2015 Shareholder Vote Recommendations

The Board of Directors makes the following recommendations to shareholders:

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 the 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 the Company.

The Board holds regular meetings, typically during the months of February, March, May, June, September and December, and additional meetings when necessary. The organizational meeting follows immediately after the Annual Meeting of Shareholders. The Board held six regular meetings in 2014. 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 a meeting. During 2014, all nominees for director 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 2014 Annual Meeting of Shareholders.

Governance Guidelines, Policies and Codes

The Board has adopted Corporate Governance Guidelines. In 2014, the Audit Committee approved a substantial revision to the Company’s Code of Conduct. The revised document, known as the Guidebook to 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 Board has also adopted a Code of Business Conduct and Ethics that applies to directors. The Board has also adopted a policy with regard to reviewing certain transactions in which the Company is a participant and an officer, director or nominee for director has, had or may have a direct or indirect material interest. All of these documents are available 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 and Exchange Commission.

Leadership Structure

The Board does not believe that any particular leadership structure is inherently superior to all others under all circumstances. Rather, it determines from time to time the structure that best serves the interests of the Company and its shareholders under the then prevailing circumstances. Between the time we became an independent public company in 2008 and until our 2013 Annual Meeting of Shareholders, Louis Camilleri served as our Chairman and Chief Executive Officer, and the Company thrived under that leadership model.

Pursuant to the Board’s plan for Mr. Camilleri’s succession, André Calantzopoulos was appointed Chief Executive Officer effective immediately following the Annual Meeting of Shareholders on May 8, 2013. Mr. Camilleri remained as Chairman and as an employee of the Company. Effective December 31, 2014, Mr. Camilleri retired as an employee, and the Board determined that it is in the Company’s best interest for him to continue as a non-employee Chairman.

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 and assists in the preparation of agendas and materials for Board meetings, working together with the Presiding Director, who approves the agendas before they are disseminated to the Board. Input is sought from all directors as to topics they wish to review. Mr. Camilleri is not an independent Chairman, and the Board will continue to have a Presiding Director as described immediately below.

Presiding Director

The non-management directors annually elect at the organizational meeting one independent director to be the Presiding Director. The Presiding Director’s responsibilities are to:

The Presiding Director is invited to attend all meetings of Committees 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 it with the performance of its responsibilities.

These Committees and their current members are listed below. The Board designates the members of these Committees and the Committee Chairs annually at its

organizational meeting following the Annual Meeting of Shareholders, based on the recommendations of the Nominating and Corporate Governance Committee. The Board has adopted written charters for each of these Committees and these charters are available on the Company’s website at www.pmi.com/governance. The Chair of each Committee develops the agenda for that Committee and determines the frequency and length of Committee meetings. Each Committee meets as often as it deems to be 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 the meaning set forth in the regulations of the Securities and Exchange Commission. No member of the Audit Committee, the Compensation and Leadership Development Committee or the Nominating and Corporate Governance Committee received any payments in 2014 from Philip Morris International Inc. or its subsidiaries other than compensation received as a director.

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. The Audit Committee monitors risks relating to internal and financial controls, certain compliance matters and information technology and cybersecurity; the Finance Committee monitors risks relating to the sources and uses of the Company’s cash flow and impact of the capital markets on the Company; the Compensation and Leadership Development Committee monitors risks relating to compensation design and payouts and management succession; the Product Innovation and Regulatory Affairs Committee monitors product and regulatory risks; and the Nominating and Corporate Governance Committee monitors risks relating to Board structure and processes and the Company’s lobbying activities. The full Board monitors risks relating to the Company’s business plan, as well as compliance and litigation.

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, Board of 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 matters that are within the scope of the responsibilities of the Board and its Committees are to be forwarded to the Presiding Director. Communications that relate to matters 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 matters that 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.

