It is a great pleasure for me to be back at the CAGNY Conference, especially as this is the first time that Philip Morris International is present here as an independent publicly traded company. Let me also extend a warm welcome to those joining us on the webcast.

My remarks contain forward-looking statements and, accordingly, I direct your attention to the Forward-Looking and Cautionary Statements section of today’s news release and our regular SEC filings. Reconciliations of non-GAAP measures included in this presentation to the most comparable GAAP measures are provided on the last slide of this presentation and are available on our website.

The key points that I will cover during my presentation are:

We had an excellent year in 2008;

We face currency headwinds if current rates prevail throughout 2009;

We have not seen any consumer downtrading in emerging markets so far and we believe that we are well placed to weather any eventual change in consumer behavior;

We remain as committed as ever to generously rewarding our shareholders; and

Our constant currency outlook for 2009 is very strong.

Let’s look at 2008. We achieved or exceeded all the mid to long-term currency neutral targets that we established and shared with you last March.

Here are the results in more detail.

In 2008, PMI cigarette shipment volume increased by 2.5% to 869.8 billion units. Our organic growth rate, that is excluding the impact of acquisitions, was 1.0%.

This strong performance was driven by emerging markets in the Eastern Europe, Middle East and Africa, or EEMA, Region, as well as the Asia and Latin America & Canada Regions and only partly offset by the impact of continued market declines in the mature markets of the EU Region and Japan. In emerging markets, PMI benefited from overall industry growth and consumer uptrading to our strong premium and mid-price brands, trends that continued through the end of the fourth quarter.

Our volume performance in 2008 was a significant improvement compared to previous years.

Net revenues excluding excise taxes rose by 12.7% in 2008 to $25.7 billion, driven by an improved volume and mix performance, strong pricing and favorable currency. Excluding currency and acquisitions, net revenues grew by 5.6%.

Revenue growth was driven by the EEMA Region with an increase of 13.6% excluding currency as higher volumes, a better product mix and price increases positively impacted our results in Eastern Europe, Turkey, the Balkans and North Africa. The Asia and Latin America & Canada Regions also achieved very solid net revenue growth, while revenues excluding currency declined slightly in the EU Region due to inventory build-ups in the prior period in advance of excise tax increases that distorted the Czech market and the impact of very large tax driven price increases in Poland. Excluding these two markets, net revenues in the EU Region were up 1.2% excluding currency.

PMI’s Operating Companies Income, or OCI, reached a record level of $10.4 billion in 2008. This represents an increase of 16.7% over the prior year, and 9.9% excluding the favorable impact of currency and acquisitions.

The key drivers of our very strong OCI growth were the EEMA and Asia Regions, where we achieved double digit profitability growth in the key markets of Egypt, Indonesia, Korea, Romania, Russia, Turkey and Ukraine. The EU Region had a solid performance with OCI up 2.7% excluding currency, as did the Latin America & Canada Region.

Reported Earnings per Share, or EPS, of $3.32 per share were up 16.1% in 2008 and 10.8% excluding currency. Adjusted EPS of $3.32 were up 52 cents, or 18.6%, and excluding currency rose by 13.2%.

We have excellent momentum going into 2009. Our market shares are growing overall, in OECD and in non-OECD countries. And our share growth is accelerating, as underscored by the chart which shows our full year 2008 versus 2007 performances and our 3 month moving average shares through December 2008.

We expect our underlying business performance to add 33 to 48 cents to our EPS in 2009, representing a growth rate of 10 to 14%. This strong performance will regretfully be overshadowed by a significant currency hit. Our EPS guidance for 2009 is based on exchange rates prevailing in early February.

Making predictions about currencies is particularly difficult at present due to the huge volatility, which is illustrated by the fact that the adverse currency impact would have been 40 cents, or only half, at the exchange rates prevailing just a few weeks ago in mid December 2008.

The chart shows the evolution in the exchange rate of the Dollar against the Euro for the period 2007 through early 2009.

PMI benefited from a favorable currency situation during the first nine months of 2008. In September, the US Dollar started to strengthen significantly as it was perceived as a “safe haven” in turbulent financial times. As a result, there was an adverse currency impact from the Euro on our fourth quarter results.

After significant volatility in December, the US Dollar has once more strengthened in the wake of election optimism in the USA and weak economic data in the EU and stood at 1.28 in early February, when we established our EPS guidance.

Since the beginning of September, we have also witnessed a strong depreciation of many emerging market currencies against the US Dollar, the most notable being the 47% decline in the value of the Russian Ruble and the 74% decline in the value of the Ukrainian Hryvnia.

Many in the investment community have expressed surprise at the magnitude of the currency unfavorability that we have disclosed. Let me try to explain this impact in greater detail first by addressing our exposure by underlying currency. As we mentioned during our earnings call, the currencies in the key emerging markets of Mexico, Russia, Turkey and Ukraine account for 58 cents of the total foreseen adverse variance of 80 cents, while other emerging market currencies are 11 cents negative.

