Operating companies income increased by $310 million during 2016. This increase was due primarily to:

• price increases ($335 million), • favorable currency ($52 million) and • lower marketing, administration and research costs ($28 million), partly offset by • unfavorable volume/mix ($106 million).

Asia - PMI Shipment Volume

Our cigarette shipment volume decreased by 7.6% to 260.0 billion units, mainly due to: Indonesia; Pakistan, reflecting a lower total estimated cigarette market resulting from excise tax-driven price increases and the growth of illicit trade; the Philippines; and Thailand, primarily reflecting the impact of excise tax-driven price increases in the first quarter of 2016, as well as lower market share; and in- switching from our cigarette brands to IQOS Consumables; partly offset by Korea, reflecting a normalization of the total estimated cigarette market following the disruptive excise tax increase in January 2015.

Cigarette shipment volume of increased by 4.0% to 76.5 billion units, mainly driven by Korea and the Philippines, partly offset by Vietnam, as well as in-switching from that brand to IQOS Consumables. Cigarette shipment volume of increased by 7.5% to 10.1 billion units, driven by Korea. Cigarette shipment volume of Lark decreased by 3.8% to 17.6 billion units, principally due to .

Asia - Key Market Commentaries

In Indonesia, estimated industry size, our cigarette shipment volume, market share and segmentation performance are shown in the tables below.

Indonesia Key Market Data Full-Year Change 2016 2015 % / p.p. Total Cigarette Market (billion units) 315.6 320.0 (1.4)%

PMI Shipments (million units) 105,524 109,840 (3.9)%

PMI Cigarette Market Share A 14.0% 14.6% (0.6) Dji Sam Soe 6.5% 6.9% (0.4) U Mild 4.2% 4.7% (0.5) Others 8.7% 8.1% 0.6 Total 33.4% 34.3% (0.9)

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