Process for Nominating Directors

The Nominating and Corporate Governance Committee is responsible for identifying and evaluating nominees for director and for 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, the Committee takes into account many factors, including whether the individual meets requirements for independence; the individual’s general understanding of the various disciplines relevant to the success of a large publicly-traded company in today’s global business environment; the individual’s understanding of the Company’s global businesses and markets; the individual’s professional expertise and educational background; and other factors, including nationality, that promote diversity of views and experience. The Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of directors that can best perpetuate the success of the business and represent shareholder interests through the exercise of sound judgment, using its breadth of 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 the activities 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 business experience and scientific expertise, as being particularly desirable to help meet specific Board needs that have arisen.

In identifying potential candidates for Board membership, the Committee relies on suggestions and recommendations from the Board, shareholders, management and others. The Committee does not distinguish between nominees recommended by shareholders and other nominees. From time to time, the Committee also retains search firms to assist it in identifying potential candidates for director, gathering information about the background and experience of such

candidates and acting as an intermediary with such candidates. In 2014, the Committee recommended three new candidates to the Board. These candidates were initially recommended to the Committee by our Presiding Director, in the case of Mr. Makihara, our CEO, in the case of Dr. Paulsen, and by a search firm, in the case of Mr. Geissler.

Shareholders wishing to suggest candidates to the Committee for consideration as directors must submit a written notice to the Corporate Secretary, who will provide it to the Committee. Our by-laws set forth the procedures a shareholder must follow to nominate directors. These procedures are summarized in this proxy statement under the caption “2016 Annual Meeting.”

Recommendations of the Board

It is proposed that twelve directors be elected to hold office until the next Annual Meeting of Shareholders and until their successors have been elected. The Nominating and Corporate Governance Committee has recommended to the Board, and the Board has approved, the persons named and, unless otherwise marked, a proxy will be voted for such persons. Each of the nominees currently serves as a director and each was elected by the shareholders at the 2014 Annual Meeting, except for Mr. Makihara and Dr. Paulsen, who joined the Board in September 2014, and Mr. Geissler, who joined the Board January 1, 2015. 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 as a whole provides a breadth of knowledge, international experience, intellectual rigor and willingness to face tough issues. Three-quarters of the nominees, two of whom are women, are non-U.S. nationals and ten different nationalities are represented, underscoring the global perspective of the Board taken as a whole.

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 for his significant and valuable contributions to its deliberations.

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 event of 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 and Corporate Governance Committee, the Board has determined that each of the following nominees for director is independent of and has no material relationship with the Company: Harold Brown, Werner Geissler, Jennifer Li, Jun Makihara, Sergio Marchionne, Kalpana Morparia, Lucio A. Noto, Frederik Paulsen, Robert B. Polet and 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 at www.pmi.com/governance. Each of the above-named nominees qualifies as independent under these standards.

In making its affirmative determination that Mr. Marchionne is independent, the Board considered the fact that the Company has a sponsorship agreement with Ferrari, a majority-owned subsidiary of Fiat. The amounts involved in the sponsorship agreement fall significantly below 2% of Fiat’s consolidated gross revenues, the threshold that, if exceeded, would preclude a determination of director independence under the Company’s categorical standards of director independence.

The sponsorship agreement with Ferrari dates back to 1984, well before Mr. Marchionne became CEO of Fiat in 2004. The agreement and its renewals have been negotiated on an arms-length basis with executives of Ferrari, and Mr. Marchionne has not been involved in any aspect of the negotiations or the agreement and has no direct or indirect material interest in the agreement.

In making the affirmative determination that Ms. Morparia is independent, the Board considered the fact that the Company has routine commercial relationships with J.P. Morgan Chase, the parent company of Ms. Morparia’s employer. Payments by the Company to J.P. Morgan Chase are immaterial and Ms. Morparia has no direct or indirect material interest in these routine commercial relationships. Ms. Morparia has never represented J.P. Morgan Chase in connection with its provision of services to the Company, the Company has no commercial relationship with Ms. Morparia’s employer, and her compensation 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 the number of directors to be elected, directors shall be elected by a majority rather than by a plurality vote. Under applicable law, a director’s term extends until his or her successor is duly elected and qualified. Thus, an incumbent director who fails to receive a majority vote would continue to serve as a holdover director. To address that possibility, 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 then consider the offer and recommend to the Board whether to accept or reject the offer.

