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UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )Filed by the Registrant☒

Filed by a Party other than the Registrant☐

Check the appropriate box:
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Preliminary Proxy Statement
Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Under Rule 14a-12

Philip Morris International Inc.
(Name of Registrant as Specified in Its Charter)(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):☒

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1)

Title of each class of securities to which transaction applies:(2)

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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amounton which the filing fee is calculated and state how it was determined):(4)

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which theoffsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule andthe date of its filing.

(1)

Amount previously paid:(2)Form, Schedule or Registration Statement No.:

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Filing Party:(4)

Date Filed: March 23, 2017

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2017 PROXY STATEMENT
And Notice of Annual Meeting of Shareholders
To be held on Wednesday, May 3, 2017

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March 23, 2017

Dear Fellow Shareholder,
You are cordially invited to join us at the 2017 Annual Meeting of Shareholders of Philip Morris International Inc. (“PMI” or the “Company”) to beheld on Wednesday, May 3, 2017, at 9:00 a.m., in the Empire State Ballroom at the Grand Hyatt New York, 109 East 42nd Street, New York,New York.
At this year’s meeting, we will vote on the election of thirteen directors, an advisory say-on-pay vote approving executive compensation, anadvisory resolution regarding the frequency of future say-on-pay votes, the approval of the 2017 Performance Incentive Plan, the approval of
the 2017 Stock Compensation Plan for Non-Employee Directors, the ratification of the selection of PricewaterhouseCoopers SA as theCompany’s independent auditors, and, if properly presented, two proposals from shareholders. There will also be a report on the Company’sbusiness, and shareholders will have an opportunity to ask questions.
We anticipate that a large number of shareholders will attend the meeting. Because seating is limited, you may bring only one immediate family
member as a guest. All attendees must present an admission ticket and government-issued photographic identification. To request an
admission ticket, please follow the instructions set forth on page 75 in response to Question 4.
The meeting facilities will open at 7:30 a.m. on May 3, 2017. We suggest you arrive early to facilitate your registration and security clearance.
Those needing special assistance at the meeting are requested to write to the Company’s Corporate Secretary at 120 Park Avenue, New York,New York 10017-5579. For your comfort and security, you will not be permitted to bring any packages, briefcases, large pocketbooks or bags
into the meeting. Also, cellular and digital phones, audio tape recorders, laptops and other portable electronic devices, video and still cameras,
pagers and pets will not be permitted into the meeting. We thank you in advance for your patience and cooperation with these rules, whichassist us in conducting a safe and orderly meeting.
Attached you will find a notice of meeting and proxy statement that contains additional information about the meeting, including the methods
that you can use to vote your proxy, such as the telephone or Internet. As we did last year, we are mailing to certain of our shareholders a
Notice of Internet Availability of Proxy Materials. This Notice contains instructions on how to access our proxy statement and 2016 Annual
Report to Shareholders and vote online. Those shareholders who do not receive the Notice will receive a paper copy of the proxy materials by
mail. By furnishing this Notice, we are lowering costs and reducing the environmental impact of our Annual Meeting.
Your vote is important. We encourage you to sign and return your proxy card, or use telephone or Internet voting prior to the meeting, so thatyour shares of common stock will be represented and voted at the meeting even if you cannot attend.
Sincerely,

Sincerely,

LOUIS C. CAMILLERI
CHAIRMAN OF THE BOARD

ANDRÉ CALANTZOPOULOS
CHIEF EXECUTIVE OFFICER

For further information about the Annual Meeting, please call toll-free 1-866-713-8075.
PMI 2017 Proxy Statement • 1

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PHILIP MORRIS INTERNATIONAL INC.
NOTICE OF 2017 ANNUAL MEETING OF SHAREHOLDERS
Date and Time

9:00 a.m. on Wednesday, May 3, 2017

Place

Empire State Ballroom
Grand Hyatt New York109 East 42nd Street
New York, New York

Items of Business(1) To elect thirteen directors.
(2) To vote on an advisory resolution approving executive compensation.
(3)

To vote on an advisory resolution on the frequency of future advisory votes on executive
compensation.

(4) To approve the 2017 Performance Incentive Plan.
(5) To approve the 2017 Stock Compensation Plan for Non-Employee Directors.
(6)

To ratify the selection of PricewaterhouseCoopers SA as independent auditors for the Company forthe fiscal year ending December 31, 2017.

(7) To vote on two shareholder proposals, if properly presented at the meeting.
(8) To transact other business properly coming before the meeting.
Who Can Vote

Only shareholders of record of shares of common stock at the close of business on March 10, 2017 (the“Record Date”) are entitled to notice of and to vote at the meeting, or at any adjournments or
postponements of the meeting. Each shareholder of record on the Record Date is entitled to one vote foreach share of common stock held. On March 10, 2017, there were 1,553,138,929 shares of common
stock issued and outstanding.

Voting of Proxies andDeadline for Receipt

All properly executed written proxies, and all properly completed proxies submitted by telephone orInternet, that are delivered pursuant to this solicitation will be voted at the meeting in accordance with thedirections given in the proxy, unless the proxy is revoked before the meeting. Proxies submitted by
telephone or Internet must be received by 11:59 p.m., EDT, on May 2, 2017.

2016 Annual Report

A copy of our 2016 Annual Report is enclosed.

Date of MailingThis notice and the proxy statement are first being mailed to shareholders on or about March 23, 2017.

Jerry Whitson
Deputy General Counsel and Corporate Secretary
March 23, 2017
WE URGE EACH SHAREHOLDER TO PROMPTLY SIGN AND RETURN THE ENCLOSED PROXY CARD OR TO USE TELEPHONE OR
INTERNET VOTING. SEE THE QUESTION AND ANSWER SECTION FOR INFORMATION ABOUT VOTING BY TELEPHONE OR
INTERNET, HOW TO REVOKE A PROXY, AND HOW TO VOTE YOUR SHARES OF COMMON STOCK IN PERSON. PLEASE NOTE THATYOU MUST OBTAIN AN ADMISSION TICKET IN ORDER TO ATTEND THE MEETING. TO OBTAIN AN ADMISSION TICKET, PLEASEFOLLOW THE INSTRUCTIONS SET FORTH ON PAGE 75 IN RESPONSE TO QUESTION 4.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on May 3, 2017: The
Company’s Proxy Statement and 2016 Annual Report are available atwww.pmi.com/investors.
2 • PMI 2017 Proxy Statement

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LETTER FROM THE BOARD OF DIRECTORS
Dear Fellow Shareholder,
Last year, with the full support of the Board of Directors, your Company announced that its key strategic priority is to develop andcommercialize smoke-free products that are a much better choice than cigarette smoking, and to lead a full-scale effort to ensure that smokefree products replace cigarettes to the benefit of adult smokers, society, our Company and its shareholders. As your Company engages in thetremendous external and internal transformation necessary to achieving that goal, the Board wishes to take this opportunity to discuss how it
perceives and performs its corporate governance role and oversees management’s efforts to enhance shareholder value responsibly andsustainably over the long term.
Over the last decade, the Board has spent an increasing portion of its time overseeing the Company’s RRP progress. We engage actively inseveral aspects of this effort. We discuss with the Company’s scientists and engineers their progress in designing multiple Reduced-Risk
Product platforms, and in conducting rigorous scientific assessments of these platforms. We monitor the Company’s progress in preparing
regulatory submissions for these products. Since the spin-off in 2008, we have considered and approved more than $3 billion in expenditures toresearch and develop these products and to manufacture them. We closely follow the Company’s steps to commercialize the IQOS product, as
well as other RRP platforms. Recognizing that these products are not risk free, we monitor management’s engagement with regulators as it
seeks to ensure that RRPs are responsibly developed, scientifically assessed and marketed. The Board oversees management’s efforts toassure that the Company’s employees are prepared and equipped to meet the new and substantial challenges of the Company’stransformation from cigarettes to RRPs. The Board is also overseeing management’s development of key performance indicators, or KPIs, sothat the Company can track and publicly report its transformation progress. To learn more about the Company’s RRP program, please visit
www.pmiscience.com.
As exemplified by the significant investments of money, time and organizational effort in RRPs, the core of the Board’s oversight framework is afocus on long-term versus short-term results. The Board devotes two meeting days each year to reviewing, understanding, discussing andchallenging management’s long-range strategic plan. It also approves the original budget each year, and its Compensation and Leadership
Development Committee sets performance goals based on that budget that determine incentive compensation levels for the Company’s
management team. We receive updates on the Company’s progress against the budget and the long-range plan throughout the year.
The Board believes that operating with integrity and in full compliance with law and regulation are central to the Company’s business strategy.
Company leaders must unequivocally evince this principle with an unmistakable and unwavering tone-at-the-top. In the words of our Chairman,“the essence of effective compliance is candor, transparency and honesty.” To reinforce this message throughout the organization, each year
the Board meets in one of our key markets, most recently in Russia, Japan, Italy, Germany, Mexico and Turkey, and the Audit Committee meetswith the local finance department in another key market.
Another critical role of the Board is to oversee that the Company effectively identifies, owns, manages and mitigates enterprise risks. In thepast two years, management has structured a more formal process to deal with enterprise risks, as discussed on page 14 of this proxystatement. Management reports to the Board and its Committees with respect to these risks throughout the year.
The Board understands the Company’s special responsibility as a tobacco company. In addition to RRPs, the Board oversees the Company’s
progress to improve continuously the sustainability of the Company’s business and its value chain and to contribute to the global sustainability
agenda. In 2015, with the Board’s encouragement, the Company became the only international tobacco company to date to join the United
Nations Global Compact, an initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to reporton their implementation. The Company filed its first Communication on Progress last year, detailing our progress vis-à-vis the Compact’s Ten
Principles in the areas of human rights, labor, environment and anti-corruption. The cornerstone of the report to the U.N. is the Company’s
determination to address the health impact of combustible tobacco products through RRPs. Space prevents our summarizing this important
report here, but it can be found at www.pmi.com/sustainability, and we commend it to you.
In 2016, the Company also published its third report on its Agricultural Labor Practices program; the report describes the scope of the program
and the Company’s commitment to and progress in implementing good agricultural practices that
PMI 2017 Proxy Statement • 3

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LETTER FROM THE BOARD OF DIRECTORS
support farmers in improving the quality and productivity of their crops, improving food security and diversification, respecting the environment,
and achieving safe and fair labor practices. The program, which is independently monitored and audited and reported transparently, has earned
praise from several sources, including the United States Department of Labor and Human Rights Watch. Our 2014-2015 Progress Report canbe found at www.pmi.com/sustainability.
We encourage the Company’s efforts regarding the environment, which resulted in its being awarded “Climate A List” status in the CDP Global
Climate Leaders Report for the third year in a row and placing the Company in the top 5% of more than 2,200 of the world’s largest companies
that were assessed on their carbon footprint.
We commend the Company’s efforts to advance the socio-economic well-being of the communities in which it has a presence. Last year theCompany partnered with more than 200 not-for-profit organizations to support 236 projects in 55 countries, focused on improving access to
education, empowering women, and promoting economic opportunities to benefit the most vulnerable populations, while also providing
emergency relief to communities suffering natural disasters in the Dominican Republic, Ecuador, Ethiopia, Indonesia, Italy, Japan, Malawi,
Mozambique, the Philippines, and Portugal.
The Board also encourages management to continue to educate, train, develop and manage the Company’s talented workforce. As atestament to management’s commitment to offering an enriching work environment and exceptional development opportunities, and initiatives
such as adopting flexible work arrangements to help employees balance their working and private lives, the Top Employer Institute recently
certified the Company as a Global Top Employer in 34 countries. The Board reviews the Company’s progress in improving diversity andinclusion against key performance indicators, including its goals of achieving a new hire ratio of 50% female by the end of this year andincreasing the proportion of females in management positions to 40% by 2022. We also monitor the Company’s pay scales and promotion rates
for females and are pleased that it has earned equal salary certifications in Japan and Switzerland and was recognized in the Profiles inDiversity Journal as one of ten companies for innovation excellence in diversity and inclusion.
Through the Company’s Compensation and Leadership Development Committee, the Board strives to link pay to performance, not just for
financial results, but also with respect to the Company’s strategic objectives to develop and commercialize RRPs, to improve sustainability, tomanage talent, to increase diversity and inclusion, and to maintain robust central compliance and integrity programs. The Company’s progressin achieving each of those strategic objectives is built into the equation that determines the level of incentive awards earned by the Company’s
executives. The Committee and the full Board also review and assist in the development of executive succession plans.
Page 10 of the proxy statement discusses the Board’s leadership structure, while page 17 outlines the attributes the Board seeks in its
members, the Board’s diversity and global perspective, its healthy pace of director refreshment, and its relatively short average tenure.
Page 8 of this proxy statement discusses the Company’s extensive investor outreach program, the results of which are reported to the Boardand the appropriate committees, and the Board’s recent actions taken to reflect investor input in the areas of compensation structure andgovernance practices. A summary of the governance practices established by the Board can be found on page 16.
The Board believes the various corporate governance practices are tools, not outcomes for achievement in and of themselves. Ultimately, thequestion is not whether a particular governance box is checked, but whether a company acts responsibly in a manner aligned with the
expectations of its consumers, its shareholders and society. The Board is confident that your Company meets, and will continue to meet, thatcritical standard.
The Board’s relationship with management is excellent. Management’s communications are thorough and transparent. Management forthrightly
informs the Board of all relevant matters, whether good or bad. It responds readily to all of the Board’s requests for information, and actively
solicits and responds appropriately to the Board’s opinions, direction and advice. The Board expects nothing less.
Harold Brown
André Calantzopoulos
Louis C. Camilleri
Massimo Ferragamo
Werner Geissler
4 • PMI 2017 Proxy Statement

Jennifer Li
Jun Makihara
Sergio Marchionne
Kalpana Morparia

Lucio A. Noto
Frederik Paulsen
Robert B. Polet
Stephen M. Wolf

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TABLE OF CONTENTS
Glossary of Terms

6

Grants of Plan-Based Awards During 2016

49

Proxy Statement Summary

7

Outstanding Equity Awards as of December 31, 2016

50

Board Operations and Governance10

Stock Option Exercises and Stock Vested During 2016

51

Board Responsibility and Meetings

10

Pension Benefits

52

Governance Guidelines, Policies and Codes

10

Non-Qualified Deferred Compensation

56

Leadership Structure

10

Deferred Profit-Sharing and Benefit Equalization Plan

56

Presiding Director

10Committees of the Board

11

Employment Contracts, Termination of Employment andChange in Control Arrangements

57

Board Risk Oversight

14

Communications with the Board

15

Summary of Corporate Governance Practices

16

Election of Directors

17

Process for Nominating Directors

17

Recommendations of the Board; Director Attributes,
Diversity, Refreshment and Tenure

17

Independence of Nominees

18

Majority Vote Standard in Uncontested Elections

18

Director Nominees

19Compensation of Directors

28

Stock Ownership Information

30

Ownership of Equity Securities

30

Section 16(a) Beneficial Ownership Reporting Compliance

31

Compensation Discussion and Analysis

32

Executive Summary32

Additional Compensation Policies and Processes

43

Compensation and Leadership Development Committee
Report46

Summary Compensation Table47

All Other Compensation

48

Advisory Vote Approving Executive Compensation

58

Advisory Vote on the Frequency of Future Say-on-Pay Votes

59

Approval of the 2017 Performance Incentive Plan

60

Approval of the 2017 Stock Compensation Plan for NonEmployee Directors

64

Audit Committee Matters

66

Ratification of the Selection of Independent Auditors

68

Shareholder Proposals

69

Proposal 1

69

Proposal 2

71

Related Person Transactions and Code of Conduct

73

Availability of Reports, Other Matters and 2018 Annual Meeting

74

Exhibit A: Questions & Answers

75

Exhibit B: 2017 Performance Incentive Plan

80

Exhibit C: 2017 Stock Compensation Plan for Non-Employee
Directors

90

Exhibit D: Reconciliations

94

PMI 2017 Proxy Statement • 5

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GLOSSARY OF TERMS
Financial Terms:▪

Net revenues exclude excise taxes.

▪

Operating Companies Income, or OCI, is defined as operating income, excluding general corporate expenses and the amortization of
intangibles, plus equity (income) or loss in unconsolidated subsidiaries, net.

▪

Adjusted OCI is defined as reported OCI adjusted for asset impairment, exit and other costs.

▪

OCI growth rates are on an adjusted basis.

▪

EPS stands for Earnings Per Share.

▪

Adjusted Diluted EPS is defined as reported diluted EPS adjusted for asset impairment and exit costs, discrete tax items and unusual
items.

▪

Free cash flow is defined as net cash provided by operating activities less capital expenditures.

Other Terms:▪

Reduced-Risk Products (“RRPs”) is the term we use to refer to products that present, are likely to present, or have the potential to present
less risk of harm to smokers who switch to these products versus continued smoking. We have a range of RRPs in various stages ofdevelopment, scientific assessment and commercialization. Because our RRPs do not burn tobacco, they produce far lower quantities ofharmful and potentially harmful compounds than found in cigarette smoke.

▪

NEOs are Named Executive Officers and include our Chief Executive Officer, or CEO, our Chief Financial Officer, or CFO, and the threeother most highly compensated officers serving in 2016.

▪

PSUs are Performance Share Units.

▪

RSUs are Restricted Share Units, and may be issued in the form of deferred share awards.

▪

TSR stands for Total Shareholder Return.

▪

In this proxy statement, “PMI,” the “Company,” “we,” “us,” and “our” refer to Philip Morris International Inc. and its subsidiaries.

▪

We divide our markets into four geographic regions, which constitute our segments for financial reporting purposes:– The European Union, or EU, Region covers all the EU countries and also comprises Switzerland, Norway and Iceland, which arelinked to the EU through trade agreements;– The Eastern Europe, Middle East & Africa, or EEMA, Region includes Eastern Europe, certain Balkan countries, Turkey, theMiddle East and Africa and our international duty free business;– The Asia Region covers all other Asian markets as well as Australia, New Zealand and the Pacific Islands; and– The Latin America & Canada, or LA&C, Region covers the South American continent, Central America, Mexico, the Caribbean
and Canada.

6 • PMI 2017 Proxy Statement

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PROXY STATEMENT SUMMARY
This proxy statement contains proposals to be voted on at our Annual Meeting, and other information about our Company and our corporate
governance practices. We provide below a brief summary of certain information contained in this proxy statement. The summary does notcontain all of the information you should consider. Please read the entire proxy statement carefully before voting.
2016 Business Performance Highlights
In 2016, we delivered strong results on our key performance metrics, while also achieving notable progress against our strategic initiatives. Ourfinancial results were achieved despite significant volume declines in several markets, notably in Pakistan and the Philippines, where volume
decreases were concentrated in low unit margin brands that had a limited impact on our bottom line. We more than offset lower shipment
volumes through favorable pricing and better-than-anticipated RRP performance.
As further discussed on page 37, we also made significant progress on our strategic initiatives, with the standout achievement being the
successful national roll-out of our IQOS Reduced-Risk Product platform in Japan, where IQOS heated tobacco sticks achieved a share of
approximately 4.9% in the fourth quarter of 2016. An estimated 1.4 million adult smokers have already converted to IQOS, despite ourrestricting IQOS device sales due to temporary manufacturing capacity limitations on IQOS heated tobacco sticks. At year-end 2016, we werecommercializing RRPs in key cities or nationally in 20 markets. Importantly, we made substantial progress on other fronts of RRP development,
including scientific substantiation, underpinned by our Modified Risk Tobacco Product application to the U.S. Food and Drug Administration,
product development, engagement with the public health communities, and the RRP regulatory and fiscal environment.
2016 Performance Targets and Results

PMI 2017 Proxy Statement • 7

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PROXY STATEMENT SUMMARY
Investor OutreachThroughout the year, the Company engages in an extensive shareholder outreach program during which it seeks input on a range of matters,
including executive compensation and corporate governance. In 2015, the Compensation and Leadership Development Committee
substantially revamped our executive compensation program in response to specific concerns raised by certain institutional shareholders andto the 2015 shareholder vote of 63.3% in support of the advisory say-on-pay proposal, a level that the Committee believed was inadequate.
Our shareholders overwhelmingly supported the new compensation program, with the approval of 95.0% of the shares voted at the 2016
Annual Meeting. Based on this support and its own satisfaction with the new compensation program, the Compensation and Leadership
Development Committee has determined not to make any substantial further modifications to the program at this time.
In 2016, we met with 65 of our top 100 institutional investors, representing 72% of our available global shareholder base (which excludes index
and most pension funds), to discuss our business and environmental, social and governance issues. In addition to these regular Investor
Relations engagements, we invited our 50 largest shareholders, holding approximately 52% of our shares, to participate in individual
conference calls to discuss executive compensation and corporate governance. These engagements provided us a better understanding of ourshareholders’ priorities, perspectives and positions. We reported the substance of these engagements to our Compensation and Leadership
Development Committee, our Nominating and Corporate Governance Committee, and our entire Board of Directors.
The shareholders with whom we spoke overwhelmingly supported the new compensation program. They also commended the governancechanges made in 2015, namely the new proxy access by-law, the adoption of share ownership guidelines for non-employee directors, theenhancements to the Company’s anti-hedging and anti-pledging policies, and the formalization of the Nominating and Corporate GovernanceCommittee’s oversight of the Company’s lobbying and trade association activities and expenditures.
In September 2016, we held our biennial Investor Day, which was attended in person by sell-side analysts and by representatives of theholders of approximately 27% of our available global shareholder base. All shareholders were able to view the presentations by webcast.
During this two-day conference, shareholders received detailed presentations about our business and had the opportunity to meet with and ask
questions of our senior management team. Before the conference, we commissioned an independent third-party to survey sell-side analysts
and institutional shareholders on a number of topics, including those they most wished to see addressed at the conference and any additional
messages they wished to convey to management. The survey results were reported to us anonymously and addressed in the presentations.
We reported the results of this conference to our Finance Committee and to our entire Board of Directors.
2017 Performance Incentive Plan
The Company is asking shareholders to approve the 2017 Performance Incentive Plan to replace its 2012 Performance Incentive Plan. The
terms of the 2017 Plan are summarized beginning on page 60.
2017 Stock Compensation Plan for Non-Employee Directors
The Company is also asking shareholders to approve the 2017 Stock Compensation Plan for Non-Employee Directors to replace its 2008 Plan.
The terms of the 2017 Plan are summarized beginning on page 64.
8 • PMI 2017 Proxy Statement

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PROXY STATEMENT SUMMARY
Shareholder Agenda Items

2017 Shareholder Vote Recommendations
The Board of Directors makes the following recommendations to shareholders:

Item 1: Election of Directors
Item 2: Advisory Vote Approving Executive Compensation
Item 3: Advisory Vote on the Frequency of Future Say-on-Pay Votes
Item 4: Approval of the 2017 Performance Incentive Plan
Item 5: Approval of the 2017 Stock Compensation Plan for Non-Employee Directors
Item 6: Ratification of the Selection of Independent Auditors for 2017
Item 7: Shareholder Proposal on Human Rights Policy
Item 8: Shareholder Proposal on Mediation of Alleged Human Rights Violations

Board’s RecommendationPage

FOR each nomineeFOR
EVERY YEAR
FOR
FOR
FOR
AGAINSTAGAINST

17
58
59
60
64
68
69
71

PMI 2017 Proxy Statement • 9

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BOARD OPERATIONS AND GOVERNANCE
Board Responsibility and Meetings
The primary responsibility of the Board of Directors is to foster the
long-term success of the Company, consistent with its statutory duty
to shareholders. The Board has responsibility for establishing broad
corporate policies, setting strategic direction, and overseeing
management, which is responsible for the day-to-day operations of
the Company. In fulfilling this role, each director must exercise his or
her good faith business judgment of the best interests of theCompany.
The Board holds regular meetings, typically during the months of
February, March, May, June, September and December, andadditional meetings when necessary. The organizational meeting
follows immediately after the Annual Meeting of Shareholders. The
Board held six meetings in 2016. The Board meets in executive
session regularly with no members of management being present.
Directors are expected to attend Board meetings, the Annual
Meeting of Shareholders and meetings of the Committees on which
they serve, with the understanding that on occasion a director may
be unable to attend.
During 2016, all nominees for director then in office attended at least
75% of the aggregate number of meetings of the Board and all
Committees on which they served, and each of the nominee
directors then in office attended the 2016 Annual Meeting of
Shareholders. Mr. Ferragamo joined the Board in December 2016.
The Board approves the Company’s annual budget each year andreceives updates of the Company’s performance against the budget
throughout the year. The Board also reviews and approves theCompany’s three-year plan each year, typically in a two-day session.
The Board also regularly receives presentations on the Company’s
longer-term objectives and plans.
Governance Guidelines, Policies and Codes
The Board has adopted Corporate Governance Guidelines. In 2014,
the Audit Committee approved a substantial revision to theCompany’s Code of Conduct. The revised document, known as the
Guidebook for Success, is an interactive, plain language tool that
describes the fundamental beliefs and attributes that unite and guide
us in pursuing PMI’s goals, illustrates how to meet our commitments
to these beliefs and attributes, and explains why it is critical to do so.
The Guidebook applies to all employees, including the Company’s
principal executive officer, principal financial officer, and principal
accounting officer or controller. The

10 • PMI 2017 Proxy Statement

Board has adopted a Code of Business Conduct and Ethics thatapplies to directors. It has also adopted a policy with regard toreviewing certain transactions in which the Company is a participant
and an officer, director or nominee for director has, had or may havea direct or indirect material interest. All of these documents areavailable free of charge on the Company’s website,www.pmi.com/governance, and will be provided free of charge to
any shareholder requesting a copy by writing to the Corporate
Secretary, Philip Morris International Inc., 120 Park Avenue, New
York, New York 10017-5579.
The information on the Company’s website is not, and shall not be
deemed to be, a part of this proxy statement or incorporated into any
other filings the Company makes with the U.S. Securities andExchange Commission.
Leadership Structure
The Board believes that no particular leadership structure isinherently superior to all others under all circumstances. It
determines from time to time the structure that best serves theinterests of the Company and its shareholders under the thenprevailing circumstances. Currently, Louis Camilleri serves as our
non-executive Chairman, and André Calantzopoulos serves as ourChief Executive Officer.
As Chairman, Mr. Camilleri facilitates communication between the
Board and management and assists the CEO in long-term strategy.
He presides at all meetings of shareholders and of the Board andassists in the preparation of agendas and materials for Board
meetings, working together with the Presiding Director, whoapproves the agendas before they are disseminated to the Board.
Input is sought from all directors as to topics they wish to review.
Because he was an employee of the Company until December 31,
2014, Mr. Camilleri is not yet an independent Chairman. The Board
has a Presiding Director as described immediately below.
Presiding Director
The non-management directors elect at the annual organizational
meeting one independent director as the Presiding Director. The
Presiding Director’s responsibilities are to:▪

preside over executive sessions of the non-management
directors and at all meetings at which the Chairman is notpresent;▪

call meetings of the non-management directors as he or she
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BOARD OPERATIONS AND GOVERNANCE▪

serve as liaison between the Chief Executive Officer and thenon-management directors;▪

approve agendas and schedules for Board meetings;▪

advise the Chairman and the Chief Executive Officer of theBoard’s informational needs and approve information sent to
the Board;▪

together with the Chairman of the Compensation andLeadership Development Committee, communicate goals
and objectives to the Chief Executive Officer and the resultsof the evaluation of his performance; and▪

be available for consultation and communication if requested
by major shareholders.

The Presiding Director is invited to attend all meetings ofCommittees of the Board. Lucio A. Noto currently serves as the
Presiding Director.
Committees of the Board
The Board has established various standing Committees to assist
with the performance of its responsibilities. These Committees andtheir current members are listed below. The Board designates themembers of these Committees and the Committee Chairs at its
organizational meeting following the Annual Meeting of
Shareholders, based on the recommendations of theNominating and Corporate Governance Committee. The Board has
adopted written charters for each of these Committees and thesecharters are available on the Company’s website atwww.pmi.com/governance. The Chair of each Committee develops
the agenda for that Committee and determines the frequency andlength of Committee meetings. Each Committee meets as often as it
deems appropriate and each has sole authority to retain its own
legal counsel, experts and consultants.
The Audit Committee, the Compensation and Leadership
Development Committee, and the Nominating and Corporate
Governance Committee each consists entirely of non-management
directors, all of whom the Board has determined are independent
within the meaning of the listing standards of the New York Stock
Exchange and Rule 10A-3 of the Securities Exchange Act of 1934,as amended (the “Exchange Act”). The Board has determined that
all members of the Audit Committee are financially literate and that
Lucio A. Noto is an “audit committee financial expert” within themeaning set forth in the regulations of the Securities and Exchange
Commission. No member of the Audit Committee, the Compensationand Leadership Development Committee or the Nominating andCorporate Governance Committee received any payments in 2016
from Philip Morris International Inc. or its subsidiaries, other thancompensation received as a director.

PMI 2017 Proxy Statement • 11

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BOARD OPERATIONS AND GOVERNANCE
Committees and2016 Meetings
AUDIT
Meetings: 9

Current Members- Jennifer Li (Chair)- Werner Geissler- Jun Makihara- Lucio A. Noto
- Stephen M. Wolf

Purpose, Authority and Responsibilities
Purpose: to assist the Board in its oversight of:▪ the integrity of the financial statements and financial reporting processes and systems of internal
control;▪ the qualifications, independence and performance of the independent auditors;▪ the internal audit function; and▪ the Company’s compliance with legal and regulatory requirements.
Authority and Responsibilities:▪ sole authority for appointing, compensating, retaining and overseeing the work of the independent
auditors;▪ evaluate the internal audit function;▪ evaluate the compliance function;▪ oversee cybersecurity risk assessment and management;▪ review financial risk assessment and management;▪ oversee the risk management of excessive or discriminatory taxation;▪ oversee the risk management of illicit trade;▪ oversee the risk management of judicial and regulatory disregard for the rule of law; and▪ establish “whistleblower” procedures and review claims of improper conduct.

COMPENSATION
AND LEADERSHIPDEVELOPMENT
Meetings: 5- Werner Geissler (Chair)- Harold Brown- Lucio A. Noto
- Robert B. Polet- Stephen M. Wolf

Purpose:▪ discharge the Board’s responsibilities relating to executive compensation;▪ produce a report for inclusion in the proxy statement; and▪ review succession plans for the CEO and other senior executives.
Authority and Responsibilities:▪ review and approve the Company’s overall compensation philosophy and design;▪ review and approve corporate goals and objectives relevant to the compensation of the CEO, evaluate
his performance and determine and approve his compensation;▪ review and approve the compensation of all executive officers;▪ recommend to the Board compensation plans and administer and make awards under such plans andreview the cumulative effect of its actions;▪ monitor compliance by executives with our share ownership requirements;▪ review and assist with the development of executive succession plans, evaluate and makerecommendations to the Board regarding potential CEO candidates and evaluate and approve
candidates to fill other senior executive positions;▪ oversee the management of risks related to compensation design and payout;▪ oversee talent management, particularly with respect to diversity and inclusion and talent development
throughout the organization;▪ review and discuss with management proposed disclosures regarding executive compensation matters;and▪ recommend to the Board whether the Compensation Discussion and Analysis should be accepted forinclusion in the proxy statement and annual report.

