.
Investment property is measured by using the cost model and is stated at cost less accumulated depreciation and accumulated
impairment losses.
The estimated useful lives of major asset items are as follows:• Buildings and structures : 38 to 50 years• Machinery and vehicles : 10 to 18 years
The estimated useful lives and depreciation method are reviewed at each fiscal year end and if there are any changes made to
the estimated useful lives and depreciation method, such changes are applied prospectively as changes in estimate.

- 13 -

ii) Intangible assets (excluding right-of-use assets)
Intangible assets are measured by using the cost model and are stated at cost less accumulated amortization and accumulated
impairment losses.
Intangible assets acquired separately are measured at cost at the initial recognition, and the costs of intangible assets acquired
through business combinations are recognized at fair value at the acquisition date. Expenditures on internally generated
intangible assets are recognized as expense in the period when incurred, except for development expenses that satisfy thecapitalization criteria.
Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful lives and aretested for impairment whenever there is any indication of impairment. The estimated useful lives and amortization method of
intangible assets with finite useful lives are reviewed at each fiscal year end, and the effect of any changes in estimate would
be accounted for on a prospective basis.
The estimated useful lives of major intangible assets with finite useful lives are as follows:• Trademarks : 10 to 20 years• Software : 5 years
Intangible assets with indefinite useful lives and intangible assets that are not ready to use are not amortized, but they aretested for impairment individually or by cash-generating unit annually or whenever there is any indication of impairment.
iii) Right-of-use assets
At inception of a contract, the Group assesses whether the contract is, or contains, a lease if the contract conveys the right tocontrol the use of an identified asset for a period of time in exchange for consideration. The Group elects not to recognize
right-of-use assets and lease liabilities for short-term leases within 12 months and leases of low-value assets.
If a contract is, or contains, a lease, except for short-term leases and leases of low-value assets, the Group recognizes rightof-use assets and lease liabilities on the consolidated statement of financial position at the commencement date. The Group
recognizes the lease payments associated with short-term leases and leases of low-value assets as an expense on a straight-line
basis over the lease term.
Right-of-use asset is measured by using the cost model and is stated at cost less accumulated depreciation and accumulated
impairment losses.
An acquisition cost of a right-of-use asset includes the amount of the initial measurement of the lease liability, any lease
payments made at or before the commencement date, and any initial direct costs. The right-of-use asset is depreciated using thestraight-line method over its estimated useful life or lease term, whichever is shorter. The lease liability is initially measured at
the present value of the lease payment that is not paid at the commencement date. The lease payments are apportioned between
the financial cost and the reduction in the lease liability based on the effective interest method. The financial costs are recognizedin the consolidated statement of income.
E. Policy on accounting of significant provisions
The Group has present obligations (legal or constructive) resulting from past events and recognizes provisions when it isprobable that the obligations are required to be settled and the amount of the obligations can be estimated reliably.
If the effect of the time value of money is material, the amount of provisions is measured at the present value of theexpenditures expected to be required to settle the obligations. In calculating the present value, the Group uses the pretax
discount rate reflecting current market assessments of the time value of money and the risks specific to the liability.
In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets,” the Group recognizes a provision for
restructuring when it has a detailed formal plan for the restructuring and has raised a valid expectation in those affected that it
will carry out the restructuring by starting to implement that plan or announcing its main scheme to those affected by it.
Restructuring provisions include only the direct expenditures arising from the restructuring, which meet both of the following
criteria:• necessarily entailed by the restructuring.
• not associated with the ongoing activities of the entity.

- 14 -

F. Post-employment benefits
The Group sponsors defined benefit plans and defined contribution plans as employee retirement benefit plans.
The Company is obligated to bear pension expenses for a mutual assistance association incurred with respect to services in or
before June 1956 (prior to the enforcement of the Act on the Mutual Aid Association of Public Corporation Employees). Suchobligations are calculated and included in liabilities related to the retirement benefits.
For each plan, the Group calculates the present value of defined benefit obligations, related current service cost and past
service cost using the projected unit credit method. For a discount rate, a discount period is determined based on the period
until the expected date of benefit payment in each fiscal year, and the discount rate is determined by reference to market yields
for the period corresponding to the discount period at the end of the fiscal year on high quality corporate bonds or government
bonds. Liabilities or assets for defined benefit plans are calculated by the present value of the defined benefit obligation,
deducting the fair value of any plan assets (including adjustments for the asset ceiling for defined benefit plans and minimum
funding requirements, if necessary). Expected interest costs and interest income are recognized as financial costs.
Remeasurements of defined benefit plans are recognized in full as other comprehensive income in the period when they are
incurred and transferred to retained earnings immediately. Past service costs are recognized as profit or loss in the period whenincurred.
The cost for retirement benefits for defined contribution plans is recognized as an expense at the time of contribution.
G. Accounting for revenuei) Revenue from contracts with customers
Revenue is recognized based on the following five-step approach.
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Group mainly engages in the sale of tobacco products, prescription drugs, and processed foods. The Group evaluatesthat the performance obligation is satisfied when the customer obtains control of the products upon delivery and recognizes
revenue upon delivery of the products. Revenue is measured at the consideration promised in a contract with a customer, lessdiscounts, rebates and taxes, including consumption tax.
The tobacco excise taxes and other transactions in which the Group is involved as an agent are excluded from revenue. The
amount after deducting the tobacco excise taxes and other transactions is presented as “Revenue” in the consolidated
statement of income.
ii) Interest income
Interest income is recognized using the effective interest rate method.
iii) Dividend income
Dividend income is recognized when the shareholder’s right to receive payment is established.
H. Goodwill
Goodwill is stated at acquisition cost less accumulated impairment losses.
Goodwill is not amortized. It is allocated to cash-generating units that are identified according to types of businesses andtested for impairment annually or whenever there is any indication of impairment. Impairment losses on goodwill arerecognized in the consolidated statement of income and no subsequent reversal is made.

