Annual Financial Report for the year 2025 (unofficial PDF version)

Annual Financial Report 2025

Statutory Declaration of Persons Responsible for the Philip Morris ČR a.s.

2025 Annual Financial Report

We confirm that to the best of our knowledge, the financial statements and consolidated financial statements, drawn up in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and financial results of the issuer, Philip Morris ČR a.s., and the units included in the consolidation as a whole, and the consolidated annual report according to the law regulating accounting, contains a true overview of the development and results of the issuer and the position of the issuer and the units included in the consolidation as a whole, together with a description of the main risks and uncertainties it faces. We further confirm that the consolidated sustainability statement is prepared in accordance with the sustainability reporting standards adopted by the European Commission and the requirements established pursuant to Article 8(4) of the directly applicable EU regulation governing the framework for the facilitation of sustainable investments (EU Taxonomy Regulation).

In Kutná Hora on April 27, 2026

Fabio Costa Maurizio Lionetti

Chairman of the Board of Directors Member of the Board of Directors

Philip Morris ČR a.s. Philip Morris ČR a.s.

Introductory Word

Dear Shareholders,

Philip Morris ČR a.s. continues its remarkable transformation toward a smoke-free future-one built on innovation and responsibility. As we often say, we cannot change the past; we can only shape the future. And we are working toward a future that, through our ingenuity and innovation, creates opportunities, strengthens the regions in which we operate, and reflects the evolving expectations of society as a whole.

Looking at market developments, the past year saw a continued positive evolution in consumer behavior and in the market for nicotine products. These significant changes have been enabled by the growing availability of smoke-free alternatives which are less harmful or potentially less harmful compared to cigarettes. Newly available categories, variants, and flavors are contributing to the ongoing decline in cigarette consumption. It is becoming more clear that what we started in 2014 around the world and in 2017 in our region with the introduction of the first IQOS models, is the right direction - sustainable in the long term - and that less harmful ways of consuming nicotine are finding a solid place among adult users.

A closer look at the performance of individual categories shows that electronic cigarettes recorded the most notable growth within the smoke free portfolio in 2025, while the heated tobacco category has remained stable in its performance. A promising development for the coming years is the launch of ZYN nicotine pouches in both our markets last year. Although we are entering a highly competitive environment, experience from both domestic and international markets shows that this category enjoys strong demand among adult nicotine consumers.

The ZYN brand was often mentioned last year for another, very encouraging reason. Preparations to begin manufacturing ZYN nicotine pouches at our Kutná Hora

facility were launched, with production expected to start in the first half of 2026. This investment, exceeding two billion Czech crowns, represents a significant milestone not only for Philip Morris ČR a.s. but also for the entire Kutná Hora region. I am extremely pleased that this modernization connects the historical roots of our facility-with its more than two hundred year tradition of tobacco processing-to a sustainable future. With this step, Kutná Hora is becoming part of Philip Morris International's manufacturing transformation, producing nicotine pouches, a smoke free offering.

The development and expanding availability of smoke free alternatives come also with an inseparable responsibility. While these products play an important role for adults who would otherwise continue to smoke, preventing youth access to nicotine products remains one of our highest priorities-not only in the Czech Republic and Slovakia but worldwide. We view the youth access prevention to nicotine products as a key societal issue requiring cooperation among manufacturers, public institutions, retailers, and wider society. We are committed to actively contributing to its solution.

One of the pillars of PMI's internal culture and of fulfilling our long term vision is the concept of the "Gamechanger," which best captures who we are. We are a company that has been redefining established norms for more than a decade while undergoing a transformation that shapes both our internal operations and our external impact.

I am confident that thanks to the work of our employees and our collaboration with partners and the public sector, we will continue to fulfill our vision-aligned with the expectations of our shareholders and society as a whole.

Fabio Costa

Chairman of the Board of Directors Philip Morris ČR a.s.

Table of Contents

1. Company Profile and Important Events in 2025.................................................................................................................................... 5

2. Business Results 2025.............................................................................................................................................................................. 14

3. Risk Factors Related to Our Business and Industry .............................................................................................................................. 17

4. Forward-Looking and Cautionary Statements ....................................................................................................................................... 23

5. Consolidated Sustainability Statement ................................................................................................................................................... 24

6. Independent Auditor's Limited Assurance Report on the Consolidated Sustainability Statement of Philip Morris ČR a.s.......... 97

7. Consolidated Financial Statements......................................................................................................................................................... 103

8. Separate Financial Statements ................................................................................................................................................................ 145

9. Report on Relations................................................................................................................................................................................... 185

1. Independent Auditor's Report on the Audit of the Consolidated and Separate Financial Statements of Philip Morris ČR a.s... 188

2. Report of the Supervisory Board ............................................................................................................................................................. 198

3. Report on Corporate Governance. .......................................................................................................................................................... 199

This document created in PDF format is a translation from the original which was prepared in the Czech language. It represents non-official version of the Annual Financial Report. The company has taken all steps to ensure that this version conforms to the original. The official version of the Annual Financial Report prepared in single electronic reporting format ("ESEF"), which is the XHTML format, can be accessed online at: https://www.pmi.com/markets/czech-republic/cs/investor-relations/vyrocni-zpravy/. In case of any content discrepancies the official version of the Annual Financial Report always takes precedence over this document.

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Company Profile and Important Events in 2025

About us

We are Philip Morris ČR a.s., an affiliate of Philip Morris International Inc. (PMI), which spearhead the transformation of the nicotine industry by providing adults who would otherwise continue to smoke or use other nicotine products with innovative smoke-free alternatives that reduce or have the potential to reduce risk compared to traditional cigarette consumption.

Since 2017, we have been offering our adult consumers a wide portfolio of innovative smoke-free products, which we are constantly expanding. In the Czech Republic and Slovakia, we1 distribute the heated-tobacco solutions, IQOS ILUMA i with TEREA, LEVIA and DELIA consumables and KT&G-licensed lil SOLID with Fiit consumables. At the same time, we distribute electronic cigarettes VEEV ONE, VEEV inPRIME and VEEV NOW ULTRA, nicotine pouches ZYN and THUNDER and provide a variety of related accessories and services to adult nicotine users. We are also providing adult smokers with popular international and local brands such Marlboro, L&M, Petra, Sparta and RGD.

Philip Morris ČR a.s. is listed on the Prague Stock Exchange (Burza cenných papírů Praha) and holds a 99% interest in Philip Morris Slovakia s.r.o., registered in the Slovak Republic.

Philip Morris ČR a.s. runs the production plant in Kutná Hora, which has a tradition of more than two hundred years of tobacco processing. Today, the plant is one of PMI's most modern, efficient, and environmentally friendly operations globally, advancing its smoke-free future through the launch of ZYN nicotine pouches production.

In the Czech Republic and Slovakia, we employ more than 1,300 employees, who make a significant contribution to the company's development and transformation. For this reason, we continuously strive to further improve our inclusive and high-standard work environment. We aim to offer the best possible conditions, so that every employee can fully meet their potential. The EQUAL-SALARY certification in both countries validates our high performance in this area.

Being part of a global leading nicotine company, we keep focus on sustainability in any part of our business. We are mindful of and committed to our responsibility towards communities and environments in which we operate. We work hard to address sustainability issues that are material to us. At the same time, we have been contributing significantly to charitable projects across a wide range of organizations and specializations, including programs aimed at improving living conditions in communities.

1 In this report, unless otherwise indicated, "we," "us," "our," and "ours" refer to Philip Morris ČR a.s.

Our portfolio

In the Czech Republic and Slovakia, we continued to strengthen the strategic growth of our smoke free portfolio, led by IQOS ILUMA and its compatible consumables. We expanded the availability of lil SOLID and further reinforced our position in the vaping category, where VEEV ONE, VEEV InPrime and VEEV NOW ULTRA maintained strong momentum.

In 2025, we expanded our smoke-free portfolio by introducing ZYN nicotine pouches in both the Czech Republic and Slovakia, further reinforcing the company's multicategory approach and strengthening our presence across all key smoke-free product segments. Our cigarette portfolio also saw several targeted innovations and structural optimizations to better meet the needs of adult smokers.

Heated tobacco devices

IQOS ILUMA

IQOS ILUMA is a key product in our smoke-free portfolio. Like previous generations of IQOS devices, it does not burn tobacco and therefore produces no smoke. Thanks to the Smartcore Induction System technology, the device creates an aerosol that contains 95% fewer harmful chemicals compared to cigarettes2. At the core of this technology is an innovative metal heating element coated with stainless steel, inserted into the center of the tobacco stick for optimal heating. The result is easier draw, a high amount of aerosol, and a taste that remains consistent throughout use. Unlike previous generations, IQOS ILUMA has no heating blade, eliminating the risk of blade breakage and removing the need for device cleaning.

The newest device currently on the market is the IQOS ILUMA i. This premium device introduces new features and offers several advantages over its predecessor, such as a touch display, a pause mode, and a battery optimization function in eco mode, which can extend the overall battery life by up to one year.

All IQOS ILUMA i devices are compatible with TEREA tobacco sticks, which offer a wide range of classic and lighter tobacco flavors, and with DELIA sticks, also available in classic and lighter tobacco flavors. In addition, the devices are compatible with LEVIA nicotine sticks without tobacco, which provide users with refreshing menthol and fruity flavors.

lil SOLID

In addition to distributing its own range of IQOS products, PMI collaborates with the South Korean company KT&G and offers a

tobacco-heating device called lil SOLID EZ in selected markets, including the Czech Republic. This device uses a heating-pin technology that heats the tobacco from the inside. The technology used in lil SOLID EZ is the result of thorough scientific research, enabling adult users to enjoy a smoke-free tobacco experience with significantly lower levels of harmful chemicals compared to cigarettes3.

lil SOLID EZ represents another step toward building a smoke-free future and is designed primarily for adult smokers and nicotine users who are looking for a simple and affordable device.

Vaping

In the closed-system e-cigarette segment, we offer the premium VEEV ONE device, which is affordable, easy to use, and delivers an exceptional vaping experience. The pods are available in a wide range of flavors. VEEV ONE is the market leader in the closed-system category in both the Czech Republic and Slovakia.

Last year, we also introduced the VEEV inPrime device. This variant features the new AdvanceVape Induction System™, designed to fully enhance the richness and intensity of every flavor. It also offers long-lasting performance, providing up to 1,400 puffs per pod.

In the disposable e-cigarette category, we offer the VEEV NOW ULTRA device, which features a button-free design and activates automatically with a simple puff, making it ready to use at any time. The device requires no maintenance-no cleaning, charging, or refilling of e-liquid.

2 Important information: This does not necessarily equal a 95% reduction in risk. IQOS ILUMA is not risk-free "95% less" represents the average reduction in levels of the 9 chemicals recommended for reduction in cigarette smoke by the World Health Organization, which do not include nicotine. See Important Information on www.iqos.com. This does not necessarily equal a 95% reduction in risk. IQOS ILUMA is not risk-free.

3 Important information: Lil Solid EZ is not risk-free. Reductions in levels of the 9 chemicals recommended for reduction in cigarette smoke by the World Health Organization, which do not include nicotine. See Important Information on https://www.iqos.com.

Nicotine Pouches

ZYN nicotine pouches are available in various formats based on pouch size, nicotine strength, and preferred flavor. The pouches do not contain tobacco; they contain only pharmaceutical-grade nicotine derived from tobacco, along with a blend of food-grade approved ingredients and flavorings. When using ZYN, 99% fewer harmful chemicals are released compared to cigarettes4.

Like the other products in our smoke-free portfolio, ZYN nicotine pouches are intended exclusively for adult users who would otherwise continue smoking cigarettes or using other nicotine products.

We continue to focus on the systematic commercialization of this new product category across individual sales channels, with the aim of ensuring broad consumer availability and further strengthening our market position. In Slovakia, we distribute also nicotine pouches THUNDER.

Cigarettes

We continue to provide support for our cigarette portfolio. Last year, we introduced a new design for the entire L&M family, accompanied by a global campaign aimed at strengthening the brand's emotional perception. This support also included a price adjustment for two super-slim variants, enabling us to better respond to the price sensitivity of the adult female consumer segment.

