Our compliance system
The JT Group Compliance Committee plays a signi cant role in the JT Group governance. Its aim is toensure that all directors and employees fully comply with applicable laws, our Articles of Incorporation,
cultural expectations, and other compliance standards. The roles of the Compliance Committee are asfollows:■

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

Appoint an Executive O cer responsible for the JT Group Compliance■

Discuss the Annual Compliance Program and Annual Compliance Action Plans■

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

The Compliance O ce oversees departments to ensure that compliance is appropriately functioning. It
also promotes compliance by running various training programs for executives and employees.
Employees can report any violations or consult about possible violations of the JT Group Code of
Conduct by calling internal or external hotlines. The Compliance O ce is responsible for investigating
reported cases, and in the case of proven violations, each work division must implement corrective
measures. Serious cases are reviewed by the JT Group Compliance Committee, and reported to theBoard of Directors as necessary.
The head of the JT Group Compliance Committee is the Chairman of the Board, and the Committee
includes external experts as key members. The Committee meets regularly three times every year.
Among the matters discussed are initiatives to promote compliance throughout the Group, and these
initiatives will be executed based on the Annual Compliance Action Plan. The Action Plan includes
maintaining and enhancing the compliance system, taking action on Company priority issues, carryingout training and seminars, handling the Reporting Concerns Mechanism, and implementing theCompliance Promotion Month. The Compliance Promotion Month takes place in June every year. The
aim is to raise employees’ awareness of this important subject, through information sessions in every
workplace, e-learning, and seminars for managers in our headquarters.

Our international tobacco business has developed its own compliance system, the Compliance
Function. This function is led by the Chief Compliance O cer, who is responsible for promoting andenhancing the ethical culture of the business. Guiding, encouraging and supporting all employees
through various compliance processes and trainings to make the right decisions in full compliance withall applicable laws and internal policies, thereby mitigating reputational, legal and nancial risks for ourinternational business. Employees can report any violations of the Code of Conduct by using ourinternal reporting system, namely “Your Voice”, a system which is available to all employees and allbusiness partners. Serious cases of Code of Conduct violations are referred to the Business Ethics
Committee for review and investigation and where necessary shared with JT Compliance.

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

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

Living our Codes of Conduct
Our Codes of Conduct guides us to conduct business ethically and be a responsible corporate citizen.
We ensure that they are communicated on effectively throughout the entire business by running various
training courses for employees.
Our employees sign an acknowledgment form to show their commitment to following our Codes ofConduct.

We continuously review and update our Codes of Conduct to improve our standards, and the latest
revision took place in 2018. In our international tobacco business, we have digitalized the Code into anaccessible, easy-to-read document, including a decision-making guide to assist employees in making
the right choices. It is now available in 40 languages, and we provide printed booklets for those withlimited internet access.
We continued to provide training on the Codes of Conduct to our employees online and face-to-face in
2019. In our Japanese operations, 99.7% of employees completed the online courses *C. In ourinternational tobacco business, we launched a new interactive Code of Conduct video in 25 languages
to guide employees to make the right choices. For employees without computer access, we haveadopted a Train-the-Trainer approach. So far we have trained 59 local trainers, who provided face-toface training in local languages to 6,274 employees, including those from all our newly acquired entities
in the Philippines, Indonesia and Bangladesh.
In our Japanese operations, the survey outcomes are reported to each executive o cer and to eachdepartment. The relevant departments then introduce measures in their Annual Compliance Action
Plans to address any issues raised, using quantitative targets to evaluate the effectiveness of thesemeasures. In 2019, 95.8% of employees completed the survey.

In our Japanese operations, the latest survey results showed harassment* and unpaid overtime as themost important concerns. We have provided support for the JT Group companies to comply with the‘Work Style Reform Act’ and monitored overtime hours in each department. We will continue to monitor
progress and make every effort to improve the situation in these two key areas.

In our international tobacco business, theEmployee Engagement Survey covers
compliance questions. It is distributed everythree years, and the last one was completed in2018. The results showed that, since theprevious survey was carried out, the Code ofConduct is more widely understood byemployees and enforced by line managers. A
total of 90% of respondents agreed that theirdirect supervisor reinforces the importance ofadherence to compliance and ethicalstandards, compared to 85% in the previous
survey (2014).

