2018 Guide to Effective Proxies

2.4 Proxy summary | 89 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES PHILIP MORRIS INTERNATIONAL, INC. PROXY STATEMENT SUMMARY InvestorOutreach Throughouttheyear,theCompanyengagesinanextensiveshareholderoutreachprogramduringwhichitseeksinputona rangeofmatters, includingexecutivecompensationandcorporategovernance.In2015,theCompensationandLeadership Development Committee substantially revamped our executive compensation program. Our shareholders overwhelmingly supported the new compensation program, approving our 2017 say-on-pay proposal by a vote of 96.4% and our 2017 Performance Incentive Plan by a vote of 96.6%. 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 modificationstotheprogramatthistime. In 2017, we met with 61 of our top 100 institutional investors, representing 71% of our available global shareholder base (which excludes index and pension funds that do not meet with management), to discuss our business and environmental, social and governance issues. In addition to these regular Investor Relations engagements, we invited 62 of our largest shareholders, holding approximately 56% of our outstanding shares, to participate in individual conference calls to discuss executive compensation and corporate governance. These engagements provided us a better understanding of our shareholders’ 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 entireBoardofDirectors. The shareholders with whom we spoke overwhelmingly supported the new compensation program we instituted in 2015. They also commended the governance changes we have made, namely the proxy access by-law, the adoption of share retention guidelines for non-employee directors, the enhancements to the Company’s anti-hedging and anti-pledging policies, and the formalization of the Nominating and Corporate Governance Committee’s oversight of the Company’s lobbyingandtradeassociationactivitiesandexpenditures. OurFocusonSustainability As part of our continued focus on sustainability, the Board has added oversight of our sustainability strategies and performance to the charter of the Board’s Nominating and Corporate Governance Committee. Our 2017 Annual Report outlines our approach to sustainability, and notes that in 2017 we made the CDP Climate A list for the fourth year in a row and achieved CDP A list status for both Water and Supplier Engagement for the first time. The 2017 Annual Report also highlightsourcontinuedeffortstosupportourGoodAgriculturalPracticesprogram. 2018ShareholderVoteRecommendations TheBoardofDirectorsmakesthefollowingrecommendationstoshareholders: Board’sRecommendation Page Item1: ElectionofDirectors FOReachnominee 14 Item2: AdvisoryVoteApprovingExecutiveCompensation FOR 55 Item3: RatificationoftheSelectionofIndependentAuditorsfor2018 FOR 58 6• PMI2018ProxyStatement 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 not contain all of the information you should consider. Please read the entire proxy statement carefullybefore voting. 2017BusinessPerformanceHighlights In 2017, we delivered consistently strong results versus 2016 results on our key performance metrics, with net revenues growth exceeding the highest level we have achieved since our spin-off in 2008, reflecting a landmark year for our RRP, IQOS. We fell marginally short of ambitious adjusted OCI and adjusted diluted EPS growth targets, reflecting an unfavorable pricing environment in Russia, severe volume contraction in Saudi Arabia following a disruptive excise tax increase that doubled retail prices, as well as additional investments behind IQOS . Favorable pricing and judicious cos management inour combustiblebusinessalsoplayedan important role. As further discussed on page 33, we made significant progress on our strategic initiatives. Themost important achievement was our ongoing progress in commercializing IQOS . This performance was spearheaded by Japan and Korea, where HeatSticks and HEETS achieved respective shares of 13.9% and 5.5% during the fourth quarter, an unprecedented result despite capacity-driven constraints. By year-end, IQOS was available in key cities in 37 markets across all Regions and nationwideinJapan. 