The year 2025 was an important milestone for the PETRA brand, which celebrated its 40th anniversary on the market. We marked this occasion by launching a limited edition that received very positive feedback from both smokers and retailers.

As part of optimizing our cigarette portfolio, two long-cigarette variants of Chesterfield were migrated into the Marlboro Crafted line. At the same time, the Marlboro Crafted brand was introduced in a new design.

4 Important information: This does not necessarily equal a 99% reduction in risk. ZYN is not risk-free."99% less" represents the average reduction in levels of 9 harmful chemicals the World Health Organization recommends reducing in cigarette smoke, which do not include nicotine. Assessment of the smoke from a standard reference cigarette and substances released from a ZYN pouch. See Important Information on ZYN.com

Innovation and development of less harmful alternatives

Since smoking prevalence remains largely unchanged in the long term, there is a need to offer new effective solutions that can help deliver more ambitious public health goals. PMI therefore directs its efforts towards developing less harmful alternatives to cigarettes.

PMI have publicly declared that its goal is to help support all current adult smokers who would otherwise continue to smoke, to switch to smoke-free products. PMI announced its updated ambition for more than two-thirds of PMI total world-wide net revenues coming from smoke-free products by 2030.

Tobacco Harm Reduction

It has been scientifically substantiated that the primary cause of smoking related diseases is not nicotine, but the inhalation of harmful and potentially harmful constituents (HPHC)5 created as a result of the combustion process. The harm reduction concept is, thus, based on the elimination of the process.

For any smoke-free alternative to be successful in reducing harm compared with continued smoking, it must fulfil two criteria: it must be scientifically substantiated as significantly less harmful than cigarettes; and it should be satisfying for current adult smokers so that they completely switch.

This is the goal that PMI is actively working to achieve, and it underlines the motivation behind initiating its independent journey towards a smoke-free future. Smoking prevention, as well as a quality addiction system, must continue to play a primary role in the protection of public health. However, PMI is convinced that science-based, innovative smoke-free products can also make a significant contribution to permanently reducing the harm and risks associated with smoking cigarettes. The overall goal, therefore, is to develop smoke-free alternatives that present significantly less risk of harm than continued smoking, that are acceptable to current adult smokers who would otherwise continue to smoke cigarettes, and which are generally not attractive to youth, non-smokers, or former smokers.

Extensive Scientific Research

Since 2008 PMI has invested over USD 16 billion6 into the development, the scientific research and the capacity building of smoke-free products portfolio based on heating of tobacco or liquid. To this end, PMI employs nearly 1,500 world-class engineers and experts that drive forward our research, including laboratory and clinical trials.

Robust and transparent scientific research is the cornerstone of the development and assessment of our smoke-free products. PMI extensive Research and assessment program draws from the universally recognized methods used by the pharmaceutical industry and follows the instructions of the US Food and Drug Administration (FDA) for Modified Risk Tobacco Products (MRTP).

PMI clinical trials show both the potential of our smoke-free products to reduce exposure to harmful and potentially harmful constituents as well as to reduce risk of smoking related diseases. The assessment program includes post-market consumer perception and behaviour studies conducted to verify whether consumers correctly understood the product communication and determine how they will use PMI products in real life.

Combustion, Heating and Nicotine

Nicotine containing products are addictive and not risk-free. However, a long-term expert consensus has determined that nicotine is not the main cause of smoking related diseases. The majority of harmful effects of smoking are caused by chemical constituents formed as part of the tobacco combustion process.

The combustion process generates cigarette smoke that incorporates flavours from the tobacco blend, along with nicotine naturally present in tobacco leaves. When combusted, the temperature of the tip of a cigarette can reach up to 800 degrees Celsius. Such high temperatures lead to the creation of more than 6 thousand different chemical constituents7,8 many of which are harmful or potentially harmful. These harmful and potentially harmful constituents are classified according to comprehensive lists created by international organizations and public institutions in the area of public health. These include the U.S. Food and Drug Administration, Health Canada or World Health Organization. Around 100 of these chemicals are considered to be a cause or a probable cause of smoking related diseases such as lung cancer, cardiovascular diseases, or chronic obstructive pulmonary disease.

Through years of research and development, PMI has therefore developed a new class of innovative products that do not rely on the principle of burning, and therefore do not produce smoke. Instead, PMI has found several ways to produce a flavorful nicotine-containing vapor that a consumer can inhale, but that has significantly lower levels of harmful chemicals than cigarettes9. PMI conducts a very precise temperature monitoring in its heated tobacco products. This is to ensure that the tobacco temperature does not reach a level of burning.

5 Harmful and Potentially Harmful Constituents

6 As of December 31,2025, source: https://www.pmi.com

7 How Tobacco Smoke Causes Disease: The Biology and Behavioural Basis for Smoking-Attributable Disease: A Report of the Surgeon General. https://www.pmiscience.com

8 The Chemical Components of Tobacco and Tobacco Smoke, Second Edition. https://www.pmiscience.com.

9 Smoke-free products are better alternative to smoking, the best way to avoid the harms of smoking is to quit, or never to start. Some people, including pregnant women, nursing mothers, and people with existing conditions such as heart disease, high blood pressure, or diabetes should not use nicotine-containing products. Minors should not have access to or use tobacco- or nicotine-containing products.

Preventing combustion then reduces or eliminates the formation of harmful or potentially harmful constituents. Heating the tobacco is still necessary for it to release aroma and nicotine. The elimination of the combustion process and a subsequent significant reduction of harmful or potentially harmful constituents is the cornerstone of the development of smoke-free products. PMI's goal is not only to reduce or eliminate harmful or potentially harmful constituents, but to also offer a taste ritual and nicotine level comparable to cigarettes. This is to enable adult smokers who would otherwise continue to smoke to completely switch from cigarettes to smoke-free products.

Our electronically heated product IQOS is the most advanced of PMI's reduced risk products, where tobacco contained in a stick and inserted into the device is heated to around 300 - 320 degrees, and no combustion process takes place in the heated tobacco product. IQOS is therefore a better choice than cigarettes for those adult smokers that would otherwise continue to smoke cigarettes. Switching completely to IQOS represents less risk to health of adult smokers than continuing to smoke. IQOS emits an aerosol that contains 95% less harmful chemicals compared s to cigarettes10.

Another segment within the array of smoke-free alternatives includes tobacco-free products containing liquid nicotine extracted from tobacco leaves. These products are recognized as e-cigarettes and are available under the VEEV brand. A nicotine-containing e-liquid is heated to generate an aerosol.

Thanks to breakthrough technology, they are a better alternative for adult smokers than continued smoking. It is crucial to emphasize that products containing tobacco and/or nicotine are not risk-free. They contain nicotine, which is addictive. Minors, pregnant women, nursing mothers, and people with existing conditions such as heart disease, high blood pressure, diabetes, or epilepsy should not use nicotine-containing products. In particular, it is important that products containing tobacco or nicotine are not available to minors.

Key Scientific Findings

PMI has conducted, as part of its scientific assessment program, a range of clinical trials related to Platform 1 (IQOS). The most significant study to date is the six months Exposure Response Study (ERS) complemented by six months extension study that compared exposure response of adult individual following a switch from cigarettes to IQOS. The results of the first six months of clinical testing proved that participants - adult users of the IQOS product - are exposed to significantly less chemicals than adult cigarette smokers and all eight major Clinical Risk Endpoints (CREs) associated with smoking-related diseases improved favorably and in the same direction as those of smokers who quit.

These clinical endpoints concern, amongst others, lipid metabolism, acute effect on cardiovascular system, inflammation, endothelial dysfunction, oxidative stress, and respiratory tract damage. The majority, specifically five out of eight of these endpoints, showed a statistically significant difference between IQOS adult users and those who continued to smoke cigarettes. Furthermore, the results after twelve months confirmed that the alterations in all eight monitored biomarkers of potential risk, observed during the transition to heated tobacco, are entirely comparable to the data achieved when quitting smoking. You can find more information about IQOS and PMI's scientific research at www.pmi.com and www.pmiscience.com.

Decision of the U.S. Food and Drug Administration (FDA) to Grant Modified Risk Tobacco Product Status

On July 7, 2020, the U.S. Food and Drug Administration (FDA) authorized the Modified Risk Tobacco Product (MRTP) status with the "reduced exposure order" for IQOS and three HeatSticks11 variants. The granting of the MRTP status is a result of an assessment of a wide range of detailed scientific evidence submitted to the FDA by PMI in December 201612. The decision concerns exclusively PMI's business activities in the United States. So far, it is only the second tobacco product and the first in the category of heated tobacco products, eligible to use this status. In April 2026, the FDA announced that it has authorized the renewal of this decision. The FDA justified the MRTP authorization for IQOS as being suitable for the support of public health goals and is expected to benefit the health of population as a whole. Furthermore, it was confirmed that data submitted by the company shows that marketing these particular products with the authorized information could help addicted adult smokers' transition away from combusted cigarettes and reduce their exposure to harmful chemicals, but only if they completely switch. The FDA decision finds that PMI has demonstrated that the IQOS system heats and does not burn tobacco, thereby significantly reducing the production of harmful and potentially harmful constituents compared to cigarette smoke.

FDA further confirms that PMI's scientific studies have shown that a complete switch from conventional cigarettes to the IQOS product significantly reduces human exposure to harmful and potentially harmful constituents. Thus, according to the FDA, the completeness of the scientific evidence presented indicates that it is very likely that later studies will establish measurable and substantial reductions in morbidity and mortality among individual tobacco users.

On January 17, 2025, the FDA authorized the marketing of ZYN nicotine pouches, namely 20 variants currently sold in US markets. The FDA completed a comprehensive, multi-year review of all available data and was satisfied that authorizing ZYN was appropriate to promote public health and amongst other things would enable marketing of an acceptable, better option for adult smokers to switch to.

10 Important information: This does not necessarily mean a 95% reduction in risk. IQOS ILUMA is not risk-free. "95% less" represents the average reduction in levels of 9 chemicals that the World Health Organization recommends reducing in cigarette smoke and that do not include nicotine. See Important Information at www.iqos.com. This does not necessarily equate to a 95% reduction in risk. IQOS ILUMA is not risk-free.

11 Marlboro HeatSticks, Marlboro Smooth Menthol HeatSticks and Marlboro Fresh Menthol HeatSticks.

12 https://www.fda.gov/tobacco-products/advertising-and-promotion/modified-risk-orders

‌Overview of selected events in 2025

January

• As part of the fiscal consolidation measures entering into force on January 1, 2025, Slovakia increased its standard VAT rate from 20% to 23%. Effective from January 1, 2025, large corporations in Slovakia with annual taxable income exceeding EUR 5 million are subject to a 24% corporate income tax rate.

• The sale of ZYN nicotine pouches was successfully launched on the Czech market. At the same time, PMI specified the investment into the Kutná Hora manufacturing facility to launch and scale up the production of ZYN nicotine pouches, further steering this long-standing site toward a smoke-free future.

• Introduction of a refreshed L&M design, supported by a global campaign, was accompanied by a price adjustment of two super-slim variants to better address the price sensitivity of adult female consumers in Czech Republic and Slovakia.

• The beginning of the year also saw a portfolio optimization of traditional cigarettes. In the Czech Republic, we delisted variants with long-term declining demand - Start bez filtru and two RGD variants.

• Expansion of the VEEV portfolio through the introduction of Starter Kits strengthened the entry-level proposition and supported the acquisition of new adult users.

• As of January, a ban on characterizing flavors in heated tobacco sticks came into effect in Slovakia.

  February

• Czech Republic introduced excise taxes, effective February 1, 2025, on all heated products without tobacco or containing only partial tobacco, as well as on chewing tobacco, snus, electronic cigarettes, and nicotine pouches.

• Following its successful introduction on the Czech market in 2024, LEVIA Glacial Beat consumables or IQOS ILUMA was subsequently introduced in Slovakia.

  March

• To mark the 40th anniversary of the PETRA brand, we launched a limited-edition series celebrating its rich heritage.

