Reduced-Risk Products
Strategy
Daniel Torras
JTI Senior VP, Reduced-Risk Products

Forward-Looking Statements
This presentation contains forward-looking statements. These statements appear in a number of places in this document 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” orthe negative of these terms or other similar terminology. These statements are not guarantees of future performance and are subject to various risks and uncertainties. Actualresults, performance or achievements, or those of the industries in which we operate, may differ materially from any future results, performance or achievements expressed orimplied by these forward-looking statements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may beincorrect or imprecise and involve known and unknown risks and uncertainties. Forward-looking statements regarding operating results are particularly subject to a variety ofassumptions, 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)

increase in awareness of health concerns related to smoking;(2)

regulatory developments; including, without limitation, tax increases and restrictions on sales, marketing, packaging, labeling and use of tobacco products, privately
imposed restrictions and governmental investigations;(3)litigation around the world alleging adverse health and financial effects resulting from, or relating to, tobacco products;(4)

our ability to further diversify our business beyond the traditional tobacco industry;(5)

our ability to successfully expand internationally and make investments outside Japan;(6)

competition and changing consumer preferences;(7)

our ability to manage impacts derived from business diversification or business expansion;(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 2018

London – June 5, 2018

JT Investor Conference2This presentation contains images of our products in some slides. Those slides
have been included exclusively to illustrate JT Group’s strategy or performanceto our investors. They are not to be used for any other purpose.

© Copyright JT 2018

London – June 5, 2018JT Investor Conference

3Broadening spectrum of consumer needs

Consumers are increasingly
SocialConsideration

Convenienceinterested in experiences andproducts that address a$broadening spectrum ofpersonal and social needs

Affordability

Reduced Risk
Potential
Satisfaction© Copyright JT 2018

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RRP growth is expected to continue
RRP Global Category Value(Net of taxes, $Bn)

610

2016

2017

45+
20+

15

2018e

2020e

RRP Consumer Base
(MM consumers)

24

29

2016

2017

© Copyright JT 20182025e
110+55+

40+
2018e

2020e

2025e
JT Investor ConferenceLondon – June 5, 20185

Source: Internal estimates. Note: RRP global category value comprises T-Vapor and E-Vapor (consumables / refills + devices).

Our consumer-centric strategy benefits key stakeholders
Committed to developing, beyond combustibles,
a range of products with reduced-risk potential…

… to generate sustainable benefits to key stakeholders

RELEVANT & DIVERSE PRODUCT OFFERING

Consumers

OB
TOBACCOINFUSED

Society
COMBUSTIBLESPOTENTIAL FOR HARM REDUCTION

E-VAPORINFORMEDCHOICEENHANCED RETURNS IN THE LONG-TERM

ShareholdersHEATEDTEDTOBACCO© Copyright JT 2018

NEW PROFESSIONAL HORIZONSEmployeesLondon – June 5, 2018

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JTG’s global footprint focuses on markets that matter
Present in…

… accounting for

1485%

Markets© Copyright JT 2018

Global RRP
valueLondon – June 5, 2018

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Source: Internal estimates. Note: Including World Wide Duty Free as one market.

Portfolio centered on 2 brands: Ploom and Logic

T-Vapor© Copyright JT 2018

E-Vapor

London – June 5, 2018

T-Vapor │ Strong growth led by JapanConsumer Base
(MM consumers)

Category Value(Net of taxes, $Bn)

Geographic Mix(% of global volume, 2017)

3.291%
Japan
0.840201520.19%

2016

2017

2015

2016

ROW

2017

T-Vapor© Copyright JT 2018

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9Source: Internal estimates. Note: T-Vapor comprises Heated Tobacco and Tobacco Infused Vapor (consumables + devices).