- 15 -

I. Method of foreign currency translation
Consolidated financial statements of the Group are presented in Japanese yen, which is the functional currency of theCompany. Each company in the Group specifies its own functional currency and measures transactions based on it.
Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing at the dates oftransactions or an approximation of the rate. Monetary assets and liabilities denominated in foreign currencies are translated
into the functional currency at the rates of exchange prevailing at the fiscal year end date. Differences arising from thetranslation and settlement are recognized as profit or loss. However, exchange differences arising from the translation offinancial instruments designated as hedging instruments for net investment in foreign operations (foreign subsidiaries),
financial assets measured at fair value through other comprehensive income, and cash flow hedges are recognized as othercomprehensive income.
The assets and liabilities of foreign operations are translated into Japanese yen at the rates of exchange prevailing at the fiscal
year end date, while income and expenses of foreign operations are translated into Japanese yen at the rates of exchange
prevailing at the dates of transactions or an approximation to the rate. The resulting translation differences are recognized asother comprehensive income. However, the income and expenses of the Group's subsidiaries in the hyperinflationary economy
are translated into Japanese yen at the rates of exchange prevailing at the fiscal year end date in accordance with thehyperinflationary accounting. Its details are stated in "M. Hyperinflationary Accounting Adjustments." In cases where foreign
operations are disposed of, the cumulative amount of translation differences related to the foreign operations is recognized as
profit or loss in the period of disposition.
J. Method of significant hedge accounting
The Group utilizes derivatives, including forward foreign exchange contracts and interest rate swap contracts, to hedge foreignexchange and interest rate risks. These derivatives are initially measured at fair value when the contract is entered into, and aresubsequently remeasured at fair value. Changes in the fair value of derivatives are recognized as profit or loss in the
consolidated statement of income. However, the gains or losses on the hedging instrument relating to the effective portion of
cash flow hedges and hedges of net investment in foreign operations are recognized as other comprehensive income.
At the inception of the hedge, the Group formally designates and documents the hedging relationship to which hedge
accounting is applied and the objectives and strategies of risk management for undertaking the hedge. The documentation
includes identification of the hedging instruments, the hedged items, the nature of the risks being hedged and how the hedging
relationship’s effectiveness is assessed. These hedges are assessed on an ongoing basis to determine whether the hedging
relationship is effective prospectively, even though it is expected that there is an economic relationship between the hedged
item and the hedging instrument, that the effect of credit risk does not dominate the value changes that result from that
economic relationship, and that the hedge ratio of the hedging relationship is the same as that resulting from the quantity of thehedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge
that quantity of the hedged item.
If a hedging relationship ceases to meet the hedge effectiveness requirement relating to the hedge ratio due to changes in an
economic relationship between the hedged item and the hedging instrument but the risk management objective remains thesame, the Group will adjust the hedge ratio so that it meets the qualifying criteria again. The Group discontinues hedge
accounting for the portion that does not meet the requirement when the hedging relationship ceases to meet the qualifying
criteria even after adjusting the hedge ratio. The Group performs highly effective hedging, and therefore generally expects thatno significant ineffective portion should arise.
Hedges that meet the stringent requirements for hedge accounting are classified into the following categories and accounted
for in accordance with IFRS 9 “Financial Instruments.”i) Fair value hedge
The gain or loss on the hedging instrument is recognized as profit or loss in the consolidated statement of income. However,changes in the fair value of the hedging instrument are recognized as other comprehensive income if the hedging instrument
hedges an equity instrument designated as at fair value through other comprehensive income. Regarding the hedging gain orloss on the hedged item, the carrying amount of the hedged item is adjusted and the change is recognized as profit or loss inthe consolidated statement of income. However, changes in fair value of an equity instruments which the Group elected topresent in other comprehensive income are recognized as other comprehensive income.

- 16 -

ii) Cash flow hedge
The effective portion of gains or losses on hedging instruments is recognized as other comprehensive income in the
consolidated statement of comprehensive income, while the ineffective portion is recognized immediately as profit or loss inthe consolidated statement of income. The time value of the foreign currency options is excluded from the designation ofhedging instrument and recognized as hedge costs under other components of equity separately.
The amounts of hedging instruments recognized in other comprehensive income are reclassified to profit or loss when thetransactions of the hedged items affect profit or loss. In cases where hedged items result in the recognition of non-financial
assets or liabilities, the amounts recognized as other comprehensive income are accounted for as adjustments to the original
carrying amount of non-financial assets or liabilities.
If the hedged future cash flows are no longer expected to occur, any related cumulative gain or loss that has been recognizedin equity as other comprehensive income is reclassified to profit or loss. If the hedged future cash flows are still expected tooccur, amounts that have been recognized in other comprehensive income are continued to be recognized in othercomprehensive income until the future cash flows occur.
iii) Hedge of net investment in foreign operations
Translation differences resulting from the hedge of net investment in foreign operations are accounted for similarly to a cash
flow hedge. The effective portion of gains or losses on hedging instruments is recognized as other comprehensive income,while the ineffective portion is recognized as profit or loss in the consolidated statement of income. At the time of thedisposal of the foreign operations, any related cumulative gain or loss that has been recognized in equity as othercomprehensive income is reclassified to profit or loss.
K. Fair Value of Financial Instruments
Fair value of financial instruments that are traded in active financial markets at year end refers to quoted prices or dealer
quotations.
If there is no active market, the fair value of financial instruments is determined using appropriate valuation models.
L. The Company and certain subsidiaries apply the group tax sharing system.
M. Hyperinflationary Accounting Adjustments
As required by IAS 29, "Financial Reporting in Hyperinflationary Economies," the Group’s consolidated financial statements
include the operating results and financial condition of the Group’s subsidiaries in the hyperinflationary economy, restated interms of the measuring unit current at the end of the reporting period.
The Group's subsidiaries in the hyperinflationary economy have restated their non-monetary items held at historical cost, suchas property, plant and equipment, by applying the conversion coefficient at the acquisition date. Monetary items and nonmonetary items held at current cost are not restated as they are considered to be expressed in terms of the measuring unit
current at the end of the reporting period.
(5) Changes in accounting policies
The Group has adopted the following new accounting standards, amended standards and new interpretations from the fiscal year
ended December 31, 2023.
IFRS
IAS 1

Presentation of Financial Statements

Description of new standards and amendments
Amendments to require companies to disclose their material accounting
policy information rather than their significant accounting policies
Introduction of temporary exceptions to the income tax accounting anddisclosure requirements arising from tax law enacted or substantively

IAS 12

Income taxes

enacted to implement International Tax Reform-Pillar Two Model Rules
and amendments to require companies to disclose information relating toincome taxes arising from that tax law

The adoption of the above standards and interpretations does not have a material impact on the consolidated financial statements.
IAS 12 states a temporary exception to eliminate the need for recognition and disclosure of deferred tax assets and liabilities related- 17 -

to the Pillar Two Model Rules. The Group has adopted this exception retroactively.
The Group does not recognize any deferred tax assets and liabilities related to the Pillar Two Model Rules.