FINANCE
Meetings: 4- Jun Makihara (Chair)- Harold Brown- Massimo Ferragamo- Werner Geissler- Jennifer Li- Sergio Marchionne- Kalpana Morparia- Lucio A. Noto
- Frederik Paulsen- Robert B. Polet- Stephen M. Wolf

12 • PMI 2017 Proxy Statement

Purpose, Authority and Responsibilities:▪ monitor the Company’s financial performance and condition;▪ oversee sources and uses of cash flow and capital structure;▪ advise the Board on dividends, share repurchases and other financial matters;▪ advise the Board on the Company’s long-term financing plans, short-term financing plans and credit
facilities;▪ oversee the management of the Company’s cash management function;▪ oversee the management of the Company’s pension plans, including funded status and performance;▪ oversee the management of the Company’s investor relations and stock market performance;▪ oversee the management of the risks to the Company’s competitive position;▪ oversee the management of the risks to the Company’s pricing strategies; and▪ oversee the management of the risks of volatility in currency exchange rates.

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BOARD OPERATIONS AND GOVERNANCE
Committees and2016 Meetings
NOMINATING ANDCORPORATEGOVERNANCE
Meetings: 3

Current Members- Kalpana Morparia (Chair)- Jennifer Li- Lucio A. Noto
- Robert B. Polet- Stephen M. Wolf

Purpose, Authority and Responsibilities
Purpose:▪ identify qualified candidates for Board membership;▪ recommend nominees for election at the Annual Meeting;▪ advise the Board on corporate governance matters; and▪ oversee self-evaluation of the Board and each Committee.
Authority and Responsibilities:▪ review qualifications of prospective candidates for director;▪ consider performance of incumbent directors;▪ make recommendations to the Board regarding director independence and the function, compositionand structure of the Board and its Committees;▪ oversee the Company’s lobbying and trade association activities and expenditures;▪ recommend corporate governance guidelines; and▪ review director compensation.

PRODUCTINNOVATION AND
REGULATORYAFFAIRS
Meetings: 3- Harold Brown (Chair)- Massimo Ferragamo- Werner Geissler- Jun Makihara- Sergio Marchionne- Kalpana Morparia- Frederik Paulsen- Robert B. Polet- Stephen M. Wolf

Purpose:▪ monitor and review the development of new product strategies, with a particular focus on Reduced-Risk
Products;▪ monitor and review key legislative, regulatory and public policy issues; and▪ monitor and review the Company’s programs on societal alignment issues.
Authority and Responsibilities:▪ oversee the management of the risks of changing consumer preferences and the Company’s ability tocommunicate to consumers;▪ oversee the management of the risks associated with the Company’s efforts to develop andcommercialize RRPs;▪ oversee the management of the risks associated with product diversification; and▪ meet with the Company’s Scientific Advisory Board to review scientific developments.
PMI 2017 Proxy Statement • 13

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BOARD OPERATIONS AND GOVERNANCE
Board Risk Oversight
Risk oversight is conducted both by the Committees of the Board with respect to their areas of responsibility as well as by the full Board. During
2015, management conducted a reassessment of strategic enterprise risk. As part of this reassessment, the senior management team
identified and prioritized key business risks based on four risk dimensions: the impact a risk could have on the organization if it occurs, thelikelihood a risk will occur, the velocity with which a risk would affect the organization if it occurs, and the interconnectivity of a risk withother risks. As part of the risk management process, the Company established a Corporate Risk Governance Committee (CRGC) comprising
the CFO, the Vice President and Controller, the Vice President, Corporate Audit, the Vice President and Chief Compliance Officer and the Vice
President, Treasury and Corporate Finance. Ownership of each of the prioritized risks was assigned to a member of senior management, andoversight of the management of each risk was assigned to a particular Board Committee or to the full Board. Management reports on theserisks to the appropriate Committee and to the full Board throughout the year. The risk management oversight by each Committee is indicated in
the chart on pages 12 and 13. The full Board oversees the management of risks relating to the Company’s business plan and litigation, and it
receives reports on risk management by each Committee. The roles of the various components of risk assessment, management and oversightare shown below.
PMI Risk Assessment, Management and Oversight

14 • PMI 2017 Proxy Statement

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BOARD OPERATIONS AND GOVERNANCE
Communications with the Board
Shareholders and other interested parties who wish to communicate
with the Board may do so by writing to the Presiding Director, Boardof Directors of Philip Morris International Inc., 120 Park Avenue,
New York, New York 10017-5579. The non-management directors
have established procedures for the handling of communications
from shareholders and other interested parties and directed the
Corporate Secretary to act as their agent in processing any
communications received. All communications that relate to mattersthat are within the scope of the responsibilities of the Board and its
Committees are to be

forwarded to the Presiding Director. Communications that relate tomatters that are within the responsibility of one of the Board
Committees are also to be forwarded to the Chair of the appropriate
Committee. Communications that relate to ordinary business mattersthat are not within the scope of the Board’s responsibilities, such as
customer complaints, are to be sent to the appropriate subsidiary.
Solicitations, junk mail and obviously frivolous or inappropriate
communications are not to be forwarded, but will be made available
to any non-management director who wishes to review them.

PMI 2017 Proxy Statement • 15

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BOARD OPERATIONS AND GOVERNANCE
Summary of Corporate Governance Practices
The Nominating and Corporate Governance Committee of the Board reviews our corporate governance practices regularly and proposes
modifications to our principles and other key governance practices as warranted for adoption by the Board. The following summarizes our
key principles and practices and refers you to the pages of this proxy statement where you will find a more detailed discussion of various
items:▪

the Board has a policy providing that all directors are elected annually and by majority vote rather than by a plurality (see page18);▪

under our proxy access by-law, an eligible shareholder or group of shareholders who have owned 3% or more of PMI’s shares for atleast three years may nominate and include in our proxy statement director candidates to occupy up to 20% of the authorized Board
seats;▪

the Audit, Compensation and Leadership Development, and Nominating and Corporate Governance Committees consist entirely of
independent directors, all other Board Committees consist entirely of non-management directors, and the Board has no executive
committee;▪

the Board elects the Chairman annually;▪

the non-management directors elect the Presiding Director annually (see page 10);▪

directors may be removed with or without cause;▪

the non-management directors meet in executive session regularly without any members of management being present;▪

the Board assesses its performance and the performance of Board Committees annually;▪

PMI has not adopted a poison pill rights plan;▪

the Board has adopted a clawback policy providing for the recovery of cash bonuses and equity compensation in appropriate
circumstances (see page 44);▪

the Board has adopted share ownership requirements and anti-hedging and anti-pledging policies for directors and executives
intended to align their interests with those of our shareholders and to protect against inappropriate risk taking (see page 44);▪

the Compensation and Leadership Development Committee has adopted a policy that in the event any equity award granted under the
proposed 2017 Performance Incentive Plan vests on an accelerated basis upon the termination of an executive officer’s employment
for any reason other than death or disability, the former officer must hold such shares for at least one year following termination(see page 44);▪

we do not gross up the limited perquisites we provide our named executive officers to offset their taxes on imputed income;▪

both the current and proposed Performance Incentive Plans include a double-trigger feature to the vesting provisions following achange in control as described on pages 57 and 62; and▪

the Board has established independent oversight of political spending and lobbying that requires periodic reporting bymanagement to the Nominating and Corporate Governance Committee with respect to the Company’s lobbying and trade association
activities and expenditures.

16 • PMI 2017 Proxy Statement

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ELECTION OF DIRECTORS
Process for Nominating Directors
The Nominating and Corporate Governance Committee is
responsible for identifying and evaluating candidates for director andfor recommending to the Board a slate of nominees for election at
the Annual Meeting of Shareholders.
In evaluating the suitability of individuals for Board membership, theCommittee takes into account many factors. These include whether
the individual meets requirements for independence; the individual’s
general understanding of the various disciplines relevant to thesuccess of a large publicly-traded company in today’s global
business environment; the individual’s understanding of theCompany’s global business and markets; the individual’s
professional expertise and educational background; and otherfactors, including nationality and gender, that promote diversity ofviews and experience. The Committee evaluates each individual in
the context of the Board as a whole, with the objective ofrecommending a group of directors that can best perpetuate thesuccess of the business and represent long-term shareholderinterests through the exercise of sound judgment, using its breadthof knowledge and experience. In determining whether to recommend
a director for re-election, the Committee also considers the director’s
attendance at meetings and participation in and contributions to theactivities of the Board. The Committee has not established any
specific minimum qualification standards for nominees to the Board,
although from time to time the Committee may identify certain skills
or attributes, such as financial experience, global businessexperience and scientific expertise, as being particularly desirable tohelp meet specific Board needs.
In identifying candidates for Board membership, the Committee
relies on suggestions and recommendations from the Board,shareholders, management and others. The Committee does notdistinguish between nominees recommended by shareholders andother nominees. From time to time, the Committee also retains
search firms to assist in identifying candidates for director, gathering
information about their background and experience, and acting as
an intermediary with such candidates. In 2016, the Committee
recommended Massimo Ferragamo to the Board after he wasinitially recommended by our Presiding Director and met with eachof our directors.
Shareholders wishing to suggest candidates to the Committee forconsideration as directors must submit awritten notice to the Corporate Secretary, who will provide it to theCommittee. Our by-laws set forth the procedures a shareholder must
follow to nominate directors. These procedures are summarized inthis proxy statement under the caption “2018 Annual Meeting.”
In addition, our by-laws permit an eligible shareholder or group ofshareholders who have owned 3% or more of PMI’s shares for atleast three years to nominate and include in our proxy statement
director candidates to occupy up to 20% of the authorized Board
seats.
Recommendations of the Board; Director Attributes, Diversity,
Refreshment and Tenure
It is proposed that thirteen directors be elected to hold office until thenext Annual Meeting of Shareholders and until their successors
have been elected. The Nominating and Corporate GovernanceCommittee has recommended to the Board, and the Board has
approved, the persons named and, unless otherwise marked, aproxy will be voted for such persons. Each of the nominees currently
serves as a director and each was elected by the shareholders at
the 2016 Annual Meeting, except for Mr. Ferragamo, who joined theBoard in December 2016. The Board believes that the experience,
qualifications, attributes and skills of each of the nominees
presented qualify them to deal with the complex global, regulatory
and financial issues that the Company faces, and that the Board asa whole provides a breadth of knowledge, international experience,
intellectual rigor and willingness to face tough issues. More than
three-quarters of the nominees, two of whom are women, are nonU.S. nationals. Ten different nationalities are represented,
underscoring the global perspective of the Board taken as a whole.
The Board has experienced a healthy level of director refreshment
since our spin-off in 2008. Five of the original directors continue toserve on the Board. Of the remaining members of the Board, one
joined in 2010, two in 2011, one in 2013, two in 2014, one in 2015
and one in 2016. The average tenure of the Company’s directors is
5.5 years.
In recommending and nominating Mr. Marchionne, the Nominating
and Corporate Governance Committee and the Board, respectively,
took note of Mr. Marchionne’s membership on various boards of
directors. The Board unanimously recommends Mr. Marchionne forhis significant and valuable contributions to its deliberations.

PMI 2017 Proxy Statement • 17

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ELECTION OF DIRECTORS
Although it is not anticipated that any of the persons named below
will be unable or unwilling to stand for election, a proxy, in the eventof such an occurrence, may be voted for a substitute designated by
the Board. However, in lieu of designating a substitute, the Board
may amend the Company’s by-laws to reduce the number of
directors.
Independence of Nominees
After receiving the recommendation of the Nominating andCorporate Governance Committee, the Board has determined thateach of the following nominees for director is independent of andhas no material relationship with the Company: Harold Brown,
Massimo Ferragamo, Werner Geissler, Jennifer Li, Jun Makihara,Kalpana Morparia, Lucio A. Noto, Frederik Paulsen, Robert B. Poletand Stephen M. Wolf. To assist it in making these determinations,
the Board has adopted categorical standards of director
independence that are set forth in the Corporate Governance
Guidelines, which are available on the Company’s website atwww.pmi.com/governance. Each of the above-named nominees
qualifies as independent under these standards.
In making the determination that Mr. Marchionne is not independent,
the Board considered the Company’s sponsorship agreement withFerrari, which began in 1984, well before Mr. Marchionne became
CEO of Fiat (which then owned Ferrari) in 2004. The agreement andits renewals have been negotiated on an arms-length basis withexecutives of Ferrari, and Mr. Marchionne has not been involved inany aspect of the negotiations or the agreement. The Nominating
and Corporate Governance Committee has reviewed thesponsorship as a Related Person Transaction (see page 73) anddetermined that it is in the best interests of the Company.
18 • PMI 2017 Proxy Statement

In making the affirmative determination that Ms. Morparia is
independent, the Board considered the fact that the Company hasroutine commercial relationships with J.P. Morgan Chase,
Ms. Morparia’s employer. Payments by the Company to J.P. Morgan
Chase are immaterial and Ms. Morparia has no direct or indirectmaterial interest in these routine commercial relationships.
Ms. Morparia has never represented J.P. Morgan Chase inconnection with its provision of services to the Company, and hercompensation is not affected by any banking relationship between
the Company and J.P. Morgan Chase.
Majority Vote Standard in Uncontested Elections
All directors are elected annually. The Company’s by-laws provide
that, where the number of nominees for director does not exceed thenumber of directors to be elected, directors shall be elected by amajority rather than by a plurality vote. Under applicable law, adirector’s term extends until his or her successor is duly elected andqualified. Thus, an incumbent director who fails to receive a majority
vote would continue to serve as a holdover director. To address thatpossibility, our Corporate Governance Guidelines require a director
who receives less than a majority of the votes cast to offer to resign.
The Nominating and Corporate Governance Committee would thenconsider, and recommend to the Board whether to accept or reject,
the offer.
The Board recommends a vote FOR each of
the nominees identified below.

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ELECTION OF DIRECTORS
Director Nominees
Current Committee Membership

Nominee

Harold Brown

Director
Since

2008

Nationality

USA

Experience andQualifications
Highlights▪ Civic Leadership▪ Geopolitical andGovernmental
Affairs▪ Science andTechnology▪ Academic andResearch

Independent

Audit

✓

Nominating
andCorporate
Governance

Product
Innovation
andRegulatory
Affairs

Compensationand Leadership
Development

Finance

✓

✓

Chair

✓

✓

✓

✓

André Calantzopoulos

2013

Greece /Switzerland▪ Senior Executive▪ Tobacco Industry▪ Operations▪ Global BusinessLouis C. Camilleri

2008

UK

▪ Senior Executive▪ Tobacco Industry▪ Operations▪ Financial▪ Global Business

Massimo Ferragamo

2016

Italy

▪ Senior Executive▪ Global Consumer
and Luxury
Products▪ Marketing✓▪ Global Consumer
Products▪ Senior Executive▪ Operations▪ Financial▪ Civic Leadership✓✓▪ Senior Executive▪ Financial▪ Technology▪ Global Business

✓

Chair

✓

✓

✓

Chair

✓

✓

✓

Werner Geissler

Jennifer Li

2015

2010

Germany

China

Jun Makihara

2014

Japan

▪ Global Business▪ Global Finance

Sergio Marchionne

2008

Italy /
Canada▪ Senior Executive▪ Financial▪ Law▪ Global Automotive
Business

India▪ Senior Executive▪ Global Finance▪ Law▪ RiskManagement✓▪ Senior Executive▪ Operations▪ Financial▪ Global Business✓(Presiding
Director)▪ Global
Pharmaceutical▪ Senior Executive/
Entrepreneur▪ Civic Leadership▪ Academic andResearch✓

Kalpana Morparia

Lucio A. Noto

Frederik Paulsen

2011

2008

2014

USA

Sweden

✓

Chair

✓

✓

✓

Chair

✓

✓

✓

✓

✓

PMI 2017 Proxy Statement • 19

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ELECTION OF DIRECTORS
Director Nominees
Current Committee Membership

Nominee

Robert B. Polet

Stephen M. Wolf

20 • PMI 2017 Proxy Statement

Director
Since

Nationality

2011

Netherlands

2008

USA

Experience andQualifications
Highlights

Independent▪ Senior Executive▪ Global
Consumer andLuxury Products▪ Marketing✓▪ Senior Executive▪ Global Business▪ Operations

✓

Audit

✓

Product
Innovation
andRegulatory
Affairs

Compensationand Leadership
Development

Finance

Nominating
andCorporate
Governance

✓

✓

✓

✓

✓

✓

✓

✓

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ELECTION OF DIRECTORS
Director Nominees

HAROLD BROWN
Professional Experience:
Dr. Brown has been a Counselor at the Center for Strategic and International Studies since 1992. He was a partnerof Warburg Pincus, a leading private equity firm, from 1990 until his retirement in 2007. Previously, he was
Chairman of the Foreign Policy Institute at The Johns Hopkins University School of Advanced International Studies.
Dr. Brown is President Emeritus of the California Institute of Technology and served as Secretary of Defense for theUnited States from 1977 through 1981.

Primary
Occupation:Counselor, Center
for Strategic andInternational
Studies
Director since:
2008
Age: 89

Other Directorships and Associations:
Dr. Brown is a member of the board of directors of Chemical Engineering Partners, Inc. and is president emeritus
and life trustee of the California Institute of Technology, a member of the North American Group of the TrilateralCommission and a trustee emeritus of the RAND Corporation. Dr. Brown served as a director of Altria Group, Inc.
from 1983 to April 2003, and again from December 2004 to March 2008.
PMI Board Committees:
Dr. Brown is Chair of the Product Innovation and Regulatory Affairs Committee and a member of the Compensationand Leadership Development and Finance Committees.
Director Qualifications:
Dr. Brown combines a scientist’s intellect with an extensive knowledge and unique experience of international
geopolitical and governmental affairs that are of particular benefit to the Board in his role as Chair of the ProductInnovation and Regulatory Affairs Committee.

ANDRÉ CALANTZOPOULOS
Professional Experience:
Mr. Calantzopoulos became our Chief Executive Officer immediately following our Annual Meeting of Shareholders
on May 8, 2013. He served as our Chief Operating Officer since our spin-off on March 28, 2008, and until becoming
CEO. Mr. Calantzopoulos served as PMI’s President and Chief Executive Officer between 2002 and the date of our
spin-off. He joined the Company in 1985 and worked extensively across Central Europe, including as Managing
Director of PM Poland and President of the EEMA Region.

Primary
Occupation:
Chief Executive
Officer

Director Qualifications:
Mr. Calantzopoulos’s intellect and all-encompassing knowledge of the Company serve him well as CEO and as amember of the Board. He has played an instrumental role in numerous key initiatives, including critical innovative
developments, such as the new architecture that has revitalized the Marlboro brand, new product development,
including Reduced-Risk Products, and revamped adult consumer engagement activities that drove our broad-based
market share gains in both OECD and non-OECD markets.

Director since:
2013
Age: 59
PMI 2017 Proxy Statement • 21

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ELECTION OF DIRECTORSLOUIS C. CAMILLERI
Professional Experience:
Mr. Camilleri is our Chairman, having served as our Chairman and Chief Executive Officer from our spin-off in 2008
until the 2013 Annual Meeting of Shareholders. Mr. Camilleri remained as Chairman and an employee of theCompany following the 2013 Annual Meeting. He retired effective December 31, 2014, and continues to serve as a
non-employee Chairman. Before our spin-off, Mr. Camilleri was Chairman and Chief Executive Officer of Altria
Group, Inc., positions he had held since 2002. From November 1996 to April 2002, he served as Senior Vice
President and Chief Financial Officer of Altria Group, Inc. He had been employed continuously by Altria Group, Inc.
and its subsidiaries (including Philip Morris International Inc.) in various capacities since 1978.

Primary
Occupation:
Chairman of the
Board
Director since:
2008

Other Directorships and Associations:
Mr. Camilleri is a director of América Móvil, S.A.B. de C.V. and Ferrari N.V. He previously served on the Board of
Telmex International SAB from December 2009 to April 2011. Mr. Camilleri was a director of Kraft Foods Inc. fromMarch 2001 to December 2007 and was Kraft’s Chairman from September 2002 to March 2007.
Director Qualifications:
Mr. Camilleri’s extensive and detailed knowledge of the Company and the tobacco industry and an incisive strategic
view, combined with his transparency and open-mindedness, serve him well in his ongoing role as Chairman of theBoard.

Age: 62MASSIMO FERRAGAMO
Professional Experience:
Mr. Ferragamo has served as Chairman of Ferragamo USA Inc. since 2000, having previously served as Presidentof that company since 1985. Mr. Ferragamo is also Vice President of the Lungarno Hotel Group and Executive Vice
President of the Ferragamo Foundation.
Other Directorships and Associations:
Mr. Ferragamo is a director of Ferragamo Finanziaria S.p.A. Mr. Ferragamo served on the board of directors of
Yum! Brands, Inc. from 1997 until 2016.
PMI Board Committees:
Mr. Ferragamo is a member of the Finance and Product Innovation and Regulatory Affairs Committees.
Primary
Occupation:
Chairman,
Ferragamo USA Inc.
Director since:
2016
Age: 59
22 • PMI 2017 Proxy Statement

Director Qualifications:
Mr. Ferragamo’s entrepreneurial spirit and deep experience in the global luxury consumer products business willcomplement the considerable expertise of our formidable Board of Directors in the years to come.

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ELECTION OF DIRECTORSWERNER GEISSLER
Professional Experience:
Mr. Geissler became an Operating Partner of Advent International in 2015. He previously served as Vice Chairman
and Special Advisor to the Chairman and CEO of Procter and Gamble until his retirement in January 2015. He
joined that company in 1979 and served in various capacities, including President, Northeast Asia, from 2001 to
2004, Group President, Central and Eastern Europe, Middle East and Africa, from 2004 to 2007, and Vice
Chairman, Global Operations, from 2007 to 2014.
Other Directorships and Associations:
Mr. Geissler is a director of the Goodyear Tire and Rubber Company.

Primary
Occupation:
Operating Partner,
Advent International
Director since:
2015

PMI Board Committees:
Mr. Geissler is Chair of the Compensation and Leadership Development Committee and a member of the Audit,
Finance, and Product Innovation and Regulatory Affairs Committees.
Director Qualifications:
Mr. Geissler has a keen knowledge of the global consumer products business, having served as a senior consumer
products executive in many of the Company’s most important markets and regions. His deep senior executive
experience serves him well as Chair of the Compensation and Leadership Development Committee.

Age: 63JENNIFER LI
Professional Experience:
Ms. Li joined Baidu, Inc., the largest Internet search engine in China and the third-largest independent searchengine in the world, in March 2008, as Chief Financial Officer, responsible for a wide range of corporate functions,
including Finance, Human Resources, International Operations, Marketing, Communications and Purchasing.
Previously, from 1994 to 2008, she held a number of senior finance positions at various General Motors companies
in China, Singapore, the United States and Canada, rising to Chief Financial Officer of GM’s business in China and
Financial Controller of the North American Operations of GMAC.
PMI Board Committees:
Ms. Li is the Chair of the Audit Committee and a member of the Finance and Nominating and Corporate
Governance Committees.
Primary
Occupation:
Chief Financial
Officer, Baidu, Inc.
Director since:
2010

Director Qualifications:Ms. Li draws upon her strong financial and accounting expertise as Chair of the Audit Committee, and herexperience in a fast-growing, high-tech business and Asian background strengthen the Board’s depth and global
perspective.

Age: 49
PMI 2017 Proxy Statement • 23

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ELECTION OF DIRECTORSJUN MAKIHARA
Professional Experience:
Mr. Makihara was employed at Goldman, Sachs & Co. from 1981 to 2000, during which time he was a General
Partner for six years, working in New York, Los Angeles, and Tokyo. During his tenure in Tokyo, he was co-head of
the Investment Banking Group and the Japanese Equities Group and also served as co-branch manager.
Subsequently, he was Chairman of Neoteny Co., Ltd., a Japanese venture incubator until 2015.
Other Directorships and Associations:
Mr. Makihara is a director of Monex Group, Inc. and Shinsei Bank, Ltd. He is a trustee of the Protestant Episcopal
Cathedral Foundation in Washington, D.C. and a board member of the Japan Society in New York. He also servedon the board of RHJ International S.A. from 2005 to 2014.
Primary
Occupation:
Retired Businessman
Director since:
2014
Age: 59

PMI Board Committees:
Mr. Makihara is Chair of the Finance Committee and a member of the Audit and Product Innovation andRegulatory Affairs Committees.
Director Qualifications:
Mr. Makihara brings his deep experience in finance to his position as Chair of the Finance Committee, and theBoard benefits from his entrepreneurial spirit and a thorough knowledge of business in Asia, one of the Company’s
most important segments.

SERGIO MARCHIONNE
Professional Experience:
Mr. Marchionne is Chief Executive Officer of Fiat Chrysler Automobiles N.V., having become a member of theBoard of Directors of a predecessor of that company, Fiat S.p.A., in May 2003. He is also Chairman of Ferrari N.V.
and CNH Industrial N.V. Mr. Marchionne has been a member of the Board of SGS S.A. since May 2001, serving as
the Chief Executive and Managing Director from 2002 to 2004 and Chairman since March 2006. Mr. Marchionne isa director of Exor S.p.A., an investment company that, directly or indirectly, holds significant equity investments in
Fiat Chrysler and CNH. Mr. Marchionne is a chartered accountant and lawyer who, since beginning his career in
1983, has held executive positions at several firms prior to assuming his current positions.
Other Directorships and Associations:
Mr. Marchionne was a member of the Board of Directors of UBS from 2007 to 2010.
Primary
Occupation:
Chief Executive
Officer, Fiat Chrysler
Automobiles N.V.
Chairman, Ferrari N.V.
Chairman, CNH
Industrial N.V.
Director since:
2008
Age: 64
24 • PMI 2017 Proxy Statement

PMI Board Committees:
Mr. Marchionne serves on the Finance and Product Innovation and Regulatory Affairs Committees.
Director Qualifications:
Trained as both a lawyer and an accountant and currently the chief executive of an international automotive
manufacturer, Mr. Marchionne brings strategic insights and a hands-on multi-disciplinary approach to the Board,along with experience in many of the same international markets in which the Company does business.

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ELECTION OF DIRECTORSKALPANA MORPARIA
Professional Experience:
Ms. Morparia assumed her current position in April 2016, having previously served as CEO of J.P. Morgan India
since 2008. She is a member of J.P. Morgan’s Asia Pacific Management Committee. Prior to joining J.P. Morgan
India, Ms. Morparia served as Joint Managing Director of ICICI Bank, India’s second-largest bank, from 2001 to
2007 and the Vice Chair of ICICI’s insurance and asset management business from 2007 to 2008.
Other Directorships and Associations:Ms. Morparia is a director of Dr. Reddy’s Laboratories Ltd. and Hindustan Unilever Limited.

Primary
Occupation:
Chief Executive
Officer, South andSouth East Asia
J.P. Morgan Chase

PMI Board Committees:
Ms. Morparia is Chair of the Nominating and Corporate Governance Committee and is a member of the Financeand Product Innovation and Regulatory Affairs Committees.
Director Qualifications:With her strong executive leadership experience in finance, and her deep knowledge of international business, Ms.
Morparia provides a keen perspective on economies in Asia, while her legal background and deep experience inhighly regulated industries serve her well as Chair of the Nominating and Corporate Governance Committee.

Director since:
2011
Age: 67

LUCIO A. NOTO
Professional Experience:
Mr. Noto assumed his current position with Midstream Partners, LLC in March 2001. He retired as Vice Chairmanof ExxonMobil Corporation in January 2001, a position he had held since the merger of the Exxon and Mobilcompanies in November 1999. Before the merger, Mr. Noto was Chairman and Chief Executive Officer of Mobil
Corporation. Mr. Noto had been employed by Mobil continuously since 1962.
Other Directorships and Associations:
Mr. Noto is a director of Penske Automotive Group, Inc. He also served on the boards of IBM from 1995 to 2008,
Altria Group, Inc. from 1998 to 2008, Shinsei Bank from 2005 to 2008, Commercial International Bank from 2006
to 2009 and RHJ International S.A. from 2011 to 2015.
Primary
Occupation:
Managing Partner,
Midstream
Partners, LLC
Director since:
2008
Age: 78

PMI Board Committees:
Mr. Noto is the Presiding Director, and a member of the Audit, Compensation and Leadership Development,
Finance and Nominating and Corporate Governance Committees.
Director Qualifications:
As the former chief financial officer and chief executive officer of a large, multi-national oil company, together withhis past governance experience serving on the boards and audit committees of a number of major international
companies, Mr. Noto brings an extensive knowledge of internal controls and risk assessment to his Audit
Committee role and a strong “hands-on” approach as Presiding Director.
PMI 2017 Proxy Statement • 25

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ELECTION OF DIRECTORSFREDERIK PAULSEN
Professional Experience:
Dr. Paulsen has been Chairman of the Ferring Group, a research-driven, specialty biopharmaceutical group, since
1988, having joined that company in 1976.
Other Directorships and Associations:Dr. Paulsen is a member of the boards of MGIMO University in Moscow, Russia, and the Pro Universitate of theChristian Albrechts University in Kiel, Germany, and a trustee of the Salk Institute of Biological Research in La
Jolla, California, USA.
PMI Board Committees:
Dr. Paulsen is a member of the Finance and Product Innovation and Regulatory Affairs Committees.
Primary
Occupation:
Chairman,Ferring Group
Director since:
2014

Director Qualifications:Dr. Paulsen’s substantial experience as head of a successful multinational biopharmaceutical group, together withhis scientific background, bring a unique perspective to the Company’s critical efforts to develop Reduced-Risk
Products.

Age: 66

ROBERT B. POLET
Professional Experience:
Mr. Polet is currently serving as Chairman of Safilo Group S.p.A. He was President, Chief Executive Officer andChairman of the Management Board of the Gucci Group from 2004 until March 2011. Previously, Mr. Polet spent
26 years in the Unilever Group in a variety of executive roles, including President of Unilever’s Worldwide Ice
Cream and Frozen Foods division, Chairman of Unilever Malaysia, Chairman of Van den Bergh and Executive
Vice President of Unilever’s European Home and Personal Care division.
Other Directorships and Associations:
Mr. Polet is a director of William Grant & Sons Limited and Arica Holding B.V. and the chairman of Rituals B.V.
Primary
Occupation:
Chairman, Safilo
Group S.p.A.
Chairman, Rituals B.V.
Director since:
2011
Age: 6126 • PMI 2017 Proxy Statement

PMI Board Committees:
Mr. Polet serves on the Compensation and Leadership Development, Finance, Nominating and Corporate
Governance, and Product Innovation and Regulatory Affairs Committees.
Director Qualifications:
In his previous position, Mr. Polet was responsible for managing such global luxury brands as Gucci, Bottega
Veneta, Yves Saint Laurent, Boucheron, Balenciaga, Sergio Rossi, Alexander McQueen and Stella McCartney. He
brings to the Board his considerable entrepreneurial business experience in the global luxury business and his
deep executive background running major consumer packaged goods businesses, as well as his extensive
knowledge of global markets.