Non-employee directors may also elect to defer the award of shares of common stock and all or part of the annual and committee retainers. Deferred fee amounts are “credited” to an unfunded account 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 and determine the “earnings” that are credited for bookkeeping purposes to a non-employee director’s account. Subject to certain restrictions, a non-employee director is permitted to take cash distributions, in whole or

in part, from his or her account either prior to or following termination of service.

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

Our compensation and benefits program supports our business and financial objectives. The program’s components are set and periodically reviewed by the Committee. Each component is designed to achieve one or more of the following objectives:

These objectives provide the framework for the various components of compensation and benefits and take into account the specific nature of our business. Together, these elements form an aggregate package that is intended to be appropriately competitive. The design of the overall package encompasses the following features:

In determining the precise levels of each element of compensation, as well as the total compensation and benefits package awarded, the Committee exercises its business judgment and discretion in pre-establishing compensation ranges, setting the actual level of compensation within these ranges and reviewing total compensation design to assure that the various ranges remain appropriately competitive and continue to meet our objectives.

The Committee compares the Company’s compensation practices and levels of pay to a Compensation Survey Group as further discussed on page 38. Our compensation program also reflects local practices and is designed to deliver total direct compensation upon

attainment of targeted goals at the 75^th percentile of the local market; actual total direct compensation can exceed the 75^th percentile when business and individual performance exceed targeted goals, and can be significantly lower if goals are not met.

The Committee also compares the mix of compensation for our named executive officers to the compensation for those executives with similar roles in companies in our Compensation Survey Group.

The three components of total direct compensation are base salary, annual incentive compensation awards and equity awards. We also provide our executives retirement benefits and limited perquisites.

Our total direct compensation program emphasizes pay-for-performance, and the one component that is fixed for a given year, base salary, constitutes the smallest portion of executive compensation. With respect to compensation earned in 2014, base salary constituted approximately 23% of total direct compensation for our named executive officers. The second component is the annual cash-based incentive compensation award that is determined by the

Committee based on individual and Company performance and that constituted approximately 24% of total direct compensation for our named executive officers in 2014. The third component is the equity award granted in 2015 that was determined based on 2014 individual performance and the Company’s rolling three-year total shareholder return over the 2012 to 2014 period relative to our Compensation Survey Group, our tobacco peer group and the S&P 500 Index, and that constituted approximately 53% of total direct compensation for our named executive officers in 2014.

Last Year’s Say-on-Pay Vote on 2013 Executive Compensation: In 2014, 96.22% of the votes cast at our Annual Meeting of Shareholders approved, on an advisory basis, the 2013 compensation of our named executive officers. Based on this vote and the many conversations the Company continues to have with our shareholders, the Compensation and Leadership Development Committee believes that shareholders strongly support the Committee’s approach to aligning pay with performance.

Changes in Salary Banding Structure: Historically, the Company used a salary band structure for its executives, with letter-based bands ranging from A at the highest level through I at the lowest. Effective January 1, 2014, the Committee replaced the nine lettered salary bands with fifteen numeric grades ranging from 28 at the highest level to 14 at the lowest. The narrower salary levels under the new numeric system will afford the Company greater flexibility to differentiate job accountabilities and a more granular career progression ladder. The change in banding structure was not intended to have an immediate impact on the base salaries of most of the affected employees.

Recent Changes in Executive Compensation Levels and Mix: In 2013 and 2014, the Compensation and Leadership Development Committee took several significant actions regarding the absolute levels and the component mix of executive compensation. The first two of these actions reflected Mr. Calantzopoulos’s succession as Chief Executive Officer and Mr. Camilleri’s continuation as Chairman. This succession took place immediately after the 2013 Annual Meeting of Shareholders.