- 18 -

2. Notes to accounting estimates
The following are estimates that have been recorded in the consolidated financial statements for the current fiscal year based on
accounting estimates and that will have material impacts on the consolidated financial statements for the next fiscal year.
(1) Impairment of Property, Plant and Equipment, Goodwill, Intangible Assets and Investment Properties
A. Amount recorded in the consolidated financial statements for the current fiscal year.
Plant and Equipment¥821,499 million
Goodwill
Intangible Assets¥2,616,440 million¥206,982 million

Investment Properties¥9,338 million
B. Information that helps understanding of the content of accounting estimates
With regard to property, plant and equipment, goodwill, intangible assets and investment properties, if there is any
indication that the recoverable amount has declined below the carrying amount, the Group performs an impairment test.
Such indications include, but are not limited to significant changes with adverse effect on the results of past or projectedbusiness performance, significant changes in the use of acquired assets or in overall business strategy, and significant
deteriorations in industry or economic trends. With regard to goodwill, an impairment test is conducted at least once a year
regardless of whether there are any indicators of impairment.
An impairment test is performed by comparing the carrying amount to the recoverable amount of the asset under assessment.
If the recoverable amount is below the carrying amount, impairment losses are recognized. The recoverable amount iscalculated based primarily on a discounted cash flow model. Certain assumptions must be made for the useful lives andfuture cash flows of the assets, the applicable discount rates as well as long-term growth rates. These assumptions are basedon the best estimates and judgments made by management. However, there is a possibility that these assumptions will beaffected by changes in uncertain future economic conditions, which may have a material impact on the consolidated
financial statements in future periods.
(2) Post-employment Benefits
A. Amount recorded in the consolidated financial statements for the current fiscal year.
Retirement benefit assets
Retirement benefit liabilities¥65,856 million¥279,443 million

B. Information that helps understanding of the content of accounting estimates
The Group has various types of retirement benefit plans, including defined benefit plans. In addition, the mutual pension
benefits plan of the Company is one of the public pension systems under the jurisdiction of the government of Japan and theCompany is legally obligated to bear a part of the pension costs of the plan.
The present value of defined benefit obligations on each of these plans and the related service costs are calculated based on
actuarial assumptions. These actuarial assumptions make use of estimates and judgments on a number of variables, including
discount rates and inflation rate.
The Group obtains advice from external pension actuaries with respect to the appropriateness of their actuarial assumptions
including the aforementioned variables.
The actuarial assumptions are determined based on the best estimates and judgments made by management. However, there
is a possibility that these assumptions will be affected by changes in uncertain future economic conditions, or by the
publication or amendment of related laws, which may have a material impact on the consolidated financial statements infuture periods.

- 19 -

(3) Provisions
A. Amount recorded in the consolidated financial statements for the current fiscal year.
Provisions¥64,161 million
B. Information that helps understanding of the content of accounting estimates
The Group recognizes various provisions, including provisions for asset retirement obligations and restructuring, in the
consolidated statement of financial position.
These provisions are recognized based on best estimates of the expenditure required to settle the obligations, taking into
account the pertinent risks and uncertainties which exist at the year-end for those obligations.
Expenditures required to settle the obligations are calculated by taking possible results into account comprehensively;
however, they may be affected by the occurrence of unexpected events or changes in conditions which may have a material
impact on the consolidated financial statements in future periods.
(4) Income Taxes
A. Amount recorded in the consolidated financial statements for the current fiscal year.
Income tax payables¥29,647 million
Deferred tax assets
Deferred tax liabilities¥89,379 million¥40,586 million

B. Information that helps understanding of the content of accounting estimates
The Group operates business activities around the world, and it recognizes current tax liabilities and income taxes as theestimated amounts to be paid to the tax authorities based on the estimation in accordance with their laws and regulations.
Calculating current tax liabilities and income taxes requires estimates and judgment on various factors, including theinterpretation of tax regulations by taxable entities and the tax authority in the jurisdiction or the experience of past tax
audits.
Therefore, there may be differences between the amount recognized as tax liabilities and income taxes and the amount of
actual tax liabilities and income taxes. These differences may have a material impact on the consolidated financial
statements in future periods.
In addition, deferred tax assets are recognized to the extent that it is probable that taxable income will be available against
which deductible temporary differences can be utilized.
In recognizing the deferred tax assets, when judging the possibility of the future taxable income, the Group reasonably
estimates the timing and amount of future taxable income based on the business plan.
The timing when taxable income arises and the amount of such income may be affected by changes in uncertain future
economic conditions. Therefore, this may have a material impact on the consolidated financial statements in future periods.
(5) Contingencies
With regard to contingencies, any items that may have a material impact on business in the future are disclosed in light of all
the available evidence as of the year end and by taking into account the probability of these contingencies and their impact onfinancial reporting.
The content of contingencies is described in “10. Contingencies.”(6) Other information
In relation to the recent situation in Russia and Ukraine, there is no material impact on the accounting estimates and judgments
at present.

- 20 -

3. Notes to changes in accounting estimates
Previously, the Group used the estimated useful life of 10 to 15 years for tobacco manufacturing machinery. However, inconsideration of changes in the business environment, the estimated useful lives of some tobacco manufacturing machines havebeen revised to 18 years from the current fiscal year based on the economically usable forecast period in line with actual conditions
and this change will also be applied prospectively.
As a result of this change, operating income for the year ended December 31, 2023 increased by ¥8,333 million compared with theprevious method.

