National Expansion Post-launch Report The i005 sales expansion started since Sept 1. In this issue, we introduce a message from the RRP Director, promotional activities and Operations? work towards the expansion. Message from Ashok Rammohan. RRP Director I GO 5 Dear Team, We are entering a New Era of the Tobacco Industry with the national expansion of (Q03. PMJ is leading the efforts in establishing a new 'Heat not Burn category' to offer LAS the most innovative and advanced product through 1008 and Marlboro Heatsticksm. The preparation for the launch. involved all functions across PMJ and I am pleased to inform you that we are off to a great start and this was possible only because of the good collaboration between SPT teams and the field force across all regions. As you know, building 1008 will take time and focus as we need to educate LAS through Guided Trials and also assist them in fully switching to the product to realize the full bene?ts. We have observed some great examples of effective consumer engagement by the fietd force using effective core selling messages, including indoor air quality benefits. With ongoing efforts to demonstrate the reduced risk potential of i am confident that we will continue to attract more and more LAB into the category. The journey has just begun and i am sure you are all excited to be part oi this revolution. Consumer Engagement During the 2015 FI Grand Prix herd at the Suzuka Circuit between September 25 and 28. consumer engagement for i008 was hotel in a booth called the ?1008 Cube'. The Cube featured Guided Trials and 1008 sales in addition to providing LAS an 1008 Lounge where they could try using i008 and pamCIpate in an innova? tive and next?generation CE Engagement called Bode racing game. Through this game, LAS were able to grab a chance to enter the VIP Paddock lounge. For four days, a total 2,521 adult smokers visited the ?i003 Cube" to experience the world of i008. For the production of in 2015, a Training Center has been established in our Fitter Technology and Innovation affiliate lntertaba in Bologna, ltaly. In addition to its role as a temporary production facility, it is also being used to train the future stalt of the 'Green?eld" factory that PMI is building especiatly for i008 production. Completion is expected in 2016. Technicians and engineers trained in the Development Center in Switzerland were the ?rst to move to the Training Center in order to train staff on?site. i008 Device The assembly of the 1008 device is carried out by our partner in Malaysia, while the majority of the components are manufactured by external suppliers. Although the parts are manufactured using different automatized processes and technologies (injection molding, metal stamping, electronic board, printing and decoration, etc}, the assembly of the i005 device remains a manual process, which is relatively common in the electronic device industry. {Photo} 41.13an partners in Asia handxe production and assernh?y. 5-6.Manual assembly at the device 11 Asia '31 close cooperaton with Phil colleagues who have been art-site support _perations This was accomplished in time despite a very challenging scope, timing and complexity. Why? - Creation of new processes to ensure a smooth supply of electronic devices, a new product for PMI. This posed new challenges in managing several requirements for importation. documentation, product warranty. etc. - Expansion of the new version: New device development led to new speci?cations and new packaging development. However, we could only leverage our experience from the previous pilot launch, and the majority of details had to be redeveloped. - Following the evaluation of pilot launches, there were several changes in the project and a new line up for was approved by management that has resulted in the introduction of two new variants. Some other key facts and figures regarding the national expansion: We shipped over 70 plane loads to prepare launch inventories of both Heatsticksw and devices. Our factory ran at 120% capacity to support the Japanese expansion. - Over 250 shipping and billing documents were processed before the launch. The next steps will bring commercialization in more markets in the coming Operalims route lot Ma'boro l-leatsticlrs?I months. The future for i008 is de?nitely a very exciting one! 9m? ?Do you Know?? Session: Behind the scenes of was After Sales Service A in this "Do you Know?" session. ?from Operations made a presentation about ?Customer Care'. ?1008 After Sales Service?. ?Logistics' and the 'Call Center?. What does ?Customer Care' do? The Customer Care tun than was added to the Operations. department last November. in addition to Customer Care, Operations also has the Supply team. Commercialization and Procvrernent Customer Care to charged with three main tool-:9, it has the CRCC that handles calls from censumem regardmg combustible Cigarettes Second. It is tasked Quality Assurance (Oh) that collects and inspects defects to provide teedbacI-t to the factories. after sales services which has just started this Seotember and is today?s main topic. i005 After Sales Services is deployed in three channels .005 Atter Sales Services can be split into three categories. The ?rst channel IS the JQOS Customer Center, is the Call Center We receive inquiries and issues from Mutt smokers from 8:00 to 22.00 every day. The second channel is the JQOS Stores Sewlce Stabom. which prohde After Sales at Flagship Stored or specially contracted GAs. For customers who cannot find one nearby or do not want to go to a Semce Station. we provide a delivery semce by tomato, The third channel is the i003 Inspection Center located in Yomnto's general togistics terminal at Hanedo. which