First, in connection with his appointment as CEO, effective May 8, 2013, Mr. Calantzopoulos was promoted from salary band B (now grade 26) to salary band A (now grade 28). Nevertheless, his annual base salary was maintained at its then existing level of CHF 1,476,150 (or $1,575,790 at June 11, 2013, the date of the Committee’s action). Mr. Calantzopoulos’s annual incentive compensation award target was set at 200% of his annual base salary, a reduction from the level of 300% previously associated with salary band A.

His equity award target was set at 600% of his base salary, the level previously associated with salary band A. In both 2014 and 2015, Mr. Calantzopoulos received no

increase in his base salary or his incentive compensation and equity award targets.

Second, recognizing the fact that while he would fully assist in the management transition, Mr. Camilleri would no longer have management responsibility for the Company, effective May 8, 2013, he was removed from the Company’s salary band structure, his base salary was reduced from $1,750,000 to $1,000,000, and he ceased to be eligible for annual incentive compensation awards. Reflecting his role in assisting the CEO in long-term strategy, Mr. Camilleri remained eligible for equity compensation awards with a target of 600% of his new base salary. (Mr. Camilleri retired as an employee effective December 31, 2014.)

Third, after reviewing data from the Compensation Survey Group, as well as market data in Switzerland and other geographies where the Company has a significant presence, the Committee determined, effective January 1, 2014:

In 2015, for the third year in a row, the Committee determined not to increase the base salaries of the Swiss-based executive officers.

For 2014, except for the Chairman, all of our named executive officers were in salary grades 28 to 24. Our CEO is the only employee in salary grade 28. As shown in the chart below, the Compensation Committee determined, effective January 1, 2014, to rebalance the target level mix of fixed (base salary) and at-risk (annual incentive compensation and equity awards) compensation to more closely reflect the mix at the 75^th percentile of the Company’s Compensation Survey

Group and the Swiss market, and to remain consistent with our objectives of putting proportionately greater compensation at risk for each increase in salary level and to further enhance the focus of senior executives on longer-term performance, while minimizing equity dilution. The increase in base salary as a percentage of total direct compensation reflects a reduction in target levels for both annual incentive compensation and equity awards, and not an increase in base salary levels.

Approximately 77% of total direct compensation earned by our named executive officers in 2014 was variable and directly linked to the Company’s and the individual’s performance. The lower percentage versus last year reflects reduced incentive compensation and equity award targets and a lower Company stock rating in 2014. The following section describes the process by which the Committee ties variable compensation to performance.

At the beginning of each year, the Committee sets target ranges with respect to key performance metrics. Each of the target ranges set by the Committee is based on the Company’s original operating budget approved by the Board for that year. The budget and the targets reflect appropriately ambitious but realistic performance goals. In February, the Committee evaluates the Company’s actual results against these targets and assigns the Company an incentive compensation (IC) business rating ranging from 0 to 150, with a rating of 100 correlating to attaining targeted levels of performance. Its evaluation is not only quantitative but also qualitative. Numerical weights are not assigned to any specific performance measure. Nor is a rating assigned based solely on the key performance measures. Rather, the Committee also assesses the Company’s progress on key strategic initiatives and our performance relative to our international competitors. It then determines the Company’s IC business rating based on its assessment of the Company’s overall performance for that year.

Next, the Committee determines the Company’s stock business rating, which can range from 0 to 150, based on the Company’s total shareholder return, or TSR, over a rolling three-year period relative to the returns of our Compensation Survey Group, our tobacco peer group and the S&P 500 Index.

Individuals are rated based on both a quantitative and a qualitative assessment of performance. Ratings can range from 0% to 150% for incentive compensation (IC) awards and from 0% to 130% for equity awards. To assure a disciplined, fair and equitable assessment of individual performance, the Company calibrates individual performance ratings to achieve budgeted total targeted compensation assuming Company ratings of 100%.

