Factory floor of Kansai factory: One of the key tobacco manufacturing plants in Japan
022 026 045 JT 046 050 OPERATIONS & ANALYSIS JT
Industry Overview Electronic Cigarette e-cigarette Vapor E-VaporHeat-not-Burn e-cigarette E-Vapor 5.7 40% 2013 * 2014 * * EU 2017 5 JT 42/3 * M&A * Euromonitor e-cigarette2014 022 JAPAN TOBACCO INC. ANNUAL REPORT 2014
10 2010 2011 2012 2013 2014 23,167 24,062 24,616 24,905 25,429 3,831 3,751 3,708 3,463 3,165 3,091 3,006 2,927 2,795 2,702 1,816 1,918 2,031 2,212 2,389 2,179 1,959 1,974 1,941 1,875 986 1,028 1,021 1,009 959 934 912 953 917 947 OPERATIONS & ANALYSIS 905 899 893 885 895 1,014 974 1,025 867 827 839 845 834 796 804 Euromonitor 4 % 2010 2011 2012 2013 2014 Philip Morris International Inc. 24.6 25.1 25.7 25.7 26.2 British American Tobacco Plc. 18.7 19.1 19.0 19.1 19.2 Japan Tobacco Inc. 16.3 15.6 16.0 16.3 16.0 Imperial Tobacco Group Plc. 8.7 8.6 8.5 8.5 8.5 Euromonitor Excluding China National Tobacco Corp (CNTC) 10 2010 2011 2012 2013 2014 Marlboro Philip Morris International Inc. Altria Group Inc. 4,144 4,108 4,141 3,959 3,914 Winston Japan Tobacco Inc. Reynolds American Inc. 1,224 1,224 1,302 1,359 1,279 Pall Mall British American Tobacco Plc. Reynolds American Inc. 994 1,010 1,016 1,048 1,091 L&M Philip Morris International Inc. 847 873 881 895 890 MEVIUS Japan Tobacco Inc. 952 812 844 837 791 Camel Japan Tobacco Inc. Reynolds American Inc. 643 606 603 608 662 Gudang Garam Gudang Garam Tbk PT. 523 537 578 605 643 Kent British American Tobacco Plc. 570 602 636 618 602 Gold Flake ITC Ltd. British American Tobacco Plc. 592 590 619 606 529 Dunhill British American Tobacco Plc. 480 471 470 515 528 Euromonitor Excluding China National Tobacco Corp (CNTC) JAPAN TOBACCO INC. ANNUAL REPORT 2014 023
Industry Overview continued 2013 9,800 2014 IMS Health 2013 36.8% 29.2% 10,000 9.6% 24.4% 2014 IMS Health 8,000 6,000 4,000 2,000 8,306 8,913 9,652 9,573 9,801 21 2014 4 5.6% 0 2009 2010 2011 2012 2013 2014 IMS Health 37% 29% 10% 2014 IMS Health 024 JAPAN TOBACCO INC. ANNUAL REPORT 2014
OPERATIONS & ANALYSIS 2013 8.7%9,771 10,000 8,000 2014 4 5%8% 2013 21.4% 15.8% 12.6% 10.8% 8.0% 31.4% 6,000 4,000 8,327 8,328 8,593 8,992 9,771 2,000 0 2009 2010 2011 2012 2013 JAPAN TOBACCO INC. ANNUAL REPORT 2014 025
Review of Operations R&D Emerging Product 026 JAPAN TOBACCO INC. ANNUAL REPORT 2014
OPERATIONS & ANALYSIS GFB JAPAN TOBACCO INC. ANNUAL REPORT 2014 027
Review of Operations continued 2014 1 12 Thomas A. McCoy President & CEO, JTI 2014JTI 13.1% JTI JTI GFB Fine Cut GFBAmber Leaf Old Holborn JTITop Employer Global 2015 e-cigarette E-LitesZanderaEmerging Product 3,980 4.7% 2,622 2.0% GFB 11,911 3.0% JT JTI90 120JTI JTI JTI +3.5% US 4,253 +1.1% US JT +13.1% Fine Cut11.1% 4.7%3,980 GFB 20% 2015 GFB Emerging Product 2015 8%JTI JT 028 JAPAN TOBACCO INC. ANNUAL REPORT 2014 JTI GFB 958 3.5% 3.0%