2017PerformanceTargets andResults Strategic Initiatives Rating -- -- 15% 115 150 50 100 PMI 2017 Annual Incentive Compensation PerformanceRating (1) (1) See pages 33-34 for details. Measure (a) Target NetRevenues (c) AdjustedOCI (d) OperatingCash Flow (f) AdjustedDiluted EPS (e) ShareofTop30OCI Markets (b) Weight Achieved Result Performance Rating 18 16 15% 15% 15% 20% 9.4% 7.4% 10.0% 8.1% 8.7% 11.2% 90 132 71 79 20% 5.5% 3.8% 120 (a) Fora reconciliationofnon-GAAP toGAAP financialmeasuresseeExhibit B to this proxy statement. (b) Numberof top30OCImarkets inwhich sharewasgrowingor stable. (c) Excludingexcise taxes, currencyandacquisitions. (d) Excluding currencyandacquisitions. (e) Excluding currency. (f) Net cashprovidedbyoperatingactivities,excluding currency. Measure(a)TargetAchievedResultWeightPerformanceRatingShareofTop30OCIMarkets(b)181615%90NetRevenues(c)8.1%9.4%15%132AdjustedOCII(d)8.7%7.4%15%71AdjustedDilutedEPS(e)11.2%10.0%20%79OperatingCashFlow(f)3.8%5.5%20%120StrategicInitiativesRating15%115PMI2017AnnualIncentiveCompensationPerformanceRating(1)50100150(1)Seepages33-34fordetails.a)Forareconciliationofnon·GAAPtoGAAPfinancialmeasuresseeExhibitBtothisproxystatement.(b)Numberoftop30OCImarketsinwhichsharewasgrowingorstable.(c)Excluding excisetaxes.currencyandacquisitions.(d)Excludingcurrencyandacquisitions.(e)Excludingcurrency.(f)Netcashprovidedbyoperatingactivities,excludingcurrency. PMI2018ProxyStatement •5 PROLOGIS PROXYSUMMARY 2017 Environmental Stewardship, Social Responsibility and Governance (ESG) Highlights WETAKEESGSERIOUSLY Continuous Board Refreshment Ms. Cristina Bita is our new director nominee (third new director nominee in three years) 10 Green Stars awarded by GRESB (1) (North America and Asia Sector Leader) (their highest designation for outstanding performance in ESG) # 1 REIT in Green Street Corporate Governance rankings for 15 consecutive years Forfurtherdetail,pleasesee“BoardofDirectorsandCorporateGovernance”,“EnvironmentalStewardship,Social ResponsibilityandGovernance”and“CompensationDiscussionandAnalysis.” (1) GlobalRealEstateSustainabilityBenchmark(“GRESB”) ContinuousBoardRefreshmentMs.CristinaBitaisournewdirectornominee(thirdnewdirectornomineeinthreeyears)10GreenStarsawardedbyGRESB (1) (NorthAmericaandAsiaSectorLeader)(theirhighestdesignationforoutstandingperformanceinESG) I 3 Total of 05 pages in section PROXYSUMMARY 2017 Compensation Highlights WEINCENTIVIZEOUTPERFORMANCERESPONSIBLY Inclusion & Diversity bonus metric added for 2017 performance year Eliminated Bonus Exchange Premiums for NEOs starting with 2018 performance year No Increase in Base Salaries of our named executive officers in 2016 or 2017 Added 7-year Vesting to Prologis Outperformance Plan Awards in 2018 plan amendment Forfurtherdetail,pleasesee“CompensationDiscussionandAnalysis.” I 2 PROXYSUMMARY Proxy Summary 2017 Business Highlights OURBUSINESSMODELDELIVERSRESULTS In2017,weoutperformedbothoperationallyandintheequitymarketsforyet anothersuccessfulyear. 108 % 5-year TSR (1) Over 640 bps outperformance over MSCI REIT and Cohen & Steers REIT Indices in 5-year TSR (2) 378 % increase in Net Earnings per share over the last 5 years 70 % increase in Core FFO per share (3) over the last 5 years (1) Totalstockholderreturn(“TSR”)iscalculatedbasedonthestockpriceappreciationanddividendspaidtoshowthetotalreturntoa stockholderoveraperiodoftime.TSRassumesdividendsarereinvestedincommonstockonthedaythedividendispaid. (2) Arealestateinvestmenttrustisa“REIT.”MSCIUSREITIndexisthe“MSCIREITIndex”andtheCohen&SteersRealtyMajorsPortfolio Indexisthe“Cohen&SteersREITIndex.”Measuredin5-yearannualizedTSR. (3) CoreFFOpershareisanon-GAAPmeasure.PleaseseeAppendixAforadiscussionandreconciliationtothemostdirectlycomparable GAAPmeasure. Forfurtherdetail,pleasesee“CompensationDiscussionandAnalysis.” 108 % 5-yearTSR (1) Over640bpsoutperformanceoverMSCIREITandCohen&SteersREITIndicesin5-yearTSR (2) 378 % increaseinNetEarningspersharoverthelast5years70 % increaseinCoreFFOpershare (3) overthelast5years I 1