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ELECTION OF DIRECTORSSTEPHEN M. WOLF
Professional Experience:
Mr. Wolf has been Managing Partner of Alpilles, LLC since April 2003. Previously, he was Chairman of US Airways
Group from November 2001 to April 2003, and Chief Executive Officer of US Airways, Inc. from January 1996 toNovember 1998. Prior to joining US Airways, he had served since August 1994 as senior advisor in the investmentbanking firm of Lazard Frères & Co., LLC. From 1987 to July 1994, he was Chairman and Chief Executive Officer
of UAL Corporation and United Air Lines, Inc.
Other Directorships and Associations:
Mr. Wolf is Chairman of the Advisory Board of Trilantic Capital Partners and a director of Fiat Chrysler Automobiles
N.V. Mr. Wolf served as Chairman of R.R. Donnelley & Sons Company from 2004 to 2014. From 1993 to 2008, Mr.
Wolf served as a director of Altria Group, Inc. He is a trustee emeritus of the Brookings Institute.
Primary
PMI Board Committees:
Occupation:
Managing Partner, Alpilles, Mr. Wolf is a member of the Audit, Compensation and Leadership Development, Finance, Nominating andCorporate Governance, and Product Innovation and Regulatory Affairs Committees.
LLC
Director since:
2008
Age: 75

Director Qualifications:
As a former chief executive officer of four New York Stock Exchange listed companies, and with experience on theboards of a number of companies, Mr. Wolf provides strong counsel on a wide array of matters.
PMI 2017 Proxy Statement • 27

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COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company receive no additional
compensation for services as a director. The Company’s philosophy is toprovide competitive compensation necessary to attract and retain highquality non-employee directors. The Board believes that a substantial portionof director compensation should consist of equity-based compensation toassist in aligning directors’ interests with the interests of shareholders.
The Nominating and Corporate Governance Committee periodicallybenchmarks director compensation against the Company’s Peer Group(discussed on page 43), considers the appropriateness of the form andamount of director compensation and makes recommendations to the Board
concerning such compensation with a view to attracting and retaining
qualified directors. Based on the latest available data, total compensation for
the Company’s non-employee directors ranked in the top quartile of theCompany’s Peer Group.
At his request, Dr. Paulsen serves as a director without compensation.
Except for the Chairman, all other non-employee directors receive an annual
cash retainer of $125,000 and a retainer of $5,000 for each Committee of
which they are a member. The Chairman receives an annual cash retainer of$1.25 million. The Presiding Director receives an additional annual retainer of$25,000 and the chairs of each Committee receive an additional annual
retainer of $35,000 for services rendered in connection with those
responsibilities. Directors do not receive meeting fees or stock options.

Summary of Directors’ Compensation
PMI provides competitive compensation levels to attract andretain high-quality non-employee directors, and it uses a
substantial component of equity-based compensation.
Compensation levels are benchmarked to our Peer Group.
Annual cash retainer:
Annual equity award:$125,000$175,000

Chairman annual cash retainer:
Chairman annual equity award:$1,250,000$1,250,000

Presiding Director cash retainer:
Committee Chair cash retainer:
Committee member cash retainer:$25,000$35,000$5,000Committee meeting fees:
Stock options:

None
None

The Chairman’s compensation reflects the Committee’s view ofthe value he brings to the Company, based on his deep
knowledge of our business acquired during his 39 years ofservice to the Company and its former affiliates. It also reflects
his substantial time commitment in fulfilling the duties of
Chairman.

Pursuant to the 2008 PMI Stock Compensation Plan for Non-Employee Directors, each non-employee director then in office (except for
Dr. Paulsen) received an annual equity award on May 4, 2016, of shares of common stock having a value of $175,000 on the date of grant(1,782 shares of common stock with a value of $98.225 per share). As a non-employee Chairman, Mr. Camilleri received an annual equity
award having a value of $1.25 million.
A non-employee director may not sell or otherwise dispose of PMI shares received pursuant to the annual equity award (other than shares
withheld from the grant to pay taxes) unless he or she continues after the disposition to own PMI shares having an aggregate value of at least
five times the then-current annual cash retainer. The Company’s anti-hedging and anti-pledging policies also apply to non-employee directors(See page 44).
28 • PMI 2017 Proxy Statement

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COMPENSATION OF DIRECTORSThe following table presents the compensation received by the non-employee directors for fiscal year 2016.

Name

Harold Brown
Louis C. Camilleri
Massimo Ferragamo (c)Werner Geissler
Jennifer Li
Jun Makihara
Sergio Marchionne
Kalpana Morparia
Lucio A. Noto
Frederik Paulsen (d)Robert B. Polet
Stephen M. Wolf

Fees Earnedor Paid in Cash($)

EquityAwards($)

Personal Useof Company Aircraft($) (a)Car
Expenses($) (b)All Other
Compensation
($)

Total
($)

175,000
1,250,000
9,750
171,250
175,000
166,250
135,000
175,000
178,750
145,000
158,750

175,000
1,250,000
87,500175,000
175,000
175,000
175,000
175,000
175,000
175,000
175,000

185,470-

23,710--350,000
2,709,180
97,250346,250
350,000
341,250
310,000
350,000
353,750
320,000
333,750(a) For reasons of security and personal safety, PMI requires Mr. Camilleri to use Company aircraft for all travel. The amounts shown are the incremental cost of personal use ofCompany aircraft to PMI and include the cost of trip-related crew hotels and meals, in-flight food and beverages, landing and ground handling fees, hourly maintenance contract
costs, hangar or aircraft parking costs, fuel costs based on the average annual cost of fuel per hour flown, and other smaller variable costs. Fixed costs that would be incurredin any event to operate Company aircraft (e.g., aircraft purchase costs, depreciation, maintenance not related to personal trips, and flight crew salaries) are not included.
Mr. Camilleri has agreed to reimburse the Company for his personal usage of Company aircraft to the extent that the aggregate incremental cost of such usage exceeds$200,000 per fiscal year. He is responsible for his own taxes on any imputed taxable income resulting from personal use of Company aircraft.
(b) The amount shown for Mr. Camilleri includes the incremental cost of personal use of driver services that PMI provided for reasons of security and personal safety. Mr. Camilleri
is responsible for his own taxes on any imputed taxable income resulting from car expenses.
(c) Mr. Ferragamo’s cash retainer and equity award were pro-rated to reflect his joining the Board in December 2016.
(d) At his request, Dr. Paulsen serves as a director without compensation.

Non-employee directors may also elect to defer the award of sharesof common stock and all or part of the annual and Committee
retainers. Deferred fee amounts are “credited” to an unfundedaccount and may be “invested” in eight “investment choices,”
including a PMI common stock equivalent account. These“investment choices” parallel the investment options offered to
employees under the PMI Deferred Profit-Sharing Plan anddetermine the “earnings” that are credited for bookkeeping purposes
to a non-employee director’s account.

The Company reimburses non-employee directors (other thanDr. Paulsen) for their reasonable expenses incurred in attending
Board of Directors, Committee and shareholder meetings and othercorporate functions, including travel, meals and lodging. Nonemployee directors (other than Dr. Paulsen) also are covered bybusiness travel and accident insurance, which the Company
maintains for their benefit when they travel on Company business,
as well as group life insurance.

PMI 2017 Proxy Statement • 29

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STOCK OWNERSHIP INFORMATION
Ownership of Equity Securities
The following table shows the number of shares of common stock beneficially owned as of March 10, 2017, by each director, nominee fordirector and named executive officer, and the directors and executive officers of the Company as a group. Unless otherwise indicated, each of
the named individuals has sole voting and investment power with respect to the shares shown. The beneficial ownership of each director,
nominee for director and executive officer, and of the directors, nominees for director and executive officers as a group, is less than 1% of theoutstanding shares.

Name

Harold Brown
André Calantzopoulos
Louis C. Camilleri
Massimo Ferragamo
Marc Firestone
Werner Geissler
Martin King
Jennifer Li
Jun Makihara
Sergio Marchionne
Kalpana Morparia
Lucio A. Noto
Jacek Olczak
Frederik Paulsen
Robert B. Polet
Stephen M. Wolf
Miroslaw ZielinskiGroup (28 persons)Amount andNature ofBeneficial
Ownership (1)52,908752,671753,806
1,005
177,643
5,279
146,033
17,672
9,025
63,614
10,702
95,524
226,486
12,23180,654
209,293
3,503,522(1) Includes shares of deferred stock as follows: Dr. Brown, 33,119; Mr. Calantzopoulos, 188,170; Mr. Camilleri, 29,332; Mr. Ferragamo, 1,005; Mr. Firestone, 63,350; Mr. King,30,230; Mr. Makihara, 5,665; Mr. Noto, 55,946; Mr. Olczak, 59,210; Mr. Wolf, 57,332; Mr. Zielinski, 39,370; and group, 771,369. Also includes 17,085 shares as to which
beneficial ownership is disclaimed by Mr. Noto (shares held by spouse) and 22,196 shares held in trust as to which he has not disclaimed beneficial ownership. Also includes
1,360 shares as to which beneficial ownership is disclaimed by Mr. Makihara (shares held by spouse). Also includes 19,789 shares held in trust as to which Dr. Brown sharesvoting and/or investment power with others and as to which he has not disclaimed beneficial ownership.

In addition to the shares shown in the table above, as of March 10, 2017, those directors who participate in the Company’s director deferred fee
program had the following PMI share equivalents allocated to their accounts: Mr. Ferragamo, 106; Mr. Makihara, 4,161; Mr. Noto, 86,755; andMr. Wolf, 29,261. See “Compensation of Directors” on page 29 for a description of the deferred fee program for directors.
30 • PMI 2017 Proxy Statement

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STOCK OWNERSHIP INFORMATION
The following table sets forth information regarding persons or groups known to the Company to be beneficial owners of more than 5% of theoutstanding common stock.

Name and Address of Beneficial Owner

BlackRock, Inc.
55 East 52nd Street
New York, NY 10055
The Vanguard Group
100 Vanguard Blvd.
Malvern, PA 19355

Number of Shares
Beneficially Owned
89,268,611 (1)104,668,333 (2)Percent of Common
Stock Outstanding on
March 10, 2017

5.75%

6.74%

(1) According to a Schedule 13G/A, dated January 25, 2017, filed with the U.S. Securities and Exchange Commission on January 25, 2017, by BlackRock, Inc. presenting thenumber of shares as of December 31, 2016.
(2) According to a Schedule 13G/A, dated February 9, 2017, filed with the U.S. Securities and Exchange Commission on February 13, 2017, by The Vanguard Group presenting

the number of shares as of December 31, 2016.

Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that during 2016 all reports for the Company’s executive officers and directors that were required to be filed under
Section 16 of the Securities Exchange Act of 1934 were filed on a timely basis, except that the purchase of 1,000 shares on November 17,
2016, by Mr. Patrick Brunel was inadvertently reported late.
PMI 2017 Proxy Statement • 31

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COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our Compensation Discussion and Analysis outlines the design of our executive compensation program components, the objectives andprinciples upon which they are based, our 2016 performance and the resulting decisions of the Compensation and Leadership Development
Committee to reflect that performance in setting compensation for our CEO, the other named executive officers, and the other members of oursenior management team.
Compensation and Leadership Development Committee
The Compensation and Leadership Development Committee consists entirely of non-management directors, all of whom our Board has
determined are independent within the meaning of the listing standards of the New York Stock Exchange. Its responsibilities are described
below and set forth in the Compensation and Leadership Development Committee Charter, which is available on the Company’s website atwww.pmi.com/governance. The members of the Committee are: Werner Geissler (Chair), Harold Brown, Lucio A. Noto, Robert B. Polet andStephen M. Wolf. The Committee met five times in 2016. The Chair of the Committee, in consultation with the other members, sets meeting
agendas. The Committee reports its actions and recommendations to the Board.
Program Design, Philosophy and Objectives
Our compensation and benefits program supports our business andfinancial objectives. The program’s components are set andperiodically reviewed by the Committee. In 2015, the Committee
adopted substantial changes to the program, as set forth in thisCompensation Discussion and Analysis. Each component of our
new program is designed to achieve one or more of the following
objectives:▪

to support our ability to attract, develop and retain world-classleaders in a controversial industry;▪

to align the interests of executives and shareholders;▪

to reward performance against pre-defined objectives;▪

to support long-term business growth, superior financial results,societal alignment and integrity of conduct;▪

to promote internal fairness and a disciplined assessment of
performance; and▪

to align executive incentives with our risk management
objectives.

These objectives provide the framework for the various componentsof compensation and benefits and take into account the specificnature of our business. Together, these elements form an aggregate
package that is

32 • PMI 2017 Proxy Statement

intended to be appropriately competitive. The design of the overall
package encompasses the following features:▪

a mix of fixed and “at-risk” compensation: the higher theorganizational level of the executive, the lower the fixedcomponent of the overall compensation and benefits package;▪

a mix of annual and long-term compensation and benefits toappropriately reward the achievement of both annual and longterm goals and objectives;▪

a mix of cash and deferred equity compensation that seeks
to discourage actions that are solely driven by the Company’s
share price at any given time to the detriment of PMI’s long-term
strategic goals; and▪

an optimal balance of equity compensation comprising both
performance-based and time-based awards, without using stock
options, and with significant share ownership requirements, toalign the interests of executives and shareholders whileremaining mindful of the potentially dilutive nature of equity
compensation on shareholder value.

Under our new compensation program, the Committee reviews local
market and Peer Group data, but no longer targets total directcompensation at a specific percentile of the market. Instead, theCommittee sets total direct compensation at levels that it believes
necessary to attract and retain talented executives in a controversial
industry and remain competitive with other consumer productcompanies.

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COMPENSATION DISCUSSION AND ANALYSIS
Components of Our Total Direct Compensation Program
The three components of total direct compensation are base salary,
annual performance-based variable cash awards and variable equity
awards. We also provide our executives retirement benefits andlimited perquisites.

a given year, base salary, constitutes the smallest portion of
executive compensation for salary grades 26 and above. See page
35 for the target compensation mix of our NEOs in 2016. The key
characteristics and key objectives of each component of ourcompensation program, as restructured in 2015, are as follows:

Our total direct compensation program emphasizes pay-forperformance, and the one component that is fixed for
Component

Key Characteristics

Key Objective

Base Salary▪ Fixed component of compensation reflecting the scope of theexecutive’s role, performance and market pay practices.

▪ Intended
toprovidesufficientcompetitive base pay to attract,develop and retain world-classleaders.

Incentive
Compensation (IC)Awards▪ Annual performance-based variable cash award for meeting or
exceeding performance goals pre-established by the Committee.

▪ Intended to motivate executives tomeet or exceed our performancegoals and strategic objectives in agiven fiscal year.

Equity Awards▪ Long-term variable equity awards contribute to all six of theCommittee’s program design objectives while minimizing sharedilution and protecting against excessive risk taking.
▪ Amount of each award is determined by multiplying the executive’sbase salary by the target percentage for that salary grade, andthen by the executive’s individual performance rating, plus or minusten percentage points, for the most recently completed year.

▪ The Company’s incentive compensation business rating isdetermined by a fixed formula that measures the Company’s
results against performance targets pre-established and preweighted by the Committee (see page 38). The final award isdetermined by multiplying the executive’s base salary by the IC
business rating and by the executive’s IC target and individual
performance rating.

▪ Intended to motivate our executives to
produceresultsthatenhancesustainable shareholder value andstrengthen the Company over the
long-term.

– for the February 2017 grant, 60% of the award was in the formof PSUs that vest at the end of the 2017-2019 performancecycle in amounts that depend on the degree to which preestablished and pre-weighted performance goals are achievedor exceeded (see pages 39-40).
– 40% of the February 2017 award was granted in the form of
RSUs that vest at the end of the three-year cycle (assuming
continued employment).
PMI 2017 Proxy Statement • 33

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COMPENSATION DISCUSSION AND ANALYSIS
Changes in Compensation Structure2015 Say-on-Pay Vote: Following the 2015 vote in which only
63.3% of our shareholders supported our advisory say-on-pay
proposal, the Committee substantially changed the Company’scompensation program. It adopted a fixed formula approach that
substantially limits the Committee’s discretion in determining theCompany’s performance rating for annual cash incentive awards
and in determining the size of equity awards. It added a new longterm equity award, the PSU, that vests at the end of a three-year
cycle only to the extent pre-established and pre-weighted
performance goals are achieved. Dividend equivalents will be paid
on PSUs only at the end of the three-year cycle and only on earned
shares.
The new PSUs reflect performance in several ways. First, an
executive’s award opportunity over the three-year cycle is based on
his or her prior-year performance rating. Second,34 • PMI 2017 Proxy Statement

the number of shares that vest at the end of the cycle is determinedby the Company’s performance during that cycle against preestablished objective quantified metrics. These metrics are: relative
and absolute Total Shareholder Return, currency-neutral compound
annual adjusted OCI growth, and the Company’s performanceagainst specific product innovation targets. Finally, the value of theshares that vest depends on the price of the Company’s shares atthe vesting date, which follows completion of the three-year
performance cycle.
2016 Say-on-Pay Vote: The new compensation program wasoverwhelmingly supported by our shareholders and received 95%
approval at the 2016 Annual Meeting of Shareholders.

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COMPENSATION DISCUSSION AND ANALYSIS
Target Compensation Mix
All of our NEOs are in salary grades 28 to 25. Our CEO is the only employee in salary grade 28, and no employee is in salary grade 27. The
target compensation mix for 2016 and for 2017 is shown in the following chart:

In February 2017, the Committee granted PSUs for the 2017-2019 performance cycle and RSUs. It also established performance targets forthe 2017 annual incentive compensation awards that are payable in February 2018. Award targets as a percentage of base salary for our CEO
and our named executive officers are unchanged from 2016:2017 Cash Incentive
Targetas % of Base Salary (1)2017-19 Performance Share
Units Target
as % of Base Salary(60% of total Equity Award) (2)2017 Restricted Share Units
Targetas % of Base Salary(40% of total Equity Award) (3)André Calantzopoulos (CEO)

200%

360%

240%

Marc Firestone

125%

165%

110%

Martin King

100%

105%

70%

Jacek Olczak

125%

165%

110%

Miroslaw Zielinski

100%

105%

70%

(1) Possible award range is between 0 and 225% of target.
(2) Possible award grant range is between 0 and 150% of target; between 0 and 200% of PSUs granted may vest, depending on performance versus criteria established at thetime of grant.
(3) Possible award grant range is between 0 and 150% of target.

PMI 2017 Proxy Statement • 35

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COMPENSATION DISCUSSION AND ANALYSIS
Use of Equity Awards Versus Stock Options: Equity awards are
made in the form of RSUs and PSUs, rather than stock options,because these forms of awards:▪

establish a relationship between our cost and the value
ultimately delivered to our executives that is more direct andmore visible than is the case with stock options; andan annual Company run rate (the sum of all director stock
awards and RSUs granted during the period, plus the number of
all PSUs vested during the period, divided by the weighted
average number of shares outstanding during the period) in 2016of 0.08% and a total 2016 year-end overhang (number ofunvested RSUs plus unvested PSUs at target as a percentage of
all shares outstanding at year-end) of 0.32%.

▪

require the use of substantially fewer shares than stock options
to deliver equivalent value, resulting in

Our run rate and overhang each compares favorably to those of ourPeer Group.

36 • PMI 2017 Proxy Statement

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COMPENSATION DISCUSSION AND ANALYSIS
2016 Company Performance and Targets
The Committee determined the 2016 cash incentive award businessrating based on 2016 results versus performance metrics preestablished by the Committee. Each of the performance targets set
by the Committee was based on achieving or exceeding theCompany’s original 2016 operating budget approved by the Board.
The budget and the targets reflected appropriately ambitious but
realistic performance goals.
2016 Results: In 2016, we delivered strong results on our key
performance metrics, while also achieving notable progress against
our strategic initiatives. Our financial results were achieved despite
significant cigarette shipment volume declines in several markets,
notably in Pakistan and the Philippines, where volume decreases
were concentrated in low unit margin brands that had a limited
impact on our bottom line. Cigarette shipment volume was also
reduced by in-switching from our cigarette brands to IQOS heated
tobacco sticks. As of the first quarter of 2017, we will report
shipment volume on a combined basis including both cigarettes and
IQOS heated tobacco sticks. We more than offset lower shipment
volumes through favorable pricing and better-than-anticipated RRP
performance.
Share of Top 30 OCI Markets: We registered a growing or stable
cigarette market share in 17 of our top 30 OCI markets, below ourtarget of 18 markets. Our total cigarette market share, excluding the
U.S. and China, declined by 0.6 points in 2016, with low price andlow unit margin brands in the Philippines accounting for 0.5 points ofthe total decline. Cigarette share for the balance of our portfolio wasessentially stable.
Net Revenues (excluding excise taxes, currency and acquisitions):
Net revenues (excluding excise taxes) of $26.7 billion reflected
constant currency growth, excluding acquisitions, of 4.4%, above ourtarget of 3.8% growth. This strong result was driven in part by afavorable pricing variance equivalent to 6.0% of prior year net
revenues (excluding excise taxes), and the strong performance of
RRPs.
Adjusted OCI (excluding currency and acquisitions): Constantcurrency adjusted OCI, excluding acquisitions, of $11.1 billion, wasup 10.3%, well above our target of 8.3% growth, driven by growth innet revenues and our judicious cost management initiatives,
notwithstanding higher investment in RRPs.

Adjusted Diluted EPS (excluding currency): Our 11.8% constantcurrency growth comfortably exceeded our target of 10.9%.
Free Cash Flow: Constant currency free cash flow increased 4.9%
above last year, outpacing our target of 3.0%. This result was
primarily driven by higher net earnings that more than offset higher
working capital requirements due to manufacturing capacity
expansion for RRPs.
The Committee also rated our performance on the following key
strategic initiatives that the Committee pre-set in February 2016,
based on a ratings range of 0-70 if key initiatives were missed, 80120 if they were mostly or all accomplished, and 130-150 if they
were mostly or all exceeded.
▪

the continued commercialization of IQOS as well as other
innovative Reduced-Risk Product platforms;▪

the ongoing development of our brand portfolio, including
Marlboro, and a continued stream of innovations as well as afocus on key growth segments;▪

the continued transformation of our commercial organizations;▪

the optimization of our global manufacturing footprint for bothcigarettes and RRPs;▪

progress towards improving tax structures in both RRP and
combustible categories;▪

the completion of key business development initiatives;▪

continuing efforts to pursue comprehensive, evidence-based
regulation governing the manufacture, marketing, sale and useof tobacco products and our RRPs;▪

our continued efforts to improve sustainability across thebusiness;▪

continuing with a comprehensive plan to further improveorganizational effectiveness;▪

our ongoing efforts to nurture and develop our talent pool andfuture leadership, and to further increase diversity; and▪

maintaining and enhancing our robust control, compliance andintegrity programs.

As a result of this evaluation, the Committee concluded that theCompany had accomplished its strategic objectives and it assigned
us a strategic initiatives rating of 110.
PMI 2017 Proxy Statement • 37

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COMPENSATION DISCUSSION AND ANALYSISIC Business Performance Rating: The Committee employed the following pre-established matrix that assigned a rating of 100 correlating toattaining the targeted performance. Ratings for each factor can range from 0 to 150. The percentages indicated for net revenues, adjusted OCI,
adjusted diluted EPS, and free cash flow represent growth versus 2015 results. Actual results are shown in the blue boxes.
2016 Performance Versus Target
TargetRating:0

40 ... 80

90

95

100

108

110

<8

8

14

16

17

18

20

Net Revenues (c)

<1.4%

1.4%

3.0%

3.8%

4.2%

Adjusted OCI (d)

<4.2%

4.2%

7.0%

8.3%

9.4%

Adjusted Diluted EPS (e)

<6.1%

6.1%

9.3%

10.9%

Free Cash Flow (f)<(2.3)%(2.3)%

1.2%

3.0%

115

117

120

130

140

150

22

24

27

30

4.7%

5.1%

5.5%

5.9%

10.6%

11.5%

12.3%

13.2%

13.3%

14.3%

15.2%

16.1%

5.7%

6.7%

7.7%

8.7%

Measure (a)Market Share (Top 30 OCI (b)Markets)

Strategic Initiatives

11.8%

4.4%
10.3%

12.0%
4.2%

4.9%

110

(a) For a reconciliation of non-GAAP to GAAP financial measures see Exhibit D to this proxy statement.
(b) Number of top 30 OCI markets in which share was growing or stable.
(c) Excluding excise taxes, currency and acquisitions.
(d) Excluding currency and acquisitions.
(e) Excluding currency.
(f) Net cash provided by operating activities less capital expenditures and excluding currency.

Our performance rating for each factor was weighted in accordance with the pre-established formula shown below to produce an overall IC
business rating.
2016 IC Business Rating
MeasurePerformance
RatingWeightWeighted Performance
RatingMarket Share (Top 30 OCI Markets)

95

15%

14.25

Net Revenues

115

15%

17.25

Adjusted OCI

117

15%

17.55

Adjusted Diluted EPS

108

20%

21.60

Free Cash Flow

115

20%

23.00

Strategic Initiatives

110

15%

16.50

38 • PMI 2017 Proxy Statement

Table of Contents

COMPENSATION DISCUSSION AND ANALYSISIn addition to certifying the IC business performance rating, the Committee rated each executive officer’s personal performance during 2016.
Individual ratings can range from 0% to 150%. To assure a disciplined, fair and equitable assessment, individual performance ratings were
calibrated to reflect each executive’s contribution to the overall results of the Company. Application of the following formula then determined the
cash incentive award for each named executive officer in 2016.
Incentive Compensation Award Formula

IC
Award

=

Base
SalaryIndividual
Target%(varies bygrade)X

X

IC
Business
Rating(0%-150%)

X

Individual
Rating(0%-150%)2017 Incentive Compensation (IC) Awards: For 2017, the Committee retained the six performance metrics used in 2016 — except it changed
free cash flow to operating cash flow, which is a U.S. GAAP measure — and it set performance targets for those metrics. Each of the 2017
performance targets reflects the Company’s 2017 budget approved by the Board, with a performance factor of 100 equating to achieving
budgeted results. The full range of potential results is reflected in a pre-established matrix that will generate an overall IC businessperformance rating for 2017. In addition to pre-establishing a formula for grading our results against the performance factors, the Committee
pre-established the weights for each factor.
Long-Term Equity Awards: The Committee establishes the equity award target opportunity for our CEO and each NEO based on Company
targets by salary grade, which are unchanged from the levels established in 2014, and the individual’s performance rating for this award. The
Committee grants the individual 40% of the award opportunity in the form of time-based RSUs and 60% in the form of performance-based
PSUs.
Equity Award Grant Formula
EquityAward
TargetOpportunity(40% RSU &60% PSU)=

Base
SalaryX

Individual
Target %(varies bygrade)

X

Individual
Rating(0%-150%)

PSU Performance Metrics: The Committee established three metrics for determining the number of PSUs that will vest at the end of the 20172019 performance cycle. The first measure, which is weighted at 50%, is the Company’s Total Shareholder Return during the three-year cycle
relative to the Peer Group and on an absolute basis. The second measure, which is weighted at 30%, is the Company’s currency-neutralcompound annual adjusted OCI growth rate over the cycle, excluding acquisitions. The final measure, which is weighted 20%, is theCompany’s performance against a specific RRP volume measure for PMI’s transformation to Reduced-Risk Products during the performancecycle. The Committee believes that these performance measures are the most appropriate factors in terms of incentivizing senior management
to produce results that enhance sustainable shareholder value and strengthen the Company over the long term.
The aggregate of the weighted performance factors for the three metrics will determine the percentage of PSUs that vest at the end of thethree-year performance cycle. Each vested PSU entitles the participant to one share of common stock. An aggregate weighted PSU
performance factor of 100 will result in the targeted number of PSUs being vested. The minimum percentage of PSUs that can vest is zero,
while the maximum is twice the targeted number.
PMI 2017 Proxy Statement • 39

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COMPENSATION DISCUSSION AND ANALYSISTSR Performance Factor. The TSR performance factor, which determines 50% of the PSU payout, will be calculated based on the Company’s
three-year rolling TSR versus the Company’s Peer Group (see page 43). To adjust for market volatility, the TSR calculations will be based on
the average of the 20 trading days immediately before the start of the performance cycle and the last 20 trading days of the performance cycle.
To reflect that several members of the Peer Group are primarily listed on foreign stock exchanges and report their financial results in different
currencies, the Company will measure the TSRs for those companies by using the price performance of their publicly traded American
Depository Receipts (“U.S. ADRs”). The use of U.S. ADRs will avoid the need to adjust the TSRs of non-U.S. Peers to reflect currencychanges, and will increase transparency by enabling shareholders to directly observe such TSRs. The TSR performance factor for the 20172019 performance cycle will be calculated relative to the Peer Group in accordance with the following schedule, with linear interpolation forresults between the 25th and 85th percentiles:

Below Threshold
ThresholdTargetMaximum

PMI TSR as a Percentile ofPeer Group

Performance Factor

Below 25th percentile
25th percentile
50th percentile
85th percentile and above

0%
50%
100%
200%

In addition to evaluating our relative TSR, if the Company’s absolute TSR for the performance cycle is zero or less, the Committee will cap the
TSR performance factor at target or less. This approach would limit rewards for a performance cycle in which we performed in line with, or
better than, the Peer Group, but shareholders did not realize a positive return.
Adjusted Currency-Neutral OCI Growth Performance Factor. The adjusted OCI growth performance factor for the 2017-2019 performancecycle, which determines 30% of the PSU performance factor, will be the compound annual growth rate of the Company’s adjusted OCI(excluding currency and acquisitions) as shown below, with linear interpolation for results between the percentages shown:

Below Threshold
ThresholdTargetMaximumThree-Year Adjusted OCI CAGR
(excluding currency and acquisitions)
ResultPerformance Factor

<4%
4%
8%
11%

0%
50%
100%
200%

The 8% growth that equates to a performance factor of 100% is the upper-end of our mid-term adjusted currency-neutral OCI growth target of
6% to 8%.
Transformation Performance Factor. The Board, the Committee and management consider the success of the Company’s RRPs to be vital to
the Company’s long-term success. Accordingly, the Committee has established specific RRP volume targets that will account for 20% of the
PSU performance factor over the 2017-2019 cycle. The Committee established the targets at what it believes are appropriately ambitious levels
that reflect the Board-approved three-year plan.
PSU Vesting Mechanics. At the end of the three-year performance cycle, the Company’s performance factor for each of the three metrics will
be calculated and then weighted, resulting in an overall PSU performance factor from 0-200%. This percentage will be applied to the
executive’s target PSU award to determine the number of shares of common stock to be issued to the executive.
The Committee may adjust the PSU performance metrics if appropriate to reflect significant unplanned acquisitions or dispositions.
40 • PMI 2017 Proxy Statement

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COMPENSATION DISCUSSION AND ANALYSIS
2016 Individual Performance and Compensation Decisions
André Calantzopoulos, Chief Executive Officer: The Committee
assigned Mr. Calantzopoulos an individual performance rating for2016 of 110% for the incentive compensation award and a rating of
115% for the equity award. As a result, Mr. Calantzopoulos received
an annual incentive compensation award of CHF 3,572,280, or$3,607,646 based on the conversion rate on the date of the award.
Mr. Calantzopoulos’s equity award was split into 41,870 RSUs and62,800 PSUs. The Committee also increased Mr. Calantzopoulos’sbase salary for 2017 by CHF 36,907 to CHF 1,513,057, or$1,528,036 based on such conversion rate. This was the firstincrease in Mr. Calantzopoulos’s base salary since 2012.
Mr. Calantzopoulos’s performance rating for the incentive
compensation award reflects the Committee’s view that under his
capable leadership the Company delivered a strong financial
performance in 2016. The Company also made excellent progress
on its strategic initiatives, notably in the areas of continuing todevelop the Company’s brand portfolio, optimizing the global
manufacturing footprint, completing key business development
initiatives, continuing to improve sustainability across the business,
effectively nurturing and developing the Company’s talent pool, andmaintaining its robust control, compliance and integrity programs.
The Committee set Mr. Calantzopoulos’s individual performance
rating for the annual incentive award at the same level as theCompany’s formula-driven annual performance rating.
Mr. Calantzopoulos’s individual performance rating for the equity
award reflects that the Company achieved important milestones inthe development of RRPs on all fronts: product development,commercialization, scientific substantiation, third-party engagement
and the regulatory and fiscal environment. Mr. Calantzopoulos’s
equity rating also reflects his decisive leadership in the Company’s
external and internal transformation to a future built on smoke-free
products.
Other Named Executive Officers:
Marc Firestone: Mr. Firestone serves as our Senior Vice President
and General Counsel. His incentive compensation and equity
awards recognize his widespread contributions to the Company’s
results and inspiring leadership of our Law and Corporate Affairs
Departments. His incentive compensation award and his

equity award were each based on an individual performance ratingof 115%. These ratings reflect his critical role in numerous
regulatory, litigation and compliance strategic initiatives, notably his
contribution to our continued progress in the regulatory and fiscal
framework for RRPs and his insightful guidance of our Corporate
Affairs initiatives and our strong compliance culture. The Committee
also approved Mr. Firestone’s base salary increase for 2017 by CHF
19,994 to CHF 1,020,006, or $1,030,104 based on the conversion
rate on the date of the Committee’s decision.
Martin King: Mr. King serves as President of our Asia Region. His
incentive compensation award and his equity award were eachbased on an individual performance rating of 115%. Cigarette
shipment volume in Asia declined by 7.6%, mainly due to total
market declines in Pakistan, the Philippines, Thailand andIndonesia, the latter accentuated by temporary PMI market share
weakness, and in-switching from our cigarette brands to IQOS
heated tobacco sticks, partly offset by Korea. Excluding acquisitions,net revenues (excluding excise taxes) and adjusted OCI increased
significantly by 5.9% and 8.9%, respectively, on a constant currency
basis. Mr. King’s ratings also reflect the resounding success of IQOS
in Japan, and his strong leadership of our Asia business in a difficult
operating environment. The Committee also approved Mr. King’sbase salary increase for 2017 by CHF 19,998 to CHF 845,004, or$853,370 based on the conversion rate on the date of theCommittee’s decision.
Jacek Olczak: Mr. Olczak serves as our Chief Financial Officer. His
incentive compensation award and his equity award were eachbased on an individual performance rating of 120%. These ratings
recognize Mr. Olczak’s exceptional leadership and contributions to
our financial results, notably our free cash flow performance, themanagement of our balance sheet, the attractive terms of multiple
bond issuances in the capital markets, and the continued focus onprocess change optimization in the context of our RRP business
transformation, as well as effective productivity and cost savings
initiatives. Finally, he assured timely and transparent communicationof our strategies and results to the investment community andplayed a critical role in the implementation of numerous crossfunctional strategic initiatives. The Committee also approved Mr.
Olczak’s base salary increase for 2017 by CHF 20,007 to CHF
974,012, or $983,655 based on the conversion rate on the date of
the Committee’s decision.
PMI 2017 Proxy Statement • 41

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COMPENSATION DISCUSSION AND ANALYSIS
Miroslaw Zielinski: Mr. Zielinski serves as President, Reduced-Risk
Products. His incentive compensation and equity awards were eachbased on an individual performance rating of 130%. These ratings
reflect his invaluable strategic contributions to the development andcommercialization of RRPs, his critical role in the successful roll-out
of IQOS, the significant progress made in the development andcommercialization of our other RRP platforms, the significant
progress in scientific42 • PMI 2017 Proxy Statement

substantiation of our RRP platforms, the implementation of highly
innovative route-to-market models, the development of novel adultconsumer engagement platforms, and his critical contributions to theCompany’s long-term strategies. The Committee also approved
Mr. Zielinski’s base salary increase for 2017 by CHF 20,007 to CHF
945,009, or $954,365 based on the conversion rate on the date of
the Committee’s decision.

