#1JT International Investor Field Trip Russia Market St. Petersburg September 28, 2010 Ji E quality commitment innovation synergy#2Forward-looking and cautionary statements This presentation contains forward-looking statements about our industry, business, plans and objectives, financial conditions and results of operations based on current expectations, assumptions, estimates and projections. These statements discuss future expectations, identify strategies, discuss market trends, contain projections of operational results and financial condition and state other forward-looking information. These forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that could cause our actual results to differ from those suggested by any forward-looking statement. We assume no duty or obligation to update any forward-looking statement or to advise of any change in the assumptions and factors on which they are based. 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) health concerns relating to the use of tobacco products; 2) legal or regulatory developments and changes; including, without limitation, tax increases and restrictions on the sale, marketing and usage of tobacco products, governmental investigations and privately imposed smoking restrictions; 3) litigation in Japan and elsewhere; 4)our ability to further diversify our business beyond the tobacco industry; 5)our ability to successfully expand internationally and make investments outside of Japan; 6)competition and changing consumer preferences; 7)the impact of any acquisitions or similar transactions; 8) local and global economic conditions; and 9)fluctuations in foreign exchange rates and the costs of raw materials. This presentation contains packages of our brands in some slides. Those slides have been developed to explain JTI's performance to our investors. And they are not intended to promote the purchase of our products E JTi 2#3Kevin Tomlinson Russia General Manager E JTi 3#4Agenda Introduction Economy and Tobacco Market Overview JTI Strategy & Performance Conclusions JTi E 4#5- - Introduction - - JTi E 5#6Russia market at a glance Kaliningrad St. Petersburg •Smolensk Moscow Yaroslavl Tula Voronezh Rostov-na-Dgnu Nizhni Novgorod Surgut ° o Saratov Samara Ekaterinburg Krasnodar Volgograd Stavropol Kazan Perm O Ufa • Chelyabinsk Omsk Novosibirsk Krasnoyarsk O ° Kemerovo Divisional city Khabarovsk Irkutsk Vladivostok JTi E Russian Market 17.1 million sq. km 142 million people Male/Female 46%/54% Urban population 73% Smoking Incidence 40% (1) 390 billion cigarettes(2) Largest JTI Market 28 Sales Divisions employing 2,300 people (3) Strategic partnership with the largest distributor in Russia, shared with key industry players (1) consumption: 1+ cigarettes a day; (2) FY 2009; (3) Headcount as of May 2010 Source: Rosstat Jan-2010, TNS Global consumer study 2010, JTI Estimates 6#7Market share of key players in Russia Share of Market (%) Share of Value(¹) (%) 36.436.9 25.325.7 20.3 19.8 8.7 8.3 JTI PMI BAT Imperial Aug 08-July 09 Aug 09-July 10 33.3 34.5 30.9 30.5 23.4 22.1 JTi E 6.0 6.0 JTI PMI BAT Imperial JTI is the market leader in Russia both in terms of Share of Market and Share of Value (1) Share of value based on retail selling price Source: A.C. Nielsen 7#8JTi E - Economy & Tobacco Market Overview - 80#9Economic environment Real GDP growth, % Unemployment, % JTi E Growth of real disposable income, % 8.2 7.7 7.2 6.5 5.6 4.2 4.3 3.4 2.3 7.7 4.8 2008 2009 2010f 2011f 2008 2009 2010f 2011f 2008 2009 2010f 2011f -7.9 Severe