Philip Morris (0M8V) Risk Analysis

Governmental actions, combined with the diminishing social acceptance of smoking and private actions to restrict smoking, have resulted in reduced industry volumes for our combustible products in many of our markets, and we expect that such factors will continue to reduce combustible consumption levels and will increase down-trading and the risk of counterfeiting, contraband, illicit trade and cross-border purchases. Governmental actions to restrict or entirely prohibit the use of certain SFP categories have also been considered or adopted in various jurisdictions. A significant factor influencing these developments are reports issued by the World Health Organization (the "WHO") and Framework Convention on Tobacco Control (the "FCTC"), and related proposals, which make a number of policy recommendations on SFPs that, if implemented, could restrict both the availability of these products and the access to accurate information about them. These reports and proposals are not binding on the WHO Member States or on parties to the FCTC, and so it is not possible to predict the extent to which any of the reports or proposals are implemented into regulations by Member States. However, these proposed guidance documents could ultimately lead to restrictions on the availability of certain of our SFPs or access to accurate information about them in one or more of our current or future markets, which could have a material adverse effect on our financial results and growth prospects. We anticipate that significant regulatory restrictions will continue to be considered and adopted in many markets. Regulatory initiatives that have been contemplated, proposed, introduced, or enacted by governmental authorities in various jurisdictions include: - restrictions on or licensing of outlets permitted to sell tobacco or nicotine-containing products;- the levying of substantial and increasing tax and duty charges;- restrictions or bans on advertising, marketing and sponsorship;- the display of larger health warnings, graphic health warnings and other labeling requirements;- restrictions on packaging design, including the use of colors, and mandating plain packaging;- restrictions on packaging and cigarette formats and dimensions;- restrictions or bans on the display of product packaging at the point of sale and restrictions or bans on vending machines;- generation sales bans, under which the sale of certain tobacco or nicotine-containing products to people born after a certain year would be prohibited;Classification of the product as food such that any nicotine amounts beyond de minimis content de facto bans the nicotine product from the market- requirements regarding testing, disclosure and performance standards for tar, nicotine, carbon monoxide and/or other smoke or product constituents;- disclosure, restrictions, or bans of tobacco and nicotine-containing product ingredients, components or other product features, including bans on the flavors of certain tobacco and nicotine-containing products, and restrictions on certain device features;- increased restrictions on smoking and use of tobacco and nicotine-containing products in public or private spaces, both indoors or outdoors;- restrictions or prohibitions of novel tobacco or nicotine-containing products or related devices;- elimination of duty free sales and duty free allowances for travelers;- restrictions in terms of importing or exporting our products impacting our logistics activities and ability to ship our products;- encouraging litigation against tobacco companies; and- excluding tobacco companies from transparent public dialogue regarding public health and other policy matters. Our financial results could be materially affected by regulatory initiatives resulting in a significant decrease in demand for our brands. More specifically, requirements that lead to a commoditization of tobacco products or impede adult consumers' ability to access and convert to our SFPs, as well as any significant increase in the cost of complying with new regulatory requirements, could have a material adverse effect on our financial results and growth prospects.