Incentive Compensation Award Formula

Annual individual incentive compensation award targets in 2013 and 2014 as a percentage of base salary were as follows:

Equity Award Formula

Annual individual equity award targets in 2013 and 2014 as a percentage of base salary were as follows:

Equity awards are granted to management employees under the Philip Morris International Inc. 2012 Performance Incentive Plan and are intended to build stock ownership and enhance the retention and commitment of participants to increasing long-term shareholder value. Equity awards are made in shares of performance-based deferred stock, rather than stock options, because this form of award:

As a result, our run rate and overhang each compares favorably to those of the Compensation Survey Group.

Equity award recommendations are approved annually at the Committee’s February meeting, and are granted on the date of approval. The Committee determines the dollar value of each award based on its assessment of the Company’s prior three-year TSR relative to the

returns of our Compensation Survey Group, our tobacco peer group and the S&P 500 Index, along with its rating of the individual’s performance. The number of shares awarded is based on the fair market value of PMI stock on the date of grant.

Equity awards generally vest three or more years after the date of the award, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58. The three-year vesting period provides PMI with a means of both retaining and motivating executives.

Recipients receive dividend equivalents on unvested equity awards during the vesting period in order to further align the interests of participants with those of shareholders.

2014 Company Performance and Targets

Analysis of 2014 Incentive Compensation Business Rating: The Committee believes that quality of results is key and, accordingly, uses its business judgment to assess performance both on a quantitative and qualitative basis and to tie compensation to performance based on those assessments rather than on a fixed formula. With regard to its quantitative assessment, the following table shows the performance target ranges pre-established by the Committee for 2014 incentive compensation awards and the Company’s results. The percentages indicated for cigarette volume, net revenues, adjusted OCI and adjusted diluted EPS represent targeted and actual growth versus 2013 results.

We met or exceeded five of our performance target ranges for 2014 and narrowly missed one, despite facing a number of specific challenges in key markets such as Italy, Japan and the Philippines, investing in the launch of Reduced-Risk Products, rolling out the Marlboro 2.0 Architecture, and undertaking a major optimization of our manufacturing footprint, all within an operating environment of continued macro-economic weakness, significant market declines in Russia and the EU, and consumer down-trading across many geographies. We also encountered unanticipated geopolitical problems in the EEMA region.

Within this context, we effectively used every business lever under our control to deliver a solid currency neutral financial performance. Importantly, we continued to strengthen our business fundamentals as witnessed by

the broad-based share gains of our industry-leading portfolio. We made substantial progress in addressing our specific market challenges and achieved currency neutral adjusted earnings per share growth of 7.8%, within our target range.

Cigarette Volume (excluding acquisitions): fell by 2.8% in 2014, within our performance target range of minus 2.8% to minus 1.8%. The decline was driven by total market declines, notably in Russia, the Philippines, Japan, Poland, Kazakhstan and France, and the impact of unfavorable inventory movements, predominantly in Japan, Russia and the Middle East, but partially offset by market share gains in both the EU and EEMA Regions. Our volume performance was hindered by the Asia Region, driven by lower market share in Japan, a lower total duty-paid market in the Philippines, and temporary share weakness in Indonesia.

Share of Top 30 OCI Markets: Our market share performance was strong, with 19 of our top-30 income markets registering growing or stable share, exceeding our target range of 15-17 markets, despite significant price competition at the low end of the market in several markets, most notably Mexico, Ukraine, Australia, and Turkey.

Net Revenues (excluding excise taxes, currency and acquisitions): Net revenues of $29.8 billion, reflecting constant currency growth, excluding acquisitions, of 2.0% versus 2013, fell within our performance target range of 1.9% to 2.9%. This result reflected the severely adverse volume/mix that eroded a significant portion of our favorable pricing.