- 21 -

4. Notes to consolidated statement of financial position(1) Accumulated depreciation of assets (including accumulated impairment losses)
Property, plant and equipment:¥
Goodwill and intangible assets:
Investment property:¥¥

1,228,214million
1,286,459million
17,693million(2) Assets pledged as collateral and liabilities relating to collateral
Pursuant to Article 6 of the Japan Tobacco Inc. Act, the Company’s properties are pledged as general collateral for its
corporate bonds.
Amount of liabilities relating to collateral
Bonds:¥

125,000million¥¥

3,905million
6,430million(3) Allowance for doubtful accounts directly deducted from assets
Trade and other receivables:
Other financial assets:- 22 -

5. Notes to consolidated statement of changes in equity(1) Class and total number of issued shares and class and total number of treasury shares(Thousands of shares)
Number of shares as ofJanuary 1, 2023

Increase for theyear ended
December 31, 2023

Decrease for theyear ended
December 31, 2023

Number of shares as ofDecember 31, 2023

2,000,000--

2,000,000

225,1460455

224,692

Issued shares
Ordinary shares
Treasury shares
Ordinary shares(Notes) The increase of 0 thousand treasury shares (ordinary shares) is due to purchase of shares less than one unit. The decrease of
455 thousand treasury shares (ordinary shares) is composed of 260 thousand treasury shares due to exercise of share options,
158 thousand treasury shares due to disposal for restricted stock remuneration and 37 thousand treasury shares due to disposal
for performance share unit remuneration.
(2) Cash dividendsi) Dividends payments
Total dividends Dividends per share(Millions of yen)
(Yen)

Resolution

Class of shares

Basis date

Effective date

Annual Shareholders’Meeting

Ordinary shares

200,558

113

December 31, 2022

March 27, 2023

Ordinary shares

166,856

94

June 30, 2023

September 1, 2023

(March 24, 2023)
Board of Directors(July 31, 2023)

ii) Dividends whose basis date is in the year ended December 31, 2023 but whose effective date falls in the year ending
December 31, 2024.
The following proposal will be placed on the agenda of the Annual Shareholders’ Meeting to be held on March 22, 2024.
(Proposal)

Class ofsharesTotal dividends(Millions of yen)

Source ofdividends

Dividends per
share (Yen)

Ordinaryshares177,531

Retainedearnings

100

Basis date

Effective date

AnnualShareholders’Meeting

December 31, 2023

March 25, 2024

(March 22, 2024)(3) Class and number of shares under subscription rights to shares as of December 31, 2023 (excluding rights whose exercise period
has not yet begun)
Ordinary shares

351,400shares- 23 -

6. Revenue recognition(1) Disaggregation of Revenue
The disaggregation of “Revenue” is as follows. The amounts are presented after the elimination of intercompany transactions.
(Millions of yen)
Reportable Segments
Tobacco(Note 2)

Pharmaceuticals

Other

Processed
Food

ConsolidatedCore revenue
from tobacco business(Note 1)
Other
Total

2,478,625－－－

2,478,625

112,285

94,875

153,854

1,439

362,452

2,590,910

94,875

153,8541,439

2,841,077(Note 1) Core revenue from tobacco business does not include revenue related to the distribution business and contract manufacturing.
(Note 2) Revenue from RRP in core revenue from the “Tobacco Business” was ¥81,641 million. RRP represents Reduced-Risk
Products with potential to reduce the health risks associated with smoking.
Breakdown of core revenue from tobacco business by cluster is as follows.
(Millions of yen)
Clusters
AsiaCore revenue

Western Europe

796,919603,254

EMA
1,078,451

Asia: All over Asia including Japan
Western Europe: Western Europe region
EMA: Africa, Middle East, Eastern Europe, Turkey, Americas and all duty-free markets
Asia includes Taiwan, Japan, the Philippines, etc.
Western Europe includes Italy, the United Kingdom, Spain, etc.
EMA includes Turkey, Romania, Russia, etc.

- 24 -

Total
2,478,625

A. Tobacco BusinessTobacco business engage in the sale of tobacco products.
The Group evaluates that the performance obligation is satisfied when the customer obtains control of the products
upon delivery and recognizes revenue upon delivery of the products. Revenue is measured at the consideration
promised in the contract with customers, less discounts, rebates and taxes, including consumption tax. In addition,
where the Group makes payments to the customer, except in the case when consideration payable to the customer isa payment for a distinct product or service from the customer, revenue is measured at the amount which isconsideration promised with the customer, less consideration payable to the customer.
Considerations for transactions are received mainly within one year from the satisfaction of the performanceobligations and includes no significant financing components.
The tobacco excise taxes and other transactions in which the Group is involved as an agent are excluded fromrevenue. The inflow of economic benefits after deducting the tobacco excise taxes and other transactions ispresented as “Revenue” in the consolidated statement of income.
B. Pharmaceutical BusinessPharmaceutical business mainly engages in the sale of prescription drugs and licensing.
The Group evaluates that the performance obligation is satisfied when the customer obtains control of the products
upon delivery and recognizes revenue upon delivery of the products. Revenue is measured at the consideration
promised in the contract with customers, less discounts, rebates and taxes, including consumption tax. In addition,
where the Group makes payments to the customer, except the case when consideration payable to the customer is apayment for a distinct product or service from the customer, revenue is measured at the amount of consideration
promised with the customer, less consideration payable to the customer.
Revenue from licensing is generated by licensing out the rights to develop and market each compound to licensees
in the development stage, and the Group receives upfront income, milestone revenue and sales-based royalties.
Upfront income is recognized at the time the customer obtains control of the license. Milestone revenue isrecognized at the time the milestone agreed between the parties such as the progress of development is achieved.
Sales-based royalties are measured based on the Group’s licensees’ sales, and recognized by taking into
consideration the timing of occurrence.
Considerations for transactions are received mainly within one year from satisfying their performance obligations
and includes no significant financial component.
C. Processed Food Business
Processed Food business engages in the sale of frozen and ambient processed foods and seasonings.
The Group evaluates that the performance obligation is satisfied when the customer obtains control of the products
upon delivery and recognizes revenue upon delivery of the products. Revenue is measured at the consideration
promised in a contract with a customer, less discounts, rebates and taxes, including consumption tax. In addition,
where the Group makes payments to the customer, except the case when consideration payable to the customer is apayment for a distinct product or service from the customer, revenue is measured at the amount of consideration
promised with the customer, less consideration payable to the customer.
Considerations for transactions are received mainly within one year from satisfying their performance obligations
and includes no significant financial component.
Transactions in which the Group is involved as an agent are excluded from revenue. The inflow of economic
benefits after deducting these transactions is presented as “Revenue” in the consolidated statement of income.
(2) Transaction Price Allocated to the Remaining Performance Obligations
The Group uses the practical expedient and does not disclose information on the remaining performance obligations because it
has no significant transactions with initial expected contractual terms exceeding one year. There are no significant amounts ofconsiderations from contracts with customers that are not included in transaction prices.