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COMPENSATION DISCUSSION AND ANALYSIS
Additional Compensation Policies and Processes
Peer Group: The Committee uses a single customized peer group both to benchmark its compensation programs and to compare its TSR
when calculating the Company’s PSU performance factor. The following 20 companies, selected in 2015 on the basis of their global presence,focus on consumer products, and similarity to the Company in terms of net revenues and market capitalization, constitute our Peer Group:

PMI 2017 Proxy Statement • 43

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COMPENSATION DISCUSSION AND ANALYSIS
Factors Mitigating Against Possible Adverse Consequences of
Our Compensation Program: Several elements of ourcompensation program protect against the possibility thatcompensation incentives might cause employees to take risks that
could materially adversely affect the Company. First, we do not havedifferent incentive compensation award programs for particularbusiness units or functions. Our annual incentive compensation andequity awards apply to management employees worldwide, and theaward pools for each of those programs are based on companywide performance measures that cannot be unduly influenced by aparticular business unit or group. Second, all employees are rated
on the same scale within general guidelines set by the Committee.
These ratings are based on pre-established individual performance
criteria so that no particular group of employees will all receive thesame rating. Third, both the company-wide and the individual
performance measures are subject to maximum levels that limit theamount of awards.
Furthermore, with respect to the long-term equity component of ourcompensation program, RSUs generally vest only after three years
from the date of grant, and PSUs only vest to the extent preestablished targets are achieved over a three-year performancecycle. In addition, our executives are subject to share ownership
requirements and comprehensive anti-hedging, anti-pledging andclawback policies described in the following sections.
Share Ownership Requirements: The Company has for several
years set share ownership requirements for executives at levels thatare among the highest for publicly owned companies. Unvested
units of the Company’s PSU equity award do not count towards theownership requirement. The required share ownership level isshown below:
NEOs

Multiple of base salary

Salary grade 28

15 times

Salary grade 27

9 times

Salary grade 26

6 times

Salary grade 25

5 times

Executives are required to meet their ownership levels within five
years of joining PMI or within three years of a promotion. The
Committee reviews each executive officer’s compliance with therequirements on an annual basis. As of December 31, 2016, all of
our named executive officers met or exceeded the applicablerequirements.
44 • PMI 2017 Proxy Statement

The Company also imposes share ownership requirements on nonemployee directors (see page 28).
Post-Termination Share Holding Period: In addition to theselongstanding and rigorous share ownership requirements, theCommittee has determined that any equity award held by an
executive officer under the 2017 Performance Incentive Plan thatvests on an accelerated basis upon such officer’s termination of
employment for any reason other than death or disability must be
held for at least one year following such termination.
Anti-Hedging and Anti-Pledging Policies: The Company’s antihedging policy prohibits directors, executive officers and otherdesignated employees from purchasing any financial instrument orotherwise engaging in any transaction that is designed to hedge oroffset any decrease in the market value of the Company’s shares
held by them directly or indirectly, including prepaid variable forward
contracts, equity swaps, collars and exchange funds, and othertransactions with comparable economic consequences. The
foregoing does not prohibit trading in broad-based index funds.
Directors, executive officers and designated employees are also
prohibited from engaging in short sales related to the Company’s
shares.
The Company’s anti-pledging policy prohibits directors andexecutive officers from pledging the Company’s shares, including
holding shares in a margin account.
Clawback Policy Regarding the Adjustment or Recovery ofCompensation: Under our Board-approved policy and as set forthin the applicable equity award agreement, if the Board or an
appropriate Committee of the Board determines that, as a result offraud, misconduct, a restatement of our financial statements, or asignificant write-off not in the ordinary course affecting our financial
statements, an executive has received more compensation thanwould have otherwise been paid, the Board or Committee shall takeaction as it deems necessary or appropriate to address the events
that gave rise to the fraud, misconduct, write-off or restatement andto prevent its recurrence. Such action may include, to the extent
permitted by applicable law, requiring partial or full reimbursement of
any incentive compensation paid to the executive, causing thepartial or full cancellation of equity awards, adjusting the futurecompensation of such executive, and dismissing or taking legal
action against the executive, in each case as the Board or
Committee determines to be in the best interests of the Company.

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COMPENSATION DISCUSSION AND ANALYSIS
Role of the Committee in Executive Compensation: The role of
the Committee is to discharge the Board’s responsibilities relating to
executive compensation matters. In this regard, the Committee is
responsible for the development and administration of our executive
compensation and benefits program, in furtherance of which theCommittee has the authority and responsibility to:▪

review and approve corporate goals and objectives relevant tothe compensation of the CEO, to evaluate the performance of
the CEO in light of these goals and objectives, and determine
and approve the compensation of the CEO based on thisevaluation;▪

set senior executive compensation and make recommendations
to the Board with respect to incentive compensation plans andequity-based plans, administer and make awards under suchplans and review the cumulative effect of its actions;▪

review and approve compensation of all executive officers;▪

oversee the management of risks related to compensation
design and payout;▪

monitor compliance by executives with the Company’s shareownership requirements; and▪

review and assist the Board with the development of executive
succession plans.

Role of Compensation Consultants: During 2016, the Committee
retained the services of Mr. Michael Halloran of Mercer LLC, awholly-owned subsidiary of Marsh & McLennan Companies, Inc.
(“MMC”) and Mr. Daniel J. Ryterband of Frederic W. Cook & Co.
Mr. Halloran and Mr. Ryterband advised the Committee with respect
to the compensation of the Chairman, the CEO and otherexecutives. In addition, Mr. Halloran and Mr. Ryterband provided theCommittee with input into the design of our compensation andbenefit programs and evolving regulatory and executive
compensation market trends.
Mercer was paid $30,340 for Mr. Halloran’s services.
PMI and its affiliates have engaged other offices of Mercer to provide
services unrelated to executive compensation, primarily benefits
consulting and benchmarking of salaries for different position levels
around the world. Mercer’s fees for these services totaled $944,544
in 2016. Mercer is retained directly by the relevant PMI business
function, region or market when Mercer provides these otherservices, and these services and fees are not subject to the approvalof the Committee. In addition, MMC and its affiliates other than
Mercer provided certain non-compensation related services,primarily insurance brokerage, to PMI and its affiliates in 2016 forfees totaling $1,311,072. Neither these additional services nor thefees are subject to the Committee’s approval.
Frederic Cook & Co. was paid $44,092 for Mr. Ryterband’s services.

In fulfilling these duties, the Committee is supported by our SeniorVice President, Human Resources and his department, theCommittee’s executive compensation consultant and other outside
legal, financial and compensation counsel, where appropriate.
Role of the CEO in Executive Compensation: Our CEO makes
recommendations to the Committee with respect to thecompensation of executive officers other than himself. The
Committee reviews and discusses the compensation of theseofficers with the CEO, and the Committee makes the final
compensation decisions with respect to these executive officers. The
CEO makes no recommendation and has no role in setting any
aspect of his own compensation; he does not attend any Committee
meetings when any element of his compensation is discussed.

Consistent with the requirements of its Charter, the Committee has
reviewed and considered:▪

the services Mr. Halloran and Mr. Ryterband performed for theCommittee during 2016;▪

the other services performed by Mercer and MMC for PMI and
its affiliates in 2016;▪

the fees paid by the Company as a percentage of Mercer’s total
revenue and the fees paid by the Company as a percentage ofFrederic W. Cook & Co.’s total revenue;▪

Mr. Halloran’s and Mr. Ryterband’s ownership of the Company’s
stock (neither has any such ownership);
PMI 2017 Proxy Statement • 45

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COMPENSATION DISCUSSION AND ANALYSIS▪

the conflicts of interest policies and procedures of Mercer andFrederic W. Cook & Co.;▪

the relationships among PMI, its executive officers and theCommittee members, and Mercer and MMC, and Frederic W.
Cook & Co.; and▪

the quality and objectivity of the services Mr. Halloran and Mr.
Ryterband provided to the Committee.

Based on its review, the Committee has concluded that the advice it
received from Mr. Halloran is objective and not influenced by
Mercer’s or MMC’s relationships with PMI or its affiliates.
Other than obtaining advice on executive compensation, theCompany has no relationship with Mr. Ryterband or his firm, and theCommittee regards them as independent.

Policy with Respect to Qualifying Compensation for
Deductibility: Our ability to deduct compensation paid to individual
officers who are covered by Section 162(m) of the U.S. Internal
Revenue Code is generally limited to $1.0 million annually. However,this limitation does not apply to performance-based compensation,
provided certain conditions are satisfied. The annual incentive
compensation awards for 2016 and the equity awards that wereawarded to our covered named executive officers in February 2017
were subject to, and made in accordance with, performance-based
compensation arrangements.
We have taken appropriate actions, to the extent feasible, topreserve the deductibility of annual incentive compensation andequity awards. However, notwithstanding this general policy, theCommittee has authorized, and continues to retain the discretion toauthorize, other payments that may not be deductible, if it believes
that they are in the best interests of both the Company and its
shareholders.

Compensation and Leadership Development Committee
Interlocks and Insider Participation: No member of the Committee
at any time during 2016 had any relationship with the Company thatwould be required to be disclosed as a related person transaction oras a compensation committee interlock.

Compensation and Leadership Development Committee Report
The Compensation and Leadership Development Committee has reviewed and discussed the Compensation Discussion and Analysis
contained on pages 32 through 57 of this proxy statement with management. Based on its review and discussions with management,
the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxystatement.
Compensation and Leadership Development Committee:
Werner Geissler, Chair
Harold Brown
Lucio A. Noto
Robert B. Polet
Stephen M. Wolf
The information contained in the report above shall not be deemed to be “soliciting material” or to be “filed” with the Securities andExchange Commission or subject to Regulation 14A or 14C or the liabilities of Section 18 of the Securities Exchange Act of 1934, as
amended, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, except to the extent specifically incorporated by reference therein.
46 • PMI 2017 Proxy Statement

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COMPENSATION DISCUSSION AND ANALYSIS
Summary Compensation Table
The following table sets forth information concerning the cash and non-cash compensation awarded by PMI to our named executive officers:
the Chief Executive Officer, Chief Financial Officer and the three most highly compensated officers serving as executive officers on
December 31, 2016. These amounts are based on the compensation earned by these officers while employed by PMI for each year.

Name and Principal Position
André Calantzopoulos,
Chief Executive Officer
Marc Firestone,
Senior Vice President
and General Counsel
Martin King,
President, Asia Region
Jacek Olczak,
Chief Financial Officer
Miroslaw Zielinski,
President, Reduced-Risk Products

Year
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014

Salary (1)
($)

Stock
Awards (2)($)

Non-Equity
Incentive Plan
Compensation (3)($)

Change in
PensionValue (4)($)

All Other
Compensation (5)
($)

Total
Compensation($)

1,501,552
1,538,848
1,615,871
1,015,680
1,039,253
1,092,660
842,239860,274
904,627
971,563994,271
1,045,532
943,738
964,144
1,013,852

11,092,956
8,140,289
7,373,771
3,157,371
3,033,480
3,381,815
1,507,449
1,395,384
1,663,315
3,286,679
2,652,546
2,971,427
2,112,721
1,785,368
1,885,609

3,507,393
4,640,861
2,961,504
1,552,548
1,801,209
1,313,626
1,024,674
1,080,723
866,985
1,545,518
1,796,453
1,196,229
1,298,724
1,514,641
1,060,438

1,839,863
1,828,411
1,941,518
662,383
539,493621,372
1,676,224
978,367
1,679,182
1,295,084
1,113,850
1,808,118
1,156,579
1,057,675
1,469,430

182,561
180,570
232,205
19,23818,16814,473
1,043,628
1,451,476
512,818
20,746
15,972
13,77914,96044,80545,881

18,124,325
16,328,979
14,124,869
6,407,220
6,431,603
6,423,946
6,094,214
5,766,224
5,626,927
7,119,590
6,573,092
7,035,085
5,526,722
5,366,633
5,475,210(1) The 2016 base salaries are converted to U.S. dollars using an average conversion rate for 2016 of $1.00 = 0.9852 CHF. Year-to-year variations in the salaries and otheramounts reported for our officers result in part from year-to-year variations in exchange rates.
(2) The amounts shown in this column represent the aggregate grant date fair value of stock awards computed in accordance with FASB ASC Topic 718. The number of sharesawarded in 2016, together with the grant date values of each award, is disclosed in the Grants of Plan-Based Awards During 2016 table on page 49.
The assumptions used in the calculation of the grant date fair value of PSUs awarded in 2016 are described in Note 9 to the consolidated financial statements contained in our2016 Form 10-K. The table below provides the grant date fair value of PSUs awarded in 2016 for each of our NEOs assuming the maximum level performance is achieved.

Name

2016 PSUs Maximum
Value at 200%($)

André Calantzopoulos

13,754,410

Marc Firestone

3,914,896

Martin King1,868,384

Jacek Olczak

4,075,596

Miroslaw Zielinski

2,619,610(3) The 2016 annual incentive compensation awards are converted to U.S. dollars using the conversion rate on December 30, 2016, of $1.00 = 1.0185 CHF.
(4) The amounts shown reflect the change in the present value of benefits under the pension plans listed in the Pension Benefits table. The increases in change in present pension

value in 2016 were driven by the mandated use of lower interest rates to discount projected future benefits. Such increases would reverse in the event higher interest rates areused in future periods.
(5) Details of All Other Compensation for each of the named executive officers appear on the following page.
PMI 2017 Proxy Statement • 47

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COMPENSATION DISCUSSION AND ANALYSISAll Other Compensation

Name and Principal Position
André Calantzopoulos,
Chief Executive Officer
Marc Firestone,
Senior Vice President
and General Counsel
Martin King,
President, Asia Region
Jacek Olczak,
Chief Financial Officer
Miroslaw Zielinski,
President, Reduced-Risk Products

Year
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014
2016
2015
2014

International
Assignments (a)($)

Personal
Use ofCompany
Aircraft (b)($)

Car
Expenses (c)($)

TaxPreparation
Services (d)($)

Totals($)

1,013,498
1,438,395
495,060-

149,114142,174
197,002-31,92436,83833,565
8,722
268
30,13013,081
6,289
20,746
15,972
13,114
11,40733,93528,637

1,523
1,558
1,638
10,516
17,90014,473
11,469665
3,553
10,87017,244

182,561
180,570
232,205
19,23818,16814,473
1,043,628
1,451,476
512,818
20,746
15,972
13,77914,96044,80545,881(a) The amounts shown include payments or reimbursements made pursuant to PMI’s Long-Term Assignment Guidelines, which are designed to facilitate the relocation of

employees to positions in other countries by covering expenses over and above those that the employees would have incurred had they remained in their home countries.
International assignments and relocations provide a key means for the Company to meet its global employee development and resource needs, and the Long-Term
Assignment Guidelines ensure that employees have the necessary financial support to help meet cost differences associated with these assignments. The Long-Term
Assignment Guidelines cover housing, home leave, relocation, education expenses and tax equalization, as well as other program allowances. Currently, there areapproximately 990 participants in the program.
(b) For reasons of security and personal safety, PMI requires Mr. Calantzopoulos to use Company aircraft for all travel. The amounts shown are the incremental cost of personaluse of Company aircraft to PMI and include the cost of trip-related crew hotels and meals, in-flight food and beverages, landing and ground handling fees, hourly
maintenance contract costs, hangar or aircraft parking costs, fuel costs based on the average annual cost of fuel per hour flown, and other smaller variable costs. Fixedcosts that would be incurred in any event to operate Company aircraft (e.g., aircraft purchase costs, depreciation, maintenance not related to personal trips, and flight crewsalaries) are not included. Mr. Calantzopoulos has agreed to reimburse the Company for his personal usage of Company aircraft to the extent that the aggregate
incremental cost of such usage exceeds $200,000 per fiscal year; he is responsible for his own taxes on any imputed taxable income resulting from personal use ofCompany aircraft.
(c) Amounts shown for Mr. Calantzopoulos include the incremental cost of personal use of driver services that PMI provided for reasons of security and personal safety. With
respect to Messrs. Calantzopoulos, Firestone, King, Olczak, and Zielinski, amounts include the cost, amortized over a five-year period, of a vehicle, including insurance,
maintenance, repairs and taxes. Executives are responsible for their own taxes on any imputed taxable income resulting from car expenses.
(d) The tax preparation services are pursuant to PMI policies that apply to all Swiss payroll-based management employees.

The following are the specific amounts paid by the Company under the Long-Term Assignment Guidelines:

Name and Principal Position
Martin King,
President, Asia Region

Year
2016
2015
2014

Housing($)
415,335
259,236
130,463

Home
Leave
($)
20,781
27,17434,328

Relocation($)
136,878
127,616

Tax
Equalization (a)($)
506,000
943,606
158,210

Other
ProgramAllowances (b)($)
71,382
71,50144,443

Totals($)
1,013,498
1,438,395
495,060

Amounts that were paid or incurred in currency other than U.S. dollars are converted to U.S. dollars using average conversion rates for 2016 of $1.00 = 0.9852 CHF and$1.00 = 7.7621 HKD.
(a) The tax equalization payments made pursuant to PMI’s Long-Term Assignment Guidelines are to ensure that an assignee’s income tax liability is approximately the same asif he or she had not accepted a long-term international assignment. Payments for tax equalization often occur in years following the actual tax year. The Company has
covered the excess taxes on behalf of Mr. King pursuant to our assignment tax principle. The amount reflected in the table includes the incremental taxes paid by early 2017
in relation to Mr. King’s 2015 and 2016 compensation.
(b) Other Program Allowances include tax preparation services paid by the Company under the Long-Term Assignment Guidelines.
48 • PMI 2017 Proxy Statement

Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS
Grants of Plan-Based Awards During 2016
Estimated Possible Payouts
Under Non-Equity
Annual Incentive Plan (1)

Grant
Date

Threshold($)

Target($)

Maximum($)

2016
2/4/2016
2/4/2016

02,898,675

6,522,019

Marc Firestone,
Senior Vice President
and General Counsel

2016
2/4/2016
2/4/2016

0

Martin King,
President, Asia Region

2016
2/4/2016
2/4/2016

0

2016
2/4/2016
2/4/2016

0

2016
2/4/2016
2/4/2016

0

Name and Principal Position
André Calantzopoulos,
Chief Executive Officer

Jacek Olczak,
Chief Financial Officer
Miroslaw Zielinski,
President, Reduced-Risk
Products

1,227,310

Estimated Future Payouts Under
EquityIncentive Plan (2)Threshold(#)

Target(#)

Maximum(#)

35,52071,040142,080

20,22013,4801,957,448
1,199,923

6,440

934,192573,257

14,0302,037,798
1,248,881

9,020

1,309,805
802,916

40,4409,650

19,3002,634,404
10,525908,200

6,877,205
4,215,751

1,822,547
4,825

1,170,846

47,3602,761,448
10,110810,021

All Other Stock Grant Date
Awards: Number of Fair Value
Sharesofof Stock or
Stock
Units (3)Awards(#)($)

21,05042,1002,043,450
6,765

13,53027,060(1) The estimated possible payouts are converted to U.S. dollars using the conversion rate on December 30, 2016, of $1.00 = 1.0185 CHF. The numbers in these columns

represent the range of potential cash awards as of the time of the grant. Actual awards paid under these plans for 2016 are found in the Non-Equity Incentive Plan
Compensation column of the Summary Compensation Table.
(2) On February 4, 2016, each of our named executive officers received 60% of his targeted equity award in the form of PSUs. The target number of PSUs awarded was based on
the grant date fair market value, determined by using the average of the high and the low trading prices of PMI stock on that date of $89.015. The closing price of PMI stock onthat date was $89.10. These equity awards are scheduled to vest on February 20, 2019, to the extent performance goals pre-established and pre-weighted by the Committee
are achieved. For the 2016-2018 performance cycle the performance goals are based on TSR, compound annual adjusted OCI growth rate and innovation measures. Dividend
equivalents will be payable at vesting only on the earned shares.
The numbers in these columns represent the potential number of PSUs that can vest at three different levels of performance. Threshold assumes achievement of a thresholdperformance level for each of the three pre-established performance goals resulting in the vesting of 50% of the target number of PSUs. The vesting percentage can be 0 if
none of the threshold levels is achieved.
(3) On February 4, 2016, each of our named executive officers received 40% of his targeted equity award in the form of RSUs. The number of RSUs awarded was based on the
grant date fair market value, determined by using the average of the high and the low trading prices of PMI stock on that date of $89.015. The closing price of PMI stock on thatdate was $89.10. These equity awards are scheduled to vest on February 20, 2019. Dividend equivalents are payable on a quarterly basis throughout the vesting restriction
period.
On February 2, 2017, the following named executive officers received equity awards that are scheduled to vest (subject to the conditions of the awards) on February 19, 2020,
as follows: Mr. Calantzopoulos, 41,870 RSUs, 62,800 PSUs; Mr. Firestone, 13,000 RSUs, 19,500 PSUs; Mr. King, 6,830 RSUs, 10,240 PSUs; Mr. Olczak, 12,940 RSUs,
19,410 PSUs; and Mr. Zielinski, 8,650 RSUs, 12,980 PSUs. The amount of these awards was determined based on 2016 individual performance and targeted award levels bysalary grade and then split between RSUs (40%) and PSUs (60%).
PMI 2017 Proxy Statement • 49

Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS
Outstanding Equity Awards as of December 31, 2016
Stock Awards
RSUs

Stock Award
Grant Date (1)Name and Principal Position

André Calantzopoulos,
Chief Executive Officer

Marc Firestone,
Senior Vice President and General Counsel

Martin King,
President, Asia Region

Jacek Olczak,
Chief Financial Officer

Miroslaw Zielinski,
President, Reduced-Risk Products

2/4/2016
2/4/2016
2/5/2015
2/6/2014
2/4/2016
2/4/2016
2/5/2015
2/6/2014
2/4/2016
2/4/2016
2/5/2015
2/6/2014
2/4/2016
2/4/2016
2/5/2015
2/6/2014
2/4/2016
2/4/2016
2/5/2015
2/6/2014

Number ofUnits thatHave not
Vested (2)(#)

Market Valueof Units thatHave not
Vested (3)($)

47,36098,94094,8704,332,966
9,052,021
8,679,656

13,48036,87043,5101,233,285
3,373,236
3,980,730

6,440
16,96021,400589,196
1,551,670
1,957,886

14,03032,24038,2301,283,605
2,949,638
3,497,663

9,020
21,70024,260825,240
1,985,333
2,219,547

PSUs
Market or
Number of
Payout Value ofUnearned
Unearned
Units that
Units thatHave notHave not
Vested (4)Vested (3)(#)($)

71,0406,499,450

20,2201,849,928

9,650

882,879

21,0501,925,865

13,5301,237,860(1) These awards vest according to the following schedule:

Grant Date
2/4/2016

Grant TypePSU

2/4/2016
2/5/2015
2/6/2014

RSU
RSU
RSU

Vesting ScheduleAward vests between 0-200% on 2/20/2019 upon certification of the achievementof performance goals pre-established by the Committee.
100% of award vests on 2/20/2019.
100% of award vests on 2/21/2018.
100% of award vests on 2/15/2017.

Upon normal retirement or upon separation from employment by mutual agreement after reaching age 58, outstanding RSUs will vest immediately, while outstanding PSUs willvest at the end of the relevant three-year performance cycle to the extent performance goals are met. Upon death or disability, all outstanding RSUs will vest and all outstanding
PSUs will vest at 100% of target. In all other cases, the extent of vesting or forfeiture will be subject to the Committee’s discretion.
(2) Dividend equivalents paid in 2016 on outstanding RSUs for each of our named executive officers were as follows: Mr. Calantzopoulos, $1,004,279; Mr. Firestone, $415,780;
Mr. King, $199,713; Mr. Olczak, $370,965; and Mr. Zielinski, $245,737.
(3) Based on the closing market price of PMI common stock on December 30, 2016, of $91.49.
(4) Amount assumes target performance goals are achieved. The actual number of units that vest will range between 0% and 200% depending on actual performance during theperformance cycle.
50 • PMI 2017 Proxy Statement

Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS
Stock Option Exercises (1) and Stock Vested During 2016

Name and Principal Position

Stock Awards
Number of
SharesValue
Acquired on Realized on
Vesting
Vesting(#)($)

André Calantzopoulos,
Chief Executive Officer

74,2606,755,804

Marc Firestone,
Senior Vice President and General Counsel

48,2704,391,363

Martin King,
President, Asia Region

24,2702,207,963

Jacek Olczak,
Chief Financial Officer

42,0803,828,228

Miroslaw Zielinski,
President, Reduced-Risk Products

31,5302,868,442(1) The Company does not issue stock options.

On February 15, 2017, vesting restrictions lapsed for the following RSUs granted in 2014: Mr. Calantzopoulos, 94,870 shares; Mr. Firestone,
43,510 shares; Mr. King, 21,400 shares; Mr. Olczak, 38,230 shares; and Mr. Zielinski, 24,260 shares.
PMI 2017 Proxy Statement • 51

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COMPENSATION DISCUSSION AND ANALYSIS
Pension Benefits
The Pension Benefits table and the Non-Qualified Deferred Compensation table below generally reflect amounts accumulated as a result of thenamed executive officers’ service over their full careers with us, our prior parent company and affiliates. The increments related to 2016 arereflected in the Change in Pension Value column of the Summary Compensation Table on page 47. Our plans providing pension benefits aredescribed below in the Pension Benefits table, and our defined contribution plans are described in the Non-Qualified Deferred Compensationtable on page 56.