  April

• IQOS ILUMA i and IQOS ILUMA i ONE devices were launched, along with new accessories, in both the Czech and Slovak markets. The updated version offers greater flexibility through features like Pause Mode and FlexPuff, new color options, and a personalized experience. IQOS ILUMA i ONE also includes the Autostart function, which automatically begins heating upon correct insertion of the stick, eliminating the need to press a button.

• In Slovakia, we expanded our portfolio with the new L&M Loft S Line product in the super slim segment, offering adult smokers who prefer a strong brand an attractive price to value ratio.

• A new partnership between the National Museum and Philip Morris ČR a.s. was launched through a joint memorandum and donation agreement. This partnership will fund a new grant program supporting research, cultural heritage preservation, and science popularization. Over the next four years, we will contribute CZK 10 million to the initiative.

• Philip Morris ČR a.s. published its 2024 Annual Financial Report, which for the first time included a Sustainability Statement in accordance with the CSRD EU Directive. The report provides a comprehensive overview of the company's financial and economic performance, as well as progress in environmental impact, social responsibility, and corporate governance.

  May

• We introduced the new Marlboro Crafted design along with an enhanced filter construction for the Red variant, delivering a longer-lasting taste experience. The initiative was connected to a global campaign encouraging adult smokers to pursue their dreams.

• A special limited-edition VEEV One device, 'Different Perspectives', was introduced across both the Czech Republic and Slovakia. The edition was released in two exclusive colors as a targeted engagement initiative for existing VEEV One adult users, highlighting the brand's leadership in scientific innovation within the vaping category.

• On May 30, the Annual General Meeting of Philip Morris ČR a.s. shareholders was held. Among other resolutions, a gross dividend of CZK 1,220 per share was approved.

• Český Krumlov has become the third city in the Czech Republic to join the Smoke-Free City initiative and to sign a Memorandum of Cooperation with project partner Philip Morris ČR a.s. Following Karlovy Vary and Špindlerův Mlýn, the city is taking another step toward promoting healthier lifestyles, improving the quality of public spaces, and fostering open dialogue about smoking cessation.

  June

• After debuting on the Czech market in May, TEREA Silver was introduced in Slovakia. This new variant is designed for adult users who prefer a milder, smoother tobacco taste.

• We introduced a new line of DELIA tobacco sticks in the Czech Republic, paying tribute to tobacco classics with four different flavour profiles.

• At the end of June, we completed the delisting of HEETS heat-not-burn consumables from the Czech market. HEETS, our first-generation heat-not-burn consumable brand, played a pivotal role in our smoke-free transformation, serving as a foundational product that enabled hundreds of thousands of adult smokers to begin their transition away from cigarettes.

  July

• VEEV inPrime was launched on a Czech market as a premium closed pod system. The product features the AdvancedVape Induction System™, delivering up to 1,400 puffs per pod, enhanced flavor consistency, and a responsive draw. The launch represented a step-up offering within the portfolio, addressing demand for more advanced technology and an elevated user experience.

  September

• PMI announced a major expansion of its investment plan for the Kutná Hora manufacturing facility. The previously communicated USD 40 million investment to launch ZYN nicotine pouch production will be doubled, enabling further scale-up of this smoke-free category and the creation of up to 150 new jobs.

• In Slovakia, we expanded our portfolio with the launch of LEVIA Summer Pearl and LEVIA Forest Pearl-tobacco-free, flavoured herbal sticks designed to provide adult users with a light, refreshing, summer-inspired taste experience.

• We also added a new product to our portfolio on the Czech market, bringing together the appeal of the narrower cigarette segment and the value of larger pack sizes. We launched two L&M LOFT 38 variants, expanding the successful L&M LOFT line. The introduction was supported by strong commercial activation and a campaign aligned with the global L&M Here & Now concept.

• The Kutná Hora manufacturing facility successfully completed an AWS Standard certification surveillance audit, confirming that all obligations under the AWS Standard continue to be fulfilled and that the site is consistently strengthening its water stewardship practices.

  October

• On the Slovak market, we introduced LEVIA Green, a tobacco free, nicotine containing herbal stick. The variant delivers a crisp peppermint and cooling menthol taste complemented by smooth, creamy undertones, offering adult users a clean and refreshing sensory experience to its adult users.

• The City of Kutná Hora joined the Smoke-Free City initiative by signing a Memorandum of Cooperation with project partner Philip Morris ČR a.s.

  December

• HEETS heat-not-burn consumables were delisted from the Slovak market to align with a shift of adult users to IQOS ILUMA devices and

  TEREA, DELIA or LEVIA heat-not-burn consumables.

• We enhanced our cigarette portfolio on the Czech market by integrating two long-cigarette Chesterfield variants into the

  well-established Marlboro Crafted line. This move enabled us to offer adult Chesterfield smokers a premium Marlboro tobacco experience and, for a limited period, a special 21-stick pack.

• The cooperation with company Mirage as the exclusive distributor of ZYN and Thunder in Slovakia has been concluded, with all subsequent activities transitioned to Philip Morris Slovakia s.r.o.

• Philip Morris ČR a.s. was once again awarded the prestigious TOP Responsible Large Company 2025 award for its sustainability efforts. It is now among the TOP 30 large companies in the Czech Republic that can use this designation. The award is given to companies that are evaluated by an expert jury of Business for Society in the areas of strategy and management, responsible human resources management, supply chain and environment.

  Transformation of Kutná Hora Manufacturing Plant

  The manufacturing facility in Kutná Hora, which has been associated with tobacco processing since 1812, ranks among the most efficient cigarette and tobacco product factories operated by PMI worldwide over the long term.

  In 2025, the plant produced 35.9 billion units of cigarettes and cigarette equivalents.

  As PMI accelerates its widely communicated transformation from the production and sale of traditional cigarettes towards smoke-free alternatives, questions have arisen regarding the future role of the Kutná Hora facility. These questions were first addressed in June 2023, when PMI's management announced

  an initial investment of CZK 1 billion (USD 40 million) to prepare the site for the production of smoke-free products, thereby confirming the strategic importance of this long-established facility within the company's future direction.

  This investment was further specified in early 2025. At a press conference held on January 23 in Prague, PMI representatives introduced detailed plans, comprising the construction of infrastructure for the production of ZYN nicotine pouches alongside the development of advanced laboratories designed to meet high quality and safety standards.

  At the same time, it was announced that the initially planned total investment in the site's expansion and modernization would increase to approximately

  USD 80 million in subsequent phases. These investments are intended to enable a significant increase in manufacturing capacity for ZYN nicotine pouches following the successful startup of production. Nicotine pouch production will operate in parallel with the continued manufacturing of tobacco products. In connection with the expansion, approximately 150 new jobs will be created.

  A cornerstone of this transformation is the installation of three state-of-the-art, end-to-end production lines that manage the entire process, from filling cans with externally sourced nicotine powder to delivering fully packaged and palletized finished products. Each line represents an investment of approximately USD 12 million.

  Two production lines dedicated to dry nicotine pouch products were installed between late 2025 and early 2026. Commercial production is planned to start in the first half of 2026, once all necessary requirements, including positive microbiological results and the completion of required technical training for employees, are fulfilled. A third line will be installed starting in middle of 2026, with production expected to begin later this year.

  Philip Morris International and Philip Morris ČR a.s. representatives do not anticipate any negative impact on profitability resulting from the manufacturing process. According to their previous statements, it can be expected that, depending on future demand for nicotine pouches, the Kutná Hora facility could become a European manufacturing hub for this category of smoke-free products. This ongoing transformation is designed to ensure the long-term sustainability of both production and employment in the region.

  Company Profile and Important Events in 2025

  
  
  

  Social Contributions

  In the area of social responsibility, we have been involved in supporting charitable projects across a wide range of organizations and focus areas since the very beginning of our operations. Education, caregiver support, opportunities for quality of life, and environmental issues are the four main areas to which our support in the Czech Republic and Slovakia is directed. In addition, we have a special program aimed at mitigating the consequences of disasters or helping to prevent them. Many projects overlap multiple areas, meaning that one project may contain elements of several supported directions.

  A transparent way of selecting projects for support

  When allocating financial resources for charitable purposes, we always proceed in accordance with the PMI rules, which define PMI global charitable program. PMI rules, for example, require us to provide financial support exclusively to projects carried out by non-profit organizations, not individuals. Last year, we continued supporting long-term partner non-profit organizations, but we also chose to support several organizations with which we had no prior experience in this area.

  Each year, we receive dozens of applications for project support. Organizations contact us on an ongoing basis.

  Every submitted application is first reviewed by employees of the External Affairs department, who assess whether it complies with internal rules. In the second phase, we communicate the project details that meet the internal criteria and perform due diligence of the non-profit organization. The organization's history, annual reports, financial statements, and the trustworthiness of individuals in management are all verified. If due diligence is favorable, the organization may prepare and submit its project support request in English using the dedicated form. This is followed by the approval process at the national level. If the request is successfully approved, a donation contract is signed with the non-profit organization, after which it may draw the allocated funds.

  The implementation of the project is monitored by Philip Morris ČR a.s. and Philip Morris Slovakia s.r.o., and if deviations from the original project occur, the organization must report and justify them in advance and obtain approval from the donor. During and at the end of the project, the organization must submit interim and final reports, as well as provide all accounting documents related to the use of the donation.

  Project support application process

  Non-profit organizations may submit their applications for project support throughout the year. After applications are collected, due diligence and the evaluation process follow. Results are typically available within 4 to 6 months, after which the donation contract is signed and funds are disbursed. Only costs incurred after the project's verifiable approval may be recognized. Most projects last twelve months and therefore span two calendar years.

  We strive to ensure that the supported projects have a clear, meaningful purpose and a long-term positive impact that aligns with our company's values. As part of its charitable program, we do not support sports, political, or religious activities.

  However, financial or material support for non-profit sector projects is only one way we can help organizations. It is not uncommon for us to also provide donations outside the Social Contributions program, intended for general organizational operations or for organizing specific social, educational, or cultural events.

  Supported areas in the Czech Republic in 2025

• Support for environmental projects

• Caregiver support

• Opportunities for quality of life

• Support for educational projects

• Disaster relief

• PMI volunteering program

  Supported areas in Slovakia in 2025

• Opportunities for quality of life

• Support for educational projects

‌02

Business Results 2025

Consolidated financial results

Key Financial Results (in CZK million)

The year 2025 unfolded against a challenging backdrop for the combustible category, particularly in the Czech Republic, where total market erosion reflected both reduced cross-border sales and a continued consumer shift toward more affordable price segments. As our portfolio remains under-represented in these lower-priced tiers, we experienced a disproportionate impact. We continued to deploy targeted commercial and portfolio actions to address this structural imbalance; however, the benefits of these initiatives are inherently progressive and will materialize over time.

The nicotine market continued its structural transformation during the year, further confirming that the traditional binary view of combustibles versus alternatives is no longer representative of consumer behavior. The market is increasingly multi-category, with novelty segments such as oral nicotine and, in particular, vaping moving firmly into the mainstream. In response, our smoke-free portfolio continued to evolve to meet shifting consumer needs while maintaining our longstanding commitment to quality and product integrity. Within this context, the heated tobacco category remained under pressure, impacted by regulatory developments, including the annualized effects of the Czech Republic's flavor ban introduced in 2024 and the full implementation of the ban on characterizing flavored heated tobacco products in the Slovak Republic in 2025. Despite these headwinds, we made strong progress in the vaping segment, strengthening our strategic positioning in an increasingly fragmented and highly competitive landscape. Smoke-free product shipments totaled 3.5 billion units, with growth in the vaping category, partially offset by a decline in heated tobacco consumables, leading to a net mild positive volume outcome.

Throughout the year, we continued to invest deliberately to reinforce our long-term competitiveness in a rapidly changing market environment. These investments focused on enhancing brand equity, strengthening consumer engagement, and anticipating emerging trends to ensure sustained relevance. While such investments weighed on short-term profitability, they are fundamental to supporting recovery and generating long-term value for shareholders.