- 25 -

7. Financial instruments(1) Status of financial instruments
The Group is exposed to financial risks (credit risk, liquidity risk, foreign exchange risk, interest rate risk and market pricefluctuation risk) in the process of its management activities, and it manages risks based on a specific policy in order to avoid or
reduce said risks. The results of risk management are regularly reported by the department having jurisdiction over financial
operations to the president and the Board of Directors of the Company.
The Group policy limits derivatives to transactions for the purpose of mitigating risks from transactions based on actual demand.
Therefore, the Group does not transact derivatives for speculation purposes or trading purposes.
(2) The breakdown of financial instruments by fair value level
The fair value hierarchy of financial instruments is categorized from Level 1 to Level 3 as follows:
Level 1: Fair value measured at the quoted price in the active market
Level 2: Fair value that is calculated using the observable price other than categorized in Level 1 directly or indirectly
Level 3: Fair value that is calculated based on valuation techniques which include inputs that are not based on observable market
datai) Financial Instruments Measured at Amortized Cost
The carrying amount on the consolidated statement of financial position and fair value hierarchy of financial instruments
measured at amortized cost as of December 31, 2023 are as follows:(Millions of yen)
Carrying amount on
consolidated statementof financial position
Long-term borrowings (Note)
Bonds

147,390785,901

Fair value
Level 1

Level 2

Level 3

147,627－
732,331

Total
147,627
732,331－－－(Note) Current portion is included.
With regard to short-term financial assets and short-term financial liabilities measured at amortized cost, the fair value
approximates the carrying amount.
The fair value of long-term borrowings is calculated based on the present value which is obtained by discounting the total of theprincipal and interest by the interest rate assumed in a case where the same loan is newly made.
ii) Financial Instruments Measured at Fair Value
The fair value hierarchy of financial instruments measured at fair value as of December 31, 2023 is as follows:(Millions of yen)
Level 1
Derivative assets
Equity securities
Note and accountreceivables
Other
Total
Derivative liabilities
Total

Level 2

Level 3

Total－
22,69619,187－
11,585

19,187

－

－

5,307

－

5,307

686

4,799

14,976

20,461

23,382

29,293

26,56079,236－25,076－25,076－25,076－25,076- 26 -

34,281

8. Investment property(1) Status of investment property
The Group owns some rental properties such as office buildings in Tokyo and other areas.
(2) Fair value of investment property
The carrying amount on the consolidated statement of financial position and the fair value of investment properties as ofDecember 31, 2023 are as follows:(Millions of yen)
Carrying amount on consolidated statement offinancial position
Investment property

Fair value

9,338

21,574(Notes) 1. The carrying amount on the consolidated statement of financial position is the acquisition cost less accumulated
depreciation and accumulated impairment losses, if any.
2. The fair value of investment properties is determined based on a valuation conducted by an external real estate appraiser.
The valuation is made in accordance with the appraisal standards of the country where the investment property is locatedand based on market evidence of transaction prices for similar assets.

9. Per share information(1) Equity attributable to owners of the parent company per share:¥

2,157.46(2) Basic earnings per share:(3) Diluted earnings per share:¥¥

271.69271.63- 27 -

10. Contingencies
Contingent liabilities
The Company and some of its subsidiaries are defendants in legal proceedings. Provisions are not accounted for in matters where it
is not practicable to reasonably estimate the final outcomes.
The Company and some of its subsidiaries, who are defendants in such legal proceedings, believe that its defenses asserted in theseproceedings are based on substantial evidence and implement the system for response to action with the assistance of externallawyers.
(1) Smoking/vaping and health related litigation
Some of the Company’s subsidiaries are defendants in lawsuits filed by plaintiffs seeking damages for harm allegedly caused bysmoking or vaping, the marketing of tobacco or E-Vapor products, or exposure to tobacco smoke. As of December 31, 2023,
there were a total of 21 smoking/vaping and health related cases pending in which some of the Company’s subsidiaries werenamed as a defendant or for which the Company may have certain indemnity obligations pursuant to the agreement such as theCompany’s acquisition of RJR Nabisco Inc.’s overseas (non-U.S.) tobacco operations.
In March 2019, the Quebec Court of Appeal dismissed the appeal by three Canadian tobacco manufacturers including JTIMacdonald Corp. (hereinafter referred to as “JTI-Mac”), the Company’s Canadian subsidiary, of the lower court decision in thetwo class action lawsuits in Quebec. The Quebec Court of Appeal ordered a total damage award against the appellants ofapproximately ￥1,468.1 billion (approximately CAD 13.7 billion), in which the share of the total damage award against JTIMac is approximately ￥190.3 billion (approximately CAD 1.8 billion). Given the Quebec Court of Appeal’s decision, JTI-Mac
filed for protection from its creditors under the Companies’ Creditors Arrangement Act (CCAA), and the Ontario Superior Court
has granted the CCAA application and extended protection in favor of JTI-Mac (hereinafter referred to as “CCAA
Proceedings”). All of the below Canadian matters against JTI-Mac have been stayed by the CCAA Proceedings, under which
JTI-Mac carries on business in the ordinary course.
The major ongoing smoking and health related cases are as follows:i) Individual claim
There is one individual case brought against the Company’s indemnitee in South Africa.
ii) Class actions
There are eight ongoing class actions in Canada against the Company’s subsidiary and/or indemnitees. The cases are stayed by
the CCAA Proceedings.
iii) Health-care cost recovery litigation
There are ten ongoing health-care cost recovery cases in Canada pending against the Company’s subsidiary and indemnitees
brought by all the Canadian provinces (except three Canadian territories). The cases are stayed by the CCAA Proceedings.
(2) Other legal proceedings
The Company and some of its subsidiaries are also engaged in other legal proceedings such as commercial and tax disputes.

