Investing for a long-term leading
position in Russia
Antoine Ernst

General Manager, Russia

Caution on Forward-Looking Statements
Today’s presentations contain forward-looking statements. These statements appear in a number of places in these presentations and include statements regarding the intent, belief, orcurrent and future expectations of our management with respect to our business, financial condition and results of operations. In some cases, you can identify forward-looking statements
by terms such as “may”, “will”, “should”, “would”, “expect”, “intend”, “project”, “plan”, “aim”, “seek”, “target”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or the negative of theseterms or other similar terminology. These statements are not guarantees of future performance and are subject to various risks and uncertainties. Actual results, performance orachievements, or those of the industries in which we operate, may differ materially from any future results, performance or achievements expressed or implied by these forward-lookingstatements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve known andunknown risks and uncertainties. Forward-looking statements regarding operating results are particularly subject to a variety of assumptions, some or all of which may not be realized.

Risks, uncertainties or other factors that could cause actual results to differ materially from those expressed in any forward-looking statement include, without limitation:(1) decrease in demand for tobacco products in key markets;(2) restrictions on promoting, marketing, packaging, labeling and usage of tobacco products in markets in which we operate;(3) increases in excise, consumption or other taxes on tobacco products in markets in which we operate;(4) litigation around the world alleging adverse health and financial effects resulting from, or relating to, tobacco products ;(5) our ability to realize anticipated results of our acquisition or other similar investments;(6) competition in markets in which we operate or into which we seek to expand;(7) deterioration in economic conditions in areas that matter to us;(8) economic, regulatory and political changes, such as nationalization, terrorism, wars and civil unrest, in countries in which we operate;(9) fluctuations in foreign exchange rates and the costs of raw materials; and(10) catastrophes, including natural disasters.

© Copyright JT 2015

London – September 18, 2015

JT Investor Meeting2This presentation contains images or packages of our brands
in some slides. Those slides have been included exclusively
to illustrate JT Group’s strategy or performance to ourinvestors. They are not to be used for any other purpose.

© Copyright JT 2015

London – September 18, 2015

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Strong #1 with over one third of the Russian market
Share of value, 1H 2015

Share of market, 1H 2015

34.7%

33.8%

#2#2

#3

#3

#4

#4

© Copyright JT 2015

Source: Nielsen. Note: SoM and SoV on a 6-month rolling average to June 2015

London – September 18, 2015

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Leading through people and brands
9,000 Km
3,000 KmA very large market• 307 BnU industry volume (2014)• 21 $Bn industry retail value (2014)
Leading in People• Multi-award as employer• Strong employee engagement
Leading in Brand Portfolio• Winston: #1 tobacco and #1 FMCG brand• LD: #3 in the market• Peter I: #1 post-soviet heritage brand• Glamour: #1 female brand© Copyright JT 2015

Source: JTI estimates, Nielsen, Ancor, Tower Watson

London – September 18, 2015

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Global Flagship Brands driving the growth

GFB volume (BnU)

GFB SoM+17.5%GFB SoV+7.2ppt+8.0ppt

31.5

25.9%

23.8%

26.9
18.7%
15.8%

1H 2007© Copyright JT 2015

1H 20152007

1H 2015

London – September 18, 2015

Source: Nielsen. Note: SoM and SoV on a 6-month rolling average to June 2015 vs. 20072007

1H 2015
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6

Profit growth driven by focused investment and price increases
Investment (Index, 2007=100)

x1.3
2007

2010

Investing for long-term quality growth

x2.2
2014

EBITA (Index, 2007=100)x2.2© Copyright JT 20152010

Trade satisfaction: superior position•

Employee satisfaction: attract, retain talents•Consumer satisfaction: GFB equity and quality

Delivering sustainable earnings growth

x4.5
2007

••

Continuous portfolio mix improvement•

Robust pricing environment•Enhanced productivity and profitability

2014
London – September 18, 2015

Note: Investment includes trade marketing, brand marketing, sales and operating expenses. Investment and EBITA at constant currency

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Challenging environment withgrowth opportunities aheadLondon – September 18, 20158

Industry value further increase despite volume decline
Industry value(CAGR)

Solid long-term retail value growth, positive 2015
projection+16%• Favorable affordability index due to• Positive Personal disposable income forecast2007Industry volume(CAGR)

2010

2015e

• Predictable excise tax plan, reduced growth rates
Industry volume under pressure-4%• Tightening regulation• Slowing economy• Full-year cigarette industry volume decline
expected to be in a range of 7% to 9%

