AN OVERVIEW OF INVESTOR RELATIONS AT PMI

KNOWLEDGE BUILDER

INVESTOR RELATIONS

Module Title

Welcome

2 PMI Finance Academy

This Knowledge Builder will help you:

• Describe the role of Investor Relations at PMI

• Identify Investor Relations’ primary stakeholders

• Describe PMI’s shareholder ownership profile

• Understand why, how and what PMI communicates to the financial community

• Explain some key disclosure and compliance guidelines

• Understand how you can help Investor Relations

What is Investor Relations?

Investor Relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication

between a company, the financial community, and other constituencies, which ultimately contributes to a company’s securities achieving fair valuation. (1)

(1) National Investor Relations Institute

About the team

In order to establish credibility with and provide in-depth analyses to investors, analysts and other stakeholders, Investor Relations team members have:

• A long tenure at PMI

• A varied background and broad functional experience

• International experience from affiliates and regional headquarters around the world

They work closely with the CEO, CFO and Corporate Secretary’s Office.

Did you know?

Together, the seven employees in PMI’s Investor Relations team have almost 150 years of combined experience at the company.

PMI Investor Relations is a small, focused team managed from the Operations Center in Lausanne, Switzerland.

Who is this for?Would you like to find out more about the Investor Relations team at PMI?

You are in the right place. This Knowledge Builder will help you understand their role, who they work with and how you can contribute to the team’s success.

Work through this Knowledge Builder at your own pace. When you’re ready, you can explore the other aspects of the Investor Relations Learning Journey.

Knowledge builder

PMI Finance Academy3 Knowledge builder

Doug Lovett Portfolio Manager

Rowena MayBuy-side Analyst

John King Sell-side Analyst

Buy-side Analysts

Buy-side Analysts are employed by investment firms such as mutual funds, pension funds and insurance companies. They provide research and recommendations exclusively for their firms’ portfolio managers, and do not publish their analyses externally.

Portfolio Managers

Portfolio managers invest client assets based on a given investment strategy. They rely on a broad range of information – such as research and recommendations from both “Sell-side”

The Investor Relations team has a number of key stakeholders.

Sell-side Analysts

Sell-side Analysts work for investment banks and typically cover specific companies within a given industry. They issue research reports with recommendations (e.g., “Buy,” “Sell,” “Hold”) for their firms’ clients, such as portfolio managers at mutual funds. As of December 2015, PMI was covered by over 15 analysts, based primarily in New York and London.

and “Buy-side” Analysts – to support their investment decisions.

Other Stakeholders

The Investor Relations team’s other key stakeholders include:

• Financial media

• Individual (“retail”) investors

• PMI employees

Meet our key stakeholders

“I work for a global investment bank, specializing in the Food, Beverage and Tobacco industries. My clients rely on me to be up-to-speed on the latest developments in the tobacco industry and to provide timely research on PMI and its competitors.”

“I work for one of the world’s largest investment firms, with over $500 billion in client assets under management. I’m currently recommending PMI to one of my firm’s portfolio managers because he’s interested in investing in global consumer companies with leadership positions in developing countries such as Argentina, Indonesia, the Philippines and Russia.”

“I manage a fund that invests primarily in large capitalization consumer products companies. PMI has been a core shareholding in my fund since the spin-off in 2008. I particularly like the company’s broad geographic exposure, leading brand portfolio and history of annual dividend increases.”

PMI Finance Academy4 Knowledge builder

Figure 2:Non-U.S. Institutional Shareholders

Figure 1:Investor Type

PMI’s shareholder ownership profile

Did you know?

From the time of the spin-off in March 2008 to year-end 2015, the proportion of PMI’s outstanding shares held by non-U.S. institutional shareholders doubled to approximately 14%.

Approximately 75% of PMI’s shares outstanding are held by institutions, the majority of which are based in the U.S.

Nearly half of PMI’s non-U.S. institutional shareholders are based in the United Kingdom.

PMI’s institutional shareholders represent a range of investment styles, including “Value,” “Growth” and “Index” funds.

38%Value

27%Growth

27%Index

8%Other

Figure 3:Institutional Shareholder Investment Style (1)

(1) Value (Below Market P/E, Low Price-to-Book Value), Growth (Above Market Earnings Growth), Index (Benchmark to an Index)

Note: Reflects PMI’s shareholder ownership profile as of December 31, 2015. All figures based on total shares held.

Source: Bloom Partners, Inc., SPL Network and PMI estimates

75%Institutions

(U.S. 61% + Non-U.S. 14%)

25%Individuals

Other

Switzerland

Germany

Canada

Japan

49%

14%

8%

7%

7%

15%

U.K.

PMI Finance Academy5 Knowledge builder

Why does PMI have external reporting requirements?

PMI became a publicly traded company on Friday, March 28, 2008, with its first official trading day on the New York Stock Exchange on Monday, March 31, 2008.

Being a publicly-traded company gives rise to various external reporting requirements that have as an important objective the clear, consistent and transparent communication of the company’s business and financial health and future prospects. The disclosures enable investors to make informed decisions on whether to buy, sell or hold the company’s securities.

How does Investor Relations communicate financial and business information?