- 28 -

11. Significant subsequent events
No items to report.

12. All figures are rounded off to the nearest unit.

- 29 -

Nonconsolidated Statement of Changes in Net Assets(Year ended December 31, 2023)(Millions of yen)
Shareholders’ equity
Capital surplus

Retained earnings
Other retained earnings

Capitalstock

As of January 1, 2023

Legal capitalsurplus

Othercapitalsurplus

Total capitalsurplusLegalretainedearnings

Reserve forinvestment
SpecialReserve forloss onaccount for
reduction
developing
reduction
entry
new
entry
business

Retainedearnings
brought
forwardTotal
retainedearnings

100,000

736,400－

736,400

18,776331

34,780574

956,333

1,010,794

－

－

－

－

－

－

－

－

－

－

100,000

736,400－

736,400

18,776331

34,780574

956,333

1,010,794

Provision of reservefor investment loss
on developing new
business

－

－

－

－

－

326

－

－

(326)

－

Reversal of reservefor investment loss
on developing new
business

－

－

－

－

－

(331)

－

－

331

－

Provision of reserve
for reduction entry

－

－

－

－

－

－

628

－

(628)

－

Reversal of reserve
for reduction entry

－

－

－

－

－

－

(2,487)

－

2,487

－

Provision of special
account for reduction
entry

－

－

－

－

－

－

－

914

(914)

－

Reversal of special
account for reduction
entry

－

－

－

－

－

－

－

(574)

574

－

Dividends fromsurplus

－

－

－

－

－

－

－

－

(367,415)(367,415)

Net income

－

－

－

－

－

－

－

－

184,788

184,788

Purchase of treasury
shares

－

－

－

－

－

－

－

－

－

－

Disposal of treasury
shares

－

－

78

78

－

－

－

－

－

－

Net changes of items
other thanshareholders’ equity

－

－

－

－

－

－

－

－

－

－

Total changes of items
during the period

－

－

78

78

－

(5)

(1,858)341(181,104)(182,627)

100,000

736,400

78

736,478

18,776326

32,922

914

775,229

828,167

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

As of December 31,
2023- 30 -

(Millions of yen)
Shareholders’ equity

Valuation and translation adjustments
Subscription
rights tosharesTotal net
assets

10,631

1,001

1,368,643

－

－

－

－

6,903

3,728

10,631

1,001

1,368,643

－

－

－

－

－

－

－

－

－

－

－

－

－

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－(367,415)

－

－

－

－

(367,415)

Net income－

184,788

－

－

－

－

184,788

Purchase of treasury
shares

(1)

(1)

－

－

－

－

(1)

Disposal of treasury
shares

990

1,068

－

－

－

－

1,068

Net changes of items
other thanshareholders’ equity

－

－

(358)

(6,704)(7,062)(444)(7,506)

Total changes of items
during the period

989(181,560)(358)(6,704)(7,062)(444)(189,066)(489,194)

1,175,451

6,545(2,975)

3,569

557

1,179,577

Treasury shares

Total
shareholders’equityValuationdifference on
available-forsale securities(490,183)

1,357,011

6,903

3,728

－

－

－

(490,183)

1,357,011

Provision of reservefor investment loss
on developing new
business－

Reversal of reservefor investment loss
on developing new
business

As of January 1, 2023
Cumulative effects ofchanges inaccounting policies
Restated balance

Deferred
gains orlosses onhedgesTotalvaluation andtranslation
adjustments

Changes of items
during the period

As of December 31,
2023- 31 -

Notes to Nonconsolidated Financial Statements
1. Significant accounting policies(1) Basis and method of valuation for securities
Shares of subsidiaries and affiliates:
Stated at cost determined by the moving-average method.
Available-for-sale securities:
Securities with a market price:
Stated at fair value based on market prices on the closing date of the accounting period. (Valuation difference is stated as acomponent of net assets and the cost of securities sold is calculated by applying the moving-average method.)
Securities without a market price:
Stated at cost determined by the moving-average method.
(2) Basis and method of valuation for derivatives
Stated based on the fair value method.
(3) Basis and method of valuation for inventories
Stated at cost as determined by the average cost method.
(Balance sheet amounts are measured at the lower of cost or net selling value.)(4) Depreciation methods for depreciable assetsi) Property, plant and equipment (excluding leased assets)
The declining-balance method is applied. However, the straight-line method is applied for buildings (excluding accompanying
facilities) acquired on or after April 1, 1998 and for accompanying facilities and structures acquired on or after April 1, 2016.
The main useful lives are as follows:
Buildings (excluding accompanying facilities):
Machinery and equipment:

38 to 50 years
10 to 18 yearsii) Intangible assets (excluding leased assets)
Straight-line method
The main useful lives are as follows:
Patent right:
Right of trademark:

8 years
10 years

Software:
Goodwill:

5 years
10 yearsiii) Leased assets
For finance leases that do not transfer ownership of the leased property to the lessee, depreciation expense is mainly computedby the straight-line method over the lease period as the useful life assuming no residual value.

- 32 -

(5) Policy on accounting of provisionsi) Allowance for doubtful accounts
Provided for possible losses from bad debts at an amount determined based on the historical default rate for ordinary
receivables and the individual recoverability of specific doubtful receivables from customers experiencing financial difficulties.
ii) Provision for bonuses
Provided based on the estimated payable amount to provide for the payment of bonuses to employees and directors.
iii) Provision for retirement benefits
Provided in preparation for the payment of retirement benefits to employees based on the estimated retirement benefit
obligations and fair values of plan assets as of the end of this fiscal year. In calculating retirement benefit obligations, thebenefit formula basis is used as the method of attributing expected benefit to periods up to the end of this fiscal year.
Past service cost is amortized using the straight-line method over the average remaining years of service of the employees (10years).
Actuarial gains and losses are amortized from the year following the year in which the gains or losses are recognized using thestraight-line method over the average remaining years of service of the employees (10 years).
Also included in the provision for retirement benefits is the portion of public pension expenses for mutual assistanceassociation during certain periods in or before June 1956 (prior to the enforcement of the Act on the Mutual Aid Association of
Public Corporation Employees).
(6) Policy on translation of assets and liabilities denominated in foreign currency into Japanese yen
Receivables and payables denominated in foreign currencies are translated into Japanese yen at the rates prevailing at the closing
date of the accounting period with translation differences treated as gains or losses occurring in the corresponding fiscal year.
(7) Policy on accounting of revenue and expense
Revenue from contracts with customers
Revenue is recognized based on the following five-step approach.
Step 1: Identify the contract with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when the entity satisfies a performance obligation
The Company mainly engages in the sale of tobacco products and prescription drugs. The Company evaluates that theperformance obligation is satisfied when the customer obtains control of the products upon delivery and recognizes revenue
upon delivery of the products. Revenue is measured at the consideration promised in a contract with a customer, less discounts,
rebates and taxes, including consumption tax.
The tobacco excise taxes are excluded from revenue. The amount after deducting the tobacco excise taxes and other transactions
is presented as "Net sales" in the nonconsolidated statement of income.
(8) Method of hedge accounting
Deferral hedge accounting is applied.
For interest rates and currency swaps, if they satisfy the requirements for treatment that incorporates swaps into underlying
accounting items (accounting by applying foreign exchange rate stipulated in the contracts; exceptional treatment), they areaccounted for by incorporating swaps into underlying accounting items.
(9) Adoption of Group Tax Sharing System
The Company adopts the group tax sharing system.