Global Flagship Brands (GFB) Portfolio GFBJTI 8GFB Winston 1,296 Global Sales 1954Winston JTI 2007 2100 Camel 464 Global Sales 1913 Camel 85 JTI OPERATIONS & ANALYSIS 5 2014Winston 0.4ppt9.6% No. 2 Winston 2014Camel 0.5ppt 27 3.6% 2014 5 Camel 4 No. 1 5ppt7.9% 30 21 26 10 Fine Cut Camel Black & White 34.1% Essential Activate Fine Cut 2 Winston Core No. 1 Fine Cut Winston XSWinston 1999JTI Camel2014 Winston Core Winston King Size, Winston Super Slims Winston Fine Cut Camel 464 XS Winston 303 Filter King Size 1Fat Slim 2 1999 2014 JT JAPAN TOBACCO INC. ANNUAL REPORT 2014 029
Review of Operations continued 20% 13.1% 1.1% South & West Europe North & Central Europe CIS+ Rest-ofthe-World Total JTI 598 516 1,657 1,208 3,980 GFB 514 278 1,157 672 2,622 US 4,206 2013 reported -423 Volume GFB 2014GFB 2%2,622 GFB 12 0.5ppt 14.3% GFB 1.8ppt 65.9% GFB GFB 0.6ppt 14.4% +13.1% +1.1% 938 Price/ Mix 36 Other 30% 29% 42% 34% 4,757 2014 at constant FX 17% 43% 13% 20% 25% 15% 17% 16% -504 FX 4,253 2014 reported Rest-of-the-World CIS+ North & Central Europe South & West Europe South & West Europe 2014 2013 2.2% GFB 2.1% GFB 1.0% Fine Cut7.1% Winston Camel 0.8ppt 20.8% Benson & Hedges 28.6% Fine Cut GFB 8.3% JTI 2015 Winston Camel Benson & Hedges 0.6% GFB 4.9% Fine Cut WinstonCamel 2.2% 0.7ppt21.7% South & West Europe 5.1% 10.3% 030 JAPAN TOBACCO INC. ANNUAL REPORT 2014
MEVIUS 178 Global Sales 1977 Mild Seven MEVIUS 1 18 LD 449 Global Sales 1999 LD OPERATIONS & ANALYSIS MEVIUS 2007LD JTI 42 Fine Cut 2014 MEVIUS 178 2014 LD 0.1ppt2.4% 449 MEVIUS Fine Cut 7.3% No. 1 0.4ppt5.9% Benson & Hedges Glamour 109 1873Benson & Hedges 72 2005 GlamourJTI Global Sales 2014North & Central Europe Global Sales 2014 Glamour Benson & Hedges 72 109 0.1ppt1.0% 0.1ppt1.9% Silk Cut Sobranie 29 Global Sales 1964 Silk Cut 1970 26 Global Sales Sobranie 1879 2014 2014 Sobranie15.1%26 Silk Cut 29 0.1ppt 0.6% JT JAPAN TOBACCO INC. ANNUAL REPORT 2014 031
Review of Operations continued North & Central Europe 2014North & Central Europe 0.8% GFB 5.4% CIS 8.5% 31.5% Winston Camel Benson & Hedges GFB 5.6% 2.0% 0.2ppt32.0% 40% Sterling Fine CutAmber Leaf No. 1Amber Leaf No. 1 North & Central Europe 7.7% 12.8% CIS 2014 CIS 10.5% GFB6.5% GFB CISGFB 2014 9.5% JTI Winston 0.7ppt 15.0%Camel Sobranie LD4 Rest-of-the-World Rest-of-the-World 0.8% GFB 2.1% JTI No.1 Winston 1.2ppt4.8% MEVIUS MEVIUS 4 Camel2.3% GFB 0.7% 2.4ppt29.0%Camel Winston 20% Rest-of-the-World 3.8% JTIJT 2015 GFB Zandera 2015 Emerging Product 2015 8% 032 JAPAN TOBACCO INC. ANNUAL REPORT 2014
Other Tobacco Products Portfolio Ploom & E-Lites 2014 11JTI ZanderaZandera e-cigarette E-Lites Emerging Products e-cigarette Heat-not-burn e-cigarette Ploom 6 E-Lites OPERATIONS & ANALYSIS Emerging Product Ploom Zerostyle Emerging Product Ploom E-Lites Fine Cut JTI Fine Cut Fine Cut Roll-your-own Make-your-own 2014JTI Fine Cut 11.1% GFB Fine CutWinston Camel LD Benson & Hedges32.7% JTI Fine Cut 20141.6ppt18.8% Amber Leaf Old Holborn JTI Fine Cut 1 2 Fine Cut Shisha JTI 2013 3 20142 1 JT JAPAN TOBACCO INC. ANNUAL REPORT 2014 033