The decline in the Euro is expected to have an adverse impact of 13 cents and other developed market currencies another 16 cents. This is expected to be partially offset by a 15 cent positive impact from the Japanese Yen and a 3 cent positive impact generated by the conversion of our Swiss Franc costs into US Dollars at more favorable rates.

I would like to stress that the breakdown of the variance is based on underlying currencies and that this does not necessarily equate to the impact on individual market profitability. Let me elaborate further.

Currency, whether positive or adverse, has a straight line impact on net revenues. From our discussions, it appears that some models used outside PMI, which cannot replicate the underlying details of our business model, have sought to simplify the complex effect of currency movements by applying a similar rule to profitability. However, the relationship between currency and OCI is neither linear nor simple nor consistent across our wide range of markets. What happens is that the impact of favorable and unfavorable currency movements on OCI is also influenced by the extent to which there are elements in the cost structure that are not in local currency.

Let me use a theoretical example to illustrate this. Market X has net revenues of $2.0 billion, but faces a currency depreciation of 25%. The impact on net revenues will be a decline of $500 million or 25% to $1.5 billion. If all the costs were in local currency, they would also go down by 25% and OCI of $1.2 billion in this example would decline to $900 million.

However, if half the costs in this market were in US Dollars, be they leaf costs, direct materials or marketing expenses, then total costs in this market would decline not to $600 million but to $700 million. As a result, OCI would decline to $800 million, or by 33%, and the OCI margin would decrease from 60% to 53%. The same effect would of course work in reverse in the event that the local currency appreciated.

To what extent can we directly protect ourselves against currency swings through hedging?

Let me reiterate that it is our policy never to carry out income hedges - or what we call “translation hedges”. Such hedges are purely speculative and would have a significant unpredictable impact on the company’s profitability. We at PMI run a solid and prudent business and therefore will not speculate on currencies.

However, we do seek to protect our business, where appropriate and feasible, through so-called “transaction hedges”. The two main examples are the hedging of the Japanese Yen on the sale of cigarettes to our affiliate in Japan and the hedging of the US Dollar on the purchase of tobacco leaf.

Opportunities for additional transaction hedges are however quite limited. They are generally not available at acceptable costs due to the large interest differentials and the applied volatility charges or simply non-existent in large quantities in our key emerging market currencies.

Let’s look at PMI’s cost structure.

In 2008, our total costs above the OCI line were $16.2 billon, of which $9.3 billion represented Costs of Goods Sold and $6.9 billion marketing, overheads and other expenses.

Tobacco leaf is the single largest component in our cost structure with $3.6 billion in 2008. In terms of currency denomination in our P&L, 26% of these costs are in US Dollars, 48% in Euros and 26% in other currencies.

PMI purchases tobacco leaf from a number of countries. The most important sources of leaf are Argentina, Brazil, Greece, Malawi, Turkey and the USA.

Tobacco leaf is fundamentally a US Dollar denominated agricultural crop. However, PMI converts a large part of its leaf purchases into Euros for inventory and balance sheet valuation purposes and this currency is subsequently used in transactions with local affiliates.

Direct materials account for $2.4 billion in costs. In terms of currency, 60% are in Euros, 26% in Dollars and 14% in other currencies.

Other elements of our Cost of Goods Sold total $3.3 billion with the majority of these costs being denominated in local currencies, which here would include part of the Euro total due to our large production volume in the EU.

Likewise our $6.9 billion in sales allowances, marketing expenditures, overheads and other expenses above the OCI level are predominantly accounted for in local currency, though with 12% the Swiss Franc is relatively important, reflecting the location of our operations center in Lausanne, Switzerland.

While this gives you the overall picture, it should be stressed that there are significant regional variations in the currency split of PMI’s costs, as illustrated here with the examples of Indonesia and Russia.

In Indonesia, 88% of our costs are in Rupiah, while in Russia only 39% of our costs are denominated in Rubles. This reflects the greater Dollar and Euro sourcing of leaf tobacco and direct materials in Russia. In Indonesia, we are able to include local tobacco in our cigarette production and cloves are sourced locally. In both countries, marketing and support function costs are predominantly accounted for in their respective local currency.

The Russian example also highlights the importance to PMI not only of movements of the Ruble against the Dollar but also the Ruble against the Euro.

Let me close this section on currency by highlighting the fact that the Japanese Yen is the only major currency which has appreciated in value since the beginning of 2008. All our other main currencies have moved in the same unfavorable direction, some with large declines, thus amplifying the adverse impact. History has generally shown that large currency swings tend to be at least partially reversed over time so we are optimistic that these strong currency headwinds will be temporary.

A second concern that has been expressed by investors is the potential for consumer downtrading particularly in emerging markets. The fact is that we still see continued uptrading in emerging markets.