* Harassment includes sexual harassment andbullying.

Reporting concerns
Across the JT Group, each of our operatingcompanies has specially trained members
who handle compliance matters. If anemployee is concerned about a potential
violation of our Code of Conduct, they cancontact their line manager, HR lead, or amember of the compliance team. Employees
in Japan receive a booklet explaining theprocess for reporting concerns. We also
provide an external concern-reporting service
run by an independent provider. Every reported
concern and investigation report is treated ona strictly con dential basis.
JT reporting concerns (for business partners)

JT reporting concerns*
JTI reporting concerns* We distribute a Reporting Concerns Booklet to ouremployees in which they can nd detailed information
about the process for reporting concernsWe offer multiple communication channels for employees, customers, and business partners tocon dentially raise concerns about potential violations of our Codes of Conduct or policies. We review
all concerns raised, launch investigations as needed, and take appropriate corrective actions.
Employees are informed about our Reporting Concerns Mechanism through various channels, including
the Group intranet. In 2018, our Japanese operations made the Mechanism available in four additional
languages (English, Chinese, Vietnamese, and Nepalese) to meet the needs of our diverse workforce.
Any concerns are then dealt with by specially trained contact persons, who all follow a mandatory faceto-face training course.

*There were no cases related to anti-competitive behavior in 2018 and 2019.

In our international tobacco business, there is a Reporting Concerns Mechanism called Your Voice,which is available in 16 languages. Employees are able to report concerns via multiple channels
including designated trained contact persons.
In 2019, we received 723 reports accross the JT Group, covering issues such as labor practices anddiscrimination. In the case of proven violations of our Codes of Conduct, we took appropriate action in
the form of dismissal, verbal or written warnings, nancial penalties, or other measures.

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

Anti-bribery and corruption
With operations spanning the world, some ofour businesses are conducted in jurisdictions
with a high prevalence of bribery andcorruption. Our Codes of Conduct clearlyprohibit bribery and forbid corrupt practices inany form. Taking into account legislation suchas the Unfair Competition Prevention Act ofJapan, the U.S. Foreign Corrupt Practices Act,
the U.K. Bribery Act, and anti-bribery laws inChina, we have introduced the JT Group AntiBribery Policy.

We take a zero-tolerance approach to corruption and bribery, and all executives and employees must
respect and comply with our JT Group Anti-Bribery and Corruption Policy. The training courses help us
to reinforce this policy. In our Japanese operations, we run an e-learning course on anti-bribery andcorruption every two years. In 2019, 2,419 employees took this course.

In our international tobacco business, in 2019, 4,607 employees completed the anti-bribery andcorruption online training. We also provide face-to-face trainings locally for employees without
computer access as a part of the general Code of Conduct trainings that includes an anti-bribery andcorruption section. In 2019, 5,128 employees attended this training.
The JT Group Code of Conduct
JTI Code of Conduct
The JT Group Anti-Bribery Policy

Gifts, hospitality, and entertainment
Our internal policies and procedures help to prevent bribery and to ensure an appropriate level ofexchange of gifts, hospitality, and entertainment, which must be transparent and reasonable, and must
respect local regulations. We therefore require all employees in our Japanese operations to seek
approval for anything they receive or wish to give. To ensure that compliance is well-embedded within
the organization, we conduct regular training and run communications campaigns across the Group.
All exchanges with non-governmental third parties above 250 U.S. dollars in our international tobacco
business must be approved. For government and public o cials, all requests, regardless of the amount,have to be approved. The number of gifts, hospitality, and entertainment requests sent for approval in2019 was 632, vs. 603 in 2018.

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

Preventing nancial crime
The JT Group does not tolerate any form of nancial crime. In our international tobacco business, weabide by the EU Cooperation Agreement obligations, and take into account the U.K. Criminal Finances
Act 2017. We perform policy controls and provide program training, and we publish employee
communications on the subject.
The global policy sets out principles and guidelines to prevent employees from being involved in any
form of nancial crime, including money laundering, tax evasion, and facilitating tax evasion.

Tax compliance
The JT Group Tax Policy

outlines our approach to tax compliance, tax risk management, theutilization of external tax advisors, and our relationship with tax authorities.

