[This is an English translation prepared for reference purpose only. Should there be any inconsistency between the translation and the original Japanese text, the latter shall prevail.] [Cover] Document to be filed: Annual Securities Report Provisions to base upon: Article 24, paragraph 1 of the Financial Instruments and Exchange Act Filing to: Director-General of the Kanto Local Finance Bureau Date of filing: March 24, 2021 Business year: 36th term (from January 1, 2020 to December 31, 2020) Company name (Japanese): 日本たばこ産業株式会社 (Nihon Tabako Sangyo Kabushiki- Kaisha) Company name (English): JAPAN TOBACCO INC. Title and name of representative: Masamichi Terabatake, Representative Director and President, Chief Executive Officer Location of head office: 1-1, Toranomon 4-chome, Minato-ku, Tokyo, Japan Telephone number: +81-3-6636-2914 (Main) Contact person: Hiroyuki Fukuda, Senior Vice President, Communications Place of contact: 1-1, Toranomon 4-chome, Minato-ku, Tokyo, Japan Telephone number: +81-3-6636-2914 (Main) Contact person: Hiroyuki Fukuda, Senior Vice President, Communications Places where the document is available for Tokyo Stock Exchange, Inc. public inspection: (2-1, Nihonbashi-kabutocho, Chuo-ku, Tokyo) A. Company Information I. Overview of the Group 1. Trends in Principal Management Benchmarks (1) Management Benchmarks (Consolidated) International Financial Term Reporting Standards 32nd term 33rd term 34th term 35th term 36th term From January 1, From January 1, From January 1, From January 1, From January 1, 2016 to 2017 to 2018 to 2019 to 2020 to Accounting period December 31, December 31, December 31, December 31, December 31, 2016 2017 2018 2019 2020 Revenue 2,143,287 2,139,653 2,215,962 2,175,626 2,092,561 (Millions of yen) Profit before income taxes 578,237 538,532 531,486 465,232 420,063 (Millions of yen) Profit for the year 425,773 396,749 387,431 361,622 312,029 (Millions of yen) Profit attributable to owners of the parent company 421,695 392,409 385,677 348,190 310,253 (Millions of yen) Comprehensive income (loss) for the year 235,250 554,198 129,302 365,816 132,883 (Millions of yen) Total equity 2,528,041 2,842,027 2,700,445 2,743,611 2,599,495 (Millions of yen) Total assets 4,744,374 5,221,484 5,461,400 5,553,071 5,381,382 (Millions of yen) Equity attributable to owners of the parent company per share 1,371.39 1,541.94 1,468.44 1,501.12 1,421.92 (Yen) Basic earnings per share 235.47 219.10 215.31 195.97 174.88 (Yen) Diluted earnings per share 235.33 218.97 215.20 195.87 174.80 (Yen) Ratio of equity attributable to owners of the parent company to total assets 51.77 52.89 48.17 47.95 46.88 (%) Ratio of profit to equity attributable to owners of the parent company 17.19 15.04 14.30 13.16 11.97 (%) Price earnings ratio (PER) 16.32 16.57 12.15 12.41 12.02 (Times) Net cash flows from operating activities 376,549 419,212 461,389 540,410 519,833 (Millions of yen) Net cash flows from investing activities (687,509) (352,632) (383,307) (123,571) 5,354 (Millions of yen) Net cash flows from financing activities 91,318 (77,032) (62,360) (333,832) (297,404) (Millions of yen) Cash and cash equivalents at the end of the year 294,157 285,486 282,063 357,158 538,844 (Millions of yen) Number of employees [Separately, average number 44,667 57,963 63,968 61,975 58,300 of temporary employees] [7,904] [6,744] [6,618] [7,116] [6,681] (Person) Notes: 1. The Group prepares the consolidated financial statements in accordance with International Financial Reporting Standards (hereinafter, “IFRS”). 2. The yen amounts are rounded to the nearest million. 3. Revenue does not include consumption taxes. - 1 - (2) Filing Company’s Management Benchmarks (Non-consolidated) Term 32nd term 33rd term 34th term 35th term 36th term From January 1, From January 1, From January 1, From January 1, From January 1, 2016 to 2017 to 2018 to 2019 to 2020 to Accounting period December 31, December 31, December 31, December 31, December 31, 2016 2017 2018 2019 2020 Net sales 729,286 681,840 696,250 660,805 596,887 (Millions of yen) Ordinary income 203,242 199,336 190,343 278,968 240,491 (Millions of yen) Net income 173,607 160,120 164,595 262,469 241,752 (Millions of yen) Share capital 100,000 100,000 100,000 100,000 100,000 (Millions of yen) Total number of shares issued 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 (Thousands of shares) Net assets 1,663,675 1,592,966 1,493,562 1,417,365 1,390,011 (Millions of yen) Total assets 2,849,913 2,885,760 2,670,883 2,614,357 2,597,930 (Millions of yen) Net assets per share 927.93 888.31 832.87 798.18 782.73 (Yen) Cash dividends per share (Yen) 130 140 150 154 154 [Interim dividends per share] [64] [70] [75] [77] [77] (Yen) Net income per share 96.94 89.40 91.89 147.72 136.27 (Yen) Diluted net income per share 96.88 89.35 91.84 147.65 136.21 (Yen) Equity ratio 58.3 55.1 55.9 54.2 53.5 (%) Return on equity (ROE) 10.29 9.84 10.68 18.05 17.24 (%) Price earnings ratio (PER) 39.65 43.00 28.48 16.47 15.43 (Times) Dividend payout ratio 134.1 156.6 163.2 104.3 113.0 (%) Number of employees [Separately, average number 7,298 7,336 7,457 7,464 7,366 of temporary employees] [1,117] [1,222] [1,225] [1,221] [1,183] (Person) Total shareholder return (%) 88.9 87.3 67.9 67.2 63.3 [Comparative indicator: Dividend-included TOPIX] [100.3] [122.6] [103.0] [121.7] [130.7] (%) Highest share price 4,850.0 4,243.0 3,708.0 2,899.0 2,437.5 (Yen) Lowest share price 3,627.0 3,607.0 2,481.0 2,179.0 1,796.5 (Yen) Notes: 1. The financial statements of the filing company are prepared in accordance with Japanese GAAP. 2. The yen amounts are rounded to the nearest million. 3. Net sales do not include consumption taxes. 4. The yearly highest and lowest share prices were those recorded on the first section of the Tokyo Stock Exchange. 5. The Company has applied the “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018) and relevant Guidances effective from the beginning of the 35th term, and the principal management benchmarks for the 34th term represent those after this accounting standard, etc. was applied retrospectively. - 2 - 2. History (1) Background of the Company’s Transition to Stock Company Before it became a stock company, Japan Tobacco Inc. (hereinafter, “the Company”) was formerly Japan Tobacco and Salt Public Corporation, or JTS. JTS was established on June 1, 1949 with the “Aim to bring soundness and efficiency to the operation of the national government monopolies.” JTS, serving as the main body for conducting operations of the tobacco monopoly system and other government monopolies, contributed to establishing stable supply of tobacco and securing tobacco-derived financial revenues. However, the growth in demand for cigarettes in Japan began to slow in the mid-1970s as the result of demographic trends and growing concern about health risks associated with smoking. This trend continued, such that growth in industry sales essentially stopped. In addition to the structural change, the Japanese domestic tobacco market was virtually opened to foreign tobacco suppliers, triggering competition between domestic and foreign tobacco products in Japan, and foreign countries stepped up pressure on Japan to take further market-opening measures, which were difficult to implement within the framework of the monopoly tobacco sales system. Amid such pressure as well as moves toward the reform of government-run public corporations, Ad Hoc Commission on Administrative Reform was established in March 1981 to conduct research on the public corporation system. In its third report (July 30, 1982), the commission proposed drastic reform of the monopoly system and the public corporation system. In response to this proposal, the government conducted a comprehensive review of these systems and drafted bills to: Abolish the tobacco monopoly law in order to liberalize tobacco imports and establish a tobacco business law in order to make necessary adjustments related to the tobacco business. Abolish the JTS law, reorganize JTS as stock company so as to enable it to pursue rational corporate management as much as possible and establish the Act on Japan Tobacco Inc., which provides for a necessary minimum level of regulation in light of the corporation’s need to compete with foreign tobacco companies on an equal footing in the domestic market following the liberalization of tobacco imports. These bills were enacted on August 3, 1984 in the 101st session of the Diet and promulgated on August 10 of the same year. (2) Status of the Company After Its Incorporation The Company was incorporated on April 1, 1985, pursuant to the Act on Japan Tobacco Inc. (Act No. 69 of August 10, 1984; hereinafter, the “JT Act”), and all of the start-up capital was provided by the Japan Tobacco and Salt Public Corporation, or JTS. When incorporated, the Company succeeded all the rights and obligations of JTS.