economic crisis impact in 2009, but economic forecasts point to a gradual recovery Note: 2010 and 2011 figures are forecasts Source: IHS Global Insight, Economist Intelligence Unit 9#10JTi E Regulatory environment ☐ New tobacco regulations (enforced since July 2010) set product and packaging requirements compliant with the FCTC: □ Enlarged health warnings ☐ Ingredients reporting ☐ Reduced levels of tar and nicotine ☐ Notation on products with "lights" and "mild" descriptors Legislative discussion ongoing regarding smoking in public places and further restrictions on advertising The Russian market is increasingly regulated 10#11Excise tax environment □ Three-year excise schedule in place since 2007 □ Average 2008-2010 growth rates at 25-30% ☐ Anticipated tax increase in 2011-13 in the range of 30-40% annually □ Current excise incidence for Winston is 19% of the retail price JTi E Ad Valorem, (% of MRP) Specific, (Rub/M) Minimum Excise Tax, Winston Excise (Rub/ M) Burden (Rub/pack) YOY increase 2007 5.0% 100 115 3.07 2008 5.5% 120 142 3.72 21.3% 2009 6.0% 150 177 4.74 27.4% 2010 6.5% 205 250 6.21 31.0% Predictable excise tax environment in Russia supports steady development of government tax revenue and business The next tax schedule to 2013 is currently under discussion (1) MRP: Minimum Retail Price Source: Russian Ministry of Finance, JTI Estimates 11#12Industry size evolution 21 408 404 405 390 18 400 400 357 303 14 15 300 268 12 10 200 13 12 100 0 2006 2007 2008 2009 Volume, BNU Value, RUB Bn Value US $ Bn 9 6 E JTi The industry contracted sharply in 2009 as a result of the economic crisis, both in terms of volume and value Industry value declined in US$ terms in 2009. However, RUB value continued to increase driven by tax and price increases Note: Value based on retail selling price, at average US$ FX rate (1) RUB value: left-hand scale; (2) US$ value: right-hand scale Source: Central Bank of Russia, JTI Estimates 12#13Consumption pattern evolution Index (Jan. 2007 = 100 100) 95.6 95.5 89.9 86.1 E JTi NOV 2008 JAN 2009 MAR 2009 MAY 2009 JUL 2009 SEP 2009 NOV 2009 JAN 2010 MAR 2010 MAY 2010 JUL 2010 After the severe contraction of 2009, we are observing a return of the historical pattern of higher consumption during summertime 50 50 JAN 2007 MAR 2007 MAY 2007 JUL 2007 SEP 2007 NOV 2007 JAN 2008 MAR 2008 MAY 2008 JUL 2008 SEP 2008 Off-take data, although only available with 6 months' delay, shows a Q1 market contraction of 7%, less than the 11% reported by A.C. Nielsen Source: A.C. Nielsen, July '10 data 13#14Down-trading is slowing down Share of Market, % Value/Base Mid-Price | Sub-Premium Premium Prestige Q1 10 vs Q1 09 ■■Q2 10 vs Q2 09 100 10.9 11.2 11.1 11.1 11.1 11.1 11.1 11.1 -0.1 0.0 Prestige 5.3 5.3 5.2 5.0 4.7 4.6 4.6 4.6 -0.7 25.4 26.1 26.2 26.1 25.7 25.7 25.9 26.1 Premium -0.6 JTi E -0.4 Sub Premium 16.7 17.2 17.9 18.6 19.4 19.9 20.5 20.8 -0.4 41.6 40.1 39.6 39.3 39.2 38.6 38.0 37.4 -1.5 -1.6 Mid Price Value/Base 2.7 2.6 FY08 Q109 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 July 10 -2 -1 0 1 2 3 July data confirms the trend of return to growth of Sub-premium that we have seen since Q2 10 The effect of the June price increase cannot yet be seen in the July data Source: A.C. Nielsen 14#152010 Industry outlook JTi E □ Economic forecasts point to gradual recovery and resumption of up-trading □ FCTC will continue to drive regulation □ Excise tax regime is expected to remain predictable □ Industry volume contraction expected to slow down by year end, with FY contraction at circa. 