Review of Operations continued 2014 1 12Like-for-Like 6,498 1.0% 2,387 +1.8% JT 2014 1,862 JT 10960% 2014 4 20 20143.6% 1,124 20-1.0% 6,498 1.8% 2,387-3.6% -1.0% +1.8% 1,165 1,124 6,563 6,498 2,346 2,387 2013 1 12 2014 1 12 2013 1 12 2014 1 12 2013 1 12 2014 1 12 034 JAPAN TOBACCO INC. ANNUAL REPORT 2014
JT OPERATIONS & ANALYSIS 2013 2 No.1 1 1978 30 2015 2 33 1969 2015 2 14 1995 8 2 1mg 2015 2 9 1 2 JAPAN TOBACCO INC. ANNUAL REPORT 2014 035
Review of Operations continued MEVIUS 201460.4% 0.1ppt JT MEVIUS % 61.1 61.5 59.6 60.1 60.0 32.8 2013 10 12 JT MEVIUS 33.4 2014 1 3 31.3 2014 4 6 31.7 31.9 2014 7 9 2014 10 12 2014 MEVIUS 2015 2015 4 MEVIUS JT 036 JAPAN TOBACCO INC. ANNUAL REPORT 2014
JT OPERATIONS & ANALYSIS JAPAN TOBACCO INC. ANNUAL REPORT 2014 037
Review of Operations continued 2014 1 12Like-for-Like 658 +76 73 +63 JAKJTE-052 LEO Pharma ElvitegravirHIV Vitekta E/C/F/TAF Trametinib Mekinist dabrafenib 250mg TO-203 2015 1 Stribild 76 63 +76 +63 582 658 137 73 2013 1 12 2014 1 12 2013 1 12 2014 1 12 038 JAPAN TOBACCO INC. ANNUAL REPORT 2014
MR OPERATIONS & ANALYSIS MR MR MR 499 MR MR ISO14001 JAPAN TOBACCO INC. ANNUAL REPORT 2014 039
Review of Operations continued 2015 2 5 JTK-303 elvitegravir / cobicistat/ emtricitabine/ tenofovir alafenamide HIV HIV 2 JTT-851 2 GPR40 JTZ-951 HIF-PHD HIF-PHD JTE-051 ITK T JTE-052 JAK JAK JTE-151 ROR Th17ROR JTE-350* JTT-251 2 PDHK PDH JTT-252 2 SGLT1 SGLT1 JTK-351 HIV HIV * elvitegravir JTK-303 Gilead Sciences HIV HIV elvitegravir/cobicistat/emtricitabine/tenofovir alafenamide trametinib GlaxoSmithKline * MEK dabrafenib MEK Phase 3 ICOS MedImmune ICOS T ICOS JTE-052 LEO Pharma JAK JAK * 2015 3 2GlaxoSmithKilneNovartis 040 JAPAN TOBACCO INC. ANNUAL REPORT 2014
Phase 1 Phase 2 Phase 3 Phase 2 Phase 2 JTK-303 elvitegravir 3 Gilead Sciences OPERATIONS & ANALYSIS Phase 2 Phase 1 Phase 1 Phase 1 Phase 1 Phase 1 ALK Phase1 Phase1 JAPAN TOBACCO INC. ANNUAL REPORT 2014 041
Review of Operations continued 2014 1 12Like-for-Like 1,612 +40 14 +8 2010 * 40 8 * +40 +8 1,572 1,612 14 6 2013 1 12 2014 1 12 2013 1 12 2014 1 12 042 JAPAN TOBACCO INC. ANNUAL REPORT 2014
OPERATIONS & ANALYSIS HACCPISO22000 ISO22000 HACCP 30 ISO22000 JAPAN TOBACCO INC. ANNUAL REPORT 2014 043
Review of Operations continued 2014 1 12Like-for-Like 1,813 25 5 +16 16 25 +16 5 1,838 1,813 21 2013 1 12 2014 1 12 2013 1 12 2014 1 12 2015 2 4 2015 2 4JT JT JT 2015 9 1988 4SJT JT 2015 9JT * 2014 12 2015 12 044 JAPAN TOBACCO INC. ANNUAL REPORT 2014
JT Group and Sustainability JT OPERATIONS & ANALYSIS JT4S 4 4 4S 4S JT JT FY2014 http://www.jti.co.jp/csr/report/index.html JT Group and Sustainability How we do business Our People Responsible Supply Chain Environment Product, Responsibility and Consumer Impact The Bigger Picture JAPAN TOBACCO INC. ANNUAL REPORT 2014 045
Risk Factors JT * CIS * 2015 2 JT 1. JT 046 JAPAN TOBACCO INC. ANNUAL REPORT 2014