13 Shipments in the Czech Republic include the combustible portfolio, such as cigarettes and volume tobacco for make-your-own cigarettes (0.60 g is the equivalent of one cigarette), and smoke-free products such as HEETS, TEREA and DELIA heated tobacco consumables, LEVIA tobacco-free nicotine consumables and Fiit sticks from KT&G as well as VEEV ONE and VEEV inPRIME e-cigarettes consumables, VEEV NOW and VEEV NOW ULTRA disposables and ZYN nicotine pouches (all recalculated to cigarette equivalents).

14 Shipments in Slovakia include the combustible portfolio, meaning cigarettes, and smoke-free products such as HEETS, TEREA and DELIA heated tobacco consumables, LEVIA tobacco free nicotine consumable and Fiit sticks from KT&G as well as VEEV ONE e-cigarettes consumables, VEEV NOW and VEEV NOW ULTRA disposables, ZYN and THUNDER nicotine pouches (all recalculated to cigarette equivalents).

Consolidated revenues, net of excise tax and VAT, increased by 0.4% or CZK 0.1 billion compared with the prior year, reaching

CZK 21.7 billion. This performance included an unfavorable currency impact of 0.7 percentage points, primarily reflecting the depreciation of the euro against the Czech koruna and its translation effect on the Slovak results at a consolidation level. On a constant currency basis, consolidated revenues increased by 1.1% or CZK 0.3 billion year-on-year. Revenue growth was mainly driven by favorable net pricing across both the combustible and smoke-free portfolios (CZK 1.0 billion), alongside a positive volume and mix contribution from smoke-free products (CZK 0.1 billion). These effects were partly offset by lower combustible volumes (CZK 0.7 billion), reflecting continued market contraction and share pressure across both markets and lower manufacturing services (CZK 0.1 billion).

Profit from operations declined by 7.1% compared with the prior year to CZK 3.7 billion, including a negative currency impact of

2.1 percentage points. This decline primarily reflects lower combustible volumes and the increased level of strategic investments undertaken to strengthen long-term capabilities. Finance income from the cash pool decreased by CZK 0.1 billion, mainly due to the normalization and decline of interest rates compared with the elevated levels observed in 2024. Conversely, income tax expense decreased by CZK 0.1 billion, in line with the lower profit before tax. Taking all these factors into account, net income for the year 2025 declined by 9.2% year-on-year to CZK 3.0 billion, including a negative currency impact of 2.5 percentage points.

Business in the Czech Republic

Philip Morris ČR a.s. recorded revenue growth in the full year, with revenues net of excise tax and VAT increasing by 3.6% year-on-year to CZK 13.1 billion. Revenue performance was supported by favorable net pricing across both combustible and smoke-free product categories, contributing approximately CZK 0.7 billion, alongside a positive volume and mix effect from smoke-free products of

CZK 0.2 billion. These positive factors were partially offset by lower combustible volumes, which reduced revenues by approximately CZK 0.4 billion.

The total combined market of cigarettes and heat-not-burn units declined by an estimated 4.7% compared to the prior year, reaching

13.6 billion units. In line with longer-term trends, this contraction continued to reflect lower cross-border sales and a gradual erosion in overall consumption. The competitive landscape continues to evolve, with accelerated growth in alternative nicotine categories such as vaping and oral products, drawing incremental consumer demand and contributing to broader category fragmentation.

The estimated combined market share of Philip Morris ČR a.s. decreased to 39.5%, representing a decline of 1.1 percentage point versus the prior year. Share performance continued to be influenced by pricing dynamics in the cigarette segment, which are driving consumer down-trading toward lower-priced offerings where the company's portfolio is currently underrepresented. Developments in smoke-free categories did not alter the overall share trajectory during the year.

Domestic shipments of the combustible portfolio, including cigarettes and fine-cut tobacco, declined by 0.3 billion units year-on-year to

3.4 billion units, reflecting both the contraction of the total market and the company's share evolution. Smoke-free product shipments totaled 2.3 billion units, with growth in the vaping category, partially offset by a decline in heated tobacco consumables, leading to a net mild positive volume outcome.

Market share in the Czech Republic

Note: As part of our ongoing commitment to data accuracy and transparency, we have conducted a refinement of our internal market estimation methodology. While this technical adjustment has no financial implications, it does affect the reported share metrics for the year 2024. Specifically, the estimated combined market share for Philip Morris ČR a.s. in 2024 has been revised from 39.6% to 40.6%. This refinement reflects a more precise view of the total market and will be consistently applied in our full-year 2025 reporting to ensure continuity and comparability.

Business in Slovakia

Philip Morris Slovakia s.r.o. recorded a 1.7% decline in revenues, net of excise tax and VAT, to EUR 244 million compared to the prior year. Full-year performance reflects the annualized impact of the ban on characterizing flavors for heated tobacco products, which significantly reduced the smoke-free portfolio's volume contribution during the period. Overall volume-driven pressure amounted to EUR 14.8 million, stemming from declines in combustible products (EUR 10.8 million) and smoke-free products (EUR 4.0 million). These effects were partially offset by favorable net pricing across both combustible and smoke-free categories, contributing EUR 10.5 million.

The total combined market offer cigarettes and heat-not-burn units contracted by an estimated 3.5% year-on-year to 6.6 billion units, driven primarily by lower cigarette consumption in line with longer-term structural trends. At the same time, the overall nicotine category continued to evolve, with total consumption remaining broadly stable as growth in vaping and oral segments increasingly compensated for declines in traditional categories.

The estimated combined market share of Philip Morris Slovakia s.r.o. declined by 2.5 percentage points to 50.1%. This development was primarily driven by a 1.9 percentage point decline in cigarette share, reflecting limited exposure to the expanding value segment amid prevailing pricing dynamics. In addition, heat-not-burn consumables recorded a further 0.6 percentage point erosion over the year, reflecting the regulatory impact and disproportionately affecting the company given its leadership position in this category.

Domestic shipments of combustible products declined by 0.2 billion units year-on-year to 2.3 billion units, reflecting both the contraction of the total market and share evolution. Smoke-free product shipments totaled 1.2 billion units, broadly stable versus the prior year, as growth in vaping and oral categories was offset by lower heated tobacco volumes.

Market share in Slovakia

Manufacturing services

Revenues from manufacturing services decreased slightly by 4.5% year-on-year to CZK 2.5 billion. Production volumes at the Kutná Hora factory remained at a high level, totaling 35.9 billion units during the period. The modest decline reflects a gradual adjustment of conventional product volumes as the site prepares for the installation and ramp-up of new novelty product lines.

As previously reported, investments in new novelty product lines are progressing as planned. Installation and implementation activities are ongoing, positioning the factory for the start of production in 2026.

‌03

Risk Factors Related to our Business and Industry

The following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained in this 2025 Annual Financial Report of Philip Morris ČR a.s.

Any of the following risks could materially adversely affect our business, our operating results, our financial condition, and the actual outcome of matters as to which forward-looking statements are made in this report.

We are aware of the risks impacting our business and taking appropriate actions to mitigate them.

Overall Business Risks

Our ability to grow profitability may be limited by our inability to successfully introduce new products, improve our margins through higher pricing and improvements in our brand mix, promote brand equity or develop strategic business relationships.

This can be influenced by several factors described below.

Competitive environment

We face intense competition, and our failure to compete effectively could have a material adverse effect on our profitability and results of operations. We compete primarily based on product quality, brand recognition, brand loyalty, taste, innovation, packaging, service, marketing, advertising and retail price. We are subject to highly competitive conditions in all aspects of our business. The competitive environment and our competitive position can be significantly influenced by weak economic conditions, erosion of consumer confidence, competitors' introduction of lower-price products or innovative products, higher nicotine product taxes, higher absolute prices and larger gaps between retail price categories, and product regulation that diminishes the ability to differentiate nicotine products according to the level of their risk.

Consumer preferences

We may be unable to anticipate changes in adult consumer preferences or to respond to consumer behaviors, limiting our ability to further scale up our smoke-free products (SFP) and encourage current adult smokers who would otherwise continue to smoke to switch to smoke-free products. Our business is subject to changes in consumer preferences, which may be influenced by local economic conditions.

To be successful, we must:

• promote brand equity successfully;

• anticipate and respond to new consumer trends;

• ensure that our products meet our quality standards and consumer expectations;

• develop new products or acquire distribution rights to these in order to broaden brand portfolios;

• improve productivity;

• educate and convince adult smokers to convert to our smoke-free nicotine products;

• ensure effective adult consumer engagement, including communication about product characteristics and usage of smoke-free nicotine products;

• provide excellent customer care;

• ensure adequate production capacity to meet demand for our products; and

• be able to protect or enhance margins through price increases.

  In periods of economic uncertainty, adult consumers may tend to purchase lower-priced brands, and the volume of our premium-price and mid-price brands and our profitability could be materially adversely impacted as a result.

  Business model

  Our profitability, and consequently, the amount of our dividend pay-out reflects our dual role of being a full risk entrepreneur of combustible portfolio products and a limited risk distributor for smoke-free products.

  Our remuneration for commercialization of smoke-free products is based on a set margin on revenues from sales. As a limited risk distributor, we do not own intellectual property rights for smoke-free products and therefore do not absorb all the costs or bear the risks associated with such ownership. As our return is proportionate to our risk for commercializing smoke-free products, the impact of the sales volume variances of such products on our profitability is limited. Consequently, if the current consumer preference trend towards smoke-free products continues and volume declines of combustible portfolio products accelerate, we do not expect that over time the additional profit generated from increased sales of smoke-free products will offset the decreasing profits generated from the sales of combustible portfolio products.

  Consumption of combustible tobacco products continues to decline. This decline is due to multiple factors, including increased taxes and tax-driven pricing, governmental actions, the diminishing social acceptance of smoking, and the continuing prevalence of illicit products.

  Illicit trade

  We lose revenues as a result of insufficient law enforcement to protect legal market from counterfeiting, contraband and cross-border purchases. Large quantities of counterfeit cigarettes are sold in the international market. We believe that Marlboro is the most heavily counterfeited international cigarette brand, although we cannot quantify the revenues we lose as a result of this activity. In addition, our revenues are reduced by contraband and legal cross-border purchases.

  The volume of the illicit cigarette market in the Czech Republic has been growing in recent years, reaching one of the highest levels in 202415 and, according to the empty pack survey, the share of counterfeit products remains elevated in 2025.

  Talent attraction and retention

  Our ability to implement our strategy of attracting and retaining the best talent may be impaired by the decreasing social acceptance of cigarette smoking. To be successful, we must continue transforming our culture and ways of working, align our talent and organizational design with our increasingly complex business needs, and innovate and transform to a consumer-centric business.

  Risks related to strong regulations within our industry

  The tobacco and nicotine industry is heavily regulated and subject to significant governmental measures to reduce and/or prevent smoking and the use of tobacco products. Their abrupt changes can have a significant impact on consumer preferences and their late communication can disrupt the production and availability of our products in the market. There is also a risk that regulation of tobacco and nicotine products will not be differentiated according to the risk profile of individual products and law enforcement will not adequately protect those under 18 years of age. This chapter describes risks we face in relation to current or anticipated developments in each regulatory area.

  Excise tax

  Tobacco products are subject to excise taxes with tax rates expressed in currency units per physical quantity which requires their periodic adjustments for inflation. There are risks that the excise tax rates in neighbouring countries will be raised less than in the domestic country which could encourage domestic consumers to buy tobacco and nicotine products in other countries and discourage consumers in other countries from buying tobacco and nicotine products in the domestic country, as well as that the excise tax increases will lead to price increases higher than inflation, which might reduce demand for our products. The revision of the EU Tobacco Excise Directive (2011/64/EU) launched in 2025 also reduces the predictability of our business environment. The proposal aims to increase minimum tax rates and harmonize definitions and administrative procedures for tobacco and nicotine products. The proposed entry into force is in 2028. However, the proposal is subject to unanimous adoption by the Council and until then, its business impacts remain to be seen.

