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Anti-bribery and corruption > P.23

02 How we dobusiness
Our Codes of Conduct underpin how we dobusiness across the JT Group. They outline
our individual and collective responsibility
to key stakeholder groups and to wider
society. All operations are required tocomply with the high standards of businessintegrity laid down in the Codes. These
include preventing bribery and corruption,
avoiding discrimination, respecting humanrights, environmental protection, data
privacy, and fair competition.
We establish systems and checks to ensurecompliance, and all employees are required
to abide by their respective Code. Employees
are trained on the requirements of the Codeand are provided with mechanisms toreport concerns about potential breaches orviolations.

20 | JT Group Sustainability ReportCode of Conduct
The JT Group Code of Conduct outlines our responsibilities towards consumers, business partners, shareholders, employees, andsociety. Our international tobacco business and pharmaceuticals subsidiary have their own Codes of Conduct, which are based on theJT Group Code but also reflect their individual operating circumstances.
Our Codes of Conduct outline our legal and ethical obligations and describe practices and procedures that must be followed to meetthese obligations. The standards set within our Codes of Conduct form an integral part of how we manufacture, sell, and market ourproducts and are supported by our policies, procedures, and operating guidelines. The consequences of violating laws and ethicalprinciples can be severe, including large fines or criminal penalties, loss of business, and damage to our reputation. Our Codes ofConduct work to protect our business from actions that might lead to these consequences.
Our Codes of Conduct are regularly updated. The JT Group Code of Conduct is updated in line with changes to relevant laws andregulations, and the most recent update was in 2012. In our international tobacco business, we update the Code of Conduct every
three years. The most recent revision was in 2011 and the next update will be in 2014.
All employees and executives are required to adhere to their relevant Code of Conduct, and in our international tobacco business wealso require all commercial partners to act in accordance with our standards. Every employee across the JT Group1 receives a copyof the relevant Code of Conduct when they join the Company or when there is an update to the Code. Each employee is required tosubmit an acknowledgement that they have received the Code. Please see www.jt.com and www.jti.com for full details of the Group
Code and international tobacco business Code, respectively.
1excluding Torii Pharmaceutical

Ryoji Chijiiwa
Senior Executive Vice President, Compliance and General Affairs,Japan Tobacco Inc.

Code of Conduct training
We provide online, face-to-face, and on-the-job training toraise awareness of our Codes of Conduct and embed ethicalbehavior across our business practices. For employees required
to adhere to the JT Group Code of Conduct, we expanded
the scope of our online training in 2013 and 98.9% of eligible
employees participated in compliance training during
the year *C.

In our international tobacco business, employees are required
to complete an online or face-to-face training session once
every three years. The last session of Code of Conduct training
was delivered to 22,365 employees around the world in 18
languages.

98.9%of employees participated incompliance training during the year *C

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How we do business“Our Codes of Conduct are vital to our success and are critical documentsthat support our compliance and ethics programs. Our Codes reflect theJT Group’s values and responsibilities to consumers, business partners,shareholders, employees and society; and they indicate the behavior thatevery one of us should follow.”ComplianceIn our Japanese domestic tobacco, pharmaceutical, andbeverage and processed food businesses, every division isrequired to assess their compliance risks and submit plans toaddress any risks identified. A compliance survey is carriedout each year, and the results of the survey feed into eachdivision’s plans for addressing compliance risks. Approximately
28,500 employees2 responded to the 2013 compliance survey,representing a response rate of 95.5%. Each division2 is also
required to hold a compliance meeting at least once a year. The
meetings raise awareness of compliance issues and risks andallow risk management plans to be developed.
In our international tobacco business, we launched a second
global compliance survey in 2014 to evaluate employees’
perception of the culture of compliance within the business andwhether we operate in line with the Code of Conduct.
2“The response rate of 86% for the2014 Compliance survey exceeded
expectations and benchmarks of otherhigh performance companies. This
response represents almost 20,000
employees participating either online
or in paper format.”Bruno Duguay
Chief Compliance Officer, Japan Tobacco International

excluding Torii Pharmaceutical

Reporting concerns
Across the JT Group, each of our operating companies has its
own compliance team. If an employee is concerned about apotential violation of our Codes of Conduct, they can contact
their line manager, human resources lead, or a member of thecompliance team. All employees in Japan2 receive a Reporting
Concerns booklet explaining the process. In Japan, we also
provide an external reporting concerns service, run by anindependent provider. All reported concerns and investigation
reports are treated on a strictly confidential basis.