2007

2010

© Copyright JT 2015

Source: JTI estimates. Note: Industry value at constant currency

2015eLondon – September 18, 2015

JT Investor Meeting9Strong portfolio with solid leadership in Mid-Price
JTI Share of segment, 1H 2015

Price segments development
Price index(Winston KS = 100)Premium+

13.4%-0.6ppt

12.8%

> 110

Mid-Price

26.3%-0.6ppt

25.7%

90 to 110

65.3%
Value

60.3%

+1.2ppt

61.5%< 9025.2%
12.1%

1H 2014© Copyright JT 2015

Premium+

1H 2015
London – September 18, 2015

Mid-Price

Value

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Source: Nielsen. Note: Price segments adjusted vs. standard disclosure for this presentation only. Price segments and JTI SoS on a 6-month rolling average to June

10

Unique position for future growth

London – September 18, 2015

11Winston: The #1 FMCG brand in Russia• Line extensions and upgrades to cover allconsumer trends (pack, format, filter, price)

Winston share of market
15.1%

Line extensions
Core (KS, SS)• On-going Premiumization: Quality• Well-equipped if down-trading continues

4.3%
10.6%

8.7%

2007
© Copyright JT 2015

10.1%

10.8%

2010

1H 2015
London – September 18, 2015

Source: Nielsen. Note: SoM on a 6-month rolling average to June 2015 vs. 2010 and 2007

JT Investor Meeting12LD: Strong contender in ValueLD share of market• #3 brand with strong growth potential

Club• Reformulation of the Core family and LD
Club line extension6.2%

Core (KS, SS)• Attracting both up- and down-traders withits rapidly enhancing equity

5.2%
2.2%
4.0%
5.0%
4.0%

2007
© Copyright JT 2015

20101H 2015
London – September 18, 2015

Source: Nielsen. Note: SoM on a 6-month rolling average to June 2015 vs. 2010 and 2007

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Expanding the portfolio to seize new growth opportunities
JTI Compact propositions

Packaging format, 1H 2015
Category
SoM

CompactBig packs(25 cig+)

Super Slims(KS & 100s)© Copyright JT 2015

Growthvs. 2014

11%

3%

JTISoS+6ppt

+3ppt

22%

+1ppt

30%

0%

JTI Big Pack propositions

38%London – September 18, 2015

Source: JTI estimates, Nielsen. Note: SoM and SoS on a 6-month rolling average to June 2015

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Leveraging equity to build Premium brands• Tailored approach and gradual roll-out
when showing positive returns

Share of market, 1H 2015
Brand

Area

St. Petersburg

SoM

1.9%

vs. 2010 (ppt)• Innovation centric in product (i.e. filter,packaging) and initiatives• Brand endorsement test

+0.6

• Mevius LSS Inside on Winston XS© Copyright JT 2015

Moscow

1.0%

Vladivostok

7.3%

+0.8

+3.1

London – September 18, 2015

Source: JTI estimates, Nielsen. Note: SoM on a 6-month rolling average to June 2015

JT Investor Meeting16Solid trade partnerships for quality growth
Retail universe evolution(‘000 point of sales)• Trade investment generates strong returns
JTI SoM in retail channels vs. National*
Modern (urban)

325260250

2013

2014

2015e

Modern Trade volume weight

Traditional withJTI equipment
Top 10 Accounts+1.9ppt+3.7ppt+5.0ppt• Partnership with national distributor andretailers for permanent availability, out of stock
reduction, optimal portfolio for each geography

29%32%35%

201320142015e© Copyright JT 2015

Source: JTI estimates, Nielsen. *JTI National SoM = 33.8% (June YTD 2015)• Employee and field empowerment under 9regional heads for optimal agility, proximity andspeed of decision. Central office supports field
effort and maintains synergies
London – September 18, 2015

JT Investor Meeting17Commitment to a long-term leading position in Russia•

Solid business fundamentals centered on Quality: talented people, the right trade partners, astrong portfolio and continued competitive investment•Growth strategies anchored on a JT Kaizen culture and the 4S model, striving to deliver
superior, consistent and balanced stakeholders satisfaction•

Challenging environment expected, but untainted commitment and positive prospect in thelong-run• Market size decline and mid-term consumer down-trading continues, at a slowing pace
• Predictable and reducing excise growth rate to maintain a favorable affordability index•

Margin improvement will be seized via continuous investment on brand equity andcapabilities…

•…With the prerequisite to not compromise JTI’s leading position in Russia© Copyright JT 2015

London – September 18, 2015

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