  In the Czech Republic, Act no. 349/2023 Coll. amending certain laws in connection with the consolidation of public budgets. amended also Act no. 353/2003 Coll. on excise taxes. This amendment came into force on January 1, 2024 and introduced the following changes:

• a four-year calendar of tobacco excise tax increases for years 2024 to 2027. As of February 1, 2024, the specific component of the cigarette excise tax rate increased by 10% and the minimum tax rate increased by 20%. The excise tax rate on tobacco for smoking increased by 10%. In 2025-2027, these tax rates will increase by 5% each year. The ad valorem component of the cigarette excise tax remains unchanged (at 30%). The excise tax rate on heated tobacco products increased by 15% in 2024 and will increase by 15%

  15 Source: KPMG report - Illicit Cigarette Consumption in Europe - 2024 Results.

  annually in 2025-2027. These excise tax increases are accompanied by sell-by-date anti-forestalling regulation applicable to cigarettes with a three-month period and heated tobacco products with a six-month period.

• the introduction of an excise tax on e-liquids for e-cigarettes with a tax rate of CZK 2.5 per ml in 2024 with further increases up to CZK 10 per ml in 2027 and on nicotine pouches with a tax rate of CZK 400 per kg with further increases up to CZK 1700 per kg in 2027.

  The table shows tax rates in 2023-2027:
  	2023	2024	2025	2026	2027
  Cigarettes
  - specific component (CZK per 1000 sticks	1,970	2,170	2,280	2,390	2,510
  - ad valorem component (%)	30%	30%	30%	30%	30%
  - minimum excise tax (CZK per 1000 sticks	3,520	4,220	4,440	4,660	4,890
  Tobacco for smoking (CZK per kg)	3,000	3,300	3,470	3,650	3,830
  Heated tobacco products (CZK per kg of tobacco)	3,000	3,450	3,970	4,570	5,260
  E-liquids for e-cigarettes (CZK per ml)	n/a	2.5	5.0	7.5	10.0
  Nicotine Pouches (CZK per kg)	n/a	400	800	1,200	1,700

  In Slovakia, Act no. 530/2023 Coll. amending certain laws in connection with the consolidation of public budgets amended also Act no. 106/2004 Coll. on tobacco excise taxes. As of February 1, 2024, the specific tax rate on cigarettes increased by 8%, the ad valorem component increased by 2 percentage points, the minimum excise tax on cigarettes increased by 12%, the excise tax rate on fine-cut tobacco increased by 37% and the excise tax rate on heated tobacco products increased by 13%.

  Later in 2024, Act no. 106/2004 Coll. on tobacco excise taxes was further amended by:

• Act no. 233/2024 Coll. amending the Act on tobacco excise tax;

• Act no. 354/2024 Coll. amending the Act on value added tax and some other acts;

• Act no. 278/2024 Coll. amending certain acts in connection with the consolidation of public budgets.

  These amendments came into force throughout the second half of 2024 and introduced the following changes:

• a four-year calendar of tobacco excise tax increases for years 2025 to 2028;

• the introduction of excise taxes as of February 1, 2025, to all heated products without tobacco or only partially with tobacco, chewing tobacco, sniffing tobacco, electronic cigarettes and nicotine pouches;

• a further increase of excise taxes on electronic cigarettes, nicotine pouches, chewing tobacco and sniffing tobacco in 2027;

• excise tax increases on cigarettes, tobacco for smoking, cigars, cigarillos and heated tobacco products in 2026 and 2028. The ad valorem component of the cigarette excise tax remains unchanged (at 25%).

  The table shows tax rates for 2023 - 2028:
  	2023	2024	2025	2026	2027	2028
  Cigarettes
  - specific component (€ per 1000 sticks)	84.6	91.3	91.3	102.5	102.5	113.5
  - ad valorem component (%)	23%	25%	25%	25%	25%	25%
  - minimum excise tax (€ per 1000 sticks	132.1	148.0	148.0	166.2	166.2	182.0
  Tobacco for smoking (€ per kg)	101.3	139.0	139.0	177.0	177.0	209.5
  Heated tobacco products containing only tobacco (€ per kg of tobacco)	187.8	211.3	211.3	238.1	238.1	264.8
  Heated tobacco products without tobacco (€ per kg of filling)	n/a	n/a	211.3	238.1	238.1	264.8
  E-liquids for e-cigarettes (€ per ml)	n/a	n/a	0.2	0.2	0.3	0.3
  Nicotine pouches (€ per kg)	n/a	n/a	100.0	100.0	200.0	200.0

  Tobacco and nicotine products regulation

  There is a risk that regulation of tobacco and nicotine products will not be differentiated according to the health risks which would hinder our ability to inform adult users about the relative risks of individual products.

  In the EU, tobacco and nicotine products are regulated by the Tobacco Products Directive (2014/40/EU), which entered into force on May 19, 2014, and became applicable in the EU Member States as of May 20, 2016.

  The legislation lays down rules on - among others - the manufacturing, presentation and sale of tobacco and related products, including certain rules for the commercialization of e-cigarettes and novel tobacco products, such as:

• the prohibition on placing on the market of tobacco products containing flavorings in any of their components, such as filters, papers, packages, capsules, or any technical features allowing modification of the smell or taste of the tobacco products concerned or their smoke intensity, covering cigarettes, roll-your-own tobacco, and heated tobacco products (the so-called "flavor ban");

• a pre-launch notification requirement;

• enlarged, combined health warnings covering 65% of the main surfaces of cigarette packs and roll-your-own tobacco, as well as dedicated health warnings for other types of tobacco and related products;

• enhanced reporting obligations;

• the extension of the "flavour ban" to heated tobacco products, which became effective on November 23, 2022;

• tracking and tracing requirements for cigarettes and roll-your-own tobacco aiming to increase efficiency of illicit trade prevention, extended to other tobacco products such as heated tobacco products as of May 20, 2024.

  In the Czech Republic, the Directive is transposed by Act no. 110/1997 Coll. on foodstuffs and tobacco products and other related laws together with:

• Decree no. 261/2016 Coll. on tobacco products

• Decree no. 37/2017 Coll. on electronic cigarettes and herbal products for smoking

  In addition to EU-level harmonization, Czech domestic legislation provides for supplementary rules applicable to electronic cigarettes and nicotine pouches:

• Decree No. 141/2023 Coll. regulates nicotine pouches by setting maximum nicotine limits, and banning packaging designs that appeal to young people (applicable from July 2023)

• amendment to Decree No. 37/2017 Coll. regulates electronic cigarettes by prohibiting certain flavours and packaging that appeals to young people (applicable from December 2025, with a sell-by-date period until the end of June 2026)

In Slovakia, the Directive is transposed by Act no. 89/2016 Coll. on the manufacture, labelling and sale of tobacco products and related products and on the amendment and supplement to selected laws. On February 13, 2024, the Slovak Parliament approved the amendment to Act no. 89/2016 Coll. on the manufacture, labelling and sale of tobacco products and related products, which transposed new provisions, including the extension of the "flavour ban" to heated tobacco products. The amendment entered into force on January 1, 2025.

Single-use plastics regulation

The objectives of the EU Directive 2019/904 ("Single-Use Plastics Directive" or "the Directive") are to prevent and reduce the impact of certain plastic products on the environment, in particular the aquatic environment, and on human health, as well as to promote the transition to a circular economy, with innovative and sustainable business models, products, and materials, thus also contributing to the efficient functioning of the internal market16.

In order to achieve its objectives, the Directive introduced various measures for various types of goods. In the area of our business, the Directive concerns tobacco products with filters and filters marketed for use in combination with tobacco products. Specifically, under the Directive, Member States were required to introduce marking requirements on product packaging and implement Extended Producer Responsibility Schemes ("EPR"), which requires producers to contribute to costs associated with the cleaning and collection of littered tobacco post consumption waste in public, as well as to cost for awareness-raising measures designed to inform consumers to correctly dispose of cigarette butts and thereby reduce litter. Measures were implemented gradually in several stages with EPR fully in place in the

16 Article 1 of the Directive 2019/904 of June 5,2019 on the reduction of the impact of certain plastic products on the environment.

EU Member States by January 5, 2023. In the Czech Republic the effective date for EPR for producers of tobacco products with filters was January 1, 2023, while in Slovakia it was December 1, 2024.

To ensure the collective fulfilment of the obligations of manufacturers of tobacco products with filters and filters placed on the market for use in combination with tobacco products in the territory of the Czech Republic, Philip Morris ČR a.s., in accordance with the requirements of Act No. 243/2022 Coll17., became one of the founders of joint-stock company NEVAJGLUJ a.s. (hereinafter referred to as "NEVAJGLUJ") with a stake of 24%. NEVAJGLUJ was registered in the Commercial Register in March 2023, in July 2023 it submitted an application for authorization to operate a collective system (EPR system), and the authorization was granted by the Ministry of Environment of the Czech Republic on October 10, 2023. Philip Morris ČR a.s. is being represented in statutory bodies of the NEVAJGLUJ, namely holds a position of the Chairman of the Board of Directors, and also one member of the Supervisory Board. More information on EPR system NEVAJGLUJ in the Czech Republic is available at https://www.nevajgluj.cz.

In Slovakia, Philip Morris Slovakia s.r.o. became one of the founders of joint-stock company SPAK-EKO a.s. with a stake of 25%. SPAK-EKO

a.s. was registered in the Commercial register in September 2023. Philip Morris Slovakia s.r.o. is being represented in statutory bodies of SPAK-EKO a.s., namely holds a position of the Chairperson of the Board of Directors, and one member of the Supervisory Board. In order to ensure collective compliance with the obligations of manufacturers of tobacco products with filters and filters placed on the market for use in combination with tobacco products in the territory of the Slovak Republic, in January 2025 SPAK-EKO a.s. proposed the Ministry of the Environment of the Slovak Republic to conclude a voluntary agreement that would recognize the SPAK-EKO a.s. system as the representative of the sector to which the obligations apply.

The part of the 2025 annual costs of the EPR system operation borne by Philip Morris ČR a.s, amounts to CZK 51,7 million. The part borne by Philip Morris Slovakia s.r.o. amounts to EUR 524 thousand.

Risks related to other external factors

We also face risk factors arising from adverse developments in the economic situation and external environment which could affect our financials, disrupt our supply chain, manufacturing capabilities, and distribution channels or undermine our data protection efforts. Some risks can be anticipated, and appropriate business-continuation plans can be adopted in advance but some risks, for example the global events such as covid-19 pandemic or war in Ukraine, cannot.

Expected economic and financial situation

The overall macroeconomic environment in 2025 was shaped by GDP growth dynamics, easing inflationary pressures, and stabilizing energy prices. These factors continued to influence both our cost base and revenue performance throughout the year.

Over the full year 2025, the Czech economy recorded a solid recovery, with real GDP growth reaching approximately 2.6%18 year on year, marking the strongest annual expansion since 2022. Economic growth was driven primarily by domestic demand, with household consumption playing a key role, supported by a recovery in real wages and a resilient labor market. Economic momentum remained positive throughout the year, and inflation continued its downward normalization trend. The average consumer price inflation for full-year 2025 amounted to 2.5%19, remaining close to the Czech National Bank's inflation target. Overall price stability contributed to a more predictable environment for households and supported domestic demand conditions.

Natural gas and electricity remain the primary energy inputs at our production plant in Kutná Hora. For the full year 2025, utilities costs were significantly lower year on year, reflecting favorable energy price developments compared to 2024. Energy markets stabilized in the second half of the year, contributing to subdued inflationary pressures and improved cost visibility going into 2026.

Slovakia estimates 0.8% year-on-year GDP growth in 2025, down from 1.9%20 in 2024, while average annual inflation rose from 2.8% in 2024 to 4%21 in 2025, influenced by indirect taxation factor. Consumer sentiment remains fragile, though modest real wage growth continues to support spending.

According to the latest projections of CNB for 2026, it is expected that inflation will further decline towards 1.6%, GDP to continue to grow at stable 2.9%22. All of this should maintain stable unemployment, economic activity of both businesses and consumers leading to stability in consumer sentiment and consumer spending. Slovakia's economy is projected to grow modestly, with GDP rising by about 1% 23in 2026, supported mainly by investment under the final phase of the Recovery and Resilience Plan, despite easing labor market tightness and a slight decline in employment.