T-Vapor │ Despite recent slowdown, still a sizeable category in JapanRRP Share of Market in Japan(% of total industry volume)% 2121..77%
21.7%
21.2% 21.3% 21.6%21.0%
2211.0.0% 21.2%

JJanan Feb‘18‘18 ‘18

Mar‘18Apr May
Maayy‘18 ‘18
87.4%

0.7%
2016

2017

© Copyright JT 2018

Source: Internal estimates. Note: May 2018 share of market for the 3 weeks ending May 21.

2018
London – June 5, 2018

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10Our 2020 ambition in Japan40%© Copyright JT 2018

Our ambition is to achieve
40% share of RRP in
Japan by year-end 2020

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Roadmap to 40%│ 1 Better understanding of Japanese consumers

Japanese consumers are seeking an experience that …
… reduces social pressure from others
due to smoking

2020 Ambition

40% Shareof RRP

Social Consideration40%… has less impact on their routine
than cigarettes

Convenience39%… has a reduced-risk potential
compared to smoking cigarettes

13%… is less expensive than cigarettes© Copyright JT 2018

Source: JT consumer study (Japan 2018).

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12Roadmap to 40%│ 2 Ploom TECH better addressing key consumer needs
Leading Competitor

Product AttributeNo smellSocialConsideration

2020 Ambition

Continuous use40% Shareof RRP

MinimalmaintenanceConvenienceEasy to use© Copyright JT 2018

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13Source: JT consumer study (Japan 2018).

Exclusive Ploom TECH use expanding rapidly

46

48

154

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44

170

1044

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1,500+“Ploom TECH Only”
Restaurants in JapanJT Investor Conference

14Roadmap to 40%│ 3 Ploom TECH capacity now in place, ramping up through 2020
Ploom TECH Capsule Manufacturing Capacity1(Stick equivalents2, Bn)

2X2020 Ambition:Ambition:
2020

20+

4X40%Share
40% Share
RRPof ofSegment

102.4

2017
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2020

2018

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London – June 5, 201815(1) As of year-end, annualized. (2) Conversion: 1 pack of Ploom TECH equals 20 RMC sticks.

Roadmap to 40%│ 4 Results in line with expectations
JT Share of RRP Category in Japan(% of total RRP volume)
14%
10%

11%11%

Fukuoka(city)

Sendai

11%

11%

10%

2020 Ambition:
Ambition:
2020

40%Share40% Share
RRPof ofSegment

TokyoNagoya

SapporoOsaka(pref.)Hiroshima

Recent Launches of Ploom TECH© Copyright JT 2018

Source: Internal sell-out estimates as of May 21, 2018.

London – June 5, 2018

JT Investor Conference16Roadmap to 40%│ 5 Accelerated national expansion of Ploom TECHAll Prefectures

Sapporo2020 Ambition:
Ambition:
2020

40%Share40% Share
RRP
of ofSegment

Saitama (pref.)Osaka (pref.)Fukuoka (pref.)ef.)

Fukuoka(city)

TokyoT((pref.)SendaiTokyo (pref.)Chiba (pref.)June/July 2018

Kanagawa (pref.)NagoyaHiroshima (city)

Apr 2018
Jan 2018© Copyright JT 2018

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Roadmap to 40%│ 6 Complementing our RRP offering

TOBACCOOB
INFUSEDHEATEDTED
TOBACCO2020 Ambition:
Ambition:2020• New device, same low heating temperature• Rich, RMC-likeC lik experience
iandd ttobaccobflavor

40%Share40% Share
RRP
of ofSegment• New, rich vapor, with improved satisfaction• Superior taste• Still no smoke smell, no burn, no ash• Less smell, no burn, no ash• Still easy-to-use, no maintenance• Modern design, intuitive and convenient• Same Ploom TECH capsules and manufacturing• Minimum maintenanceCo-branding with Mevius, Japan’s #1 cigarette brandExecution leveraging leading in-market salesforce capabilities© Copyright JT 2018

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JT Investor Conference18Roadmap to 40%│ 6 Complementing our RRP offering

Launchperiod*Launch
period*

2017

2018

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JT Investor Conference20* Ploom S and Ploom TECH+ will be launched in Japan late this year or early 2019 at earliest.