3% 15#16- JTI Strategy & Performance JTi E 16#17Russia performance Volume and Net Sales 2010 Net change vs. same period in 2009 (%) 21.5% 12.6% 8.4% 4.8% 0.5% -7.1% -7.4% -10.1% -12.8% Q1 10 Q2 10 Jul/Aug 10 JTi E Volume GFB Volume Reported Net Sales During July/August, total volume grew slightly, mainly driven by slowing market contraction and SOM gains. GFB volume grew strongly in July/August, mainly driven by Winston and LD RUB strength had a positive impact on net sales comparisons, especially in Q1 10. The different timings of price increases (March 2009 vs. June 2010) impacted Q2 10 net sales. 17#18JTi E JTI Russia key strategies □ Leveraging our scale to increase profitability by seizing pricing opportunities □ Focusing investment behind GFB and portfolio premiumization through innovative new launches and extensions, to capture opportunities from up-trading in the mid- and long-term ☐ Continuing to manage our strong non-GFB portfolio □ Strengthening our leadership in visibility in Modern & Traditional channels as a platform for consumer activities □ Reinforcing our standing as a good and responsible corporate citizen through our philanthropy programs ☐ Attracting, retaining and developing top talent on the market 18#19JTI share of market & share of value evolution 35.7 Share of Market 36.8 37.0 Share of Value (1) 33.9 32.0 E JTi 34.7 2008 2009 Jan-Jul 10 2008 2009 Jan-Jul 10 Strengthening leadership, with accelerated gains in SOV driven by pricing strategy (1) Share of value based on retail selling price Source: A.C. Nielsen 19#20JTI SOM growth is driven by growth in Mid Price+ JTI Share of Market by Price Segment 2008-July 2010(¹), (%) 36.6 36.7 36.8 37.0 36.9 37.0 37.2 35.7 2.6 2.5 2.4 2.2 2.1 2.1 2.1 2.4 11.9 12.7 12.8 12.7 12.5 12.6 12.8 13.1 8.5 9.0 9.3 9.7 10.1 10.3 10.5 10.6 12.9 12.2 12.0 12.1 12.2 11.7 11.5 11.4 FY 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 July 10 Value/Base Mid-Price Sub-Premium Premium and above Total Share of Market JTi E JTI Share of Market is growing driven by GFB development and up-trading into the Mid-Price+ segments (1) January to July 2010 Source: A.C. Nielsen 20#21Pricing evolution 40 40 35 55 30 35 25 27 Pricing evolution 2009-2010 (RUB/20 pack) 37 31 29 20 16 15 15 18 40 JTi Pricing first announced by JTI 43 Russian Style 33 Winston 20 LD Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan-Feb Mar Apr May Jun Jul Aug Sep 09 10 JTI as the leader in the market has a consistent track record of seizing pricing opportunities 21#22Reported net sales per '000 evolution (indexed) Index (Year 2007 = 100) 150 140 130 120 110 100 100 90 80 80 2007 121 117 2008 2009 131 Jan-Aug 2010 JTi E Sustainable strategy to improve reported net sales per '000, reflecting pricing and mix improvement Note: 2007 figures include pro-forma Gallaher 22#23Our volume is driven by strong brands THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. SOBRANIE MILD SEVEN РУССКИЙ стиль CAMEL Winston Glamour ΠΕΤΡΙ Sawk LD Maximum КУРЕНИЕ Retail КУРЕНИЕ КУРЕНИЕ УБИВАЕТ УБИВАЕТ УБИВАЕТ КУРЕНИЕ УБИВАЕТ КУРЕНИЕ УБИВАЕТ КУРЕНИЕ УБИВАЕТ КУРЕНИЕ УБИВАЕТ selling 65 50 43 41 33 31 22 22 КУРЕНИЕ УБИВАЕТ 20 price (RUB) Share of Market 10.2 July 2010(1), % PROFIT ENGINE 1.1 0.6 0.3 2.5 3.7 0.0 Sobranie Mild Seven Russian Style Camel Winston Glamour Peter 1 Premium and above Sub Premium Mid Price 5.2 LD Winston: #1 Brand (10.2%), Glamour #1 in Super Slims (2.5%) Leading in Sub-Premium (49% SOS(2)) & Mid-Price (52% SOS). Strong #2 position in Premium (32% SOS). Opportunity in Prestige (6% SOS). Strong local brands (Russian Style & Peter I) (1) 12-month rolling average to July 2010 ;(2) SOS: Share of Segment Note: Sobranie, Mild Seven, Camel & Russian Style: prices as of July 2010; Winston, Glamour, LD and Peter I: prices as of June 2010 Source: A.C. Nielsen 23#24GFB/non-GFB volume evolution 100% 0% 57.8% 57.4% 54.0% 52.1% 51.9% 53.1% 52.2% JTi E Non-GFB volume 42.2% 42.6% 46.0% 47.9% 48.1% 46.9% 47.8% GFB volume 1 H1 2007 H2 H1 2008 H H2 H1 2009 H2 Jan-Aug We are focused on driving GFB volume growth Note: 2007 figures include pro-forma Gallaher 2010 24#25Winston is the No1 brand in Russia, its leadership is constantly strengthened by innovative propositions THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. JTi AMERICAN BLEND Winston BLUE Winston КУРЕНИЕ УБИВАЕТ Share of Market (%) 1 1 1 1 10.1 10.3 9.6 0.0 0.2 8.7 1.2 0.8 1.4 0.2 8.8 9.0 8.7 8.5 КУРЕНИЕ УБИВАЕТ 2008 2009 2007 Regular I King Size Super Slims Jan-July 10 Super Slims 100 Winston Family 1 Rank in the market Winston Super Slims & XS drive family growth despite down-trading Following first signs of market recovery, recent performance of Winston Regular is encouraging Note: 2007 figures include pro-forma Gallaher Source: A.C. Nielsen 25#26Opportunity for innovative development in Premium and above THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. SOBE SOBRANIE SOBRANIE LONDON KYPEHVE BPEMT BALEMKYPEHME BPEMT BALEMY 300POBO CAMEL FILTERS DISCOVER MORE CAMEL ACCESO CAMEL DISCOVER MCRE CAMEL CAMEL ACCESS 19 Lac DISCOVER MORE CAMEL ACCIDENSO 36.9 Share of Volume (%) July 2010(1) 13.8 MILD SEVEN Fees SAGE SHELL LSS SKY BLUE UNCIAL FULD ЛЕВАНИЯ ИРИНА MILD SEVEN LINITED EDITION IN MILD SEVEN MILD SEVEN LESS SMOKE SMELL LSS WIND BLUE DARCON FLI LOBENAHHH REHA CHARACOAL FILTER MILD SEVEN LIMITED EDITION КУРЕНИЕ УБИВАЕТ КУРЕНИЕ УБИВАЕТ KYPEHVE SPEDIT BALEMY 300PCB КУРЕНИЕ ВРЕДИТ ВАШЕМУ ЗДОРОВЬЮ KOPEHME SPEDIT BALEMY SOPOBBI JTI Share of Market JTI Premium and above price segment share Compared to our overall SOM, we are under-represented in Premium and above segments; this is a significant opportunity for JTI Investing into innovative formats & technologies and image driving Limited Edition Packs, with the aim to drive share of segment gains in Premium and above (1) 12-month rolling average to July 2010 Source: A.C. Nielsen 26 JTi#27LD Striving for No1 position in Mid-Price THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. L'D ED RED КУРЕНИЕ УБИВАЕТ LD Share of Market, % 3 2 4 5 5.2 LD 4.8 4.2 4.1 LD CLUB GOLD КУРЕНИЕ УБИВАЕТ JTi 2007 2008 2009 Jan-July 10 ⑰Rank in the market International proposition in Mid-Price segment, capitalizing on innovation (Super Slims & King Size Super Slims available) Note: 2007 figures include pro-forma Gallaher Source: A.C. Nielsen 27#28Peter I is among the top 5 brands in the market THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. JTi Peter I Share of Market, % 5 7 ПËTPI 9 3.9 13 3.5 3.2 ЗОЛОТАЯ СЕРИЯ 2.8 ЭТАЛОН КУРЕНИЕ УБИВАЕТ 2007 2008 2009 Jan-July 10 5 Rank in the market Strong heritage proposition with ongoing growth in SOM Note: 2007 figures include pro-forma Gallaher Source: A.C. Nielsen 28#29Continuous improvement: integrated processes for Trade Marketing Excellence 360° Customer View Trade Marketers Consumers & Customer Randy Dand tme marieg excelerde Tale So 1111111 Cal V OF AM Skele Key Retail Accounts, Traditional, Leisure Distributor JTi E simply and intuitively READY FOR A CHANGE? Access the information you need