FCP and KT&G Letter to New Board of Directors: "Governance Structure Improvement Must Be Pursued"

Five Demands Including Stock Options Tied to Stock Performance
Outside Director Accused of Embezzlement Urges "Decision According to Conscience"

Flashlight Capital Partners (FCP) stated on the 29th, "The appointment of Outside Director Son Dong-hwan at the shareholders' meeting is a great victory for all shareholders, including FCP," and added, "We sent five requests for improving KT&G's governance structure to the newly formed board of directors on the 28th."

Lee Sang-hyun, CEO of FCP, revealed the five demands, saying, "KT&G is only taking its first steps now," and "The newly formed board, including Director Son, must push for governance improvements."

FCP's demands are: ▲ Stock price-linked performance compensation (paying at least two-thirds of the salary of the president and all board members in stock options) ▲ Improvement of accounting transparency (disclosure and investigation of overseas business performance) ▲ Recovery of donated treasury shares (prohibiting any involvement to prevent welfare/scholarship foundations from being used as retirement plans for current and former executives, and establishing measures to recover freely donated treasury shares) ▲ Globalization of ginseng (appointing a verified 'global consumer goods expert' as the representative of KGC) ▲ Suspension of asset management business (halting investments in various real estate/private equity funds and returning surplus cash to shareholders).

FCP also urged the current outside directors, who are under embezzlement allegations, to "follow their conscience." CEO Lee said, "Now it depends on Director Son Dong-hwan," and added, "We hope he will be a true outside director acting as CCTV for shareholders and remain a successful case of value-up."

Meanwhile, at the KT&G shareholders' meeting held the previous day, the proposal to appoint candidate President Bang Kyung-man was approved. President Bang received the highest number of votes (89,097,866 votes) in the cumulative voting system, which appoints the top two candidates out of three, including two outside director candidates, as internal and external directors. Son Dong-hwan, a candidate proposed by the largest shareholder IBK Industrial Bank and a professor at Sungkyunkwan University Law School, ranked second with 56,603,958 votes and joined as a new outside director. Lim Min-gyu, CEO of LMK Consulting and a candidate recommended by the KT&G board for outside director, was eliminated, ranking third.