Name and Principal Position

André Calantzopoulos,
Chief Executive Officer
Marc Firestone,
Senior Vice President
and General Counsel
Martin King,
President, Asia Region

Jacek Olczak,
Chief Financial Officer
Miroslaw Zielinski,
President, ReducedRisk Products

Plan Name

Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland
Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland
Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland
Retirement Plan for Salaried Employees
Benefit Equalization Plan (BEP)
Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland
Pension Fund of Philip Morris in Switzerland
IC Pension Plan of Philip Morris in Switzerland
Supplemental Plan of Philip Morris in Switzerland

Number ofYears of
CreditedService (1)
(#)

35.00
11.92
11.00
4.75
3.92
4.75
11.58
10.92
8.00
14.00
14.00
27.00
10.92
8.00
31.00
11.92
11.00

Present Value
Paymentsof Accumulated During Last
Benefits (2)(3)
Fiscal Year($)($)

16,330,826
2,434,361
6,568,028
1,749,139
149,863
708,985
3,532,845
588,846
942,792
788,453
3,942,898
9,210,078
587,751
1,908,360
10,148,615
1,050,376
1,818,887-(1) As of December 31, 2016, each named executive officer’s total years of service with PMI or its affiliates were as follows: Mr. Calantzopoulos, 31.92 years; Mr. Firestone, 4.71

years; Mr. King, 25.58 years; Mr. Olczak, 23.79 years; and Mr. Zielinski, 25.33 years; the years shown in this column are the years credited under the named plan for purposesof benefit accrual. Additional years may count for purposes of vesting or early retirement eligibility. Differences between each named executive officer’s total service and thecredited service shown for each plan result from transfers between entities sponsoring various plans. Mr. King’s credited service under the U.S. plans reflects his prior service
as a U.S. payroll-based employee. While such credited service is now frozen, he continues to earn eligibility and vesting service and increases in his benefit due to increases in
his compensation as a result of his continued service with PMI. The Pension Fund of Philip Morris in Switzerland allows employees to purchase additional service credit with
contributions from their own funds, and Messrs. Calantzopoulos, Olczak, and Zielinski have purchased 3.08, 15.67, and 13.83 years, respectively, without any Company
contribution.
(2) The amounts shown in this column for pension plans in Switzerland are based on a 60% joint and survivor annuity commencing at age 62 (the earliest date on which, assuming
continued employment, the individual would be eligible for benefits that are not reduced for early commencement) and the following actuarial assumptions: discount rate 0.59%,
mortality table LPP 2015 with a load of 2.00% for expected improvements in mortality and interest rate on account balances of 3.4%. Present value amounts in Swiss francs areconverted to U.S. dollars using the conversion rate on December 30, 2016, of $1.00 = 1.0185 CHF.
The amounts shown in this column for Mr. King’s U.S. pension benefits are based on a single life annuity (or, for the BEP, a lump sum payment) using the same assumptions
applied for year-end 2016 financial disclosure under FASB ASC Topic 715, except that in accordance with SEC requirements, benefits are assumed to commence at theearliest date on which, assuming continued employment, the individual would be eligible for benefits that are not reduced for early commencement.
See Note 13 to our consolidated financial statements for a description of our FASB ASC Topic 715 assumptions. Like all present value amounts, the amounts shown in thiscolumn change as the interest rate used to discount projected future benefits is adjusted, with lower interest rates producing higher present values and higher interest rates
producing lower present values.
52 • PMI 2017 Proxy Statement

Table of Contents

COMPENSATION DISCUSSION AND ANALYSIS(3) In addition to the benefits reflected in this column, we generally provide a survivor income benefit allowance, or SIB allowance, to the surviving spouse and children of U.S.

payroll-based employees who die while covered by our Retirement Plan for Salaried Employees. Following the death of a retiree who has a spouse and whose retirement
benefits are being paid as a single life annuity, the surviving spouse becomes entitled to a SIB allowance four years after the retiree’s death, in an amount equal to the amountthe spouse would have received if the participant had elected to receive monthly payments under the Retirement Plan in the form of a 50% joint and survivor annuity. The
surviving spouse of a participant who dies prior to retirement and prior to age 61 becomes entitled to receive 25% of the base salary of the deceased employee commencing
four years after the participant’s death, provided the spouse has not remarried, and continuing until the deceased employee would have reached age 65. At that time, thesurviving spouse receives the same survivor benefit he or she would have received if the deceased employee continued to work until age 65 earning the same base salary as ineffect at the time of death. These benefits are reduced by any death benefits payable from the Retirement Plan. If there is no surviving spouse, SIB allowances for each childequal 10% of the base salary of the deceased employee (to a maximum of 30% of base salary), become payable monthly beginning four years after the employee’s death, andcontinue until the child reaches age 25 if a full-time student (age 19 if not). The present value of such post-retirement SIB benefits for Mr. King, assuming his spouse survives
him, is $40,842. There is no SIB allowance under the BEP since the BEP benefit is only available as a lump sum.
PMI 2017 Proxy Statement • 53

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COMPENSATION DISCUSSION AND ANALYSIS
Retirement Plans for U.S. Payroll-Based Employees
Pensions for our U.S. payroll-based employees are payable from thetax-qualified Retirement Plan and non-qualified supplemental plans.
These plans recognize the employees’ prior service with companies
with which we were previously affiliated.
Mr. King, who is a former U.S. payroll-based employee, has accrued
benefits under the tax-qualified Retirement Plan and the nonqualified supplemental Benefit Equalization Plan (BEP). The
provisions of these two plans are described below.
The BEP provides both supplemental pension benefits andsupplemental deferred profit-sharing benefits. The provisions of the
BEP relating to deferred profit-sharing benefits are describedfollowing the Non-Qualified Deferred Compensation table.
Retirement Plan for Salaried Employees
The tax-qualified Retirement Plan is a non-contributory planmaintained for the benefit of our U.S. payroll-based salaried
employees hired before January 1, 2009. Subject to tax law limits,
the pension formula generally applicable under the Retirement Plan
provides for lifetime benefits following termination of employment
equal to (a) 1.75% of the employee’s average compensation (thesum of annual salary and annual incentive compensation award in
the 60 consecutive months during the employee’s last 120 months ofservice that, when divided by five, produces the highest average)
minus (b) 0.30% of such compensation up to the applicable Social
Security-covered compensation amount, times (c) years of credited
service (up to a maximum of 35). Social Security-covered
compensation is generally an amount equal to the average of theSocial Security taxable wage bases for the 35-year period that ends
in the year the participant reaches age 65. The resulting benefit isexpressed as a single life annuity payable commencing at normal
retirement age.
Employees who terminate employment before age 55 with vested
benefits may commence receiving payment of their accrued
pensions after attaining age 55, with reductions for earlycommencement of 6% for each year by which commencement
precedes age 65. For an employee who terminates employment
after age 55, the reduction for early commencement is generally 6%
for each year by which commencement precedes age 60. If an
employee has 30 years of service and is age 55 or older, or is 60 orolder with 5 years of service, the annuity
54 • PMI 2017 Proxy Statement

immediately payable on early retirement is 100% of that payable atnormal retirement age.
Benefit Equalization Plan (BEP)
The tax law applicable to the funded tax-qualified Retirement Plan
limits the annual compensation that can be taken into account indetermining the five-year average compensation under the plan. As
a result of this and certain other tax limits, only a portion of thebenefits calculated under the Retirement Plan formula can be paid toaffected employees from the Retirement Plan. To compensate forthe loss of these benefits under the funded tax-qualified plan, eligible
employees accrue supplemental benefits under non-qualified plans.
Generally, the supplemental pension benefits accrued under the
BEP equal the difference between (a) the pension benefits
determined under the Retirement Plan provisions described above,
disregarding the tax law limits, and (b) the benefits that can beprovided from the Retirement Plan after taking the tax law limits into
account.
Retirement Plans for Swiss Payroll-Based Employees
Pensions for our Swiss payroll-based employees are payable from afunded defined benefit pension plan and incentive compensation(IC) pension plan qualifying for favorable treatment under Swiss law.
To the extent that Swiss tax or other limitations do not allow paying
the full pension under the qualified plans, the balance is expected tobe payable under a supplemental pension plan.
Pension Fund of Philip Morris in Switzerland
With limited exceptions, all Swiss payroll-based employees over 25
years of age become immediately covered by the Pension Fund ofPhilip Morris in Switzerland, a broad-based contributory-funded plan
providing defined retirement, disability and death benefits up to limitsprescribed under Swiss law. Retirement benefits are expressed as
an annuity at normal retirement age equal to 1.8% of theparticipant’s five-year average pensionable salary (base salaryminus two-thirds of the maximum social security benefits of CHF
28,200 in 2016) multiplied by years of credited service (to amaximum of 40 to 41 years, depending on the employee’s date ofbirth). Effective April 1, 2015, employees between the ages of 25
and 34 contribute 6% of their pensionable salary to the Fund, andthe contribution increases to 7% for employees between the ages of
35 and 54 and 8% for employees between the ages of 55 and 65.
Subject to certain conditions, participants may elect to receiveTable of Contents

COMPENSATION DISCUSSION AND ANALYSIS
pension benefits entirely or partially in a lump sum. For determining
lump sum values, a discount rate of 4% and the LPP 2015 mortality
table is used. The LPP mortality table is a commonly used mortality
table in Switzerland. For an employee who completes 30 years ofservice and retires at age 62, this translates into payments
equivalent to a pension of 54% of five years’ annual averagepensionable salary. For an employee with 40 years of credited
service at age 65, this “replacement ratio” is approximately 72% of
average salary. Participants may retire and commence benefits as
early as age 58; however, for each year that retirement precedesage 62, the 1.8% multiplier used to calculate the amount of theretirement pension is reduced by 0.06% (at age 58 the multiplier is
1.56%). Swiss law permits participants in a pension plan to makeadditional voluntary contributions to the pension plan to compensate
for missing years of credited service.

payable in a lump sum or as an annuity. The plan guarantees that
there is no loss of principal on either the employee contributions or
the Company match. In 2016, the assets of the funds had a positive
performance of 4.3%, and 3.0% was credited on plan balances.

If an employee terminates employment with us before age 58, thelump sum value of the pension calculated using the termination lumpsum factors is transferred either to a new pension fund or to a
blocked bank account until early retirement age is reached. An
employee who is age 50 or over upon termination of employment
can elect under certain conditions to remain in the plan as anexternal member. In this case, neither the employee nor theemployer can contribute any further funds. At the age of 58, theformer employee must then elect to take retirement in the form of anannuity, a lump sum or a mix of both.

Supplemental Plan of Philip Morris in Switzerland
For some Swiss payroll-based employees, including our NEOs, thelaws and regulations applicable to the Pension Fund of Philip Morrisin Switzerland and the IC Pension Plan of Philip Morris in
Switzerland limit the benefits that can be provided under thoseplans. For these employees, we maintain a Supplemental Plan
under which an amount is calculated and deposited annually in a
Swiss foundation to make up for the difference between the full
pension an employee would have received had these plans not been
subject to such limitations (assuming the employee becomes entitledto benefits from the Supplemental Plan). However, the annual
deposits do not serve to increase the amount that an individual
would have received absent such limits. In determining the amountof the annual deposit, the actuarial assumptions used are the sameas those described above for the Pension Fund of Philip Morris in
Switzerland.

IC Pension Plan of Philip Morris in Switzerland
Swiss payroll-based employees in salary grades 14 and above whoare eligible to participate in the annual incentive compensation
award program described above are also eligible to participate in the
IC Pension Plan of Philip Morris in Switzerland, a funded plan which,for the named executive officers, provides for participant
contributions of up to 1.5% of pensionable salary (as defined above),subject to maximum Swiss pension law limits, and an equalmatching contribution from the employer. As with the pension plan,
participants may make additional voluntary contributions subject tocertain terms and conditions.
Benefits ultimately received depend on interest rates set by thePension Board of the plan (which consists of members appointed by
the employer and an equal number selected by participants in theplan) and are

If an employee terminates employment with the Company before
age 58, the employee’s account value is transferred to either a new
pension fund or to a blocked bank account until early retirement age
is reached. An employee who is age 50 or over upon termination of
employment can elect under certain conditions to remain in the plan
as an external member. In this case, neither the employee nor theemployer can contribute any further funds to the plan althoughinterest does accrue on the account balance. At the age of 58, theformer employee must then elect to take retirement in the form of anannuity, a lump sum payment or a mix of both.

In the event of a Supplemental Plan participant’s termination of
employment from the Company, if the Foundation Board determines
in its sole discretion that he or she is entitled to a benefit, theSupplemental Plan benefit is paid in a lump sum at the time that
benefits first become payable to the participant under the Pension
Fund of Philip Morris in Switzerland and the IC Pension Plan ofPhilip Morris in Switzerland. As the Supplemental Plan is not a taxqualified plan, the benefits from this plan, when paid, are adjusted
for the loss of favorable tax-qualified plan treatment.

PMI 2017 Proxy Statement • 55

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COMPENSATION DISCUSSION AND ANALYSIS
Non-Qualified Deferred Compensation

Name and Principal Position

Plan Name

Martin King,
President, Asia Region

Benefit Equalization Plan (BEP),
Deferred Profit-Sharing

Executive
Contributionsin 2016($)

Registrant
Contributionsin 2016($)

00Aggregate
Earnings
in 2016 (1)
($)

306

Aggregate
Withdrawals/
Distribution($)

0

Aggregate
Balance as ofDecember 31,
2016
($)

19,900(1) The amount in this column consists of amounts credited as earnings for 2016 on account balances attributable to the prior participation under the defined contribution portion of

the BEP. This amount does not constitute above-market earnings and, accordingly, is not included in amounts reported in the Summary Compensation Table on page 47.

Deferred Profit-Sharing and Benefit Equalization Plan
For U.S. payroll-based employees, we provide non-qualified defined
contribution benefits supplementing the benefits provided under our
tax-qualified Deferred Profit-Sharing Plan for Salaried Employees, or
DPS. Under the DPS, contributions are made on behalf of eachparticipant for each year. Currently, none of our named executive
officers is eligible for DPS contributions.

additional benefits the participant would have received under the
DPS but for the application of the tax law limits.

As is the case for the Retirement Plan, the applicable U.S. tax law
limits the amount of compensation ($265,000 for 2016) that can betaken into account under the tax-qualified DPS for any year andimposes other limits on the amounts that can be allocated toindividuals under the DPS. A DPS participant whose salary was
more than the compensation limit or who was otherwise affected by
tax law limits is entitled to a supplemental profit-sharing benefit in an
amount generally equal to the

The DPS fund used as an earnings measure under this portion of
the BEP is invested in a variety of high-quality fixed-income
instruments with strong credit ratings and, for 2016, produced
earnings at a rate of approximately 1.6%. Participants typicallyreceive their supplemental profit-sharing benefits upon termination of
employment in a lump sum or, if elected in advance, as a deferredlump sum payment or in installments over a number of years not toexceed their life expectancy.

56 • PMI 2017 Proxy Statement

The funds accumulated in the DPS portion of BEP for Mr. King
reflect the contributions while he was a U.S. payroll-based
employee.

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COMPENSATION DISCUSSION AND ANALYSIS
Employment Contracts, Termination of Employment and Change in Control Arrangements
As a general matter, PMI has not utilized special employment
contracts for its named executive officers. However, as required by
local law, our Swiss payroll-based executive officers are covered bycontracts; these contracts do not include change in control
provisions.
PMI’s 2012 Performance Incentive Plan includes a double-trigger
feature. Under the plan, the changes to vest or pay applicableawards occur immediately upon a change in control only if the entity
acquiring PMI does not agree to assume or replace the awards. In
addition, if the acquiring entity agrees to assume or replace theawards, but an employee’s employment is terminated involuntarilyand other than for cause or the employee terminates employment forgood reason within two years after the change in control, theapplicable awards will become vested or be payable upon theemployee’s termination of employment as follows:change in control of PMI, calculated as if a change in control
occurred on December 31, 2016, applying certain assumptions. For
outstanding awards granted under PMI’s 2012 Performance
Incentive Plan, we have assumed that the awards become vested
and payable as of December 31, 2016, either because the acquirer
does not assume or replace the awards or because the employee’s
employment is involuntarily terminated.

Name

Unvested
PSUs (1)($)

Unvested
RSUs (1)($)

Completed2016
AnnualIncentive
Compensation
Award
Cycle (2)($)

André Calantzopoulos

Total
($)

2,166,483

22,064,643

2,898,675

27,129,801

Marc Firestone

616,6438,587,251

1,227,310

10,431,204

Martin King294,293

4,098,752

810,021

5,203,066

the restrictions on outstanding RSUs would lapse;

Jacek Olczak

641,955

7,730,906

1,170,846

9,543,707

Miroslaw Zielinski

412,620

5,030,120

908,200

6,350,940▪

outstanding PSUs would vest on a pro-rata basis at target andbe payable in cash;(1) Assumes the change in control price is equal to the closing market price of PMI on▪

unless otherwise determined by the Compensation andLeadership Development Committee, equity awards would becashed out at the change in control price; and▪

fully earned but unpaid annual incentive compensation awards
would become payable.

▪

Under PMI’s 2012 Performance Incentive Plan, a change in control
occurs: (i) upon an acquisition of 20% or more of either PMI’scommon stock or the voting power of PMI’s voting securities,
excluding certain acquisitions involving PMI or its affiliates or where
PMI’s beneficial owners continue to meet certain ownershipthresholds; (ii) when members of the PMI Board as of the effective
date of PMI’s 2012 Performance Incentive Plan, or thereafter
nominated or elected by such members, cease to constitute amajority of the PMI Board; (iii) upon certain reorganizations,mergers, share exchanges and consolidations involving PMI; or(iv) upon the liquidation or dissolution, or sale of substantially all of
the assets of PMI, with limited exceptions.
The amounts in the accompanying table are estimates of theamounts that would have become payable on a

December 30, 2016, of $91.49. Value of unvested PSUs assumes target numberof shares awarded prorated for the amount of time lapsed in the performancecycle.
(2) Assumes target award payable under our annual incentive compensation award
program for a full year. Amounts are converted to U.S. dollars using theconversion rate on December 30, 2016, of $1.00 = 1.0185 CHF.

Benefits payable under PMI’s qualified pension and profit-sharing
plans and supplemental plans are discussed above. None of thoseplans provide PMI’s executive officers with an additional
enhancement, early vesting or other benefit in the event of a change
in control or termination of employment, except for certain plan
provisions applicable to all plan participants that ensure vesting andcontinuation of profit-sharing contributions for the year of a change
in control and the following two years. Mr. King is already fully
vested under these plans. Similarly, no enhanced provisions apply tothe above-named executive officers with respect to continued
medical, life insurance or other insurance coverage following
termination of employment, whether or not in connection with achange in control.
Involuntary Separation Without Cause
In the event of involuntary separation without cause, a severance
payment is typically determined as a multiple of monthly base salary.
The amount of severance paid varies based on a number of factors,
including the circumstances of the termination and the executive’s
years of service.
PMI 2017 Proxy Statement • 57

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ADVISORY VOTE APPROVING EXECUTIVE COMPENSATIONThe Compensation Discussion and Analysis section discusses indetail how our compensation programs support our business andfinancial objectives, how they work and are administered under the
direction of our independent Compensation and Leadership
Development Committee, and how the Committee’s decisions
concerning the 2016 compensation of our executive officers weredirectly tied to our performance.
Pursuant to Section 14A of the Exchange Act, we are asking ourshareholders to indicate their support for our named executive
officer compensation as described in this proxy statement. Thisannual say-on-pay vote gives our shareholders the opportunity to
express their views on our NEOs’ compensation at each Annual
Meeting of Shareholders. This vote is not intended to address any
specific item of compensation, but rather the overall compensationof our named executive officers and the philosophy, policies andpractices described in this proxy statement.

Accordingly, we will ask our shareholders to vote “FOR” the following
resolution at the Annual Meeting:
RESOLVED, that the Company’s shareholders approve, onan advisory basis, the compensation of the named
executive officers, as disclosed in the Company’s Proxy
Statement for the 2017 Annual Meeting of Shareholders
pursuant to the compensation disclosure rules of the
Securities and Exchange Commission, including theCompensation Discussion and Analysis, the Summary
Compensation Table and the other related tables anddisclosure.
This say-on-pay vote is advisory and, therefore, not binding on the
Company, the Compensation and Leadership Development
Committee or the Board of Directors. The Board and the Committee
value the opinions of our shareholders and will review the voting
results when making future decisions regarding executive
compensation.

The Board recommends a vote FOR the resolution approving the compensation of
our named executive officers.
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ADVISORY VOTE ON THE FREQUENCY OF FUTURE SAY-ON-PAY VOTES
Pursuant to Section 14A of the Exchange Act, we are seeking yourinput with regard to the frequency of future shareholder advisory
votes on our executive compensation programs. We are asking
whether the advisory vote should occur every year, every two years
or every three years.
After careful consideration, the Board of Directors has determinedthat an advisory vote on executive compensation that occurs every
year continues to be the most appropriate alternative for our
Company and, therefore, the Board recommends that you vote for a
one-year interval for the say-on-pay advisory vote.
In formulating its recommendation, the Board considered that anannual advisory vote on executive compensation will allow ourshareholders to provide us with their direct input on ourcompensation philosophy, policies and practices every year.
Additionally, an annual advisory vote on executive compensation isconsistent with our policy of seeking input from, and engaging in
discussions with, our shareholders on corporate governance mattersand our executive compensation philosophy, policies and practices.

You may cast your vote on your preferred voting frequency bychoosing the option of every one year, two years or three years or
you may abstain from voting on the resolution set forth below:
RESOLVED, that the option of once every one year, twoyears, or three years that receives the highest number ofvotes cast in response to this resolution will be determined,on an advisory basis, to be the preferred frequency withwhich the Company is to hold a shareholder vote toapprove the compensation of the named executive officers.
We will regard the option that receives the highest number of votes
cast by shareholders to be the frequency that has been selected byshareholders. Although this vote is advisory and not binding on the
Board or PMI, the Board will carefully consider the outcome.

The Board recommends a vote of once EVERY YEAR as the frequency with which shareholders are provided an advisory vote on
executive compensation.
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APPROVAL OF THE 2017 PERFORMANCE INCENTIVE PLAN
The Board of Directors has adopted the 2017 Performance Incentive Plan (the “2017 Plan”) to replace the 2012 Performance Incentive Plan,
which was approved by our shareholders in 2012 (the “2012 Plan”). The 2017 Plan, like the 2012 Plan, permits the Company to compensate
management with equity and cash incentive awards. New awards will not be made under the 2017 Plan until shareholder approval is obtained
for the Plan. The Company has no plans to grant additional awards under the 2012 Plan after the date of this proxy statement.
The 2017 Plan provides the Compensation and Leadership Development Committee with the flexibility to compensate executives throughvarious awards. These awards may be tied to the financial or operational performance of the Company as well as to the performance of theCompany’s stock. Because of the key role the 2017 Plan will play in the compensation of executives, the Board urges you to vote for its
approval.
The terms of the 2017 Plan are summarized below. In addition, the full text of the 2017 Plan is set forth in Exhibit B to this Proxy Statement.
The following summary is qualified in its entirety by reference to the text of the 2017 Plan. Shareholder approval of the 2017 Plan is one of therequirements for allowing us to continue to make certain awards to executive officers that will be tax-deductible by us as performance-based
compensation for U.S. tax purposes.
Comparison of the 2017 Plan and the 2012 Plan
The following compares the key provisions of the two plans:▪

the term of each of the Plans is five years;▪

the 2012 Plan authorized 30 million shares of common stock, while the 2017 Plan authorizes 25 million shares, representing 1.61% ofshares outstanding as of March 10, 2017;▪

both Plans prohibit the recycling of shares available for issuance with shares that are forfeited or withheld to pay taxes;▪

each of the Plans authorizes restricted shares, restricted share units, performance-based cash incentive awards and performance-based
equity awards;▪

neither Plan authorizes stock options or stock appreciation rights;▪

each Plan features a double-trigger change in control provision as further described on pages 57 and 62;▪

the Board has adopted a clawback policy applicable to each Plan providing for the recovery of incentive compensation in appropriate
circumstances as described on page 44, and the 2017 Plan requires that all awards thereunder are subject to this policy; and▪

the Board has adopted rigorous stock ownership requirements and anti-hedging and anti-pledging policies for executives intended to aligntheir interests with those of our shareholders and to protect against inappropriate risk taking as described on page 44.

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APPROVAL OF THE 2017 PERFORMANCE INCENTIVE PLAN
Run Rates and Dilution. The following table sets forth information regarding equity awards granted, the run rate for each of the last threefiscal years and the average run rate over the last three years. The Company’s regular annual long-term equity awards are granted in Februaryof each year. The last column reflects awards issued through March 10, 2017.
FY 2014

FY 2015

FY 2016

3-YearAverage

RSUs granted

2.43

1.54

1.21

1.73

1.20

Director Stock Awards granted

0.02

0.03

0.03

0.03

-

PSUs vested

-

-

-

-

-

1,566.37

1,548.90

1,551.06

1,555.44

1,552.00

RUN RATE (shares in millions)

Weighted average number of shares outstanding
Run rate (1)

0.16%

0.10%

0.08%

0.11%

YTD
2017

0.08%

(1) Run rate includes the sum of all director stock awards and RSUs granted during the period, plus the number of all PSUs vested during the period, divided by the weighted

average number of shares outstanding during the period. The Company does not issue stock options.

The Company’s run rates as shown above and its 2016 year-end overhang (number of unvested RSUs plus unvested PSUs (at target) as apercentage of all shares outstanding at year-end) of 0.32% each compares favorably to those of its Peer Group.
Eligibility. Employees of the Company, its subsidiaries and its affiliates, who are responsible for or contribute to the management, growth andprofitability of the Company, its subsidiaries and affiliates, are eligible to receive awards under the 2017 Plan. Such eligible employees include
executive officers, senior officers, and other key executive and management employees (currently, approximately 8,750). Awards that are paid
to our named executive officers (other than the Chief Financial Officer) are potentially subject to the tax deduction limitations of Section 162(m)of the Internal Revenue Code (the “Code”). The limitations of Section 162(m) do not apply, however, to “performance-based” compensation thatmeets certain requirements, including shareholder approval of the plan.
Business Criteria for Performance Goals. The performance goals for awards that are intended to constitute performance-based
compensation for purposes of Section 162(m) will be based on one or more of the following criteria: earnings per share; total shareholder
return; net revenues; operating income; operating companies income; net income; earnings before interest, taxes, depreciation andamortization expenses; free cash flow; operating cash flow; return on equity; return on capital; economic value added; product volume ormarket share; product innovation; changes in the overall cost base; operating margin; attainment of product commercialization targets;achievement of research and development milestones and other strategic initiatives; achievement of regulatory milestones; portfoliotransformation; or achievement of diversity and inclusion goals. The measures of these criteria may be adjusted in a manner consistent with thepractices of the Company in communicating results.
Negative Discretion. Notwithstanding the achievement of any performance goal established under the 2017 Plan, the Committee has thediscretion to reduce some or all of a performance-based award that would otherwise be paid to a participant.
Incentive Awards. Incentive awards expressed in cash, common stock, or both may be granted under the 2017 Plan. These awards will beearned only if corporate, business unit or individual performance objectives over performance cycles established by or under the direction of
the Committee, are met.
Restricted Shares and Restricted Share Units. Restricted shares and RSUs may also be awarded. Restricted shares are shares of common
stock issued to a recipient while RSUs represent the right to receive shares, in each case that vest and become transferable upon thesatisfaction of conditions described in the applicable award agreement. Restricted shares and RSUs may be forfeited if, for example, therecipient’s employment terminates before the award vests. Except as specified in the applicable award agreement, the holder of a restricted
share award will have all the rights of a holder of common stock on his or her restricted shares, including the right to receive dividends. The
holder of RSUs will have none of the rights of a holder of common stock unless and until shares of common stock are actually delivered insatisfaction of such units. The Committee may provide for the payment of dividend equivalents with respect to any shares of common stock
subject to unvested RSUs.
Performance Share Units. PSUs are performance-based awards denominated in shares of common stock and based on the achievement of
pre-established performance goals during a performance cycle, with the vesting percentage determined
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APPROVAL OF THE 2017 PERFORMANCE INCENTIVE PLAN
by formula. The recipient of PSUs will have none of the rights of a holder of common stock until shares are earned and delivered in satisfactionof such units. The Committee may provide for the payment of dividend equivalents with respect to shares that are actually earned at the end ofa performance cycle.
U.S. Federal Income Tax Consequences.
Restricted Shares. The recognition of income from an award of restricted shares for federal income tax purposes depends on the restrictions
imposed on the shares. Generally, taxation will be deferred until the first taxable year the shares are no longer subject to substantial risk of
forfeiture. At the time the restrictions lapse, the employee will recognize ordinary income equal to the then fair market value of the shares. The
employee may, however, make an election to include the value of the shares in gross income in the year of award despite such restrictions.
Generally, PMI will be entitled to deduct the fair market value of the shares transferred to the employee as a business expense in the year theemployee includes the compensation in income.
RSUs and PSUs. Generally, an employee will not recognize ordinary income until the shares become payable, even if the award vests in an
earlier year. PMI will generally be entitled to deduct the amount the employee includes in income as a business expense in the year of
payment.
Cash Incentive Awards. Any cash payment an employee receives under an incentive award will generally be included in the employee’s
income, as ordinary income, in the year paid. PMI will generally be entitled to deduct the amount the employee includes in income as abusiness expense in the year of payment.
Deductibility of Awards. Section 162(m) places a $1.0 million annual limit on the compensation deductible by PMI paid to certain of its
executives. The limit, however, does not apply to “qualified performance-based compensation.” PMI believes that cash incentive awards and
PSUs under the 2017 Plan will qualify for the performance-based compensation exception to the deductibility limit. The Committee retains thediscretion to issue awards that are not so qualified.
Other Tax Consequences. State tax consequences may in some cases differ from those described above. Awards under the 2017 Plan will inmany instances be made to employees who are subject to tax in jurisdictions other than the United States and may result in tax consequences
differing from those described above.
Award Limits. The 2017 Plan places limits on the maximum amount of each type of award that may be granted to any employee in any plan
year. The maximum number of shares of common stock that may be the subject of all awards that are intended to comply with theperformance-based exception under Section 162(m) awarded to any employee during any single calendar year shall not exceed 500,000. Forawards that are settled in cash but denominated in shares of common stock, the maximum aggregate amount of cash that may be paid to aparticipant in a single calendar year is equal to 500,000 multiplied by the fair market value of a share of common stock on the payment date.
The maximum amount of all awards denominated in cash that are intended to comply with the performance-based exception under Section
162(m) that can be paid to any employee during any single calendar year shall not exceed $10 million for awards with a performance cycle of
one year or less and shall not exceed such annual maximum multiplied by the number of years in any performance cycle having a term of morethan one year.
Award limits that are expressed as a number of shares will be adjusted appropriately in the event of any transaction or event that affects ourcommon stock, including but not limited to a merger, share exchange, reorganization, consolidation, recapitalization, reclassification,
distribution, stock dividend, stock split, reverse stock split, split-up, spin-off or issuance of rights or warrants.
Change in Control. The 2017 Plan includes a double-trigger feature under which outstanding equity awards will not accelerate or vest if theentity acquiring PMI agrees to replace the award with a time-based equity award of equivalent value. For this purpose, the value of outstanding
PSUs would be determined based on actual performance through the date of the change in control if more than one-half of the performancecycle has elapsed and such performance is determinable. Otherwise, the value of outstanding PSUs would be based on the assumption thattarget performance had been achieved.
If outstanding equity awards are not replaced, outstanding RSUs would fully vest and the value of outstanding PSUs would be determined as
set forth above and be payable immediately in cash.
If outstanding equity awards are replaced as described above but, within two years after the change in control, the employee’s employment isterminated involuntarily and other than for cause or the employee terminates employment for
62 • PMI 2017 Proxy Statement

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APPROVAL OF THE 2017 PERFORMANCE INCENTIVE PLAN
good reason, the replacement award would fully vest. The definition of change in control in the 2017 Plan is similar to that in the 2012 Plan(summarized on page 57), except that no change in control is deemed to occur in certain business combination transactions if beneficial
owners prior to such transaction beneficially own more than 50% in an entity resulting from such transaction (as opposed to 60% in the 2012Plan).
Future Awards. Future awards under the 2017 Plan cannot be determined at this time because grants are at the discretion of the Committee.
However, we believe that incentive and equity awards granted under the 2012 Plan in 2016 would not have been any different had they been
awarded under the 2017 Plan.
Shares Remaining Under the Company’s Equity Compensation Plans. The number of shares to be issued upon exercise or vesting andthe number of shares remaining available for future issuance under the 2012 Plan and the Philip Morris International Inc. 2008 Stock
Compensation Plan for Non-Employee Directors at March 10, 2017, were as follows:(C)(A)
Number of Shares
Number of Shares
Remaining Available forto be Issued upon(B)
Future Issuance Under
Exercise of Outstanding
Weighted Average
Equity Compensation Plans
Options and Vesting of
Exercise Price of(Excluding Securities
RSUs and PSUs
Outstanding Options
Reflected in Column A)

Equity compensation plans approved by shareholders (1)5,392,560 (2)-19,868,589 (3)(1) The 2008 Stock Compensation Plan for Non-Employee Directors was approved by our former parent company in connection with our spin-off.
(2) Represents 3,750,500 shares of common stock that may be issued upon vesting of RSUs granted under the 2012 Plan and 1,642,060 shares that may be issued upon vestingof PSUs granted under the 2012 Plan if maximum performance targets are achieved for each performance cycle. PMI has not granted options since the spin-off and the 2017
Plan does not authorize stock options or stock appreciation rights.
(3) Following shareholder approval of the 2017 Plan, no further awards will be made under the 2012 Plan, although prior awards will continue to be valid. The Company has noplans to grant additional awards under the 2012 Plan after the date of this proxy statement.