- 33 -

(10) Changes in accounting policies(Application of the Implementation Guidance on Accounting Standard for Fair Value Measurement)
The Implementation Guidance on Accounting Standard for Fair Value Measurement (ASBJ Guidance No. 31, June 17, 2021;
hereinafter, “Implementation Guidance on Fair Value Measurement Accounting Standard”) has been applied from the beginningof the current fiscal year. In accordance with the transitional treatment set forth in Paragraph 27-2 of the Implementation
Guidance on Fair Value Measurement Accounting Standard, this accounting standard has been prospectively applied from the
beginning of the current fiscal year.
There is no impact on the financial statements.
(11) Changes in presentation method
Foreign exchange gains and losses had previously been included in “Other” under non-operating income or non-operating
expenses in nonconsolidated statement of income. However, in the current fiscal year, it is presented separately as “Foreignexchange losses” under non-operating expenses as the amount became material. In the previous fiscal year, the foreign exchange
gains included in “Other” under non-operating income was ¥ 469 million.

- 34 -

2. Notes to accounting estimates
The following are the estimates and assumptions that have material impacts on the amounts recognized in the nonconsolidated
financial statements.
In relation to the recent situation in Russia and Ukraine, there is no material impact on the accounting estimates and judgments atpresent.
Evaluation of shares of subsidiaries and affiliates(1) Amounts recorded in the nonconsolidated financial statements for the current fiscal year
Shares of subsidiaries and affiliates¥1,502,043 million(2) Information that helps understanding of the content of accounting estimates
Of the shares of subsidiaries and affiliates recorded in the balance sheet at the end of the current fiscal year, the shares of JT
International Holding B.V., a subsidiary, amounted to ¥ 1,356,191 million. JT International Group Holding B.V., a previously
subsidiary, was extinguished, due to an absorption-type merger with JT International Holding B.V., on August 23, 2023. Whether
or not to recognize impairment of the shares of that company is determined by comparing the carrying amount of those shares tothe actual value calculated based on net assets of that company. In addition, the Company determines whether the actual value of
those shares has declined significantly or not by referring to the result of the impairment test of goodwill allocated to the tobacco
cash-generating unit in the consolidated financial statements in accordance with IFRS. The assumptions used in the impairment
test are based on management’s best estimates and judgment. However, they may be affected by the results of changes in
uncertain future economic conditions, and if a review is necessary, it may have a significant impact on the amounts recognized in
the nonconsolidated financial statements in future periods.

3. Notes to change in accounting estimates
Change in the estimated useful lives of tobacco production machinery
The Company had previously used a period of 10 years for the estimated useful lives of tobacco production machinery. However,inconsideration of changes in the business environment, the Company has, from the current fiscal year, revised the estimated useful
lives for some tobacco production machinery to 18 years based on estimated economically useful lives that are more consistentwith
actual conditions and applied this change prospectively.
As a result, operating profit for the current fiscal year increased by ¥1,173 million compared to the figure calculated using theprevious method.

- 35 -

4. Notes to nonconsolidated balance sheet(1) Receivables and payables with respect to subsidiaries and affiliates (excluding items separately presented)
Short-term receivables:¥
14,723 million
Short-term payables:
Long-term payables:(2) Accumulated depreciation of property, plant and equipment:¥¥

10,944 million
27 million¥

432,256 million(3) Pursuant to Article 6 of the Japan Tobacco Inc. Act, the Company’s assets are pledged as general collateral for its corporate
bonds.
Amount of liabilities relating to collateral:

Bonds

¥

125,000 million(4) Guarantee obligations
Guaranteed party

Guarantee amountType of guarantee obligation(Millions of yen)
JT International
Financial Services B.V.

670,539

Bond guarantee, guarantee
denominated in foreign currencies¥

670,539 million

(EUR
(USD

2,022 million)
1,986 million)(GBP

400 million)

JT International Company
Netherlands B.V.

69,726

Loan guarantee, guarantee
denominated in foreign currencies¥(EUR

69,726 million
445 million)

JT International Hellas A.E.B.E.

30,682

Loan guarantee, guarantee
denominated in foreign currencies¥(EUR

30,682 million
196 million)

Gallaher Ltd.

28,518¥28,518 million

JT International spol. s r.o.
JT International Germany GmbH

19,69916,100JT International S.A.

14,359PT. Karyadibya Mahardhika

11,247

JT Canada LLC Inc.

10,535

JT International Zagreb d.o.o.

Loan guarantee, guarantee
denominated in foreign currencies
Loan guarantee, guarantee(USD¥

201 million)others
19,699 million

denominated in foreign currencies(CZK

3,105 million)others

Loan guarantee, guarantee
denominated in foreign currencies¥(EUR

16,100 million
103 million)

Loan guarantee, guarantee¥(CHF

14,359 million
44 million)

denominated in foreign currencies
Loan guarantee, guarantee
denominated in foreign currencies
Loan guarantee, guarantee

(USD
(EUR

26 million)
20 million)others¥

11,247 million(IDR

1,220,960 million)¥

10,535 million

denominated in foreign currencies(CAD

98 million)

10,200Loan guarantee, guarantee
denominated in foreign currencies¥(EUR

10,200 million
65 million)

Other (42 companies)

91,566

Loan guarantee

Total

973,170(5) Payables to Directors and Audit & Supervisory Board Members
Long-term payables:¥

77 million(6) “Cash management system deposits received” are funds entrusted in the cash management system for domestic groupcompanies.

- 36 -

5. Notes to nonconsolidated statement of income(1) Amount of transactions with subsidiaries and affiliates
Net sales:¥

51,022 million

Purchase of goods:
Selling, general and administrative expenses:¥¥

67,184 million
82,632 million

Dividends income:Amount of non-operating transactions:¥¥

162,733 million
15,521 million(2) Total research and development expenses are ¥60,963 million, all of which were recorded as general and administrative
expenses.