Adjusted OCI (excluding currency and acquisitions): Constant currency adjusted OCI, excluding acquisitions, was flat versus 2013 and below our target performance range of 0.5% to 2.1% growth, a result driven by adverse volume/mix and higher manufacturing costs that offset strong pricing. Three markets weighed heavily: Australia, Indonesia and Japan, which more than offset the above-target performance of both the EU and EEMA Regions.

Adjusted Diluted EPS (excluding currency): Our 7.8% constant currency growth fell within the performance target range of 6.6% to 8.6% growth.

Free Cash Flow: Free cash flow of $7.3 billion, excluding the impact of changes in currency exchange rates from the rates assumed in establishing the free cash flow performance target range, fell within the target range of $7.0 to $8.0 billion.

André Calantzopoulos, Chief Executive Officer: Mr. Calantzopoulos was promoted from Chief Operating Officer to Chief Executive Officer following the May 2013 Annual Meeting of Shareholders; however, the Committee maintained his base salary at its prior level. It also set Mr. Calantzopoulos’s annual incentive award target at 200% of base salary, versus the 300% level previously associated with the CEO position. The Committee set Mr. Calantzopoulos’s equity award target at 600%, the level previously associated with the CEO position. The Committee maintained Mr. Calantzopoulos’s base salary, incentive target and equity award target at these levels in 2014 and 2015.

The Committee assigned Mr. Calantzopoulos individual performance ratings for 2014 of 105% for the incentive compensation award and 100% for the equity award, resulting in an annual incentive compensation award of CHF 2,944,920 and an equity award of CHF 7,528,370, or $3,184,224 and $8,140,289, respectively, based on the conversion rate on the date of the awards.

These awards reflect the Committee’s view that under Mr. Calantzopoulos’s capable leadership the Company used every lever within its control to deliver a solid currency neutral financial performance in 2014, meeting or exceeding five of its six performance targets, despite

facing a difficult operating environment as described on page 32. The Company also made substantial progress on several strategic initiatives as described on page 33.

Louis C. Camilleri, Chairman: Mr. Camilleri stepped down from his position as Chief Executive Officer immediately following the 2013 Annual Meeting of Shareholders. He remained as an employee and as Chairman of the Board.

Reflecting his new role, Mr. Camilleri’s base salary was reduced for the remainder of 2013 from $1.75 million to $1.0 million, and he ceased to be eligible for annual incentive compensation awards. He remained eligible for equity compensation awards with a target of 600% of his new base salary. The Committee maintained Mr. Camilleri’s base salary and equity award target at these levels in 2014.

Effective December 31, 2014, Mr. Camilleri retired from his employment and became a non-employee Chairman of the Board. In recognition of his strong leadership throughout 2014, and of the fact that he would not be eligible for an equity award for his 2014 service as a result of his retirement, the Committee granted Mr. Camilleri a cash award of $3.75 million, or approximately 63% of his targeted equity award.

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 excellent performance and inspiring leadership of our Law and Corporate Affairs Departments. His incentive compensation award was based on a personal rating of 110% and his equity award on a personal rating of 120%. These ratings recognize his remarkable contributions to a number of critical initiatives in the regulatory, litigation, intellectual property and compliance fronts, notably the significant progress in the regulatory and fiscal frameworks for RRPs, his critical role in our efforts to combat plain packaging, his strategic guidance of our Corporate Affairs activities and the continued improvements in the operating efficiency of the functions he leads.

Martin King: Mr. King was appointed President of our Latin America and Canada Region in February 2014. Previously, he served as Senior Vice President Operations. His incentive compensation award was based on a personal rating of 110% and his equity award was based on a personal rating of 115%. These ratings reflect his strong leadership and robust performance of the Region. The Region’s volume in 2014 decreased by 2.7%, mainly due to total market declines in Canada, Brazil and Mexico, as well as lower market share in Mexico. Despite this volume decline, constant currency net revenues, excluding excise taxes, and adjusted operating companies income, grew by 10.6% and 12.5%, respectively. Mr. King’s ratings also reflect widespread share gains across the Region, his rapid grasp of the intricacies of his new responsibilities, and his invaluable contributions to our Operations strategies that yielded excellent results in 2014.

