ISS, a Leading Independent Proxy Advisory Firm, Agrees that Electing Flashlight Capital�s Two Independent and Highly Qualified Nominees is Necessary to Address Numerous Performance, Governance and Capital Allocation Issues at KT&G

ISS Highlights KT&G�s �Substantial Valuation Discount,� �Cause for Concern� Posed by Donations of Treasury Shares to �Friendly� Organizations and �Ample Room� to Fund Flashlight Capital�s Share Buyback and Dividend Proposals

Flashlight Capital Urges Shareholders to Make Their Voices Heard at the General Meeting and Vote FOR All Ten of Its Proposals Ahead of Upcoming Deadlines, Which for Some Shareholders are as Early as March 17^th

SINGAPORE--(BUSINESS WIRE)--Flashlight Capital Partners Pte. Ltd (�Flashlight Capital�), a meaningful shareholder of KT&G Corporation (KRX: 033780) (�KT&G� or the �Company�), today announced that Institutional Shareholder Services Inc. (�ISS�), a leading independent proxy advisory firm, has recommended the Company's shareholders vote FOR ALL ten of Flashlight Capital�s proposals under consideration at the Company�s 2023 Annual General Meeting of Shareholders (the �General Meeting�).

In its report, ISS highlights the compelling case for change at KT&G, the strength of the two independent director nominees proposed by Flashlight Capital and, notably, recommends a vote against all three management nominees:¹

• �The dissidents have made a compelling case that additional outside representation on the board is necessary to address the persistent operational underperformance, capital allocation and governance concerns.�

• �� the election of additional directors with relevant consumer retail, marketing, supply chain and capital allocation experience would help reevaluate current and future capital needs, propose an appropriate shareholder return policy, and decide the right path forward for the KGC business.�

• �Dissident nominee Suk-Yong Cha brings extensive expertise and deep understanding of the consumer retail industry, which has also been recognized by the company. In addition, this candidate brings top-level executive management experience from large consumer retail companies, as well as manufacturing, supply-chain, finance, and M&A expertise.�

• �Dissident nominee Ou-Jin Hwang brings diverse top-level executive and board leadership experience as well as global business, finance, regulatory and M&A experience. Hwang's experience and expertise would be helpful in evaluating future capital needs and providing fresh perspective on capital allocation and future shareholder return policy.�

ISS specifically details KT&G�s poor performance, operational issues and valuation discount:

• �The company has underperformed the peer median TSR over any selected period, though recent improvements in TSR performance might not be fully reflective of KT&G's deteriorating operational performance and suboptimal capital structure.�

• �KT&G's operational underperformance against peers has been reflected in its substantial valuation discount. Over the five-year period through Oct. 25, 2022, the day before FCP launched its campaign, KT&G's EV/NTM EBITDA multiple was, on average, 33 percent below the median of peers' multiples.�

Additionally, ISS notes the Company�s poor governance practice of donating treasury shares and urges shareholders to vote FOR Flashlight Capital�s proposal to cancel those shares:

• �Treasury shares are currently c. 15.3 percent of total shares, and regulatory disclosures appear to suggest that KT&G has, over time and without shareholder approval, donated a large amount of treasury shares to friendly welfare foundations and charities.�

• �Some of the recipient organizations are headed by former company executives. These donations may be a cause for concern because it is unclear how they are in accord with shareholders' interests or whether they represent a mechanism of entrenchment for incumbent directors; the history of donations also has implications for the possible consequences of the company's decision to continue holding treasury shares.�

Finally, ISS concurs with Flashlight Capital�s arguments that the Company�s capital expenditure plans are excessive and that, nevertheless, KT&G has ample ability to fund the share buybacks being proposed:

• �The negative market reaction to the five-year strategic plan announced by the company in January 2023 seems to be related to the unexpected substantial increase in capex, planned expansion in CIS and the emerging markets (which analysts argue has lower profitability), and limited visibility on expected return from those investments.�

• ��the company has ample room to support its capex program and keep financial flexibility even if the dissident's proposal for additional share buybacks and an increased dividend were approved.�

Sanghyun Lee, Managing Partner of Flashlight Capital, commented:

"We are pleased that ISS has recognized the urgent need for shareholder-driven change at KT&G by recommending investors vote FOR ALL ten of our proposals and shares our concerns around many aspects of the Company's performance, Board composition, governance and planned capital expenditures. Shareholders have suffered for too long, which is why the addition of our two truly independent and shareholder-aligned nominees to the Board will help immediately improve governance, capital management and unlock long-term value to reverse the destruction of the �lost 15 years� beginning at this year�s General Meeting. We encourage our fellow shareholders to waste no time and VOTE TODAY for all of our proposals, including for our independent director nominees, for meaningful change at KT&G.�

FOREIGN SHAREHOLDERS WILL ENCOUNTER EARLY VOTING DEADLINES WITH SOME AS EARLY AS MARCH 17, 2023. THE VOTING DEADLINES SET BY THE VOTING AGENTS ARE NOT THE OFFICIAL VOTING DEADLINES SET BY THE COMPANY.

IF YOU ARE UNABLE TO VOTE BECAUSE YOU HAVE MISSED THE INTERNAL VOTING DEADLINE OF YOUR VOTING PROVIDER � OR IF YOU HAVE QUESTIONS ABOUT HOW TO VOTE � PLEASE CONTACT GEORGESON AT [email protected].

About Flashlight Capital

Flashlight Capital Partners Pte. Ltd is an investment management firm founded by Carlyle Group�s former Head of Korea, Sanghyun Lee. Based in Singapore, Flashlight Capital�s investment philosophy is grounded in improving corporate governance and unlocking long-term value at its portfolio companies. For more information about Flashlight Capital, please visit www.FlashlightCap.com.

¹ Permission to quote ISS was neither sought nor obtained. Emphases added.

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