Press releases

These cover topics such as:

• Quarterly earnings

• Dividend declarations

• M&A transactions

• Changes in senior management and the Board of Directors

Investor conferences

Throughout the year, senior management present at select investor conferences, such as the annual CAGNY conference in the U.S. The conferences are attended by many of our key institutional stakeholders.

Separate one-on-one and group meetings are typically organized in conjunction with the presentations.

Annual Report

PMI’s Annual Report is published in March each year, prior to the Annual Stockholders’ Meeting.

It includes a joint letter to shareholders from the Chairman and Chief Executive Officer, as well as information about the company, our people and our products, and management’s discussion and analysis of financial conditions and results of operations.

Calls and meetings

Throughout the year, the Investor Relations team speaks with key institutional stakeholders by phone or in person. These discussions typically cover the company’s latest results and other publicly disclosed information.

PMI Investor Day

An “Investor Day” event is held in Lausanne every other year, during

which senior management provide a detailed update on PMI’s business performance and outlook. The event is attended by many of the company’s key institutional stakeholders and is webcast in audio format.

What are our investors and other key stakeholders interested in?

It varies, of course, but here’s a selection of the most popular topics:

• Cigarette industry volume trends

• Market share performance

• Marlboro innovation

• Pricing

• Reduced-Risk Products (1)

• Cash flow

• Dividends and share buybacks

• Regulatory and fiscal developments

• Illicit trade

(1) Reduced-Risk Products (“RRPs”) is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes.

Investor knowledge about PMI is growing. Let’s explore why, how and what PMI communicates to the financial community.

External reporting

Investors that are Highly Knowledgeable about PMI

Source: Rivel Research Group

2009-2011 Average76%

87% 2012-2014 Average

PMI Finance Academy6 Knowledge builder

A year in the life of Investor RelationsEach year the Investor Relations team:

• Supports at least one event for each of the Sell-side Analysts who cover PMI

• Participates in multiple investor conferences

• Meets with at least 60 of our top 100 U.S. institutional shareholders

• Meets with around 75% of our identified non-U.S. institutional shareholders

• Holds over 100 one-to-one/group meetings with investors

• Reaches around 70% of our available global institutional shareholders (1)

(1) Global institutional investor base excludes index and pension funds

7 PMI Finance AcademyKnowledge builder

Material information at PMI Company information that may be material includes, but is not limited to:

• Financial results

• Dividends and share repurchases

• Future pricing

• Mergers, acquisitions and divestitures

• New products or innovations

• Factory closures, lay-offs and significant developments regarding customers or suppliers

• Major events regarding the company’s equity and debt securities

• Litigation

PMI discloses material, non-public information in:

• Quarterly earnings releases

• Press releases

• Investor presentations

• SEC filings (e.g., Form 10-K and 10-Q)

Disclosure “Rulebook”

The disclosure of financial and business information is governed by:

1: Laws passed by U.S. Congress

2: Regulations and rules of the U.S. Securities and Exchange Commission (SEC)

3: Rules of stock exchanges (e.g., NYSE)

4: Best practice guidelines such as those of the National Investor Relations Institute (NIRI)

Fair disclosure

On August 15, 2000, the U.S. Securities and Exchange Commission adopted Regulation FD (Fair Disclosure) to address the selective disclosure of information by publicly traded companies and other issuers.

It mandated that all publicly traded companies disclose material, non-public information to all investors at the same time.

The information included on the PMI Investor Relations website, including webcasts, presentations and reports, helps us fulfil this requirement.

What is “material” information?

There is a substantial likelihood that a reasonable investor would consider the information in making an investment decision.

“There must be a substantial likelihood that the information would have been viewed by the reasonable investor as having significantly altered the ‘total’ mix of information made available.”

– U.S. Supreme Court

The SEC considers changes in stock price and trading volume in material assessments.

You can help PMI comply with disclosure rules

No employee of PMI and its subsidiaries should communicate any information about our businesses to any member of the investment community without securing approvals in accordance with PMI 33 (‘Providing Financial Information to Third Parties’).

Should you have any questions about what information you may or may not share publicly, please contact the Investor Relations team.

PMI and its employees are responsible for fulfilling the requirements of external laws and regulations on disclosure.

Disclosure rules

PMI Finance Academy8 Knowledge builder

What’s next? Want to stay connected with the Investor Relations team and remain up-to-date on PMI’s public disclosures?

Download the PMI IR Mobile App at: www.pmi.com/irapp

Visit our website: http://investors.pmi.com

If you have questions for us, we’re here to help.

Email us at: InvestorRelations@pmi.com

How you can help

• Notify Investor Relations before (or as soon as) important developments in your Region or market become public. For example:

– Major regulatory changes (e.g., plain packaging)

– Excise tax structure proposals/changes

– PMI price changes and tax pass-on amounts, if applicable

– Significant competitive activities (e.g., pricing, brand repositioning, product launches)

– Reduced-Risk Product (1) launches and/or developments

(1) Reduced-Risk Products (“RRPs”) is the term the company uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes.

The Investor Relations team relies on the global PMI community to help it stay informed on the latest company and industry developments worldwide.

How you can help Investor Relations