Jacek Olczak: Mr. Olczak serves as our Chief Financial Officer. His incentive compensation award was based on a personal rating of 105% and his equity award was based on a personal rating of 110%. These ratings recognize Mr. Olczak’s leadership and invaluable contributions to our financial results in a year characterized by very significant business challenges and unprecedented currency headwinds. Of particular significance is his role in the management of our working capital and balance sheet and in securing attractive capital market transactions, the seamless execution of

our manufacturing footprint optimization, productivity and cost saving programs, his drive behind our initiatives to reduce process complexity and improve speed to market across PMI, and in assuring timely and transparent communication of our results and strategies to the investment community in a very complex business year.

Matteo Pellegrini: Mr. Pellegrini serves as President of our Asia Region. In 2014 Asia faced tremendous challenges due to the continuation of the special situation in the Philippines, the annualization of our 2013 share loss in Japan, heavy price discounting in Australia, and market share challenges in Indonesia at the beginning of the year, all of which adversely impacted the Region’s business results. Volume in Asia declined 4.4% and net revenues, excluding excise taxes and adjusted operating companies income, each on a constant currency basis, decreased by 7.2% and 16.6%, respectively. His incentive compensation and equity awards were each based on a personal rating of 80%. These ratings reflect the fact that the Region fell short on several performance metrics. They do, however, recognize his strong leadership under extremely adverse circumstances, the stabilization of our share performance in Japan, sequential share improvement in Indonesia, our decisive response to the Australian situation, and, as a result of groundwork set in 2014, a better outlook for the Philippines as we entered 2015. Furthermore, these ratings reflect the successful pilot launch of iQOS in Japan.

Miroslaw Zielinski: Mr. Zielinski serves as President of our Eastern Europe, Middle East and Africa Region and PMI Duty Free. His incentive compensation and equity awards were each based on a personal rating of 120%. These ratings recognize his exceptional leadership of the Region and the Region’s excellent results achieved in 2014, which exceeded key performance metrics. Volume in the Region declined by 2.9%, mainly due to total market declines in Russia, Serbia and Ukraine. Despite this decline, net revenues, excluding excise taxes, and adjusted operating companies income, each on a constant currency basis, surged by 10.5% and 17.1%, respectively, making this Region a major contributor to PMI’s overall results in 2014. Mr. Zielinski’s ratings also reflect significant share gains across the Region, particularly in Russia, and his critical contributions to innovation and brand portfolio development, as well as business development initiatives.

Factors Mitigating Against Possible Adverse Consequences of Our Compensation Program: Several elements of our compensation program protect against the possibility that compensation incentives might cause employees to take risks that could materially adversely affect the Company. First, we do not have different incentive compensation award programs for particular business units or functions. Our annual incentive compensation and equity awards apply to management employees worldwide, and the award pools for each of those programs are based on company-wide performance measures that cannot be unduly influenced by a particular business unit or group. Second, all employees are rated on the same scale within general guidelines set by the Committee. These ratings are spread throughout the organization so that no particular group of employees will all receive the same rating. Third, both the company-wide and the individual performance measures are subject to maximum levels that limit the amount of awards.

Furthermore, the long-term component of our compensation program consists of equity awards that are effectively measured or at risk over a six-year period. At the time of grant, the awards are based on an historical three-year rolling average of total shareholder return compared to the returns of our Compensation Survey Group, our tobacco peer group and the S&P 500 Index, and the awards generally vest only after an additional three years from the date of grant. In addition, our executives are subject to stock ownership requirements and comprehensive anti-hedging and “clawback” policies described in the following two sections.