While official 2026 macroeconomic projections for the Czech Republic and Slovakia remain broadly positive to neutral, with continued GDP growth and stable labour markets, the outlook is subject to heightened external risks. In particular, the ongoing conflict involving Iran and

17 Source: Act No. 243/2022 Coll. on the reduction of the impact of certain plastic products on the environment.

18 Source: Czech Statistical Office, GDP Resources and Uses - 4.quarter of 2025

19 Source: Czech Statistical Office, Inflation, Consumer Prices

20 Source: Slovak Statistical Office, Quarterly GDP data and constant prices chain

21 Source: Slovak Statistical Office, Inflation - consumer price indices in 2025

22 Source: Czech National Bank forecast - Winter 2026

23 Source: European Commission - Economic forecast for Slovakia

the broader Middle East has increased volatility in global energy markets. Given the continued reliance of both economies on imported oil and gas, renewed energy price pressures could weigh on inflation, operating costs and consumer demand. Against this backdrop, PMI maintains a more cautious outlook for 2026 than implied by baseline economic forecasts.

Our business remains exposed to consumer down-trading to cheaper nicotine products and cross-border transactions. We continue to implement productivity initiatives to manage our cost base and maximize investment returns.

Adverse events

Natural disasters, pandemics, armed conflict, threats of war, or other adverse political and/or economic developments could disrupt our supply chain, materials availability, manufacturing and/or distribution capabilities. The impact of these risks also depends on factors beyond our knowledge or control, including their duration and severity or their recurrence.

Despite our business continuity plans and other safeguards in place, our business, operations and financial results will depend on numerous continuously evolving factors that we may not be able to accurately predict.

Cyber-security threats

We, as well as our business partners, use information systems to help manage business processes, collect, and interpret data and communicate internally and externally with employees, suppliers, consumers, customers and others. Some of these information systems are managed by third-party service providers. We are continuously evolving our approach to business continuity planning and backups to provide appropriate business resilience, particularly considering the increasing cyber threat landscape. Nevertheless, failure of these systems to function as intended, or penetration of these systems and systems owned and operated by our business partners by parties intent on extracting or corrupting information or otherwise disrupting business processes, could place us at a competitive disadvantage, result in a loss of revenue, assets, including our intellectual property, personal or other sensitive data, result in litigation and regulatory action, cause damage to our reputation and that of our brands and result in significant remediation and other costs.

Failure to protect personal data, respect the rights of data subjects, and adhere to strict data governance and cybersecurity protocols could subject us to substantial fines and other legal challenges under regulations such as the EU General Data Protection Regulation. As we are increasingly relying on digital platforms in our business, and as privacy laws in the jurisdictions in which we do business are introduced or become more stringent, the magnitude of these risks is likely to increase.

‌04

Forward-Looking and Cautionary Statements

This report and related communications contain, and Philip Morris ČR a.s. may from time to time make, written or oral forward-looking statements, including statements contained in filings with the Czech National Bank or other authorities, in reports to shareholders and in press releases and investor webcasts. You can identify these forward-looking statements by use of words such as "strategy," "expects," "continues," "plans," "anticipates," "believes," "will," "estimates," "intends," "projects," "goals," "targets" and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.

Philip Morris ČR a.s. cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties, and inaccurate assumptions. Should any known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected. Investors should bear this in mind as they consider forward-looking statements and whether to invest in or remain invested in Philip Morris ČR a.s. securities.

This 2025 Annual Financial Report of Philip Morris ČR a.s. is based on the consolidated financial statements of Philip Morris ČR a.s. and Philip Morris Slovakia s.r.o., prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

In Kutná Hora on April 27, 2026

Fabio Costa Maurizio Lionetti

Chairman of the Board of Directors Member of the Board of Directors

Philip Morris ČR a.s. Philip Morris ČR a.s.

‌05

Consolidated Sustainability Statement

‌General basis for preparation of the consolidated sustainability statement

This 2025 Consolidated sustainability statement (the "Statement") has been prepared in accordance with the EU Directive 2022/2464 on corporate sustainability reporting ("Corporate Sustainability Reporting Directive" or "CSRD"), as transposed into Czech legislation - in particular Act No. 563/1991 Coll. on Accounting as amended (the "Act on Accounting")-, and in accordance with the requirements of the Commission's Delegated Regulation (EU) 2023/2772 on sustainability reporting standards ("European Sustainability Reporting Standards" or "ESRS"), the Commission's Delegated Regulation 2025/1416 ("Quick fix Act"), Article 8 (4) of EU Regulation 2020/852 and its implementing acts, as recently amended by the Commission's Delegated Regulation 2026/73 ("revised EU Taxonomy Regulation").

The Statement does not represent a consolidated view of PMCR's parent company Philip Morris Holland Holdings B.V., or PMCR's ultimate controlling party Philip Morris International Inc. or other affiliates/subsidiaries of Philip Morris International Inc.

In this Statement, the terms "we", "our" and/or "us" refer to the PMCR group and the term "PMI"24 refers to Philip Morris International Inc., and its subsidiaries.

In this Statement, the term "materiality", "material", and similar terms are defined in the Corporate Sustainability Reporting Directive, in the referenced sustainability standards, and are not meant to correspond to the concept of materiality under the U.S. securities laws and/or disclosures required by the U.S. Securities and Exchange Commission.

24 PMI as used in this Statement does not cover PMI's wellness business, Aspeya, unless explicitly stated otherwise.

‌Disclosures in relation to specific circumstances

• Short term (0-5 years): Environmental risks and opportunities that may materialize within the next five years. Short-term environmental risks are identified and assessed through a variety of internal processes including as part of, among other processes, PMI's quarterly financial reporting process where short-term profits and losses are evaluated and our annual long-range planning process which is updated annually and reviews and sets business direction over a three-to five-year horizon.
• Medium term (6-10 years): Environmental risks and opportunities that may materialize by the 2033 time horizon. This time period aligns with PMI's climate strategy targets set for 2030, as well as the goals of PMI's water and biodiversity strategies, which run through 2033. The selected horizon reflects the interconnectedness of climate- and nature-related risks and opportunities.
• Long term (11-17 years): Environmental risks and opportunities that may materialize until the 2040-time horizon used for scenario analysis in PMI's CCRO assessment. This time period aligns with PMI's external commitment of net zero emissions as approved by the Science Based Targets initiative (SBTi). It is also an intermediate step toward internationally agreed policy commitments to 2050 (e.g., EU climate law). Metrics Including Upstream and/or Downstream Value Chain Data: PMI has instituted a robust system to estimate and monitor value chain data. Identified metrics encompass material sustainability matters such as carbon footprint and water usage in the supply chain, which are pivotal in assessing our environmental impact. The preparation basis for these metrics involves utilizing industry average data and supplier surveys to estimate upstream and downstream impacts as accurately as possible. PMI acknowledges a current level of accuracy at ±10%, with ongoing efforts to enhance this through data analytics and monitoring. In the pursuit of excellence, PMI is planning actions to improve accuracy, including the implementation of real-time monitoring systems and fostering closer collaborations with suppliers to obtain more precise data. Sources of Estimation and Outcome Uncertainty: In our reporting, we haven't identified areas with a high degree of uncertainty. Some metrics are subject to estimates where exact data is not available and it is clearly stated in the methodology description of the respective metrics. The estimates have been made based on informed assumptions and judgments, utilizing the best-available environmental data to craft a report that reflects our true standing and aspirations. Reporting year energy consumption metrics found in E1-5 and GHG emissions metrics found in E1-6 are estimates based on a mix of actuals and projections. Changes in Preparation and Presentation: In preparing the Statement, the topic of illicit tobacco trade prevention has been moved from G1: Business conduct to S4: Consumers and end users as a result of our annual sustainability materiality assessment review process. We have developed a new topic-specific section for E3: Water & Marine Resources due to a change in the results of the same assessment.

  PMI has performed a double materiality assessment in accordance with the ESRS and CSRD covering both impact materiality and financial materiality. This process is referred to in this Statement as "sustainability materiality assessment" and is described in further detail in the IRO-1 section of this Statement.

  Prior year energy consumption metrics found in E1-5 and GHG emissions metrics found in E1-6 have been revised. We restate prior year data for these metrics each year based on full year actuals and we continuously refine and enhance scope 3 calculation methodology to ensure the most accurate information is reflected for the prior periods. This process is fully aligned with PMI's Carbon Accounting Methodology and consistent with consolidated PMI disclosure practices, ensuring methodological coherence across the organization and consistency across the interlinked metrics. Restated figures and variances are stated in each instance of relevant sections.

  Material Prior Period Errors: A restatement has been applied to the 2024 value of financial resources allocated to actions related to climate change transition planning (CapEx). Details are available in section E1-1.

  Disclosures Stemming from Other Legislation or Reporting Standards: The Statement does not incorporate information from recognized standards and legislation beyond what is required by the EU legislation, as transposed by Czech law. Certain entity-specific information is included in relation to responsible marketing practices, illicit trade prevention, and product health impacts, in line with the outcomes of the PMCR group's localized sustainability materiality assessment that extend beyond specific metrics defined in the ESRS and is flagged accordingly.

  Incorporation by Reference: The Statement is explicitly structured around the requirements and nomenclature of ESRS. The incorporation by reference is limited to GOV-1-21 (c). The administrative, management and supervisory bodies's experience relevant to the sectors, products and geographic locations of PMCR's group is disclosed by reference to other sections of this 2025 Annual financial report, specifically to the Report on Corporate Governance. This approach ensures consistency and alignment with broader corporate reporting and avoids unnecessary duplication. The cross-reference is clearly indicated within the relevant section of this Statement.

  Disclosure Requirements Index

  The list of ESRS disclosure requirements below is intended to serve as a navigation tool throughout the PMCR group's Sustainability statement, providing information by sections with pages where the related information is located.

  • Mandatory disclosure requirement

  • Material

  • Derived from other legislation or industry specific matters

‌Role of the PMCR groups's administrative, management and supervisory bodies

The PMCR group's governance structure is designed to ensure we act with integrity and hold ourselves and our business to the highest ethical standards. Integrating sustainability into PMCR group relies on a formal structure with clear accountabilities at different levels of the organization.

Composition of the PMCR group's Administrative, Management, and Supervisory Bodies

PMCR is a joint stock company that has selected a so called dualistic internal structure system. The PMCR's bodies consist of the Board of Directors as the governing body, the Supervisory Board as a controlling (supervisory) body and the Audit Committee as a body overseeing financial reporting and related internal controls. PMSK is a limited liability company. As to PMSK it has only the Executive Body as a governing body.

from which:

We have ensured representation from PMCR's employees in the Supervisory Board. Two members of the PMCR's Supervisory Board are elected and recalled by PMCR's employees (in accordance with the Czech Business Corporations Act and the PMCR's Articles of Association). The Election Rules governing the elections and recalls of those members of the Supervisory Board elected by employees are prepared by the Board of Directors after consultation with the trade union.

Members of the PMCR group's bodies have extensive experience relevant to the sectors and geographic locations where the PMCR group operates, providing its subsidiaries with valuable insights and expertise. Biographies of members of PMCR's bodies are included in this Annual financial report for 2025 in its Report on Corporate Governance.

Roles and Responsibilities of the PMCR group's Administrative, Management, and Supervisory Bodies

The dedicated sustainability coordinator in PMCR and PMSK helps ensure that consolidated PMI sustainability priorities are cascaded, and programs are coordinated for Czech and Slovak markets. Under the guidance of PMI, market coordinators of PMI's subsidiaries meet monthly to ensure a concerted effort and that progress is achieved and tracked in a consistent manner. PMCR's Board of Directors is ultimately responsible for oversight of sustainability related impacts, risks and opportunities.

The basic organizational document of PMCR and PMSK is their Articles of Association, which define the internal structure of each entity, specify their bodies in more detail, and represent a set of rules that govern the functioning and organization of both entities. The PMCR group voluntarily complies with and meets the main criteria, principles and recommendations of the Corporate Governance Code based on the OECD Principles, which was adopted in 2004 by the Czech Securities Commission (the "Code"). The Code is available for view at the registered office of PMCR or in a manner allowing for remote access at the following website: https://www.philipmorris.cz.