Administration of the Plan. The 2017 Plan will be administered by the Committee, which has the power to interpret the 2017 Plan and to
adopt such rules and guidelines for carrying out the 2017 Plan as it may deem appropriate. Subject to the terms of the 2017 Plan, theCommittee has the authority to determine those employees eligible to receive awards and the amount, type and terms of each award and toestablish and administer any performance goals applicable to such awards. The Committee may delegate its authority and power under the2017 Plan to one or more officers of the Company, subject to guidelines prescribed by the Committee, but only with respect to participants who
are not subject to either Section 16 of the Exchange Act or Section 162(m) of the Code. The Committee may, in its discretion, accelerate thevesting of any equity award granted under the 2017 Plan, or otherwise amend or modify any award granted under the 2017 Plan in any mannerthat either is not materially adverse to the recipient holding the award or is consented to by the recipient.
Other Information. The 2017 Plan provides that an award may not be transferred except in the event of the employee’s death or unlessotherwise required by law or provided in an award agreement. Other terms and conditions of each award will be set forth in award agreements,
which can be amended by the Committee.
It is presently intended that the 2017 Plan constitute an “unfunded” plan for incentive and deferred compensation. The 2017 Plan authorizes thecreation of trusts and other arrangements to facilitate or ensure payment of our obligations.
The 2017 Plan was adopted by the Board on March 9, 2017, subject to shareholder approval, and no awards will be made under the 2017 Plan
after May 3, 2022. However, any awards granted before May 3, 2022, may extend beyond such date. The Company has no plans to grantawards under the 2012 Plan after the date of this proxy statement. The Board may amend the 2017 Plan at any time, provided that no such
amendment will be made without shareholder approval if such approval is required under applicable law, regulation, or stock exchange rule, orif such amendment would increase the number of shares of common stock that may be distributed under the 2017 Plan.
On March 10, 2017, the closing price of PMI common stock reported on the New York Stock Exchange was $110.54.

The Board recommends a vote FOR the approval of the2017 Performance Incentive Plan.
PMI 2017 Proxy Statement • 63

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APPROVAL OF THE 2017 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORSIntroduction
The annual equity awards granted to our directors (see page 28) are made pursuant to the 2008 Stock Compensation Plan for Non-Employee
Directors (the “Current Plan”), which was approved by Altria as our sole shareholder prior to the spin-off of PMI from Altria Group, Inc. on March
28, 2008. Under the terms of the Current Plan, no awards can be made after the awards made immediately following the 2017 Annual Meeting.
Consequently, on March 9, 2017, the Board adopted the 2017 Stock Compensation Plan for Non-Employee Directors (the “New Plan”), subject
to approval of the Company’s shareholders. The full text of the 2017 Non-Employee Director Plan is attached to this Proxy Statement as Exhibit
C.
The New Plan is intended to be the successor to the Current Plan. No awards can be made under the New Plan unless it is approved byshareholders.
The purposes of the New Plan are (i) to assist the Company in promoting the alignment of interest between the Company’s Non-Employee
Directors and the Company’s shareholders and (ii) to assist the Company in attracting and retaining Non-Employee Directors by affording theman opportunity to share in the future success of the Company.
Summary of the New Plan
The following general description of material features of the New Plan is qualified in its entirety by reference to the provisions of the New Plan
set forth in Exhibit C.
Who may receive awards under the New Plan?
Only members of the Board who are not full-time employees of the Company or its subsidiaries will be granted awards under the New Plan. At
his request, Dr. Paulsen does not participate in the Current Plan and will not participate in the New Plan. At present, eleven Non-Employee
Directors will be granted awards under the New Plan if it is approved by shareholders.
How many shares will be reserved for awards?
One million shares of common stock (approximately 0.06% of the shares outstanding as of March 10, 2017) will be reserved and available forawards under the New Plan. No shares will remain available for new awards under the Current Plan after the awards made immediately
following the 2017 Annual Meeting.
What will Non-Employee Directors receive?
Under the New Plan, on the first day of each Plan Year each eligible Non-Employee Director serving as such immediately after each Annual
Meeting of Shareholders will receive an award of shares of common stock of the Company having a fair market value as follows:(i)eligible Non-Employee Directors other than the Chairman: equal to $175,000; and(ii)

Chairman: equal to $1,250,000;

or such other amount as determined by the Nominating and Corporate Governance Committee (the “Committee”). A Plan Year is the period
commencing at the opening of business on the day on which the Company’s Annual Meeting of Shareholders is held and ending on the day
immediately preceding the day on which the next Annual Meeting is held.
Non-Employee Directors who join the Board on a day other than the first day of a Plan Year are eligible for an award that is typically prorated toreflect the number of Board meetings remaining to be held during that Plan Year.
Does the New Plan authorize stock options and other stock-based awards?
No. Unlike the Current Plan, the New Plan does not authorize stock options or other stock-based awards, reflecting the fact that no suchawards were utilized under the Current Plan.
Will Non-Employee Directors be permitted to defer shares?
A participant may defer the receipt of shares of common stock under the New Plan, as is the case under the Current Plan. Non-Employee
Directors may elect to defer the receipt of the shares of common stock awarded by timely filing an election to establish a notional deferredstock account in compliance with applicable tax rules and procedures established by the Committee. Each share of deferred common stock
credited to such an account represents an unfunded obligation of the Company to issue a share of common stock on a future payment date.
The shares of deferred stock will earn dividend equivalents in the same amounts as cash dividends paid on shares of common stock, andthese amounts will be invested in additional shares of deferred stock.
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APPROVAL OF THE 2017 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
Who administers the New Plan?
The Nominating and Corporate Governance Committee (or a subcommittee thereof) will administer the New Plan. The New Plan authorizes theCommittee to delegate such administrative functions as it deems appropriate.
U.S. Federal Income Tax Consequences
Awards of common stock are taxable to the Non-Employee Director in the year awarded unless he or she has timely filed an election to defer
receipt of the shares, in which case taxation occurs in the year received. The Company will generally be entitled to deduct a corresponding
amount as a business expense in the year the Non-Employee Director recognizes this income.
State tax consequences may in some cases differ from those described above. Awards under the New Plan may in some instances be made to
Directors who are subject to tax in jurisdictions other than the United States and may result in tax consequences differing from those describedabove.
Other Information
If approved by shareholders, the New Plan will be effective on the day following the 2017 Annual Meeting and will expire after the awards madeimmediately following the 2027 Annual Meeting of Shareholders.
The Board may amend or terminate the New Plan, provided that no amendment will be made without shareholder approval if required underapplicable law, regulation or stock exchange rule. Amendments may not increase the number of shares of Company common stock available
under the New Plan.
The following table sets forth benefits to be received by Non-Employee Directors on an annual basis starting in 2018:
New Plan Benefits
Value
($)

Each Eligible Non-Employee Director, other than the Chairman

Number of Sharesof Common Stock (2)175,000

1,584

Chairman

1,250,000

11,309Eligible Non-Employee Directors as a group (11 in total) (1)3,000,000

27,149(1) Assumes no change in the number of Non-Employee Directors and that each Non-Employee Director remains in office.
(2) The number of shares of common stock shown is based on the closing price of the Company’s common stock on March 10, 2017, which was $110.54 per share.

The table above reflects benefits expected to be received by Non-Employee Directors in 2018; however, for 2018 and future years, the fairmarket value of Non-Employee Directors’ awards may exceed these amounts, as determined by the Nominating and Corporate GovernanceCommittee or the Board.

The Board recommends a vote FOR the approval of the2017 Stock Compensation Plan for Non-Employee Directors.
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AUDIT COMMITTEE MATTERS
Audit Committee Report for the Year Ended
December 31, 2016
To Our Shareholders:Management has the primary responsibility for the financial
statements and the reporting process, including the systems ofinternal accounting control. The Audit Committee monitors theCompany’s financial reporting processes and systems of internal
accounting control, the independence and the performance of the
independent auditors, and the performance of the internal auditors.
The Audit Committee has the sole authority for appointing,compensating and overseeing the work of the independent auditors.
The Audit Committee has received representations frommanagement that the Company’s consolidated financial statements
were prepared in accordance with accounting principles generally
accepted in the United States of America, and the Audit Committee
has reviewed and discussed the consolidated financial statementswith management and the independent auditors. The Audit
Committee has discussed with the independent auditors, including inexecutive sessions without the presence of management, theindependent auditors’ evaluation of the accounting principles,
practices and judgments applied by management, the adequacy of
the Company’s financial reporting processes, controls andprocedures, and the Audit Committee has discussed any items
required to be communicated to it by the independent auditors inaccordance with regulations promulgated by the U.S. Securities andExchange Commission, the Public Company Accounting Oversight
Board and the Independence Standards Board.
The Audit Committee has received from the independent auditors
written disclosures and a letter required by applicable requirementsof the Public Company Accounting Oversight Board regarding theindependent accountant’s communications with the Audit Committee
concerning their independence and has discussed with theindependent auditors the auditors’ independence from the Company
and its management. The Audit Committee has pre-approved all
fiscal year 2016 audit and permissible non-audit services provided
by the66 • PMI 2017 Proxy Statement

independent auditors and the fees for those services. As part of thisprocess, the Audit Committee has reviewed the audit fees of the
independent auditors. It has also reviewed non-audit services andfees to assure compliance with regulations prohibiting theindependent auditors from performing specified services that might
impair their independence, as well as compliance with theCompany’s and the Audit Committee’s policies.
The Audit Committee discussed with the Company’s internal
auditors and independent auditors the overall scope of and plans fortheir respective audits. The Audit Committee has met with theinternal auditors and the independent auditors, separately andtogether, with and without management present, to discuss theCompany’s financial reporting processes and internal control overfinancial reporting and overall control environment. The Audit
Committee has reviewed significant audit findings prepared by the
independent auditors and those prepared by the internal auditors,
together with management’s responses.
In reliance on the reviews and discussions referred to above, theAudit Committee recommended to the Board of Directors theinclusion of the audited consolidated financial statements in the
Company’s Annual Report on Form 10-K for the year ended
December 31, 2016.
Audit Committee:
Jennifer Li, Chair
Werner Geissler
Jun Makihara
Lucio A. Noto
Stephen M. Wolf
The information contained in the report above shall not be deemed
to be “soliciting material” or to be “filed” with the Securities andExchange Commission or subject to Regulation 14A or 14C or theliabilities of Section 18 of the Securities Exchange Act of 1934, as
amended, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended,or the Securities Exchange Act of 1934, as amended, except to theextent specifically incorporated by reference therein.

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AUDIT COMMITTEE MATTERS
Independent Auditors’ Fees
Aggregate fees, including out-of-pocket expenses, paid to our independent auditors, PricewaterhouseCoopers SA, consisted of the following (inmillions):
Audit Fees (1)Audit-Related Fees (2)Tax Fees (3)All Other Fees (4)
TOTAL

2016

2015

$ 20.02
0.70
4.76
0.94
$ 26.42$ 21.31
0.80
4.74
1.46
$ 28.31(1) Fees and expenses associated with professional services in connection with (i) the audit of the Company’s consolidated financial statements and internal control over financial

reporting, including statutory audits of the financial statements of the Company’s affiliates; (ii) reviews of the Company’s unaudited condensed consolidated interim financial
statements; and (iii) reviews of documents filed with the Securities and Exchange Commission.
(2) Fees and expenses for professional services for audit-related services, which include due diligence related to acquisitions and divestitures, employee benefit plan audits,accounting consultations and procedures relating to various other audit and special reports.
(3) Fees and expenses for professional services in connection with U.S. and foreign tax compliance assistance, consultation and advice on various foreign tax matters, transfer
pricing documentation for compliance purposes and advice relating to customs and duties compliance matters.
(4) Fees and expenses for professional services relating to market analysis and other professional services.

Pre-Approval Policy
The Audit Committee’s policy is to pre-approve all audit andpermissible non-audit services provided by the independent
auditors. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is detailed as
to the particular service or category of service and is subject to a
specific budget. The Audit Committee requires the independent
auditors and management to report on the actual fees charged foreach category of service at Audit Committee meetings throughout
the year.

During the year, circumstances may arise when it may become
necessary to engage the independent auditors for additional
services not contemplated in the original pre-approval. In thoseinstances, the Audit Committee requires specific pre-approval before
engaging the independent auditors. The Audit Committee hasdelegated pre-approval authority to the Chair of the Audit Committee
for those instances when pre-approval is needed prior to ascheduled Audit Committee meeting. The Chair of the Audit
Committee must report on such approvals at the next scheduled
Audit Committee meeting.
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RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORSThe Audit Committee has selected PricewaterhouseCoopers SA(“PwC”) as the Company’s independent auditors for the fiscal year
ending December 31, 2017, and has directed that management
submit the selection of independent auditors to shareholders for
ratification at the Annual Meeting. Representatives ofPricewaterhouseCoopers SA are expected to be present at themeeting, will have an opportunity to make a statement if they sodesire and will be available to respond to appropriate questions.
In determining to reappoint PwC, the Audit Committee considered anumber of factors, including the following:▪

PwC has served as the Company’s independent auditors during
the nine fiscal years completed following our becoming an
independent company;▪

The results of the Audit Committee’s evaluation of PwC’s
qualifications, performance, independence and quality control
procedures;▪

The Audit Committee’s belief that PwC’s deep knowledge of theCompany and the Company’s information technology andsystems platforms better equips it to focus the audit work where
it is most needed, enhances the quality of risk-based reviews,
and enables it to design and implement a superior audit planand to effectively test for control weaknesses;▪

The Audit Committee’s belief that PwC has the capability andexpertise and professionals in the many countries that arenecessary to conduct a quality audit of our worldwide business;▪

The Audit Committee reviews and evaluates the lead partnerand senior auditors on the account and selects the incoming
lead partner when the outgoing lead partner rotates off theaccount;▪

External data relating to audit quality and performance, including
the Public Company Accounting Oversight Board’s reports on
PwC and its peer firms; and▪

The appropriateness of PwC’s fees.

Shareholder ratification of the selection of PwC as the Company’s
independent auditors is not required by the Company’s by-laws orotherwise. However, we are submitting the selection of PwC to theshareholders for ratification as a matter of good corporate practice. If
the shareholders fail to ratify the selection, the Audit Committee willreconsider whether or not to retain PwC. Even if the selection is
ratified, the Audit Committee in its discretion may direct theappointment of a different independent audit firm at any time during
the year if it is determined that such a change would be in the bestinterests of the Company and its shareholders.

The Board recommends a vote FOR the ratification of the selection ofPricewaterhouseCoopers SA as the Company’s independent auditors.
68 • PMI 2017 Proxy Statement

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SHAREHOLDER PROPOSALSPROPOSAL 1 — HUMAN RIGHTS POLICY
Reverend Michael H. Crosby, Corporate Responsibility Agent, on
behalf of the Province of St. Joseph of the Capuchin Order, claiming
beneficial ownership of at least $2,000 worth of shares, submitted
the proposal set forth below. The address and shareholdings of the
proponent will be furnished upon request made to the Corporate
Secretary. The Company is not responsible for the content of theshareholder proposal, which is printed below exactly as it was
submitted.
WHEREAS: In 2011 the United Nations released: “Guiding
Principles on Business and Human Rights.” Among peoples’ basic
rights are the right to life and liberty, education and welfare, including
the right to health. In an effort to abide by these Principles, PMI
became a member of the UN’s Global Compact on Human Rights on
June 19, 2015.
Later, The New York Times featured extended articles outlining how
PMI, through its involvement in the United States Chamber ofCommerce, has undermined nations’ efforts to protect their citizens
from smoking-related harm and deaths (“U.S. Chamber ofCommerce Works Globally to Fight Antismoking Measures,”
June 30, 2015; “U.S. Chamber Fights Smoking Laws While
Hospitals and Insurers Sit on Its Board,” July 1, 2015; “Big Tobacco’s
Staunch Friend in Washington: U.S. Chamber of Commerce,“October 9, 2015).
The Times noted this effort involves “a three-pronged strategy in the
Chamber’s global campaign to advance the interests of the tobacco
industry” in face of countries’ efforts to curb the use of tobacco: 1)“the Chamber lobbies alongside its foreign affiliates to beat backantismoking laws;” 2) “in trade forums, the Chamber pits countries
against each other and 3) in the widely-reported efforts of the
Chamber to “defend the ability of the tobacco industry to sue under
future international treaties, notably the Trans-Pacific Partnership”(TPP).
A February 25, 2015 Washington Post piece reported that a sectionof the then-proposed TPP’s “Investor-State Dispute Settlement”(ISDS) was used by Philip Morris “to stop Uruguay from
implementing new tobacco regulations intended to cut smoking
rates.” However, when this issue was taken to the World Bank’s
International Center for Settlement of Investment Dispute, it decided
in favor of Uruguay’s right to regulate tobacco packaging for the
public health and has ordered PMI to pay $7 million to cover feesand expenses(https://business-humanrights.org/en/intl-tribunal-rules-uruguay-hasright-to-protect-public-health-through-tobacco-regulation-in-casebrought-by-philip-morris).
Commenting on “Big Tobacco’s controversial, ailing crusade” suchas the above, The Economist noted (August 6, 2016) that such“avenues may be closing” due to recent rulings by the World Bankand the European Court of Justice that make it “likely that moregovernments will in future prioritize public health over IP.”PMI has a right to protect and ensure its intellectual property rights(IP). However, the proponents of this resolution believe any related
rights are secondary to human rights, especially peoples’ right tohealth and governments’ rights to ensure their citizens’ health,especially when the degree and expanse of this global
corporate/industry effort to undermine such governments’ efforts is
not publicly known.
RESOLVED: that PMI’s independent directors create a Review
Committee to review, adapt, and monitor the Company’s humanrights policy to ensure that its global and national lobbying andmarketing practices, as well as those of industry bodies to which it
belongs, are not undermining efforts of sovereign countries toprotect their citizen’s health. This Review Committee shall report its
findings annually in conjunction with PMI’s annual meeting.
The Board recommends a vote AGAINST this proposal.
In the past year, we at Philip Morris International took several boldsteps reflecting our firm commitment to human rights, including theright to health. Among these steps, we issued our first
Communication on Progress to the United Nations Global Compact,in which we reported on PMI’s progress in making the Global
Compact’s Ten Principles part of our strategy to assure sustainability
throughout our business and to reflect our commitment in our culture
and day-to-day operations. Our report acknowledged that cigarettes
pose serious health risks and that tobacco companies have a
special obligation to develop and market their products responsibly(see www.pmi.com/sustainability).
We established implementation and oversight mechanisms for oursustainability efforts that exceeded the scope of the review
committee requested by the shareholder proposal. We followed theguidance of the U.N. Guiding Principles on Business and Human
Rights, and established a cross-functional Human Rights Core Teamof specialists from our various business functions.

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SHAREHOLDER PROPOSALSThis team leads our efforts to assess human rights risks across ourglobal operations and supply chain, to develop and monitor
comprehensive and effective measures to address those risks, tocommunicate our human rights commitment both internally and to
our business partners, and to report publicly, at least annually, themeasures we have taken with respect to human rights.
The Human Rights Core Team is supported by the functional leaders
who report to our CEO and is coordinated by a Sustainability Team
reporting to our Senior Vice President of Corporate Affairs. The
Product Innovation and Regulatory Affairs Committee of PMI’s Boardof Directors provides oversight of our activities in this area and both
the Committee and the full Board receive frequent updates on these
activities. We are developing metrics to quantify and to measure ourprogress in advancing the Global Compact’s Ten Principles
throughout our global operations and supply chain. We will report
our progress publicly.
We worked with the Danish Institute on Human Rights, a leading
global institution on human rights, to support the development of ourplans, including risk assessment and gap analysis of policies andpractices. We worked with the proponents of this shareholder
resolution to understand and to reflect their perspective on thiscritical issue. Consistent with our ongoing efforts to assuretransparency, we will include details of our implementation plan inthis year’s Communication on Progress to the Global Compact.
The Company’s key strategic priority is to develop andcommercialize smoke-free products that are a much better choicethan cigarette smoking and to lead a full-scale effort to ensure thatsmoke-free products replace cigarettes to the benefit of adultsmokers, society, our Company and its shareholders. Since 2008,
we have invested more than $3 billion and substantial effort toachieve this objective, building state-of-the-art R&D facilities in
Switzerland and Singapore, hiring more than 400 scientists andengineers, publishing over 160 papers in peer-reviewed scientificjournals dedicated to health, obtaining more than 1,500 patents
related to RRPs, and building a new facility dedicated to
manufacturing RRPs.
Our greatest hope as a company is to revolutionize the industry byintroducing smoke-free products that replace cigarette smoking. This
goal is aligned with the expectations of smokers, society and ourshareholders, and we are fully committed to turning it into reality.
At year-end 2016, we were commercializing IQOS in key cities intwenty markets, and we are targeting launches in

70 • PMI 2017 Proxy Statement

key cities in an additional ten to fifteen markets in 2017, subject tocapacity. We estimate that approximately 1.4 million adultconsumers, many of whom had smoked our own cigarette brands,
have already fully converted from smoking to using IQOS.
RRPs contain nicotine and are not risk-free. We therefore supportscience-based regulation and taxation of RRPs. Regulation andtaxation should differentiate between cigarettes and products that
present, are likely to present, or have the potential to present lessrisk of harm to adult smokers who switch to these products versus
continued smoking. Regulation should provide minimum standards
for RRPs and specific rules for, among other things, ingredients,
labeling and consumer communication, and should ensure that the
public is informed about the health risks of all tobacco and nicotinecontaining products. Regulation, as well as tobacco industry
activities, should reflect the fact that youth should not consume
nicotine in any form.
With respect to regulation of cigarettes, we support many measures,
including those that strictly prohibit the sale of tobacco products tominors, limit public smoking, require health warnings on tobacco
packaging, and regulate product content to prevent increased
adverse health effects of smoking. We do oppose measures such asplain packaging or bans on all forms of communication to adultsmokers that are not based on sound evidence of a public healthbenefit, or are likely to lead to adverse consequences, such as illicit
trade. We do not believe that seeking a fair hearing on suchmeasures in limited and appropriate circumstances undermines
effective governmental efforts to protect public health. Nevertheless,in a sign of our overarching focus on developing andcommercializing scientifically substantiated RRPs, an approach that
we believe will ultimately improve public health much more thanextreme cigarette regulation, we chose not to participate in theindustry’s appeal of the court decision that upheld plain packaging
regulation in the United Kingdom.
We will continue our efforts to lead the transformation of our industry.
Our CEO has offered to meet with the proponents of this resolution
to discuss our key strategic priority, and how our ongoing work fully
addresses both the human rights and the public health interests
supported by the resolution.
For the reasons discussed above, we believe that this proposal,
while well-intentioned, is neither necessary nor in the interest ofshareholders.
Therefore, the Board recommends a vote AGAINST the
proposal.

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SHAREHOLDER PROPOSALSPROPOSAL 2—MEDIATION OF ALLEGED HUMAN RIGHTSVIOLATIONSHeather Slavkin Corzo, Director, Office of Investment of theAmerican Federation of Labor and Congress of Industrial
Organizations, on behalf of the AFL-CIO Reserve Fund, claiming
beneficial ownership of at least $2,000 worth of shares, submitted
the proposal set forth below. The address and shareholdings of the
proponent will be furnished upon request made to the Corporate
Secretary. The Company is not responsible for the content of theshareholder proposal, which is printed below exactly as it was
submitted.
RESOLVED, shareholders of Philip Morris International, Inc. (the“Company”) urge the Company to participate in mediation of any
specific instances of alleged human rights violations involving theCompany’s operations if mediation is offered by a governmental
National Contact Point for the Organisation for Economic
Cooperation and Development (the “OECD”) Guidelines forMultinational Enterprises.
For the purposes of this policy, the human rights subject tomediation shall include, at a minimum, those expressed in theInternational Labor Organization’s Declaration on Fundamental
Principles and Rights at Work:(a) freedom of association and the effective recognition of theright to collective bargaining;(b) the elimination of all forms of forced or compulsory labor;(c) the effective abolition of child labor; and(d) the elimination of discrimination in respect of employment
and occupation.
Supporting Statement
The United Nation’s Guiding Principles on Business and Human
Rights call on business enterprises to have in place the following
policies and processes:a.

A policy commitment to meet their responsibility to respecthuman rights;b.

A human rights due diligence process to identify, prevent,mitigate and account for how they address their impacts onhuman rights;c.

Processes to enable the remediation of any adverse
human rights impacts they cause or to which they
contribute.

(Guiding Principles on Business and Human Rights, United Nations,2011,
availableat
http://www.ohchr.org/Documents/Publications/Guiding
PrinciplesBusinessHR_EN.pdf). While our Company has taken steps
to commit to respect human rights and to conduct due diligence, we
believe the Company needs to provide adequate remedies forhuman rights violations involving the Company’s operations
including its tobacco supply chain.
Non-judicial grievance mechanisms to remedy human rights
violations are needed the most when formal legal mechanisms are
inadequate. For example, in the United States, agricultural workers
are excluded from the National Labor Relations Act that protects therights of workers to organize and collectively bargain. Agricultural
child labor is also permitted in the United States under the Fair
Labor Standards Act. (Teens of the Tobacco Fields: Child Labor in
United States Tobacco Farming, Human Rights Watch, December 9,2015, available at https://www.hrw.org/report/2015/12/09/teenstobacco-fields/child-labor-united-states-tobacco-farming).
This proposal urges our Company to participate in mediation ofalleged human rights violations if mediation is offered by agovernmental National Contact Point pursuant to the OECD
Guidelines for Multinational Enterprises. (OECD, 2011, available at
http://www.oecd.org/daf/inv/mne/48004323.pdf). In the UnitedStates, the State Department’s Office of the U.S. National Contact
Point provides mediation of specific instances of human rights
violations through the U.S. Federal Mediation and Conciliation
Service. (“Specific Instance Process,” Office of the U.S. National
Contact Point, U.S. Department of State, available at
http://www.state.gov/e/eb/oecd/usncp/specificinstance/index.htm).
Participation in the National Contact Point mediation process isvoluntary and does not mean that the Company will be bound by theoutcome of mediation. By agreeing to participate in National Contact
Point mediation, our Company can affirmatively signal its
commitment to remedy human rights violations should they arise in
the future.

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SHAREHOLDER PROPOSALSThe Board recommends a vote AGAINST this proposal.
As the proposal itself acknowledges, PMI is committed to respecting
human rights. In our 2016 Communication on Progress to the United
Nations Global Compact we have described in detail our labor andhuman rights policy framework, due diligence and remediation
processes (see www.pmi.com/sustainability). Further, we havecommitted to the systematic, rights-based approach embodied in the
U.N. Guiding Principles on Business and Human Rights and havetaken several steps to reflect this commitment. We established across-functional Human Rights Core Team of specialists from ourvarious business functions. This team leads our efforts to assess
human rights risks across our global operations and supply chain, todevelop and monitor comprehensive and effective measures toaddress those risks, to communicate our human rights commitment
both internally and to our business partners, and to publicly report, atleast annually, the measures we have taken with respect to humanrights.
We worked with the Danish Institute on Human Rights, a leading
global institution on human rights, to support the development of ourplans, including risk assessment and gap analysis of policies andpractices. Consistent with our ongoing efforts to assuretransparency, we will include details of our implementation plan inthis year’s Communication on Progress to the Global Compact.
This proposal focuses on potential violations of the rights offarmworkers who are not employed by the Company or its suppliers.
In this regard, it is important to recognize that since 2011 we have
implemented a comprehensive Agricultural Labor Practices (ALP)
program throughout our tobacco-growing supply chain that includes
policy, due diligence and remediation processes consistent with the
expectations set by the U.N.’s Guiding Principles. Our policy
standards are based on the ILO Declaration on Fundamental
Principles and Rights at Work, and the implementation of the ALP
program is mandatory for all our suppliers. We have trained morethan 3,500 field staff who have reached approximately 450,000
contracted farms in more than 30 countries to support farmer’s
adoption of good practices, monitor progress and enforce
compliance with our standards on a farm-by-farm basis. We have
implemented external assessments conducted by an independent
third party, and provide regular detailed updates that report thestrong progress we have been making. We believe that the global
scale, detailed scope and level of transparency of our ALP programis unprecedented within the agricultural sector. Our efforts havebeen acknowledged by a wide range of stakeholders, ranging fromthe U.S. Department of Labor, to labor unions, and Human Rights
Watch.
72 • PMI 2017 Proxy Statement

Specifically with regards to farm workers’ access to remedies, PMI’s
affiliates and suppliers continue to work, either through independent
third-parties or multi-stakeholder initiatives, to ensure worker accessto a fair, transparent, and anonymous grievance mechanism. Locallytailored mechanisms are being implemented or supported in 14
countries, involving non-governmental organizations, government
bodies, labor unions, farmer associations, local authorities, andother community members. In the United States, we took aleadership role in the creation of a multi-stakeholder initiative toaddress labor and human rights within the tobacco-growing supply
chain, which includes workers’ representatives, tobacco farmer
associations,manufacturers,
leaf-buying
companies,
nongovernmental organizations and the U.S. Department of Labor.
We have worked to establish an industry-wide grievancemechanism, and we continue to engage collaboratively andtransparently with all stakeholders, including directly with the Farm
Labor Organizing Committee, to verify alleged human rights
violations and to implement remedial steps.
We take the concerns raised by labor unions very seriously andhave followed up on the concrete cases raised during our 2016
Annual Meeting of Shareholders. Further, we have consistently
investigated and taken appropriate action every time that a concrete
allegation of a violation of our ALP Code has been brought to ourattention by the Farm Labor Organizing Committee.
We recognize the importance of both judicial and non-judicial
grievance mechanisms in mediating and resolving human rights
disputes, including those offered by the United States National
Contact Point for the OECD Guidelines for Multinational Enterprises
in its Specific Instance process. The proposal urges the Company tocommit in advance to non-binding mediation of any allegations ofhuman rights abuse. We do not share the AFL-CIO’s view thatcommitting to non-binding mediation would meaningfully contributeto our present efforts.
In light of these significant commitments, efforts and results, we
believe this proposal is unnecessary and contrary to shareholderinterests.
Therefore, the Board recommends a vote AGAINST the
proposal.