Achieving our 2020 ambition in Japan

2020 Ambition2020 Ambition:
Ambition:
m40% Shareof40%%RRPShare
Soff SegmentoSeegmengnt© Copyright JT 2018

1•

Better understanding of Japanese consumers

2•

Ploom TECH better addressing key consumers’ needs

3•

Ploom TECH capacity secured

4•

Positive results in new launch areas

5•

Accelerated national expansion

6•

Enhanced our RRP portfolio

London – June 5, 2018

E-Vapor│Today the largest RRP category
Consumer Base
(MM consumers)

Category Value(Net of taxes, $Bn)

Geographic Mix(% of global value, 2017)
33%

6.3
4.8
2220

W. Europe

5.2

2540%% USA20152016

2017

2015

2016

ROW 27%2017

E-Vapor© Copyright JT 2018

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Source: Internal estimates. Note: Category value (consumables / refills + devices).

E-Vapor│#3 global player with strong international presence
Present in…

… accounting for

1175%
Global E-Vapor
valueMarkets

BEFRDEGR© Copyright JT 2018

Source: Internal estimates. Note: WWDF stands for World Wide Duty Free.

IE

IT
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KRRUUK

USWWDFJT Investor Conference

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Logic│Our current product portfolio© Copyright JT 2018

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Logic│Wide and compelling range of liquid options

15+E-liquid flavors

Madein Europe© Copyright JT 2018

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Logic│Building a global brand© Copyright JT 2018

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Logic│Building a global brand© Copyright JT 2018

Logic│Building a global brand© Copyright JT 2018

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E-Vapor│Exponential volume growth, fueling our share in Europe
JTG E-Vapor Refills Sold(Volume)x10Acquisitions#1#1

E-Vapor brand overall in Ireland
in closed tank systems in France, Italy, and the UK
Logic Pro Share of Closed Tank Segment
As of April 2018

91%

IE

69%

FR2015© Copyright JT 2018

Source: Internal estimates.

2017
London – June 5, 2018

IT

53%

UK

51%
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E-Vapor│Introducing Logic Compact, the next step in our journey© Copyright JT 2018

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Logic Compact│Our new premium closed tank system© Copyright JT 2018

London – June 5, 2018Logic Compact│Our new premium closed tank system©CCopyrightCopy
opyrigrightht JT 201
2018
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June 5,5, 2018
2018

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E-Vapor│Building a competitive and sustainable position

1

Logic - our global brand

2

Diverse and compelling product portfolio

3Strong international presence, with leading positions in Europe

4

Expanding portfolio with Logic Compact

5

Geographic footprint expansion to 20+ markets by 2020

© Copyright JT 2018

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Our enhanced RRP portfolio

HEATEDTED
TOBACCOTOBACCOOB
INFUSEDCOMPACT

E-VAPOR© Copyright JT 2018

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Our RRP journey continues…

Wireless connectivity

Advanced e-vapor
technology

Diagnostics & usage
app functionality

New heat-not-burndevelopments

Expanded range offlavors

Novel heating system© Copyright JT 2018

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… supported by robust investments
Research & Development

New Consumer Touchpoints

Supplypp y Chain & Manufacturing

New Channels

c.$2 Bninvestment© Copyright JT 2018

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Note: Investments (M&A + R&D + CAPEX) for the 2015-2020 period.

Committed to RRP success• RRP address emerging consumer needs, representing a strategic opportunity• Consumer-centric strategy, focusing on markets and categories that matter• T-Vapor – On track to meet our 2020 target in Japan, enhancing our Ploom offering• E-Vapor – Launching Logic Compact, strengthening our portfolio and competitiveness• Focused investments driving the expansion of RRP business and financial base

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