6. Notes to nonconsolidated statement of changes in net assets
Class and number of shares of treasury shares(Thousands of shares)
Number of shares as ofJanuary 1, 2023

Increase for the year
ended December 31,
2023

Decrease for the year
ended December 31,
2023

Number of shares asof December 31, 2023

Treasury shares
Ordinary shares

225,1460455

224,692

Total

225,1460455

224,692(Note) The increase of 0 thousand treasury shares (ordinary shares) is due to purchase of shares less than one unit. The decrease of 455
thousand treasury shares (ordinary shares) is composed of 260 thousand treasury shares due to exercise of share options, 158
thousand treasury shares due to disposal for restricted stock remuneration and 37 thousand treasury shares due to disposal for
performance share unit remuneration.

- 37 -

7. Tax effect accounting(1) Breakdown of deferred tax assets and deferred tax liabilities by major cause
Deferred tax assets
Provision for retirement benefits
Obligations pertaining to mutual assistance pension benefits¥¥

24,502 million
5,376 million

Investments in subsidiaries
Accounts payable to employees who have agreed to early retirement¥¥

6,755 million
1,796 million

Other

¥

46,002 million

Subtotal¥

84,432 million¥(18,534)million¥

65,898 million

Deferred tax liabilities
Reserve for reduction entry¥(14,400)million

Deferred gains or losses on hedges
Valuation difference on available-for-sale securities¥¥(11,157)million(2,863)million

Other

Less valuation allowance
Deferred tax assets total¥(12,785)million

Deferred tax liabilities total¥(41,204)million

Net deferred tax assets¥

24,694 million(2) The breakdown of major items that caused significant differences between the effective statutory tax rate and the actual tax rate
when applying tax effect accounting
Effective statutory tax rate

30.43%(Adjustments)
Permanent difference arising from non-deductible items including entertainment expenses

0.60%

Permanent difference arising from non-taxable items including dividends income
Tax credit of items including research and development expenses(24.16%)(2.33%)

Changes in valuation allowance
Other(0.03%)
0.77%

Actual effective tax rate after applying tax effect accounting

5.27%(3) Accounting for corporate tax and local corporate tax or tax effect accounting related to these taxes
Following the adoption of the group tax sharing system, the Company applied the "Practical Solution on the Accounting andDisclosure Under the Group Tax Sharing System" (ASBJ PITF No. 42, August 12, 2021) for the accounting treatment anddisclosure of corporate tax and local corporate taxes or tax effect accounting related to these taxes.

- 38 -

8. Related-party transactions
Subsidiaries and Affiliates
Transaction amountType

Ownership
ratio ofvoting rights

Name

SubsidiaryType

Table Mark
Co., Ltd.

Directownership
100%

Relationwithrelated-parties

Lending offunds

Description oftransaction

Lending offunds

Receipt of
repayment of
funds

millions of yen

millions of yen

Lending offunds(Notes 1, 2)

26,17531,508End-of-periodbalanceItemmillions of yen
Short-term loan
receivables fromsubsidiaries andaffiliates

26,686Long-term loan
receivables fromsubsidiaries andaffiliates

5,558

Ownership
ratio ofvoting rights

Relationwith relatedparties

TS Network Co., Ltd.

Directownership
85.25%

Deposits received
for cashmanagement
systemReceipt of surplus funds(Notes 1, 2)-

Cash management
system deposits
received

221,098

Japan Filter
Technology, Ltd.

Directownership100%

Deposits received
for cashmanagement
systemReceipt of surplus funds(Notes 1, 2)-

Cash management
system deposits
received

26,992Torii PharmaceuticalCO., Ltd.

Directownership
54.85%

Deposits received
for cashmanagement
systemReceipt of surplus funds(Notes 1, 2)-

Cash management
system deposits
received

3,677

JT International
Financial Services
B.V.

Indirectownership
100%

Guarantee ofobligations

Guarantee of obligations(Note 3)

670,539--

JT International
Company Netherlands
B.V.

Indirectownership
100%

Guarantee ofobligations

Guarantee of obligations(Note 3)69,726--

JT International
Hellas A.E.B.E.

Indirectownership
100%

Guarantee ofobligations

Guarantee of obligations(Note 3)30,682--

Gallaher Ltd.

Indirectownership
100%

Guarantee ofobligations

Guarantee of obligations(Note 3)28,518--Name

Description of transaction

Transaction
amountEnd-ofperiodbalanceItemmillions of yen

Subsidiary

millions of yen

Transaction conditions and policy on determination of transaction conditions(Notes) 1. Interest rates on lending of funds and that on receipt of surplus funds are reasonably determined taking into account interest
rates on the market.
2. For lending/borrowing from the cash management system, transaction amounts are omitted from the table above because of
their frequent occurrence.
3. Guarantees of obligations are made for bank loans, and guarantee fees are calculated based on the guarantee amount.

- 39 -

9. Per share information(1) Net assets per share:(2) Net income per share:¥¥

664.12104.10(3) Diluted net income per share:¥

104.07

10. Significant subsequent events
The Company resolved at the Board of Directors held on February 13,2024 to submit a proposal for a reduction in the amount oflegal capital surplus to the 39th Ordinary General Meeting of Shareholders to be held on March 22, 2024.
(1) Purpose of the reduction in the amount of legal capital surplus
To ensure that future capital policies will be executed in a prompt and flexible manner, the Company will reduce a portion oflegal capital surplus and reclassify the reduced amount as other capital surplus, in accordance with the provision stipulated in
Paragraph 1, Article 448 of the Companies Act.
(2) Outline of the reduction in the amount of legal capital surplusi) Amount to be reduced in legal capital surplus
Legal capital surplus will be reduced by ¥ 100,000 million, from ¥ 736,400 million to 636,400 million.
ii) Method of reducing amount of legal capital surplus
The amount of legal capital surplus to be reduced will be reclassified as other capital surplus.
(3) Schedule for the reduction in the amount of legal capital surplusi) Resolution at the Board of Directors: February 13, 2024ii) Resolution at the Ordinary General Meeting of Shareholders: March 22, 2024 (planned)iii) Creditor objection statement notice: April 8, 2024 (planned)iv) Creditor objection statement final deadline: May 8, 2024 (planned)v) Effective date: June 28, 2024 (planned)(4) Future Outlook
This matter is a transfer between accounts within the Company’s net assets and will affect neither the amount of the Company’s
net assets nor its operating performance.

11. All figures are rounded off to the nearest unit.

- 40 -