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RELATED PERSON TRANSACTIONS AND CODE OF CONDUCTThe Board has adopted a policy, which is available on the
Company’s website at www.pmi.com/governance, that requires our
executive officers, directors and nominees for director to promptly
notify the Corporate Secretary in writing of any transaction in which(i) the amount exceeds $120,000; (ii) the Company is, was or is
proposed to be a participant; and (iii) such person or such person’s
immediate family members (“Related Persons”) has, had or may
have a direct or indirect material interest (a “Related Person
Transaction”). The Corporate Secretary, in consultation with outside
counsel, to the extent appropriate, shall determine whether apotential transaction with a Related Person constitutes a Related
Person Transaction requiring review under the policy (including
whether the Company or the Related Person has a material interest,
based on a review of all facts and circumstances). If the Corporate
Secretary determines that the proposed transaction constitutes a
Related Person Transaction or it would be beneficial to further
review the transaction, then, in either case, the transaction will bereferred to the Chief Executive Officer or the Nominating andCorporate Governance Committee of the Board. In deciding whether
to approve or ratify the Related Person Transaction, the reviewer isrequired to consider all relevant facts and circumstances. Based on
the review of such facts and circumstances, the reviewer willapprove, ratify or disapprove the Related Person Transaction. The
reviewer will approve or ratify a Related Person Transaction only if it
is determined that the transaction is not opposed to the bestinterests of the Company. All determinations by the CEO andCorporate Secretary must be reported to the Committee at its next
meeting.

Immediate family members of Messrs. Antonio Marques, theCompany’s Senior Vice President, Operations, and Patrick Brunel,
Senior Vice President and Chief Information Officer, are employedby the Company’s subsidiary in Switzerland in non-executive
capacities. Their compensation in 2016 amounted to approximately$133,000 and $565,000, respectively, and was consistent with theCompany’scompensation
programs.
These
employment
relationships were reviewed and approved in accordance with thepolicy.
In addition to this policy, the Code of Business Conduct and Ethics
for Directors (the “Director Code”), which is available on our website
at www.pmi.com/governance, has specific provisions addressing
actual and potential conflicts of interest. The Director Code specifies:“Our directors have an obligation to act in the best interest of theCompany. All directors should endeavor to avoid situations that
present a potential or actual conflict between their interest and theinterest of the Company.” The Director Code defines conflict ofinterest to include any instance in which (i) a person’s privateinterest interferes in any way, or even appears to interfere, with theinterest of the Company, including its subsidiaries and affiliates; (ii) a
director or a director’s family member takes an action or has aninterest that may make it difficult for that director to perform his or
her work objectively and effectively; and (iii) a director (or his or her
family member) receives improper personal benefits as a result of
the director’s position in the Company.
Similarly, our policies require all officers and employees of theCompany to avoid situations where the officer’s or employee’s
personal, financial or political activities have the potential ofinterfering with his or her loyalty and objectivity to the Company.
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AVAILABILITY OF REPORTS, OTHER MATTERS AND 2018 ANNUAL MEETINGAVAILABILITY OF FORM 10-K AND ANNUAL REPORT TO
SHAREHOLDERS
We are required to provide an Annual Report to shareholders who
receive this proxy statement. We will also provide copies of theAnnual Report to brokers, dealers, banks, voting trustees and theirnominees for the benefit of their beneficial owners of record.
Additional copies of the Annual Report, along with copies of our
Annual Report on Form 10-K for the fiscal year ended December 31,
2016, are available without charge to shareholders upon written
request to the Company’s Corporate Secretary at 120 Park Avenue,
New York, New York 10017-5579. You may review the Company’s
filings with the U.S. Securities and Exchange Commission by visiting
our website at www.pmi.com/investors. The information on our
website is not, and shall not be deemed to be, a part of this report orincorporated into any other filings we make with the SEC.
OTHER MATTERSManagement knows of no other business that will be presented tothe meeting for a vote. If other matters properly come before themeeting, the persons named as proxies will vote on them inaccordance with their best judgment.
The cost of this solicitation of proxies will be paid by us. In addition
to the use of the mail, some of the officers and regular employees of
the Company may solicit proxies by telephone and will request
brokerage houses, banks and other custodians, nominees andfiduciaries to forward soliciting material to the beneficial owners ofcommon stock held of record by such persons. We will reimburse
such persons for expenses incurred in forwarding such soliciting
material. It is contemplated that additional solicitation of proxies will
be made in the same manner under the engagement and directionof D.F. King & Co., Inc., 48 Wall Street, New York, NY 10005, at an
anticipated cost of $24,000, plus reimbursement of out-of-pocket
expenses.

74 • PMI 2017 Proxy Statement

2018 ANNUAL MEETING
Shareholders wishing to suggest candidates to the Nominating andCorporate Governance Committee for consideration as directors
must submit a written notice to the Corporate Secretary of theCompany. Our by-laws set forth the procedures a shareholder must
follow to nominate directors or to bring other business before
shareholder meetings. For a shareholder to nominate a candidatefor director at the 2018 Annual Meeting, presently anticipated to beheld on May 9, 2018, notice of the nomination must be received by
the Company between October 24 and November 23, 2017. The
notice must describe various matters regarding the nominee,
including name, address, occupation and shares held. The
Nominating and Corporate Governance Committee will consider any
nominee properly presented by a shareholder and will make a
recommendation to the Board. After full consideration by the Board,
the shareholder presenting the nomination will be notified of theBoard’s conclusion. For a shareholder to bring other matters before
the 2018 Annual Meeting and to include a matter in the Company’s
proxy statement and proxy for that meeting, notice must be received
by the Company between October 24 and November 23, 2017. The
notice must include a description of the proposed business, thereasons therefor and other specified matters. In each case, thenotice must be timely given to the Corporate Secretary of theCompany, whose address is 120 Park Avenue, New York, New York
10017-5579. Any shareholder desiring a copy of the Company’s bylaws (which are posted on our website at www.pmi.com/governance)
will be furnished one without charge upon written request to the
Corporate Secretary.

Jerry Whitson
Deputy General Counsel and Corporate Secretary
March 23, 2017

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EXHIBIT A: QUESTIONS & ANSWERS
1.

WHAT IS A PROXY?

It is your legal designation of another person to vote the stock you own. That other person is called a proxy. If you designate someone as yourproxy in a written document, that document also is called a proxy or a proxy card. André Calantzopoulos, Louis C. Camilleri and Jerry Whitson
have each been designated as proxies for the 2017 Annual Meeting of Shareholders.
2.

WHAT IS THE RECORD DATE AND WHAT DOES IT MEAN?

The Record Date for the 2017 Annual Meeting of Shareholders is March 10, 2017. The Record Date is established by the Board of Directors as
required by Virginia law. Shareholders of record (registered shareholders and street name holders) at the close of business on the Record Dateare entitled to:3.

a)receive notice of the meeting; andb)vote at the meeting and any adjournments or postponements of the meeting.

WHAT IS THE DIFFERENCE BETWEEN A REGISTERED SHAREHOLDER AND A SHAREHOLDER WHO HOLDS STOCK IN STREETNAME?

If your shares of stock are registered in your name on the books and records of our transfer agent, you are a registered shareholder.
If your shares of stock are held for you in the name of a broker or bank, then your shares are held in street name. The organization holding
your shares of stock is considered the shareholder of record for purposes of voting at the Annual Meeting. The answer to Question 18
describes brokers’ discretionary voting authority and when your broker or bank is permitted to vote your shares of stock without instruction fromyou.
4.

HOW DO I OBTAIN ADMISSION TO THE MEETING?

To obtain admission to the meeting, you must have an admission ticket. Because seating is limited, you may bring only one immediate family
member as a guest. In addition, all meeting attendees must present government-issued photographic identification at the meeting. Pleasesubmit your request for an admission ticket by Friday, April 14, 2017, by sending an e-mail to asmticket@pmi.com or by mailing or faxing arequest to the Company’s Corporate Secretary at 120 Park Avenue, New York, New York 10017-5579; facsimile: 1-877-744-5412 (from within
the United States) or 1-212-687-3188 (from outside the United States). Please include the following information with your ticket request:

5.

a)your name and mailing address;b)whether you need special assistance at the meeting;c)the name of your immediate family member, if one will accompany you; andd)if your shares are held for you in the name of your broker or bank, evidence of your stock ownership (such as a letter from yourbroker or bank or a photocopy of a current brokerage or other account statement) as of March 10, 2017.

WHAT ARE THE DIFFERENT METHODS THAT I CAN USE TO VOTE MY SHARES OF COMMON STOCK?
a)

In Writing: All shareholders of record can vote by mailing their completed and signed proxy card (in the case of registeredshareholders) or their completed and signed voting instruction form (in the case of street name holders).
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EXHIBIT A: QUESTIONS & ANSWERS

6.

b)

By Telephone and Internet Proxy: All shareholders of record also can vote their shares of common stock by touch-tone telephoneusing the telephone number on the proxy card, or by Internet, using the procedures and instructions described on the proxy cardand other enclosures. Street name holders of record may vote by telephone or Internet if their brokers or banks make thosemethods available. If that is the case, each broker or bank will enclose instructions with the proxy statement. The telephone andInternet voting procedures, including the use of control numbers, are designed to authenticate shareholders’ identities, to allow
shareholders to vote their shares, and to confirm that their instructions have been properly recorded. Proxies submitted by Internetor telephone must be received by 11:59 p.m., EDT, on May 2, 2017.

c)

In Person: All shareholders may vote in person at the meeting (unless they are street name holders without a legal proxy).

HOW CAN I REVOKE A PROXY?

You can revoke a proxy prior to the completion of voting at the meeting by:

7.

a)giving written notice to the Corporate Secretary of the Company;b)delivering a later-dated proxy; orc)voting in person at the meeting.

ARE VOTES CONFIDENTIAL? WHO COUNTS THE VOTES?

We have established and will maintain a practice of holding the votes of individual shareholders in confidence except: (a) as necessary to meet
applicable legal requirements and to assert or defend claims for or against the Company; (b) in case of a contested proxy solicitation; (c) if ashareholder makes a written comment on the proxy card or otherwise communicates his or her vote to management; or (d) to allow theindependent inspectors of election to certify the results of the vote. We will retain an independent tabulator to receive and tabulate the proxies
and independent inspectors of election to certify the results.
8.

WHAT ARE THE CHOICES WHEN VOTING ON DIRECTOR NOMINEES, AND WHAT VOTE IS NEEDED TO ELECT DIRECTORS?

Shareholders may:a)vote in favor of a nominee;b)vote against a nominee; orc)abstain from voting on a nominee.

Directors will be elected by a majority of the votes cast, which will occur if the number of votes cast “FOR” a director nominee exceeds thenumber of votes “AGAINST” that nominee. See “Election of Directors — Majority Vote Standard in Uncontested Elections” on page 18.
The Board recommends a vote “FOR” all of the nominees.
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EXHIBIT A: QUESTIONS & ANSWERS
9.

WHAT ARE THE CHOICES WHEN VOTING ON THE ADVISORY SAY-ON-PAY RESOLUTION APPROVING THE COMPENSATION OF
OUR NAMED EXECUTIVE OFFICERS?

Shareholders may:a)vote in favor of the resolution;b)vote against the resolution; orc)abstain from voting on the resolution.

The resolution will be approved if the votes cast “FOR” exceed the votes cast “AGAINST.”The Board recommends a vote “FOR” this resolution.
The advisory vote on this matter is non-binding. However, the Board of Directors and the Compensation and Leadership Development
Committee value the opinions of our shareholders and will consider the outcome of the vote when making future executive compensation
decisions.
10.

WHAT ARE THE CHOICES WHEN VOTING ON THE ADVISORY RESOLUTION REGARDING THE FREQUENCY OF FUTURE SAYON-PAY VOTES?

Shareholders may:a)vote to have future say-on-pay votes
every year,
every two years, or
every three years; orb)abstain from voting on the resolution.

The Board recommends a vote that future advisory say-on-pay votes be held EVERY YEAR.
The option that receives the highest number of votes cast will be regarded as the one selected by the shareholders. The resolution is nonbinding. However, the Board of Directors will consider the outcome of the vote when determining the frequency of future advisory say-on-pay
votes.
11.

WHAT ARE THE CHOICES WHEN VOTING ON THE PROPOSALS TO APPROVE THE PHILIP MORRIS INTERNATIONAL INC. 2017
PERFORMANCE INCENTIVE PLAN AND THE 2017 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS?

A separate vote will be held to approve each Plan. When voting on each Plan, shareholders may:a)vote in favor of the Plan;b)vote against the Plan; orc)abstain from voting on the proposal.

Each Plan will be approved by the affirmative vote of a majority of the votes cast. For this purpose, under the rules of the New York Stock
Exchange, abstentions will be counted as votes cast against the Plan.
The Board recommends a vote “FOR” each of the Plans.
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EXHIBIT A: QUESTIONS & ANSWERS
12.

WHAT ARE THE CHOICES WHEN VOTING ON THE RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS SA
AS THE COMPANY’S INDEPENDENT AUDITORS, AND WHAT VOTE IS NEEDED TO RATIFY THEIR SELECTION?

Shareholders may:a)vote in favor of the ratification;b)vote against the ratification; orc)abstain from voting on the ratification.

The selection of the independent auditors will be ratified if the votes cast “FOR” exceed the votes cast “AGAINST.”The Board recommends a vote “FOR” this proposal.
13.

WHAT ARE THE CHOICES WHEN VOTING ON EACH SHAREHOLDER PROPOSAL PROPERLY PRESENTED AT THE MEETING,
AND WHAT VOTE IS NEEDED TO APPROVE ANY OF THE SHAREHOLDER PROPOSALS?

A separate vote will be held on each shareholder proposal that is properly presented at the meeting. When voting on each of the proposals,
shareholders may:a)vote in favor of the proposal;b)vote against the proposal; orc)abstain from voting on the proposal.

A shareholder proposal will be approved if the votes cast “FOR” the proposal exceed the votes cast “AGAINST.”The Board recommends a vote “AGAINST” each of the shareholder proposals.
14.

WHAT IF A SHAREHOLDER DOES NOT SPECIFY A CHOICE FOR A MATTER WHEN RETURNING A PROXY?

Shareholders should specify their choice for each matter on the enclosed proxy. If no specific instructions are given, proxies that are signed
and returned will be voted “FOR” the election of all director nominees, “FOR” the advisory say-on-pay resolution approving the compensation of
our named executive officers, for future advisory say-on-pay votes to be held EVERY YEAR, “FOR” each of the Plans, “FOR” the proposal toratify the selection of PricewaterhouseCoopers SA as the Company’s independent auditors, and “AGAINST” each of the shareholder
proposals.
15.

WHO IS ENTITLED TO VOTE?

You may vote if you owned stock as of the close of business on March 10, 2017. Each share of common stock is entitled to one vote. As of
March 10, 2017, the Company had 1,553,138,929 shares of common stock outstanding.
16.

HOW DO I VOTE IF I PARTICIPATE IN THE DIVIDEND REINVESTMENT PLAN?

The proxy card you have received includes your dividend reinvestment plan shares. You may vote your shares through the Internet, by
telephone or by mail, all as described on the enclosed proxy card.

17.

WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?

It means that you have multiple accounts with brokers and/or our transfer agent. Please vote all of these shares. We recommend that you
contact your broker and/or our transfer agent to consolidate as many accounts as possible under the same name and address. Our transfer
agent is Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078 or you can reach Computershare at 1-877-7459350 (from within the United States or Canada) or 1-781-575-4310 (from outside the United States or Canada), or via e-mail at
pmi@computershare.com.
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EXHIBIT A: QUESTIONS & ANSWERS
18.

WILL MY SHARES BE VOTED IF I DO NOT PROVIDE MY PROXY?

If you are a street name holder of shares, you should have received a voting instruction form with the proxy statement sent from your broker orbank. Your shares held in street name may be voted only on certain “routine” matters when you do not provide your broker or bank with voting
instructions. For example, the ratification of the selection of PricewaterhouseCoopers SA as independent auditors of the Company isconsidered a “routine” matter for which brokers or banks may vote uninstructed shares. When a proposal is not a “routine” matter (such as theelection of director nominees, say-on-pay advisory votes, advisory votes on the frequency of future say-on-pay votes, approval ofcompensation plans, and shareholder proposals) and the broker or bank has not received voting instructions from the street name holder withrespect to that proposal, that broker or bank cannot vote the shares on that proposal. This is called a broker non-vote. Therefore, it is importantthat you provide instructions to your broker or bank with respect to your vote on these “non-routine” matters.
19.

ARE ABSTENTIONS AND BROKER NON-VOTES COUNTED?

Abstentions will be counted as votes “AGAINST” the 2017 Performance Incentive Plan and the 2017 Stock Compensation Plan for NonEmployee Directors. Abstentions will not be included in the vote totals for any other matter. Broker non-votes will not be included in vote totals
and will not affect the outcome of the vote.
20.

MAY SHAREHOLDERS ASK QUESTIONS AT THE MEETING?

Yes. The Chairman will answer shareholders’ questions of general interest during a designated portion of the meeting. In order to provide an
opportunity for everyone who wishes to speak, shareholders will be limited to two minutes. Shareholders may speak a second time only after allothers who wish to speak have had their turn. When speaking, shareholders must direct questions and comments to the Chairman and confine
their remarks to matters that relate directly to the business of the meeting.
21.

HOW MANY VOTES MUST BE PRESENT TO HOLD THE MEETING?

Your shares are counted as present at the meeting if you attend the meeting and vote in person or if you properly return a proxy by Internet,
telephone or mail. In order for us to conduct our meeting, a majority of our outstanding shares of common stock as of March 10, 2017, must bepresent in person or by proxy at the meeting. This is referred to as a quorum. Abstentions and shares of record held by a broker, bank or otheragent (“Broker Shares”) that are voted on any matter are included in determining the number of votes present. Broker Shares that are not voted
on any matter will not be included in determining whether a quorum is present.
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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
PHILIP MORRIS INTERNATIONAL INC. 2017 PERFORMANCE INCENTIVE PLAN
Section 1. Purpose; Definitions.
The purpose of the Plan is to support the Company’s ongoing efforts to develop and retain world-class leaders and to provide the Company
with the ability to provide incentives directly linked to the performance of the Company’s business and increases in shareholder value.
For purposes of the Plan, the following terms are defined as set forth below:(a)“Award” means the grant under the Plan of Incentive Awards (including Performance Share Units), Restricted Shares or Restricted Share
Units.

(b)“Board” means the Board of Directors of the Company.

(c)“Cause,” with respect to any Participant, means termination because of:(i)continued failure to substantially perform the Participant’s job duties (other than resulting from incapacity due to disability) after awritten demand by the Company (or any of its subsidiaries or affiliates, as the case may be) that identifies the manner in which theCompany (or any of its subsidiaries or affiliates, as the case may be) has reasonably determined that the Participant has not
performed his or her duties;(ii)

gross negligence in the performance of the Participant’s job duties, willful misconduct, or a material violation of Company policy(including the code of conduct of the Company), that the Company has reasonably determined has resulted in, or is likely to result
in, a material and demonstrable detriment to the Company’s business, operations, properties, financial condition or reputation; or(iii)

the Participant’s conviction of a felony or a plea of nolo contendere by the Participant with respect to a felony.

A termination for Cause must be communicated to the Participant by written notice that specifies the event or events claimed to provide abasis for termination for Cause.
(d)“Code” means the Internal Revenue Code of 1986, as amended from time to time, and any successor thereto.

(e)“Commission” means the Securities and Exchange Commission or any successor agency.

(f)“Committee” means the Compensation and Leadership Development Committee of the Board or a subcommittee thereof, any successor
thereto or such other committee or subcommittee as may be designated by the Board to administer the Plan.

(g)“Common Stock” or “Stock” means the common stock of the Company.

(h)“Company” means Philip Morris International Inc., a corporation organized under the laws of the Commonwealth of Virginia, or any
successor thereto.

(i)“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto.

(j)“Fair Market Value” means, as of any given date, the mean between the highest and lowest reported sales prices of the Common Stockon the New York Stock Exchange-Composite Transactions or, if no such sale of Common Stock is reported on such date, the fair market
value of the Stock as determined by the Committee in good faith.

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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
(k)

“Good Reason,” with respect to any Participant, means, unless pursuant to the Participant’s prior written consent, termination following a
Change in Control because of:(i)a material adverse change in the Participant’s job responsibilities, authority or duties with the Company (or any of its subsidiaries oraffiliates, as the case may be) as in effect immediately prior to the Change in Control (including reporting level), excluding for thispurpose an isolated, insubstantial and inadvertent action not taken in bad faith and that is remedied by the Company promptly after
receipt of written notice thereof given by the Participant to the Company;(ii)

any material reduction in the aggregate of the Participant’s base salary, benefits, cash incentive award opportunity and equity award
opportunity, as in effect immediately prior to the Change in Control, excluding for this purpose an isolated, insubstantial andinadvertent failure not occurring in bad faith and that is remedied by the Company promptly after receipt of written notice thereof
given by the Participant to the Company;(iii)

a requirement by the Company (or any of its subsidiaries or affiliates, as the case may be) for the Participant to change his or her
regular workplace that increases the Participant’s commute by more than 50 miles from the commute in effect immediately prior to
the Change in Control; or(iv)

a requirement by the Company (or any of its subsidiaries or affiliates, as the case may be) for the Participant to travel on business atleast 20 percent more than required immediately prior to the Change in Control.

A termination for Good Reason must be communicated to the Company by written notice that specifies the event or events claimed toprovide a basis for termination for Good Reason; provided that the Participant’s written notice must be tendered within ninety (90) days ofthe occurrence of such event or events and, provided further, that the Company shall have failed to remedy such act or omission within
thirty (30) days following its receipt of such notice.
(l)“Incentive Award” means an Award made pursuant to Section 5(a)(iii) and includes Performance Share Units.

(m) “Participant” means any eligible individual as set forth in Section 3 to whom an Award is granted and any authorized transferee of suchindividual.
(n)“Performance-Based Award” means any Award granted pursuant to the Plan through the application of Performance Goals andPerformance Cycles.

(o)“Performance Cycle” means the period selected by the Committee during which the performance of the Company or any subsidiary,
affiliate or unit thereof or any individual is measured for the purpose of determining the extent to which an Award subject to Performance
Goals has been earned.

(p)“Performance Goals” mean the objectives for the Company or any subsidiary or affiliate or any unit thereof or any individual that may beestablished by the Committee for a Performance Cycle with respect to any Performance-Based Awards contingently awarded under thePlan. The Performance Goals for Awards that are intended to constitute “performance-based” compensation within the meaning ofSection 162(m) (or any amended or successor provision) of the Code shall be based on one or more of the following criteria: earnings per
share; total shareholder return; net revenues, excluding excise taxes; operating income; operating companies income; net income;earnings before interest, taxes, depreciation and amortization expense; free cash flow; operating cash flow; return on equity; return on
capital; economic value added; change in the overall cost base; operating margins; product volume or market share; product innovation;
attainment of product commercialization targets; achievement of research and development milestones and other strategic initiatives;
achievement of regulatory milestones; portfolio transformation; or achievement of diversity and inclusion goals. The measures of such
criteria may be adjusted in a manner consistent with the practices of the Company in communicating results.

(q)“Performance Share Unit” has the meaning set forth in Section 5(a)(iii).
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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN(r)

“Plan” means this 2017 Performance Incentive Plan, as amended from time to time.

(s)“Restricted Period” means the period during which an Award may not be sold, assigned, transferred, pledged or otherwise encumbered.

(t)“Restricted Share” means an Award of shares of Common Stock pursuant to Section 5(a)(i).

(u)“Restricted Share Unit” means an Award described in Section 5(a)(ii).

In addition, the terms “Affiliated Group,” “Business Combination,” “Change in Control,” “Incumbent Board,” “Outstanding Company Stock,”“Outstanding Company Voting Securities” and “Person” have the meanings set forth in Section 6.
Section 2. Administration.
The Plan shall be administered by the Committee, which shall have the power to interpret the Plan and to adopt such rules and guidelines forcarrying out the Plan as it may deem appropriate. The Committee shall have the authority to adopt such modifications, procedures andsubplans as may be necessary or desirable to comply with the laws, regulations, compensation practices and tax and accounting principles of
the countries in which the Company, a subsidiary or an affiliate may operate to assure the viability of the benefits of Awards made to individuals
employed in such countries and to meet the objectives of the Plan.
Subject to the terms of the Plan, the Committee shall have the authority to determine those employees eligible to receive Awards and theamount, type and terms of each Award and to establish and administer any Performance Goals applicable to such Awards. The Committee
may delegate its authority and power under the Plan to one or more officers of the Company, subject to guidelines prescribed by theCommittee, but only with respect to Participants who are not subject to either Section 16 of the Exchange Act or Section 162(m) (or any
amended or successor provision) of the Code.
Any determination made by the Committee or by one or more officers pursuant to delegated authority in accordance with the provisions of thePlan with respect to any Award shall be made in the sole discretion of the Committee or such delegate, and all decisions made by theCommittee or any appropriately designated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including theCompany and Plan Participants.
Section 3. Eligibility.
Employees of the Company, its subsidiaries and affiliates, who are responsible for or contribute to the management, growth and profitability ofthe business of the Company, its subsidiaries or its affiliates, are eligible to be granted Awards under the Plan.
Section 4. Common Stock Subject to the Plan.
(a)Common Stock Available. The total number of shares of Common Stock reserved and available for distribution pursuant to the Plan shallbe 25,000,000. To the extent any Restricted Share or Restricted Share Unit is cashed out or terminates or expires or is forfeited without apayment being made to the Participant in the form of Common Stock, the shares subject to such Award that were not so paid, if any, shallnot again be available for distribution in connection with Awards under the Plan. Shares of Common Stock that are potentially issuablepursuant to a Performance Share Unit or other Performance-Based Award but that are not so issued due to the Participant’s terminationor to the failure to achieve Performance Goals, shall again be available for distribution in connection with Awards under the Plan. Any
shares of Common Stock that are used by a Participant as full or partial payment of withholding or other taxes shall not be available for
distribution in connection with Awards under the Plan.

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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN(b)

Adjustments for Certain Corporate Transactions. Subject to the provisions of Section 6:(i)

In the event of any merger, share exchange, reorganization, consolidation, recapitalization, reclassification, distribution (excluding
regular cash dividends), stock dividend, stock split, reverse stock split, split-up, spin-off, issuance of rights or warrants or othersimilar transaction or event affecting the Common Stock, the Committee shall make such adjustments or substitutions with respect
to the Plan and to Awards granted thereunder as it deems appropriate to reflect the occurrence of such event, including, but notlimited to, adjustments (A) to the aggregate number and kind of securities reserved for issuance under the Plan, (B) to the Awardlimits set forth in Section 5(b), (C) to the Performance Goals or Performance Cycles of any outstanding Performance-BasedAwards, and (D) to the number and kind of securities subject to outstanding Awards. In addition, the Committee may make anAward in substitution for incentive awards, stock awards, stock options or other equity-based awards held by an individual who
becomes an employee of the Company, a subsidiary or an affiliate in connection with a transaction described in this Section 4(b)(i),and, to the extent permitted by law and regulation, shares of Common Stock subject to such substituted Awards shall not reduce thenumber of shares of Common Stock reserved and available for distribution under the Plan. Notwithstanding any provision of thePlan, the terms of such substituted Awards shall be as the Committee, in its discretion, determines is appropriate.

(ii)

In connection with any of the events described in Section 4(b)(i), and consistent with Section 409A of the Code, the Committee shallalso have authority with respect to the Plan and to Awards, except as may otherwise be required under an applicable Award
agreement, to cancel or adjust the terms of an outstanding Award as appropriate to reflect the substitution for the outstanding Awardof an award of equivalent value granted by another entity. In the event of a substitution under Section 4(b)(i), references in this Planand in the applicable Award agreements thereunder to “Common Stock” or “Stock” shall be deemed (except for purposes of Section
6(b) hereunder and for any similar provisions of applicable Award agreements) to also refer to the securities of the other entity
where appropriate.

(iii)

In connection with any of the events described in Section 4(b)(i), with respect to the Plan and to Awards granted thereunder, theCommittee is also authorized to provide for the payment of any outstanding Awards in cash.

(iv)

In the event of any conflict between this Section 4(b) and other provisions of the Plan, the provisions of this section shall control.
Receipt of an Award under the Plan shall constitute an acknowledgement by the Participant receiving such Award of the ability of
the Committee to adjust any award for which an Award under the Plan is substituted.

Section 5. Awards.
(a)General. The types of Awards that may be granted under the Plan are set forth below. Awards may be granted singly, in combination or intandem with other Awards.
(i)

Restricted Shares. Restricted Shares are shares of Common Stock that are awarded to a Participant and that during the Restricted
Period may be forfeitable to the Company upon such conditions as may be set forth in the applicable Award agreement. Except asprovided in the applicable Award agreement, Restricted Shares may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Restricted Period. Except as provided in the applicable Award agreement, a Participant shall have withrespect to such Restricted Shares all the rights of a holder of Common Stock during the Restricted Period.

(ii)

Restricted Share Units. Restricted Share Units represent the right to receive shares of Common Stock, cash, or both (as determinedby the Committee) upon satisfaction of such conditions as may be set forth in the applicable Award agreement. Except as provided
in the applicable Award agreement, Restricted Share Units may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Restricted Period. Except as provided in the applicable Award agreement, a Participant shall have withrespect to such Restricted Share Units none of the rights of a holder of Common Stock unless and until shares of Common Stockare actually delivered in satisfaction of such Restricted Share Units.
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(iii)

(b)

Incentive Awards.
(1)

Incentive Awards are Performance-Based Awards that are expressed in U.S. or any other jurisdiction’s currency or Common
Stock or any combination thereof.

(2)

Incentive Awards may be in the form of Performance Share Units, which are Performance-Based Awards denominated inshares of Common Stock and based on the achievement of Performance Goals during a Performance Cycle. Except asprovided in the applicable Award agreement, Performance Share Units may not be sold, assigned, transferred, pledged orotherwise encumbered during the relevant Performance Cycle. Except as provided in the applicable Award agreement, aParticipant shall have with respect to such Performance Share Units none of the rights of a holder of Common Stock unlessand until shares of Common Stock are actually earned and delivered to the Participant. No dividend equivalents will be paidwith respect to unearned Performance Share Units; dividend equivalents may be accrued and paid at the end of a
Performance Cycle with respect to shares that are earned.

(3)

Any Award granted under the Plan may include Performance Goals and Performance Cycles.

Maximum Awards. Subject to the exercise of the Committee’s authority pursuant to Section 4:(i)

The maximum amount of each Award denominated in cash that is intended to comply with the performance-based exception under
Code Section 162(m) that can be paid to any Participant during any single calendar year shall not exceed $10,000,000 for
Performance Cycles of one year or less and shall not exceed such annual maximum multiplied by the number of years in any
Performance Cycle having a term of more than one year. Dividend equivalents paid in cash with respect to earned Performance
Share Units that are intended to comply with the performance-based exception under Code Section 162(m) shall be included in thecalculation of such limits.