checks all defective devices and inputs the defect detarls into a computer system This data is helpfut for the R50 team tor future dewce improvements The Customer Center race-res a call from a customer. and in more than hell of the cases, we deliver a replacement to the customer if we conclude it is defective A replacement IS delivered within 24 hours. For customem who cannot wort 24 hours or are not sure when they will be at home. we ask them to go a nearby somet- stntion for a replacement. For other cases, the customer usually it to on 1008 Store and we check the device's condition and replace rt as necessary. The Logistics Challenge: To deliver a replacement within 24 hours in Japan. there are three major logistics companies: Japan Post (30., Ltd, ?l?amato Transport Co. and Sagawa Express Co, Ltd, and each company has its each specialty. Japan Post has wide network since they deliver the mail. Sagawa Express provides a full range of services to the shipper. Yamato focuses on speedy delivery to the recipient. For we selected Tomato as the company to support our customers. ?r?amato provides logistics services for small packages. direct mail, standard packages, refrigerated goods, golf clubs and skis. in addition, they have delivery methods such as same-day delivery. standard shipping, courier and nighttime delivery. They also have scheduled delivery and convenience store pick-up, so we can offer services to our customers balancing 24 hour delivery and low cost. Starting September 1, we located ?ve hubs in Sapporo, Fukuoka, Osaka. Nagoya and Tokyo, If a replacement request is received from a consumer living close to one of these hubs between 20:00 the evening before until 10:00 a replacement is delivered the some day. For replacement requests received between 10:00 and 13:00. a replacement is delivered to the customer the following morning (For customers in Okinawa, it is delivered the moming two days later as we use sea freight from Fukuoka}. For replacement requests received between 18:00 and 20:00, a replacement .is delivered the following afternoon by nighttime delivery or courier. We are the first company to use Yamato?s nighttime services for 82C. Do you know how many PMJ Call Centers there are? Did you know that we have three Call Centers? The ?rst Call Center is CRCC. This Call Center receives inquiries about combustible cigarettes from or consumers. Next is the 1008 Customer Center that receives i?OOS-speci?c inquiries and diagnoses defective devices. The third is the Combustible Cigarette Campaign Office. Usually when you calla company?s Customer Center, you hear an automated menu and select a number depending on your inquiry. In our case, we had to decide the sorting of inquiries in advance. such as 'broken device'. ?unable to access the website' or ?purchase infomtation?. In addition, we assign skilled operators working full-time for device diagnosis and complicated inqum?es. operators skilled at sales for inquiries before purchasing, and part-time operators for simple inquiries. Foresee the wave of calls The response rate is very important for the Call Center. When a customer makes a call to the Call Center and makes a selection from the automated menu, the call will be put in the queue for an operator with the proper skill. This is called an offered call. The response rate is how many of these calls are received. if we receive 90 out of 100 calls. the response rate is 90%. The number of calls varies by industry, but this is very high performance compared to general Call Centers. The number of calls received by the CRCC greatly increases when there is a new product launch or product price change. Additionally. 9 am. on Mondays. year?end and holidays are busy days, we need to analyze seasonality and other factors. Going fonivard, we should be able to anticipate the number of calls by closely examining lhe correlation of each factor?s correlativity as it applies to RRPs. Tobacco Trivia Episode 3: What Is ?Tobacoo Vapor?? 3 Tao-m 1008 doesn?t gen?aie moire, but Vapou?. right? What is ?Tobaeoo Vapor' anyway? "Tobacco Vapor? is an aerosol which is generated . when tobacco leaves are heated. The vapor mostly consists of water, glycerin and nicotine. Compared to smoke from combustible cigarettes, ?Tobacco Vapor is much less bothersome for those around the user. because there is no sidestream smoke and tobacco vapor that the user exhales dissipates very qtioldy. Moreover accord'ng to studies by PMI the Tobacco Vapor? generated by the use of ?003 contains signi?cantly lower levels of harmful or potentially harmful oompounds oompared to cigarette smoke i see- That is why it is said lhat 'using roos does not negatively impact indoor air quality' 'l'hat?s right. We conducted studies to measure substances relevant to indoor a?l' quality, based on international standards like Levels of substances in ambient air where roos was used were very similar to the ones found where no tobacco Okay, so that means product is used- has a toss harmful impact on health, right? No no no! While these are important results, we have not reached the point where we can say that it 'less harmful? for both adult smokers and 1hose around them- Yet, i008 is much less bothersome for those around the user, with no the. no ash, less smell and without negatively impacting indoor air quality. What is ?Tobacco Vapor"? a An aerosol which is generated when tobacco leaves are heated. I The vapor mostly consists of water. gtycerin and nicotine. - Although we have not reached to the point where we can say that it is "less the ?Tobacco Vapor I generated by the use of MOS oontains signi?canlty lower levets of harmful or potentially harmful compounds oompared to cigarette smoke.