The PMCR group is committed to ensuring that our administrative, management, and supervisory bodies possess the necessary skills and expertise to oversee sustainability matters effectively. We have put in place mechanisms to ensure that these bodies can either directly possess or leverage sustainability-related expertise. The PMCR group organizes internal trainings and workshops for members of the Board of Directors, heads of functions responsible for actions and implementation of sustainability programs and enables them and supports/encourages them to participate in professional/specialized external trainings to increase their expertise. Moreover, the PMCR group ensures that these skills and expertise directly relate to its sustainability-related impacts, risks, and opportunities considered material, providing us with the necessary tools and knowledge to navigate the complex landscape of sustainability effectively.

PMI develops consolidated PMI sustainability-related targets. The PMCR group falls under the scope of PMI's targets, implementing actions and initiatives locally to contribute to PMI's targets achievement. PMCR's Board of Directors is monitoring progress of agreed actions and initiatives implementation rather than progress towards targets unless a specific local target is set by PMCR's Board of Directors.

‌Sustainability matters addressed by the PMCR group's administrative, management and supervisory bodies

Anchoring our sustainability priorities with executive responsibilities and accountabilities helps embed our strategy into our daily operations. The primary responsibility of PMCR's Board of Directors and PMSK's Executive Body is to support the long-term success of PMCR and PMSK within PMI. The main strategic direction and relevant corporate policies are set on the PMI level. The PMCR group strategic objectives are set on local level in alignment with PMI direction.

The members of PMCR's Board of Directors are ultimately responsible for decision making, overseeing the PMCR group's activities and implementation of agreed projects and initiatives, for driving progress and delivering on our sustainability targets within their respective areas of responsibility, via frequent discussions about new projects, initiatives, budgets and priorities. Related policies and guidelines are established to support the achievement of strategic objectives and targets and setting a framework for a day-to-day operation including sustainability matters.

PMCR's Supervisory Board supervises the performance of the Board of Director's duties and PMCR group's activities incl. sustainability matters. PMCR's Audit Committee oversees financial reporting and related internal controls.

The Board of Directors meets at least twice a year to discuss financial and other matters including sustainability topics. Representatives of the Board of Directors inform the Supervisory Board and the Audit Committee about financial and business results including sustainability matters on regular basis, at least twice a year. All board members are adequately informed about the activities, programs running during the relevant year and the results achieved including certifications obtained in correlation with PMI sustainability aspirations.

In 2025, the PMCR's Board of Directors was specifically informed about the relevance evaluation of the PMCR group's localized sustainability materiality assessment and approved its final outcome, including the proposed changes into the list of identified material impacts, risks and opportunities.

Internal Controls Manager responsible for the Czech and Slovak markets and the statutory auditor present to the Audit Committee an overview of the internal controls' environment, the auditing approach and the outcomes of the reviews performed during the year. The Audit Committee informs the Supervisory Board of its activities and conclusions and gives its recommendations regarding matters that are the subject to the discussions at the meetings of the Audit Committee.

The Supervisory Board and the Audit Committee meet at least twice a year. The Supervisory Board and the Audit Committee inform the Board of Directors about serious findings that should be addressed, if any, including sustainability related ones.

‌Integration of sustainability-related performance in incentive schemes

Integration of sustainability-related performance in incentive schemes is coordinated across PMI and based on PMI's performance which the PMCR group contributes to, but not specifically to the performance of the PMCR group in isolation.

Since 2022, PMI's Sustainability Index (also "the Index") has represented 30 percent of PMI's long-term performance-based equity award. The year 2024 marked the completion of the performance cycle for the Sustainability Index 2022-24 linked to the 2022-24 performance share units (PSUs) cycle and impacted the remuneration of PMI's executives for the first time in 2025. Sustainability is also factored in PMI's annual incentive compensation (IC) awards via Strategic Initiatives, which apply to management employees worldwide. All members of the PMCR group's bodies (as defined above) except for external (independent) members are covered by the IC award program, including its sustainability-related component.

1. Description of the Key Characteristics of the Incentive Schemes: In 2021, PMI developed a Sustainability Index to measure objectively and communicate rigorously progress toward its aspirations, using a set of clearly defined and verifiable metrics. The Index comprises KPIs that are aligned with PMI's 2025 Roadmap described in section SBM-1, which outlines PMI's key goals that aim to address the priority sustainability topics identified by PMI's 2021 sustainability materiality assessment.

   In 2022, to better align with shareholder and other stakeholder expectations, PMI linked its Sustainability Index to 30% of its PSU award for the 2022-2024 performance cycle. Using predefined target ranges approved by PMI's Board of Directors, PMI assesses and assigns a score to each KPI of the Index annually. Thereafter, using a weight assigned to each KPI informed by the results of the sustainability materiality assessment, PMI calculates the total Sustainability Index score.

   Each index is based on a three-year cycles. The number of KPIs in the Index, and relative weightings, are not identical for each PSU cycle, but consistent with the results of PMI's sustainability materiality assessment completed in 2021. Further, PMI has continued the practice of linking its sustainability performance to long-term equity compensation by leveraging an updated version of the Sustainability Index for subsequent three-year PSU cycles. Further, in 2023 PMI introduced the Index linked to the 2023-2025 PSU cycle, in 2024 PMI introduced the Index linked to the 2024-2026 PSU cycle, and in 2025 PMI introduced the Index linked to the 2025-2027 PSU cycle.

   PMI's Non-financial KPI hub, updated annually and made available on PMI.com, summarizes each Index KPI's standard, including definitions, assumptions, scope, methodology, and basis for preparation.

   In addition to the above, starting from 2024, the strategic initiative "Shaping Tobacco Harm Reduction and Championing Sustainability to create a positive social and environmental impact" is one out of five of PMI's strategic initiatives assessed as part of the metrics under PMI's annual Incentive Compensation award program.

2. Performance Assessment Against Specific Sustainability-Related Targets and/or Impacts: The number of KPIs in the Index, and relative weightings, are not identical for each PSU cycle. The structure of each version of the Index is publicly available on PMI.com. The structure of PMI's Sustainability Index 2022-2024 that contributed to 2025 compensation is outlined in the table below.

3. Integration of Sustainability-Related Performance Metrics in Remuneration Policies: Sustainability-related metrics that do not appear in PMI Sustainability Index or form part of PMI's Incentive Compensation award program are not used for benchmarking or to determine variable compensation. Individual employees in the PMCR group may have additional sustainability-related objectives that form part of their annual performance review and are not reflected in the Index or part of enterprise goals.
4. Proportion of Variable Remuneration Dependent on Sustainability-Related Targets and/or Impacts: The year 2025 marked the completion of the performance cycle for the Sustainability Index 2023-2025, for which 30 percent of PSUs were directly linked to the achievement of PMI's Sustainability Index-related targets. PSUs represented between 40-60 percent of total target equity award for PMI's executives. Strategic initiatives represented 15 percent of PMI's total Incentive Compensation award rating. One of the five strategic initiatives under PMI's 2025 Incentive Compensation award ("Shaping Tobacco Harm Reduction and Championing Sustainability to create a positive social and environmental impact") was sustainability related, thus its proportionate weight of 3 percent of PMI's IC award rating was considered to be linked with sustainability matters.

   Following the above described definition that considers a combination of PSUs and IC awards, in 2025, 5% (2024: 2%) of the PMCR group bodies' variable remuneration is dependent on PMI's sustainability related targets and performance.

   With reference to the published PMCR's 2025 Remuneration report, on top of the PMCR's bodies, also the PMSK's executives were included into the calculation to be aligned with metrics reported under GOV-1.

5. Approval and Update of Incentive Schemes: The Compensation and Leadership Development Committee of PMI's Board of Directors decided to continue linking between long-term executive compensation and sustainability performance. The KPI performance ranges have been provided by the relevant business functions and validated by PMI's Sustainability Committee. The performance ranges linked to the Sustainability Index KPIs are approved by PMI's Board of Directors for each PSU cycle.

   Purposefully phase out

   Key performance indicators 2025

   aspirations

   1. Smoke-free product shipment ratio (smoke-free/total) >30%

   2. Adjusted net revenues ratio (smoke-free/total) >50%

      KPI weight

   3. Number of markets where PMI smoke-free products are available for sale 100

      Product Impact

      Maximize the benefits of smoke-free products

   4. Proportion of markets where smoke-free products are available for sale that are low- and middle-income markets

   5. Total number of users of PMI smoke-free products (in millions)

   6. Proportion of shipment volume covered by markets with youth access prevention programs in place in indirect retail channels

      >50%

      >90%

      85 %

      Seek net positive impact in wellness and healthcare

   7. Annual net revenue from wellness and healthcare products (in billions USD) >1

      Reduce post-consumer waste

   8. Proportion of shipment volumes covered by markets with anti-littering programs in place for combustible cigarettes

   9. Proportion of shipment volumes covered by markets with end-of-life take-back programs in place for smoke-free consumables

      >80%

      >80%

      15 %

   10. Proportion of PMI smoke-free devices with eco-design certification 1

   11. Cumulative number of smoke-free electronic devices refreshed or repaired since 2021 (in thousands)

       1000

   12. Proportion of women in senior roles 35%

       Foster an empowered and inclusive workplace

       Operational Impact

   13. Proportion of PMI employees who have access to structured lifelong learning offers

   14. Cumulative number of human rights impact assessments conducted since 2018, with findings addressed

       70%

       10

       50 %

       Improve the quality of life of people in our supply chain

   15. Prevalence of child labor among contracted farmers supplying tobacco to PMI 0%

   16. Proportion of tobacco farmers supplying tobacco to PMI who make a living income

       100%

   17. Net carbon emissions in scope 1+2 (in thousands of metric tons) 0

       Tackle climate change

   18. CO2e scope 3 absolute reduction versus 2019 baseline (in-line with science-based target)

       Preserve nature

   19. Proportion of tobacco purchased at no risk of deforestation of managed natural forest and no conversion of natural ecosystems

18%

100%

50 %

Integration of climate-related performance in PMI's incentive schemes

Climate-related targets represent 2 out of 19 targets for the 2022-2024 cycle, 2 out of 16 targets for the 2023-2025 cycle, 2 out of 15 targets for the 2024-2026 cycle, and 1 out of 9 targets for the 2025-2027 cycle.

• Net carbon emissions in scope 1+2 (in thousands of metric tons)

• CO2e scope 3 absolute reduction versus 2019 baseline (in-line with science-based target)

  2023-2025 PSU cycle

• Net carbon emissions in scope 1+2 (in thousands of metric tons)

• CO2e scope 3 Forest, Land and Agriculture (FLAG) absolute reduction versus 2019 baseline (in line with science-based target)

  2024-2026 PSU cycle

• Net carbon emissions in scope 1+2 (in thousands of metric tons)

• CO2e scope 3 FLAG absolute reduction versus 2019 baseline (in line with science-based target)

  2025-2027 PSU cycle

• Absolute carbon emissions reduction in scope 3 FLAG versus 2019 baseline (in line with science-based target)

  The integration of climate-related performance into PMI's incentive schemes is fully associated with the performance share unit (PSU) program. Variable remuneration received in 2025 is based on 2022-2024 PSU cycle. Considering that 2 out of 19 targets in PMI's Sustainability Index are climate-related. Combining their contribution to the total Index score with the weight of the overall Index in the PSU program (30%), 4% of PSUs can be directly linked to climate-related performance.

  Following the above described definition, in 2025 0.4% of the PMCR group bodies' variable remuneration was linked to climate related considerations. There is no comparative information from 2024 because this is applicable for the first time in 2025.

  ‌Statement on due diligence

  Protecting and promoting the rights of our stakeholders is paramount to PMCR group. As expressed in PMI's Human Rights Commitment, the PMCR group works on respecting human rights within our organization and across our value chain, identifying and addressing our adverse impacts while maximizing opportunities to drive positive change.

  In fact, the PMCR group, as part of PMI, is committed to business practices that respect internationally recognized human rights. We uphold the principles as enshrined in the United Nations Guiding Principles on Business and Human Rights and we endorse the OECD Guidelines for Multinational Enterprises, as well as the OECD Due Diligence Guidance for Responsible Business Practices.