more quickly, TME is an advanced system allowing better trade-related data storage, access & usage by all the parties involved, thus driving efficient and effective solutions across all trade channels & within the JTI Consumer & Trade Marketing organization 29#30Continuous improvement: innovation at Points of Sale THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Total Universe in Russia at 386,000 POS SOBRANIE LONDON LD ED SOBRANIE LD Modern Trade Permanent/ Shop in Shop Traditional Temporary/ Cycle Plan 10 HoReCa Special Projects & POS materials JTi JTI is strengthening its leaderships at Point of Sale through innovative initiatives 30#31Corporate philanthropy activities JTi E US$2.8 million invested in philanthropy activities in 2009 Strategic approach Sustainable projects relevant for the communities Adequate geographical spread of projects in Moscow, St. Petersburg and regions Balance between cultural and social programs - One umbrella for all philanthropy activities in Russia JTI SOCIAL PARTNERSHIP Key projects Support of culture: The Mariinsky Theater The Bolshoi Theater The Moscow Chekhov Artistic Theater The Pushkin Museum of Fine Arts The Hermitage Museum Promotion of Japanese culture in Russia - Charity support of the elderly people: □ Good-neighborhood programs in Moscow and St. Petersburg A national program of support to elderly people was launched in 2010 Corporate philanthropy programs help strengthen the company as a good corporate citizen in Russia 31#32JTI Russia talent development JTI Russia is the fastest-growing organization in the region: In 2006: 3478 employees, 3 factories In 2010: 5540 employees, 4 factories JTI in Russia offers attractive working conditions: Our pay policies and practices are among the most competitive on the marketplace We pioneered the implementation of private pension plans in Russia early 2007 Our medical plan is one of the best in the market, covering employees and their dependants We develop people both locally and internationally: Local talent runs the business: 5,524 local employees vs. 16 International Assignees E JTi We support people development at all levels in the organization: Local Career Path program is in place since 2006 to develop successors for key positions □ We export Russian talents to help develop the greater JTI: 33 people transferred to 13 different locations since 2008 JTI's standing as an employer of choice in Russia is a cornerstone of its future growth Note: 2010 headcount as of May 32#33Conclusions - JTi E 33#34Conclusions JTi E □ We are seeing initial signs of recovery, evidenced by more stable industry volumes and signs that down-trading is slowing. We expect a 3% market contraction in 2010. As leaders on the market, we pursue pricing opportunities to increase profitability We will continue to invest in our brands with a particular emphasis in the Sub-Premium and above segments in preparation for the resumption of up-trading □ Continuous improvement and innovation in products, at point of sales and in business processes 34#35- Appendix - JTi E 35#36Route to market THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI'S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Manufacturers 87% Traditional 6% Distributors Wholesalers / Cash&Carry Hyper/Supermarkets SOB 7% 0.1% Gas and organized convenience Leisure / HoReCa M ➤ Approximate number of outlets: 386,000 ➤ Traditional channel is a key volume driving channel Share of hypermarkets and supermarkets is constantly growing Source: JTI estimate JTi 36