(ii)

The maximum number of shares of Common Stock that may be the subject of all Awards that are intended to comply with theperformance-based exception under Code Section 162(m) awarded to any Participant during any single calendar year shall not
exceed 500,000.

(iii)

In the case of Awards under Section 5(b)(ii) that are settled in cash based on the Fair Market Value of a share of Common Stock,
the maximum aggregate amount of cash that may be paid pursuant to such Awards to any Participant in any single calendar year
shall be equal to the per share Fair Market Value as of the relevant payment or settlement date multiplied by the number of sharesof Common Stock described in Section 5(b)(ii).

(c)

Negative Discretion. Notwithstanding the achievement of any Performance Goal established under the Plan, the Committee has thediscretion to reduce, but not to increase, some or all of the pay-out pursuant to a Performance-Based Award that would otherwise be paid
to a Participant.

(d)Performance-Based Exception. With respect to any Award that is intended to satisfy the conditions for the performance-based exception
under Code Section 162(m): (i) the Committee shall interpret the Plan in light of Code Section 162(m) and the regulations thereunder; (ii)the Committee shall not amend the Award in any way that would adversely affect the treatment of the Award under Code Section 162(m)and the regulations thereunder; and (iii) such Award shall not be paid until the Committee shall first have certified in writing that the
Performance Goals have been achieved.

(e)Extraordinary Events. At, or at any time after, the time an Award is granted, and to the extent permitted under Code Section 162(m) andthe regulations thereunder without adversely affecting the treatment of the Award under such Section’s performance-based exception, theCommittee, in its sole discretion, may provide for the manner in which performance will be measured against the Performance Goals (ormay adjust the Performance Goals) to reflect the impact of specific events, including, to the extent significant, corporate transactions,accounting or tax law changes, asset write-downs, litigation or claim adjustments, foreign exchange gains and losses, unbudgeted capital
expenditures and other unusual or infrequently occurring events.

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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
Section 6. Change in Control Provisions.
(a)

(b)

Impact of Event. Unless provided otherwise by the Committee (as constituted prior to a Change in Control) in an Award agreement, or as
provided in an employment agreement or similar agreement between the Company or any subsidiary or affiliate and the Participant, in theevent of a Change in Control:(i)

If and to the extent share-based Performance-Based Awards outstanding as of the date the Change in Control is determined tohave occurred are converted into, as applicable, time-based restricted shares or restricted share units of the successor (or its parent
company), then such converted awards shall remain outstanding and shall be governed by their respective terms; provided that if,
during the 24-month period following the Change in Control date, the Participant’s employment is terminated by such successor (oran affiliate) without Cause or by the Participant for Good Reason, such awards, to the extent then outstanding, shall fully vest. With
respect to share-based Performance-Based Awards that are outstanding as of the Change in Control date and are not so converted,
such Awards shall be settled in cash as promptly as is practicable (unless otherwise required by Section 409A of the Code as set
forth in the applicable terms of the Awards). In either case, the value of any awards under this Section 6(a)(i) as of the Change inControl date shall be determined in the manner the Committee deems appropriate either (1) based on actual performance as ofsuch date if (A) more than half of the Performance Cycle has elapsed as of such date and (B) actual performance is determinable
as of such date; or (2) assuming target performance had been achieved in all other circumstances.

(ii)

If and to the extent any other Awards outstanding as of the Change in Control date is determined to have occurred are assumed by
the successor (or its parent company) or cancelled in exchange for comparable awards issued by the successor (or its parent
company), and, if, during the 24-month period following the Change in Control date, the Participant’s employment is terminated bysuch successor (or an affiliate) without Cause or by the Participant for Good Reason, such awards, to the extent then outstanding,shall become free of all restrictions and fully vest. With respect to such Awards that are outstanding as of the Change in Control
date and are not assumed, converted or substituted, any deferral or other restriction shall lapse and such Awards shall be settled in
cash as promptly as is practicable (unless otherwise required by Section 409A of the Code as set forth in the applicable terms of theAwards).

(iii)

For an Award to be validly assumed, converted or substituted by a successor for purpose of this Section 6, it must (A) provide such
Participant with rights, terms and conditions substantially equivalent or superior to the rights, terms and conditions applicable undersuch Award, including, but not limited to, identical vesting schedules; (B) have substantially equivalent value to such Award(determined at the time of the Change in Control); and (C) for share-based Awards, be based on stock that is listed and traded onan established U.S. securities market or an established securities market outside the United States upon which the Participant could
readily trade the stock without administrative burdens or complexities. The determination of whether the conditions of this Section
6(a)(iii) are satisfied shall be made by the Committee, as constituted immediately before the Change in Control, in its sole discretion.

(iv)

Notwithstanding any other provision of this Section 6 or the Plan to the contrary, any Incentive Awards, including cash-based
Performance-Based Awards, relating to Performance Cycles that have been completed prior to the Change in Control date, will bedeemed earned and become immediately payable in cash.

Definition of Change in Control. A “Change in Control” means the happening of any of the following events:(i)

Consummation of the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (a “Person”)) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (A) the then-outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (B) the
combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors(the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute a Change inControl: (1) any
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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
acquisition directly from the Company or any corporation or other entity controlled by the Company (the “Affiliated Group”), (2) any
acquisition by a member of the Affiliated Group, (3) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by a member of the Affiliated Group or (4) any acquisition by any corporation pursuant to a transaction which complies
with clauses (A), (B) and (C) of paragraph (iii) of this Section 6(b); or(ii)

Individuals who, as of the effective date of the Plan, constitute the Board (the “Incumbent Board”) cease for any reason to constituteat least a majority of the Board; provided, however, that any individual becoming a director subsequent to such effective date whose
election, or nomination for election by the shareholders of the Company, was approved by a vote of at least a majority of thedirectors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies orconsents by or on behalf of a Person other than the Board; or(iii)

Consummation of a reorganization, merger, share exchange or consolidation (a “Business Combination”), in each case, unless,following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to suchBusiness Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares ofcommon stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns such shares and voting power through one or more subsidiaries) insubstantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) of any member of the Affiliated Group or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of
the corporation resulting from such Business Combination or the combined voting power of the then-outstanding voting securities ofsuch corporation except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority ofthe members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement or at the time of the action of the Board providing for such Business
Combination or were elected, appointed or nominated by the Board; or(iv)

Consummation of a (A) complete liquidation or dissolution of the Company or (B) sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (1) more than
50% of, respectively, the then-outstanding shares of common stock of such corporation and the combined voting power of the thenoutstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or otherdisposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) less than 20% of,respectively, the then-outstanding shares of common stock of such corporation and the combined voting power of the thenoutstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by any Person (excluding any employee benefit plan (or related trust) of any member of the Affiliated Group or
such corporation), except to the extent that such Person owned 20% or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities prior to the sale or disposition and (3) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or at thetime of the action of the Board providing for such sale or other disposition of assets of the Company or were elected, appointed or
nominated by the Board.

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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
(c)

Timing of Payment. Except as provided in Section 13(i), any amount required to be paid pursuant to this Section 6 shall be paid as soon
as practicable after the date such amount becomes payable (but not later than 60 days after such date, and the Participant may notdetermine the time of payment).

Section 7. Plan Amendment and Termination.
The Board may amend or terminate the Plan at any time, provided that no such amendment shall be made without shareholder approval if suchapproval is required under applicable law, regulation, or stock exchange rule, or if such amendment would increase the total number of sharesof Common Stock that may be distributed under the Plan (other than under the provisions of Section 4(b)). Except as set forth in any Award
agreement or as necessary to comply with applicable law or avoid adverse tax consequences to some or all Participants, no amendment or
termination of the Plan may materially and adversely affect any outstanding Award under the Plan without the Award recipient’s consent.
Section 8. Payments and Payment Deferrals.
Payment of Awards may be in the form of cash, Common Stock, other Awards or combinations thereof as the Committee shall determine, andwith such restrictions as it may impose. The Committee, either at the time of grant or by subsequent amendment, may require or permit deferralof the payment of Awards, under such rules and procedures as it may establish. The Committee may also provide that deferred settlements
include the payment or crediting of interest or other earnings on the deferred amounts, or the payment or crediting of dividend equivalents
where the deferred amounts are denominated in Common Stock equivalents. Any deferral and related terms and conditions shall comply with
Section 409A of the Code and any regulations and other guidance thereunder to the extent Section 409A is applicable to the Award or thedeferral of the Award.
Section 9. Dividends and Dividend Equivalents.
Subject to the provisions of Section 5(a)(iii), the Committee may provide that any Awards under the Plan earn dividends or dividend
equivalents. Such dividends or dividend equivalents may be paid currently or may be credited to a Participant’s Plan account. Any crediting ofdividends or dividend equivalents may be subject to such restrictions and conditions as the Committee may establish, including reinvestment inadditional shares of Common Stock or Common Stock equivalents.
Section 10. Transferability.
Except as provided in the applicable Award agreement or otherwise required by law, Awards shall not be transferable or assignable other thanby will or the laws of descent and distribution.
Section 11. Award Agreements.
Each Award under the Plan shall be evidenced by a written or electronic agreement (which need not be signed by the recipient unlessotherwise specified by the Committee) that sets forth the terms, conditions and limitations for each Award. Such terms may include, but are notlimited to, the term of the Award, vesting and forfeiture provisions, and the provisions applicable in the event the Participant’s employment
terminates. The Committee may, in its discretion, amend an Award agreement or accelerate the vesting of any equity Award, provided that,except as set forth in any Award agreement or as necessary to comply with applicable law or avoid adverse tax consequences to some or all
Plan Participants, no such amendment may materially and adversely affect an Award without the Participant’s consent.
Section 12. Unfunded Status of Plan.
It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. The Committee may authorize thecreation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the“unfunded” status of the Plan.
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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
Section 13. General Provisions.
(a)

The Committee may require each person acquiring shares of Common Stock pursuant to an Award to represent to and agree with theCompany in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares may
include any legend that the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock or other securities delivered under the Plan shall be subject to such stock transfer orders andother restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Commission, any
stock exchange upon which the Common Stock is then listed, and any applicable Federal, state or foreign securities law, and theCommittee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

(b)

Nothing contained in the Plan shall prevent the Company, a subsidiary or an affiliate from adopting other or additional compensation
arrangements for their respective employees.

(c)Neither the adoption of the Plan nor the granting of Awards under the Plan shall confer upon any employee any right to continued
employment nor shall they interfere in any way with any right of the Company, a subsidiary or an affiliate in relation to the employment of
any employee at any time.

(d)

No later than the date as of which an amount first becomes includable in the gross income of the Participant for income tax purposes withrespect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company
regarding the payment of, any Federal, state, local or foreign taxes of any kind that are required by law or applicable regulation to be
withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising from an Award may
be settled with Common Stock, including Common Stock that is part of, or is received upon exercise or conversion of, the Award thatgives rise to the withholding requirement. The value of any shares of Common Stock allowed to be withheld or tendered for tax
withholding may not exceed the amount allowed consistent with fixed plan accounting in accordance with U.S. Generally Accepted
Accounting Principles, to the extent applicable, and relevant tax compliance requirements. The obligations of the Company under thePlan shall be conditional on such payment or arrangements, and the Company, its subsidiaries and its affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Committee may
establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settling of withholding obligations
with Common Stock.

(e)

The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of theCommonwealth of Virginia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction orinterpretation of the Plan to the substantive law of another jurisdiction. Unless otherwise provided in an Award, recipients of an Award
under the Plan are deemed to submit to the exclusive jurisdiction and venue of the Federal or state courts of Virginia, to resolve any andall issues that may arise out of or relate to the Plan or any related Award.

(f)

If any provision of the Plan is held invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining parts of thePlan, and the Plan shall be enforced and construed as if such provision had not been included.

(g)

All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to theCompany, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of allor substantially all of the business and/or assets of the Company.

(h)

The Plan is effective as of May 3, 2017, provided it is approved by shareholders of the Company. Except as otherwise provided by the
Board, no Awards shall be made under the Plan after May 3, 2022, provided that any Awards granted prior to that date may extend
beyond it.

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EXHIBIT B: 2017 PERFORMANCE INCENTIVE PLAN
(i)

Notwithstanding anything in this Plan to the contrary, the Plan shall be construed to reflect the intent of the Company that all Awards
under the Plan and any elections to defer, distributions, and other aspects of the Plan shall, to the extent subject to Section 409A of theCode, comply with Section 409A and any regulations and other guidance thereunder. If a payment obligation under this Plan arises on
account of the Participant’s termination of employment and such payment obligation constitutes “deferred compensation” (as defined
under Treasury Regulation §1.409A-1 (b)(1), after giving effect to the exemptions in Treasury Regulation §1.409A-1(b)(3) through (b)(12)), it shall be payable only after the Participant’s separation from service (as defined in Section 409A of the Code), provided, however,that if the Participant is a Specified Employee (as defined in Section 409A of the Code), any payment that is scheduled to be paid within
six months after such separation from service shall accrue without interest and shall be paid on the first day of the seventh month
beginning after the date of the Participant’s separation from service or, if earlier, within fifteen days after the appointment of the personal
representative or executor of the Participant’s estate following the Participant’s death. With respect to any award under the Plan that
constitutes “deferred compensation” subject to Section 409A of the Code and that is payable on account of a Change in Control (including
any installments or stream of payments that are accelerated on account of a Change in Control), a Change in Control shall occur only ifsuch event also constitutes a “change in the ownership,” “change in effective control,” and/or a “change in the ownership of a substantial
portion of the assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent
necessary to establish a time or form of payment that complies with Section 409A of the Code, without altering the definition of Change inControl for purposes of determining whether a Participant’s rights to such Award become vested or otherwise unconditional upon the
Change in Control.

(j)

All Awards under the Plan shall be subject to the Company’s policies regarding the adjustment or recovery of compensation as adopted
or modified from time to time prior to a Change in Control.

(k)

No fractional shares of Common Stock or units of any securities shall be issued pursuant to this Plan or any Award, and the Committee
shall determine whether cash, other securities or property shall be paid or transferred in lieu of such fractional shares or any rights thereto
shall be eliminated.
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EXHIBIT C: 2017 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS2017 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
Section 1. Purpose; Definitions.
The purposes of the Plan are (i) to assist the Company in promoting a greater identity of interest between the Company’s Non-Employee
Directors and the Company’s shareholders; and (ii) to assist the Company in attracting and retaining Non-Employee Directors by affording theman opportunity to share in the future successes of the Company.
For purposes of the Plan, the following terms are defined as set forth below:(a)“Award” means the grant under the Plan of Common Stock.

(b)“Board” means the Board of Directors of the Company.

(c)“Committee” means the Nominating and Corporate Governance Committee of the Board or a subcommittee thereof, any successor
thereto or such other committee or subcommittee as may be designated by the Board to administer the Plan.

(d)“Common Stock” means the Common Stock of the Company.

(e)“Company” means Philip Morris International Inc., a corporation organized under the laws of the Commonwealth of Virginia, or any
successor thereto.

(f)“Deferred Stock” means an unfunded obligation of the Company, represented by an entry on the books and records of the Company, toissue one share of Common Stock on the date of distribution.

(g)“Deferred Stock Account” means the unfunded deferred compensation account established by the Company with respect to eachparticipant who elects to participate in the Deferred Stock Program in accordance with Section 6 of the Plan.

(h)“Deferred Stock Program” means the provisions of Section 6 of the Plan that permit participants to defer all or part of any Award.

(i)“Fair Market Value” means, as of any given date, the mean between the highest and lowest reported sales prices of the Common Stockon the New York Stock Exchange-Composite Transactions or, if no such sale of Common Stock is reported on such date, the fair market
value of the Common Stock as determined by the Committee in good faith.

(j)“Non-Employee Director” means each member of the Board who is not a full-time employee of the Company or of any corporation inwhich the Company owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock
entitled to vote in the election of directors in such corporation, and “eligible Non-Employee Director” has the meaning provided in Section
3 of the Plan.

(k)“Plan” means this 2017 Stock Compensation Plan for Non-Employee Directors, as amended from time to time.

(l)“Plan Year” means the period commencing at the opening of business on the day on which the Company’s Annual Meeting of
Shareholders is held and ending on the day immediately preceding the day on which the Company’s next Annual Meeting of
Shareholders is held.

Section 2. Administration.
The Plan shall be administered by the Committee, which shall have the power to interpret the Plan and to adopt such rules and guidelines forcarrying out the Plan and appoint such delegates as it may deem appropriate. The Committee shall have
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EXHIBIT C: 2017 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with the laws, regulations,compensation practices and tax and accounting principles of the countries in which Non-Employee Directors reside or are citizens of and tomeet the objectives of the Plan.
Any determination made by the Committee in accordance with the provisions of the Plan with respect to any Award shall be made in the sole
discretion of the Committee, and all decisions made by the Committee pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company and Plan participants.
Section 3. Eligibility.
Only Non-Employee Directors (except for Dr. Frederik Paulsen) shall be eligible to be granted Awards under the Plan.
Section 4. Common Stock Subject to the Plan.
The total number of shares of Common Stock reserved and available for distribution pursuant to the Plan shall be 1,000,000.
In the event of any merger, share exchange, reorganization, consolidation, recapitalization, reclassification, distribution, stock dividend, stock
split, reverse stock split, split-up, spin-off, issuance of rights or warrants or other similar transaction or event affecting the Common Stock, theCommittee is authorized to and shall make such adjustments or substitutions with respect to the Plan and to Awards authorized thereunder as
it deems appropriate to reflect the occurrence of such event, including, but not limited to, adjustments (A) to the aggregate number and kind of
securities reserved for issuance under the Plan, (B) to the Award amounts set forth in Section 5(a), and (C) to the number and kind of securities
subject to outstanding Deferred Stock obligations. In connection with any such event, the Committee is also authorized to provide for thepayment of any outstanding Deferred Stock obligations in cash, provided that any such payment shall comply with the requirements of Internal
Revenue Code Section 409A.
Section 5. Awards.
(a)Annual Awards. On the first day of each Plan Year, each eligible Non-Employee Director serving as such immediately after the Annual
Meeting held on such day shall receive an Award of Common Stock having a Fair Market Value as follows:(1)

Eligible Non-Employee Director other than Chairman: equal to $175,000; and(2)

Chairman: equal to $1,250,000(with any fractional share being rounded up to the next whole share) or such other amount as the Committee determines in its
discretion. If an eligible Non-Employee Director first becomes a member of the Board on a day other than the first day of a Plan Year, theCommittee may, in its discretion, make a pro-rated Award to such eligible Non-Employee Director.
(b)

Terms of Awards. Awards pursuant to Section 5(a) are eligible for participation in the Deferred Stock Program.

Section 6. Payments and Payment Deferrals.
(a)Each Plan participant may elect to participate in the Deferred Stock Program with respect to Awards granted under Section 5(a). The
Deferred Stock Program shall be administered in accordance with the terms of this Section 6, provided that the Committee may modify
the terms of the Deferred Stock Program or may require deferral of the payment of Awards under such rules and procedures as it may
establish. Any deferral election shall be made at a time and for such period as shall satisfy the requirements of Internal Revenue Code
Section 409A(a)(4).

(b)

Any election to have the Company establish a Deferred Stock Account shall be made in terms of integral multiples of 25% of the numberof shares of Common Stock that the participant otherwise would have been granted on each date
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EXHIBIT C: 2017 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
of grant, shall be made no later than the last day of the calendar year immediately preceding the date of grant (or in the case of aparticipant who is first becoming eligible for this Plan and any other Plan required to be aggregated with this Plan under Internal Revenue
Code Section 409A and the regulations and other guidance thereunder, no later than 30 days after the participant first becomes eligible
and before the date of grant), and shall specify the time and form of distribution of the participant’s Deferred Stock Account in a mannercomplying with Internal Revenue Code Section 409A(a)(2) and (3). Any such election shall remain in effect for purposes of the Plan until
the participant executes (i) a new election applicable to any grants to be made in years after the year in which the new election is made or(ii) an election not to participate in the Deferred Stock Program for grants in such future years. New elections pursuant to clause (i) of thepreceding sentence may be made only to the extent permitted under rules and procedures established by the Committee taking into
account administrative feasibility and other constraints.
(c)

The Deferred Stock Account of a participant who elects to participate in the Deferred Stock Program shall be credited with shares ofDeferred Stock equal to the number of shares of Common Stock that the participant elected to receive as Deferred Stock. The Deferred
Stock Account shall thereafter be credited with amounts equal to the cash dividends that would have been paid had the participant held anumber of shares of Common Stock equal to the number of shares of Deferred Stock in the participant’s Deferred Stock Account, and any
such amounts shall be treated as invested in additional shares of Deferred Stock.

(d)

If as a result of adjustments or substitutions in connection with an event described in the second paragraph of Section 4 of this Plan or asa result of the transfer of the transferred accounts, a participant has received or receives with respect to Deferred Stock credited to theparticipant’s Deferred Stock Account rights or amounts measured by reference to stock other than Common Stock, (i) such rights oramounts shall be treated as subject to elections made, crediting of the participant’s account, and any other matters relating to this Plan ina manner parallel to the treatment of Deferred Stock under the Plan, provided that any crediting of amounts to reflect dividends withrespect to such other stock shall be treated as invested in additional Deferred Stock rather than such other stock, and (ii) within 12
months following the event described in Section 4, the participant shall be offered the opportunity to convert the portion of his or her
account measured by reference to such other stock to Deferred Stock with the same Fair Market Value (rounded as necessary to reflect
fractional shares) as of the date of such conversion.

(e)

Any election by a participant for his or her Deferred Stock Account to be paid upon his or her separation from service as a member of theBoard shall be applied in accordance with Internal Revenue Code Section 409A. No separation from service shall be deemed to occur
until the participant ceases to serve on the Board.

(f)

The Deferred Stock Program shall be administered under such rules and procedures as the Committee may from time to time establish,
including rules with respect to elections to defer, beneficiary designations and distributions under the Deferred Stock Program.
Notwithstanding anything in this Plan to the contrary, all elections to defer, distributions, and other aspects of the Deferred Stock Program
shall be made in accordance with and shall comply with Internal Revenue Code Section 409A and any regulations and other guidance
thereunder.

Section 7. Plan Amendment and Termination.
The Board may amend or terminate the Plan at any time without shareholder approval, including, but not limited to, any amendments
necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended, and any regulations and other guidance
thereunder; provided, however, that no amendment shall be made without shareholder approval if such approval is required under applicablelaw, regulation, or stock exchange rule, or if such amendment would increase the total number of shares of Common Stock that may be
distributed under the Plan (subject to adjustment pursuant to Section 4 of the Plan).
Section 8. Transferability.
Unless otherwise required by law, Deferred Stock shall not be transferable or assignable other than by will or the laws of descent anddistribution.
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EXHIBIT C: 2017 STOCK COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
Section 9. Unfunded Status of Plan.
It is presently intended that the Plan constitute an “unfunded” plan for incentive and deferred compensation. The Committee may authorize thecreation of trusts or other arrangements to meet the obligations created under the Plan to deliver Common Stock or make payments; provided,
however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the“unfunded” status of the Plan.
Section 10. General Provisions.
(a)

The Committee may require each person acquiring shares of Common Stock pursuant to an Award to represent to and agree with theCompany in writing that such person is acquiring the shares without a view to the distribution thereof. The certificates for such shares may
include any legend that the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Common Stock or other securities delivered under the Plan shall be subject to such stock transfer orders andother restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities andExchange Commission (or any successor agency), any stock exchange upon which the Common Stock is then listed, and any applicableFederal, state or foreign securities law, and the Committee may cause a legend or legends to be put on any such certificates to makeappropriate reference to such restrictions.

(b)

Nothing contained in the Plan shall prevent the Company from adopting other or additional compensation arrangements for NonEmployee Directors.

(c)Nothing in the Plan shall confer upon any grantee the right to continued service as a member of the Board.

(d)No later than the date as of which an amount first becomes includable in the gross income of the participant for income tax purposes withrespect to any Award the participant shall pay to the Company, or make arrangements satisfactory to the Company regarding thepayment of, any Federal, state, local or foreign taxes of any kind that are required by law or applicable regulation to be withheld withrespect to such amount. Unless otherwise determined by the Committee, withholding obligations arising from an Award may be settledwith Common Stock, including Common Stock that is part of, or is received upon exercise of the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company,
shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the participant. The
Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settling ofwithholding obligations with Common Stock.

(e)

The terms of this Plan shall be binding upon and shall inure to the benefit of any successor to Philip Morris International Inc. and any
permitted successors or assigns of a grantee.

(f)

The Plan and all Awards made and actions taken thereunder shall be governed by and construed in accordance with the laws of theCommonwealth of Virginia, excluding any conflicts or choice of law rule or principle that might otherwise refer construction orinterpretation of the Plan to the substantive law of another jurisdiction. Recipients of an Award are deemed to submit to the exclusive
jurisdiction and venue of the Federal or state courts of Virginia, to resolve any and all issues that may arise out of or relate to the Plan or
any Award. Notwithstanding anything in this Plan to the contrary, the Plan shall be construed to reflect the intent of the Company that allelections to defer, distributions, and other aspects of the Plan shall comply with Internal Revenue Code Section 409A and any regulations
and other guidance thereunder.

(g)

If any provision of the Plan is held invalid or unenforceable, the invalidity or unenforceability shall not affect the remaining parts of thePlan, and the Plan shall be enforced and construed as if such provision had not been included.

(h)

The Plan shall be effective May 3, 2017. Except as otherwise provided by the Board, no Awards shall be made after the Awards madeimmediately following the 2027 Annual Meeting of Shareholders.
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EXHIBIT D: RECONCILIATIONSPHILIP MORRIS INTERNATIONAL INC.
and Subsidiaries
Reconciliation of Non-GAAP Measures
Adjustments to Net Revenues for the Impact of Currency and Acquisitions
For the Years Ended December 31,($ in millions)(Unaudited)

Less
ExciseTaxes

Net
Revenues

Net
Revenues
excludingExciseTaxes

Net Revenues
excludingExciseTaxes,
Currency &Acquisitions

Less
Acquisitions

Less
Currency% Change in
Net Revenues
excluding Excise
Taxes
ExcludingExcludingCurrency &Currency
Acquisitions

Total

2016 Reconciliation:
European Union
EEMA
Asia
Latin America & Canada$ 27,129 $ 18,967 $
18,286
11,286
20,531
11,8509,007
6,165

8,162 $
7,000
8,681
2,842

(147)
(600)
(8)
(525)

$

-

$

8,309
7,600
8,689
3,367

1.2 %
(4.9)%
5.8 %(10.0)%

3.0%
3.2%
5.9%
6.6%

3.0%
3.2%
5.9%
6.6%

Total

$

26,685 $(1,280)$-$27,965(0.4)%

4.4%

4.4%

2015 Reconciliation:
European Union
EEMA
Asia
Latin America & Canada$ 26,563 $ 18,495 $
18,328
10,964
19,46911,266
9,548
6,389

8,068
7,364
8,203
3,159

Total

$

26,79474,953 $73,908 $48,268 $47,114 $Adjustments to Operating Companies Income for the Impact of Currency and Acquisitions
For the Years Ended December 31,($ in millions)(Unaudited)2016 Reconciliation:
European Union
EEMA
Asia
Latin America & Canada
Total
2015 Reconciliation:
European Union
EEMA
Asia
Latin America & Canada
Total
94 • PMI 2017 Proxy Statement

Less
Acquisitions

OperatingCompanies
IncomeexcludingCurrency &Acquisitions

OperatingCompanies
IncomeLess
Currency

$

3,994
3,016
3,196
938

$

34
(839)
52
(282)

$

-

$

$

11,144$(1,035)

$

-

$

$

3,576
3,425
2,886
1,085

$

10,972% Change in Operating
Companies Income
ExcludingCurrency &Acquisitions

Total

ExcludingCurrency

3,960
3,855
3,144
1,220

11.7 %(11.9)%
10.7 %(13.5)%

10.7%
12.6%
8.9%
12.4%

10.7%
12.6%
8.9%
12.4%

12,179

1.6 %

11.0%

11.0%

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EXHIBIT D: RECONCILIATIONS
Reconciliation of Operating Companies Income to Operating Income
For the Years Ended December 31,($ in millions)(Unaudited)
2016

Operating companies income
Amortization of intangibles
General corporate expenses
Equity (income)/loss in unconsolidated subsidiaries, net
Operating income$$

11,144
(74)
(161)
(94)
10,8152015$% Change

10,972
(82)
(162)
(105)
10,623

$

1.6%

1.8%

Reconciliation of Reported Operating Companies Income to Adjusted Operating Companies Income,excluding Currency and Acquisitions
For the Years Ended December 31,($ in millions)(Unaudited)

OperatingCompanies
Income2016 Reconciliation:
European Union
EEMA
Asia
Latin America & Canada

Total
2015 Reconciliation:
European Union
EEMA
Asia
Latin America & Canada

TotalLess Asset
Impairment &Exit Costs

$

3,994
3,016
3,196
938

$

$

11,144

$

$

3,576
3,425
2,886
1,085
10,972$$$Adjusted
OperatingCompanies
Income

-

$

(68)
(68)

$

$

$

Less
Currency

3,994 $
3,016
3,196
938
11,144 $

34
(839)
52
(282)
(1,035)Less
Acquisitions

$

$

-

Adjusted
OperatingCompanies
IncomeexcludingCurrency &Acquisitions% Change in Adjusted
Operating Companies
IncomeAdjusted
excludingCurrency &Adjusted Acquisitions

$

9.6 %
(11.9)%
10.7 %(13.5)%
0.9 %

$

3,960
3,855
3,144
1,220
12,179

8.7%
12.6%
8.9%
12.4%
10.3%

3,644
3,425
2,886
1,085
11,040
PMI 2017 Proxy Statement • 95

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EXHIBIT D: RECONCILIATIONS
Reconciliation of Reported Diluted EPS to Adjusted Diluted EPS
and Adjusted Diluted EPS, excluding Currency
For the Years Ended December 31,(Unaudited)
Reported Diluted EPS
Adjustments:
Asset impairment and exit costs
Tax items
Adjusted Diluted EPS
Less:
Currency impact
Adjusted Diluted EPS, excluding Currency

2016

2015

% Change

$

4.48

$

4.42

1.4%

$

4.48

0.03
(0.03)$ 4.421.4%$(0.46)
4.94

$

11.8%

4.42

Reconciliation of Operating Cash Flow to Free Cash Flow, andFree Cash Flow, excluding Currency
For the Years Ended December 31,($ in millions)(Unaudited)
Net cash provided by operating activities (operating cash flow)
Less:
Capital expenditures
Free cash flow
Less:
Currency impact
Free cash flow, excluding currency
96 • PMI 2017 Proxy Statement

2016

2015

% Change

$

8,077

$

7,865

2.7%

$

1,172
6,905

$

960
6,905

-%

$

(340)
7,245

$

6,905

4.9%

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2017 PROXY STATEMENT
And Notice of Annual Meeting of Shareholders
To be held on Wednesday, May 3, 2017

Printed on Recycled Paper

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