2013
Total cases
reported toCompliance *A375

In our international tobacco business, our Reporting Concerns
Mechanism (RCM) is a confidential channel for employees toraise concerns. The system uses a network of more than 200
RCM contact people from around our global operations. RCM
contact persons are trained to listen carefully to any employee
reporting a concern, collect information in a consistent way,
and protect the identity of the reporting employee and any
employee suspected of misconduct. The Corporate Compliancefunction follows up on all reports and, where necessary,launches an investigation. If appropriate, corrective measures
are taken. In the last five years, use of the RCM system has
steadily increased, pointing to increasing confidence among ouremployees in the RCM process.

Anti-competitive behavior
Competition laws and the issue of fair competition are coveredby our Codes of Conduct. Our employees are prohibited fromdiscussing business operations with competitors. This includes,
but is not limited to, pricing, terms and conditions of sales orpurchases, customers, suppliers, markets, or any other sensitive
or confidential commercial information.
In our international tobacco business, for example, if an
employee is engaged in a conversation or meeting witha competitor and sensitive or inappropriate commercial
information is discussed, they are instructed to end theconversation, express their disagreement with discussing such
topics, leave the meeting immediately, and report the matter to a
Legal department representative.
Compliance news bulletin

22 | JT Group Sustainability ReportAnti-bribery and corruption
With operations spanning the world, some of our business is conducted in jurisdictions with a high prevalence of bribery andcorruption. Our Codes of Conduct forbid corrupt practices in any form. With its wide geographical spread, our international tobacco
business faces the greatest exposure to corruption risk. To ensure our approach reflects the latest regulatory developments, suchas the U.K. Bribery Act, we updated the anti-bribery and corruption requirements of JTI’s Code of Conduct in 2011. This reinforced
our zero tolerance approach to corruption in our operations. Employees are encouraged to report any concerns regarding bribery or
corruption through our Reporting Concerns Mechanism (see page 22).

% of Reporting Concerns Mechanism claims relating to corruption *E

20112012

2013

2.1%

3.4%

4.3%

02|

How we do businessTraining
In our international tobacco business, we train employees
on anti-bribery and corruption through our Code of Conduct
training. In 2013, we developed three training approaches
specific to anti-bribery and corruption: online training foremployees with a higher risk of exposure to bribery andcorruption; anti-corruption compliance workshops for regional
and local management teams, and the leadership team of ourmanufacturing operations; and the inclusion of anti-corruption
case studies within our online Code of Conduct training, which
is provided to all international tobacco business employees.

Gifts, hospitality, and entertainment
Our international tobacco business also has a policy tocomply with all laws on the exchange of gifts, hospitality, andentertainment (GHE), including with government officials. We
do not encourage a culture of exchanging GHE as it could
potentially breach local legislation and is a source of reputationalrisk. Under the policy, prior approval must be sought for all GHE
exchanges with government and public officials regardless ofvalue. In other cases, we take into account local circumstances
and all GHE exchanges above US$250 must be approved.
The purpose of GHE should be to promote healthy business
relationships rather than seeking to gain a business or personaladvantage or reward preferential treatment. In 2013, weupdated our GHE policy as part of a wider review of our anticorruption approach and launched a new GHE online training
course, which was delivered to 1,090 relevant employees during
the year.

To ensure complete transparency and provide a clear audit trail,
we have a central system to log, approve, and report all requests
for GHE. On a quarterly basis, our Corporate Compliancefunction analyzes GHE requests and reports to management thenumber and value of GHEs exchanged.
In 2013, the total number of GHE requests that were fully
approved increased to 673 from 519 in 2012. The increase in
GHE requests matches the increase in awareness across ourbusiness in line with communication, training, and management
workshops delivered in the past two years. This will continue
to be a strategic priority in order to minimize the possibility ofcorruption cases in our operations.

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