Consumer uptrading to premium cigarette brands has been taking place over several years across a very wide range of countries, as illustrated on this slide. For example, the premium and above segment in Russia has grown from an estimated 11.9% of the total market in 2005 to 17.9% last year, an average growth rate of two share points a year. In Romania and in Mexico, the segment reached very high levels for emerging markets of 43.5% and 65.4% respectively in 2008.

There are three main reasons that explain this favorable trend.

Absolute price levels for cigarettes in key emerging markets remain moderate and affordable. Premium A Mild is priced at just over 80 US cents per pack of 16 in Indonesia. Marlboro retails at just over a dollar in Russia, around 2 Dollars in Mexico and slightly below 3 Dollars in Turkey.

Price gaps have narrowed compared to five to ten years ago. Even in Russia, where the price gap between Marlboro and Optima is just over 200%, the absolute gap is 78 cents and premium cigarettes remain an aspirational consumer item.

The third reason is that cigarette prices relative to other consumer products remain low. In fact in Russia, a pack of Marlboro costs about the same as a can of local beer or half a liter of Coca-Cola, but significantly less than a Big Mac, a tube of toothpaste or a Budweiser.

Consumer uptrading continues. The trend actually improved in the second half of last year in Indonesia, Turkey and Ukraine, while the slight slowdown in Argentina and Mexico reflects the timing of substantial price increases which distorted the quarterly trends. In Russia, where we just took another price increase, the premium segment growth has softened.

The global economic crisis is however still unfolding and, therefore, there is no certainty that these positive trends will be sustained. We however do not believe that such a shift, if it were to happen, would be severe in magnitude for the reasons I just outlined.

Another key question is our pricing power going forward. Our $1.2 billion positive pricing variance on OCI in 2008 is testament to the resilience of our company. We have already announced further price increases across a wide range of countries, including Italy, Spain, Russia, Turkey, Indonesia and Mexico. We are therefore confident of our pricing power going forward.

Pricing and excise taxes are linked. While large excise tax increases did disrupt our business in the early part of the decade in such markets as France, Germany and the Netherlands, a reasonable approach is now being taken by Governments in key markets. They appear to have recognized that regular moderate excise tax increases, along with structural changes that focus on specific elements, minimum excise taxes and the elimination of loopholes is beneficial from both a Government revenue and public health perspective.

So a key success factor for PMI going forward will be the strengthening of its leading portfolio of brands and innovation in particular behind Marlboro, which remains the only truly global cigarette brand. We have proven that we can return the brand to a solid growth path and thus believe that Marlboro has a very exciting future ahead.

In the Marlboro brand architecture, Marlboro Red’s positioning continues to be anchored upon its unique rich flavor that represents the timeless masculine values of freedom, independence, mastery of one’s destiny and being in charge, focused and driven.

Marlboro Gold is the brand that explores new dimensions in smoking and is progressive, open-minded, casually elegant, inventive and confident.

Marlboro Fresh provides refreshing sensations, with an easy-going and extroverted personality.

This new architecture is being established through appropriate packaging upgrades, line extensions, effective consumer communications and continued quality improvements.

The first major innovation for Marlboro Red was Marlboro Filter Plus, also called Marlboro Flavor Plus in certain markets. The enhanced taste, which is due to the innovative tobacco plug in the filter, enabled us to extend Marlboro Red into the low and super low tar and nicotine segments with 6, 3 and one milligram variants.

It has been particularly successful in Romania, where it captured a 2.5% national share in December, as well as a 4.3% share in the capital Bucharest.

Marlboro Filter Plus and Flavor Plus are now available in 20 markets and are performing well across a wide range of geographies, particularly in large urban areas. The brand has a 2.2% share in Kuwait, 1.2% in Moscow, 0.6% in Kiev, 0.4% in Tokyo and an estimated 0.3% share in São Paolo, where it was launched only in December.

Marlboro Intense is a flavorful variant, which has been launched in nine countries, predominantly in a shorter format. Marlboro Compact is a lighter flavored version sold in Italy, while the Marlboro Pocket Pack is a shorter version of the traditional Marlboro Red. In December, Marlboro Compact achieved a 0.5% market share in Italy and Marlboro Pocket Pack a 0.6% share in Spain.

Marlboro Gold is being extended into new consumer dimensions. Marlboro Gold Edge, the first super-slims variant for Marlboro has been launched in Hungary, Poland, Russia and Ukraine and has already achieved a 0.4% market share in Warsaw. Marlboro Gold Advance is a smooth full flavor variant, which is being tested in France with very favorable initial results.

We have also developed a new pack for Marlboro Gold, which is clearly more modern and underscores the differentiated positioning of Marlboro Gold. It was initially tested in Austria, France and Italy with very positive results. In all three markets, the new pack has been very well received by existing adult smokers of the brand and has attracted considerable interest from adult smokers of competitive brands. The new pack is currently being rolled out nationally in both Austria and Poland.

The menthol segment is growing across a wide range of markets. For example, in the biggest menthol market in the world, Japan, the share of menthol is estimated to have increased from 18.4% in 2005 to 22.0% in 2008.