2. JT 2007 JT JT International Holding B.V. JT International S.A. EU26 EU 2009 EU 15 5 5010 15 2010JT JTI Macdonald Corp. 3. OPERATIONS & ANALYSIS JT JAPAN TOBACCO INC. ANNUAL REPORT 2014 047
Risk Factors continued 4. 5. JT 6. RJR 2014 12 31 19 149 048 JAPAN TOBACCO INC. ANNUAL REPORT 2014
7. JT OPERATIONS & ANALYSIS JT JT 8. JT JT JT International Holding B.V. JAPAN TOBACCO INC. ANNUAL REPORT 2014 049
Corporate Governance 2000 2000 2001 2001* 2006 2012 200020082011 * 2014 6 30 8 2 JT 4 2 5 3 5 2 2 050 JAPAN TOBACCO INC. ANNUAL REPORT 2014
3 31 3092 31 32 31 3 2011 12 2 * 2023 3 31 * OPERATIONS & ANALYSIS JAPAN TOBACCO INC. ANNUAL REPORT 2014 051
Corporate Governance continued * 1 3 1 2014 11 1951 3 21 2014 6 1 9 500 2014 82 97% 98% 1974 4 2006 10 2007 7 2008 7 2009 7 2010 7 2010 12 2012 12 2014 6 052 JAPAN TOBACCO INC. ANNUAL REPORT 2014
* * * OPERATIONS & ANALYSIS 1957 4 15 1956 1 11 1959 5 22 2014 6 1 9 2014 6 1 9 2014 6 1 9 24,400 23,800 9,900 1981 4 1980 4 1983 4 2001 6 2001 7 2000 4 2003 6 2004 6 2006 6 2007 6 2007 7 & 2009 6 2012 6 2004 6 2004 7 2005 6 2006 6 JT International S.A. Executive Vice President 2011 6 2011 6 2014 6 2002 6 2004 6 2006 6 2009 6 2010 5 2011 1 2012 6 JAPAN TOBACCO INC. ANNUAL REPORT 2014 053
Corporate Governance continued * * 1960 8 25 2014 6 1 9 15,500 1958 1 22 2014 6 1 9 12,100 1985 4 2005 6 2007 6 2008 5 2008 6 2008 7 2009 7 2010 6 2012 6 1980 4 2005 7 2006 1 2008 6 2009 10 2010 5 2010 6 2010 7 2010 8 2012 6 054 JAPAN TOBACCO INC. ANNUAL REPORT 2014
* 1943 9 15 2014 6 1 9 0 1951 4 25 2014 6 1 9 0 OPERATIONS & ANALYSIS 1966 4 1994 6 1998 4 2001 4 2001 6 2007 6 2012 6 2013 6 1995 9 2003 1 2004 4 2005 3 2006 11 2010 6 2012 6 2013 6 LIXIL JAPAN TOBACCO INC. ANNUAL REPORT 2014 055
Corporate Governance continued 4 2 42 2014 100% 1957 11 23 2015 3 4 4,800 1981 4 2004 7 2005 7 2005 9 JT International Holding B.V. Vice President 2009 7 2010 7 2012 6 056 JAPAN TOBACCO INC. ANNUAL REPORT 2014
OPERATIONS & ANALYSIS 1953 12 19 1944 12 3 1947 6 17 2015 3 4 2015 3 4 2015 3 4 0 700 0 1976 4 1968 4 1970 4 2000 7 1995 6 1972 4 2002 7 2000 5 2001 5 2004 7 2003 6 2002 1 2007 4 2008 1 2004 6 2008 1 2011 1 2006 6 2009 8 2011 4 2007 7 2010 3 2011 6 2008 7 2010 10 2010 6 2010 11 2010 12 2013 6 2011 3 2011 4 2013 6 2014 6 2015 3 JAPAN TOBACCO INC. ANNUAL REPORT 2014 057
Corporate Governance continued 2 2 4 1. 2. 3. 4. 5. 6. 7. 8. 9. 28 10. 1 28 2 31 2 058 JAPAN TOBACCO INC. ANNUAL REPORT 2014
OPERATIONS & ANALYSIS 150 JAPAN TOBACCO INC. ANNUAL REPORT 2014 059
Corporate Governance continued JT JT JT 2014 2 060 JAPAN TOBACCO INC. ANNUAL REPORT 2014
OPERATIONS & ANALYSIS JT46 JAPAN TOBACCO INC. ANNUAL REPORT 2014 061
Corporate Governance continued 4 2 2 2014 2 3 2007 8 7 22 2007 6 8 71 9 800 2 062 JAPAN TOBACCO INC. ANNUAL REPORT 2014
2014 12 31 1 2 423 235 102 86 8 54 54 2 41 41 4 517 329 102 86 14 1. 2. 2014 12 31 OPERATIONS & ANALYSIS 2014 12 311 JT 56 34 21 111 2014 12 31 2014 9 19 6 19 35,600 33,20068,800 1200 JAPAN TOBACCO INC. ANNUAL REPORT 2014 063