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Tax practices
In accordance with our responsibilities to all stakeholders in our 4S model, we are fully committed topaying our fair share of taxes within both the letter and spirit of local laws. This commitment ensuresthat our tax affairs remain transparent and sustainable on a long-term basis; we therefore do not
engage in aggressive tax planning or tax avoidance schemes. We never use legal entities for tax
purposes only, nor do we undertake any transactions whose sole purpose is to reduce our tax
contribution.
This approach is spearheaded by our experienced in-house global tax team. The team ensures that all
departments and geographies adhere to our global tax policy and that appropriate expert advice issought on all commercial and nancial decisions. Furthermore, the global tax team provides guidance
to other departments, and issues detailed annual reports showing how we meet local tax obligations. Inaddition, experienced local tax resources are embedded in the nance teams in our key tax
jurisdictions.
When taking operational or nancial decisions impacting the JT Group or its stakeholder groups, ourmanagement takes into serious consideration the impact on tax affairs, to ensure compatibility withour 4S model and global tax policy.
In 2016, the U.K. introduced a law that requires large U.K. businesses to publish an annual tax strategy
which sets out, among other things, the approach towards tax planning and how tax risk is managed.
Our tax strategy and global tax policy, which are on our website, describe our statement on U.K. tax
strategy in more detail.
JTI UK Tax Strategy

Our tobacco business is subject to substantial
taxation, including tobacco excise taxes,
which is paid at the point of sale and which
we pass on to governments. Out of the7,581,071 million Yen gross revenue wegenerate, 64% ows back to society throughtaxation which includes income taxes. In
2019, we paid 4,750,416 million Yen in
tobacco excise taxes, amounting to 63% of
global revenues; and 114,799 million Yen incurrent income taxes (corporate tax),
accounting for a further 1% of revenue.

In recent years, tax legislation and practice have become increasingly complex. This complexity brings
inherent tax risks. We try to nurture good relationships with tax authorities in order to increase certainty
on both sides and to facilitate an open and constructive discussion, where appropriate.
Read more about the JT Group Tax Policy.

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Risk management
Our group operates a diverse business which includes tobacco, pharmaceutical and processed food.
We also operate on a global basis with o ces in Europe, CIS, Africa, and the Middle East, among
others. Due to this diversity and as we operate in a changing business environment, we are exposed tovarious risks.
We look at emerging risk such as increase in cyber/IT security risk, risk of natural disasters arising fromclimate change or increase in political risk. We examine nancial and business risks such as effect ofcurrency uctuation or impact of regulatory developments. Our approach to addressing key risks isdetailed in our latest annual report under 'Risk Factors'. We also address compliance risk as we strive
to ensure all of our business operations are carried out with integrity.
Our key nancial and business risks are considered by the Board of Directors on a quarterly basis.
Internal audits are carried out by a division independent of the business, which reports directly to theGroup President. We have a crisis management and disaster response protocol, whereby a projectteam, headed by the Group President, can be swiftly called upon in times of crisis or disaster.
We recognize the need for a Group-wide global risk management framework: this would allow us to beconscious of, and appropriately deal with, more complex, wide-ranging risk factors. We are establishing
more systematic ways to analyze and respond to risk factors surrounding our Group and ourstakeholders, with a view to further strengthening our risk governance.
Integrated ReportCompliance risk management

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

In 2019, 99.6% of employees in our Japanese
operations received security education. Ourinternational tobacco business has a bespoke
i-secure program, which was established topromote a culture of cyber security awarenessboth at home and at work. The annual
learning program is executed in 100% oflocations worldwide and key behavior
indicators allow us to constantly measure theeffectiveness of our program. This learning
program supplements our technologicaldefenses against cyber crime, by ensuring all
employees are also striving to better protect
our information.

As we increasingly move towards the use of cloud services for data processing, we are re-evaluatingrisk and strengthening our security defenses. We continually assess the threat to our company using avariety of security intelligence methods. The JT Group's vision to become one of the leading globalcompanies, will require the need for technological advancements, which in turn brings new andcomplex security challenges. It is the role and responsibility of Information Security to dynamically
adapt to the ever changing technical landscape. Great efforts are being made to continually improve
the security posture of all areas of the business, with global collaboration to ensure the best security
practice and defense technologies are utilized by the JT Group as a whole.

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