Stock Ownership Requirements and Hedging: The Committee requires certain levels of PMI stock ownership for our executives, including our named executive officers. These requirements are as follows:

Executives are required to meet their ownership levels within five years of joining PMI or within three years after a promotion. The Committee reviews each executive officer’s compliance with the requirements on an annual basis. As of December 31, 2014, all of our named executive officers met or exceeded the applicable

requirements. Our executive officers are not permitted to engage in any hedging activities with respect to PMI stock.

Policy Regarding the Adjustment or Recovery of Compensation: Under our Board approved policy and as set forth in each named executive officer’s equity award agreement, if the Board or an appropriate Committee of the Board determines that, as a result of fraud, misconduct, a restatement of our financial statements, or a significant write-off not in the ordinary course affecting our financial statements, an executive has received more compensation than would have otherwise been paid, the Board or Committee shall take action as it deems necessary or appropriate to address the events that gave rise to the fraud, misconduct, write-off or restatement and to 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 the partial or full cancellation of equity awards, adjusting the future compensation 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.

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 this purpose, the Committee has the authority and responsibility to:

The Committee, in fulfilling these duties, is supported by our Senior Vice President, Human Resources and his department, its executive compensation consultant and other outside legal, financial and compensation counsel, where appropriate.

Role of the Chairman and the CEO in Executive Compensation: Our CEO makes recommendations to the Committee with respect to the compensation of executive officers other than the Chairman. The Committee reviews and discusses the compensation of these officers 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.

Role of Compensation Consultants: During 2014, the Committee retained the services of Mr. Michael Halloran of Mercer LLC, a wholly-owned subsidiary of Marsh & McLennan Companies, Inc. (“MMC”). In connection with his mandate, Mr. Halloran advises the Committee with respect to the compensation of the Chairman, the CEO and other executives. In addition to these services, Mr. Halloran provides the Committee with input into the design of our compensation and benefit programs and evolving regulatory and executive compensation market trends.

Mercer was paid $25,417 for Mr. Halloran’s services. Prior to his retention in 2009 by the Committee, Mr. Halloran had never performed any services for PMI or its affiliates and was not recommended to the Committee by management.

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 $1,330,577 in 2014. Mercer is retained directly by the relevant PMI business function, region or market when Mercer provides these other services, and these services and fees are not subject to the approval of 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 2014 for fees totaling $1,685,731. Neither these additional services nor the fees are subject to the Committee’s approval.

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

The Committee noted that Mr. Halloran does not market or sell to PMI or its affiliates the other services performed by Mercer and MMC, and Mr. Halloran receives no incentive or other compensation based on the fees paid by PMI and its affiliates for these other services. In addition, Mercer’s professional standards prohibit Mr. Halloran from considering any other relationships Mercer or any of its affiliates may have with PMI and its affiliates in rendering his advice and recommendations to the Committee. Based on its review, the Committee has concluded that the advice it receives from Mr. Halloran is objective and not influenced by Mercer’s or MMC’s relationships with PMI or its affiliates.

Compensation and Leadership Development Committee Interlocks and Insider Participation: No member of the Committee at any time during 2014 had any relationship with the Company that would be required to be disclosed as a related person transaction or as a compensation committee interlock.

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 2014 and the equity awards that were awarded for 2014 to our covered named executive officers in February 2015 were subject to, and made in accordance with, performance-based compensation arrangements.

We have taken appropriate actions, to the extent feasible, to preserve the deductibility of annual incentive compensation and equity awards. However, notwithstanding this general policy, the Committee has authorized, and continues to retain the discretion to authorize, other payments that may not be deductible, if it believes that they are in the best interests of both the Company and its shareholders. Such determinations include, for example, payment of base

salaries to some covered officers that exceed $1.0 million, with the result that a portion of such officers’ base salaries exceed the deductibility limit. In addition, covered officers’ compensation may exceed the deductibility limit because of other elements of compensation, such as dividend equivalents paid on equity awards during the time-based vesting requirements and perquisites.