  We also strive to constantly improving our business activities to achieve the highest standards of environmental sustainability, as expressed in PMI's Environmental Policy.

  The PMCR group's due-diligence framework includes escalation and remediation mechanisms, applied where negative sustainability impacts are identified as material. This is described in further detail in the Report on Corporate Governance section of this Annual Report.

  The table below provides an overview of PMI's approach and practices with regard to due diligence, by mapping the sections of the Statement where the main aspects and steps of the due diligence process are reflected.

  CORE ELEMENTS OF DUE DILIGENCE PARAGRAPHS IN THE SUSTAINABILITY STATEMENT

  ESRS 2 GOV-2: Information provided to and sustainability matters addressed by PMCR's administrative, management,

  1. Embedding due diligence in governance, strategy and business model

  2. Engaging with affected stakeholders in all key steps of the due diligence

  and supervisory bodies.

  ESRS 2 GOV-3: Integration of sustainability-related performance in incentive schemes.

  ESRS 2 SBM-3: Material impacts, risks, and opportunities and their interaction with strategy and business model.

  ESRS 2 GOV-2: Involvement in governance processes.

  ESRS 2 SBM-2: Addressing the interests and views of stakeholders.

  ESRS 2 IRO-1: Specific requirements pertaining to stakeholder engagement.

  ESRS 2 MDR-P: Reflecting various stages and purposes of stakeholder engagement throughout the due diligence process.

  Topical ESRS: Detailed guidelines on stakeholder engagement throughout the due diligence process.

  c) Identifying and assessing adverse impacts

  ESRS 2 IRO-1: Including application requirements related to specific sustainability matters in the relevant ESRS. ESRS 2 SBM-3: Addressing the identification and assessment of negative impacts.

  d) Taking actions to address those adverse impacts

  ESRS 2 MDR-A: Guidelines on actions to be taken to address negative impacts.

  Topical ESRS: Reflecting the range of actions, including transition plans, through which impacts are addressed.

  e) Tracking the effectiveness of these efforts and communicating

  ESRS 2 MDR-M: Guidelines on monitoring the effectiveness of actions taken. ESRS 2 MDR-T: Setting and tracking metrics and targets.Topical

  ESRS: Detailed guidelines on metrics and targets to track the effectiveness of efforts.

  ‌Risk management and internal controls over sustainability reporting

  Over the past decade of voluntary reporting on sustainability, PMI has designed a thorough process for developing its sustainability disclosures. Building on this experience, in 2024, PMI has instituted a robust risk management and internal control system. This system has been integrated into the preparation of this Statement by the PMCR group to mitigate potential risks that could impact the accuracy and reliability of the Statement.

  1. Scope, Main Features, and Components: The scope of the risk management and internal control processes encompasses all facets of the Statement. The main features of PMI's COSO-aligned framework include PMI's control environment, risk assessment, control activities, information and communication, and monitoring activities which have been incorporated by the PMCR group. Underlying this control environment is the articulation and wide dissemination of the sustainability reporting purpose and commitment to integrity, the design of clear objectives, the development and commitment of cross-functional resources, the set-up of structures, reporting lines, and accountability for internal controls and PMI's independent Board of Directors' oversight, and increased automation of the data collection process leveraging IT tools.

     The main features of this system are orchestrated by PMI's corporate Sustainability team through a collaborative effort involving PMI's risk management and assurance functions (PMI Risk & Assurance and PMI Internal Controls) and PMI's and PMCR's Legal teams, other support functions, and subject matter experts (SMEs). These teams work synergistically to ensure a seamless and reliable reporting process.

  2. Risk Assessment Approach: While developing the reporting process for the PMCR group's Sustainability Statement, PMI's Central Sustainability team worked with the groups noted above to identify potential risks and refine the processes and controls for reporting.
  3. Main Risks Identified and Mitigation Strategies: The principle risks inherent to the disclosure process identified include that the Statement could be misleading, unstructured, selective, unsubstantiated, and nontransparent. It could also be inconsistent and incoherent in relation to messaging from different sources from PMI or the PMCR group. To mitigate these risks, PMI's internal control framework over sustainability reporting includes:

• Entity-level controls over the sustainability materiality assessment process and the overarching sustainability reporting process. Such controls encompass, amongst other considerations, accountability requirements across the organization, scoping, traceability, oversight, and approval.

• Activity-level controls over the individual sustainability disclosures; definition of disclosure requirements and ownership within PMI's organization, review and authorization of data generation, retention, calculation and reporting, and general IT controls underlying such, leveraging the existing internal controls framework in place over financial reporting.

• In parallel, PMI's Risk & Assurance team developed a set of auditability principles to provide the organization with an understanding of the major focus points in terms of governance, process design, implementation and the control environment of non-financial data points. PMI's Sustainability team developed a comprehensive process description document to share the timeline, expectations, and controls in place with internal functions involved in contributing to and signing off on the Statement and to guide external assurance providers.

  1. Integration of Findings into Internal Functions: The outcomes of PMI's risk assessment and internal controls activities over sustainability reporting are integrated into the sustainability reporting process, aiming to continuously raise the quality of sustainability reporting. In advising on the design and implementation of PMI's internal controls framework over sustainability reporting, PMI's Internal Controls team informs cross-functional business stakeholders of its observations. PMI's Risk & Assurance team conducts regular reviews of sustainability reporting disclosures and shares the results of such reviews with cross-functional business stakeholders including PMI's executive management.

     The observations of PMI's risk management and assurance functions are integrated into business processes via immediate action plan development and implementation, which is orchestrated by PMI's Sustainability team. The progress and status is reported regularly to management to enable timely and effective risk management and decision making. In the PMCR group, the sustainability reporting related topics were integrated into the existing regular process of subsidiaries' risk assessment and internal controls were updated accordingly to cover identified sustainability reporting related risks with clear control owner assignment from local SMEs to each designed control.

  2. Periodic Reporting to Administrative and Management Bodies: To maintain transparency and accountability, PMI ensures the periodic reporting of our CSRD compliance approach and relevant observations to PMI's Sustainability Committee which is composed of senior members of PMI management, including our Group CEO PMI as well as leadership teams of PMI's Operations, People & Culture, Legal, and External Affairs teams.

  In the PMCR group, the quarterly Risk Governance Committee meetings are established between Controls functions and local management teams, covering topics of internal controls over financial reporting, data privacy, information security and ethics & compliance, which are now extended to cover also sustainability reporting controls. The PMCR group bodies are informed within the framework described in GOV-1.

  ‌Strategy, business model and value chain

  Strategy Overview

  PMI is building a future on smoke-free products that, while not risk-free, are a far better choice for adult smokers than continued cigarette smoking. The PMCR group follows this same approach and contributes to PMI's strategy and transformation. Our vision is that these products will one day replace cigarettes. To achieve this vision, PMI is radically transforming its business. Sustainability stands at the core of this transformation, which seeks to address and mitigate its biggest negative externality: the health impact of cigarette smoking.

  Product transformation: Innovating for better products

  PMI's product lines are the most visible aspect of its transformation. Over the past decade and a half, PMI has harnessed scientific and technological advances to develop alternatives to cigarettes that are scientifically substantiated to be a better choice for adult smokers than continued smoking. To achieve a smoke-free future, PMI works relentlessly to make cigarettes obsolete by replacing them with these less harmful alternatives as quickly as possible. PMI is increasing access for adult smokers by improving and expanding its portfolio of smoke-free products to meet their varying needs and preferences.

  Internal transformation: A new organization and value chains

  Since announcing its smoke-free vision, PMI has undergone a meaningful internal transformation, which unfolds as it progresses on its smoke-free journey. Internally, PMI continues to invest in its employees to re-skill and upskill their knowledge and build the capabilities they need to contribute fully to PMI's business transition. Simultaneously, PMI is recruiting top talent and acquiring new capabilities. It is also incorporating new ways of working as PMI becomes an increasingly digitalized, project-based organization focused on consumer-centricity, agility, and data-driven decision-making.

  Beyond our own operations, PMI is transforming every part of its value chain to serve PMI's purpose, while recognizing the challenges these changes pose and actively helping those impacted (in its direct and indirect operations) to best manage the transition.

  External transformation: Changing the way we engage with stakeholders

  Engaging with external stakeholders is critical to achieving PMI's purpose. Its ability to successfully transform requires that PMI works with various parts of society to create a paradigm shift in which cigarettes become obsolete.

  Continuous engagement also allows to build a shared understanding of contingency issues, proactively respond to concerns, identify potential areas of compromise, and find solutions that are good for PMI's stakeholders, and for its business and long-term success.

  PMI's 2025 Roadmap

  PMI's 2025 Roadmap outlines key sustainability goals and informs the route of PMI's long-term plan. Running to the end of 2025, it comprised 11 headline goals, each connected to PMI's eight strategies, which aimed to address the priority topics identified by its sustainability materiality assessment. You can learn more about this assessment in PMI's 2021 Sustainability Materiality Report. The Roadmap offered straightforward direction to PMI's stakeholders by clearly outlining the social and environmental impacts PMI aimed to achieve with its strategies in relation to both its products and its operations.

  In the Czech Republic and Slovakia, we are aligned with the consolidated PMI approach. In 2022, we went through a local validation of the 2021 consolidated PMI sustainability materiality assessment to tailor PMI's 2025 Roadmap goals to local needs.

  PMI's Value Plan 2030+

  During 2025, PMI developed its new strategy, charting the course for its next phase of sustainable growth. PMI is in the process of rolling out its Value Plan 2030+ which is aligned with outcomes of PMI's sustainability materiality assessment review completed in 2025. It will succeed PMI's Roadmap 2025 and guide sustainability-related activities as of 2026. For this Statement, the PMCR group has continued to disclose information related to PMI's 2025 Roadmap. We anticipate disclosing new information aligned with PMI's Value Plan 2030+ in future statements.

  Description of Key Elements, in terms of Products, Markets, Customers and Revenues

  PMI's significant products include combustible cigarettes and smoke-free products.

• Smoke-free products is the term primarily used to refer to all products that provide nicotine without combusting tobacco such as heat-not-burn, e-vapor, and oral smokeless, and that therefore generate far lower levels of harmful chemicals. As such, these products have the potential to present less risk of harm versus continued smoking.

• PMI seeks to remain competitive in the cigarette market while transitioning away from combustible tobacco products.3 This provides better access to trade partners and adult smokers, which enhances PMI's ability to switch adults who would otherwise continue smoking to smoke-free alternatives. Remaining competitive in the cigarette market also helps finance the necessary R&D, manufacturing, and commercialization investments for PMI's smoke-free portfolio. Moreover, it paves the way for the rest of our industry to follow our lead.

The PMCR group commercializes both product categories, cigarettes and smoke-free products, serving adult smokers and other adult nicotine users, having market presence in the Czech Republic via PMCR and in Slovakia via PMSK. The commercialization is done via wholesalers and their indirect retail channels as well as in our direct retail channels including e-commerce for smoke-free portfolio. As of 2025, our employee headcount stands at 1,313 (1,137 in the Czech Republic and 176 in Slovakia).

PRODUCT IMPACT

OPERATIONAL IMPACT

Purposefully phase out cigarettes

Maximize the benefits of smoke-free products

Seek net positive impact in wellness and healthcare Reduce post-consumer waste

Foster an empowered and inclusive workplace Improve the quality of life of people in our supply chain Tackle climate change

Preserve nature

The health impact of cigarette smoking is the most significant negative externality PMI aims to address. Lessening this impact is the most valuable societal contribution it can make and is the cornerstone of PMI's purpose and business strategy. Focusing PMI's resources on innovating and developing solutions that can contribute to solving some of society's most pressing challenges represents an opportunity for growth and our strongest competitive advantage.

PMI's holistic strategy addresses sustainability topics deemed material related to its products and business operations, including the environmental impact of its products, and the environmental and social impacts across its value chain. To address this broad range of considerations, PMI's three-fold approach to addressing the social impact of its products is complemented with five other impact-driven strategies. Altogether, these eight strategies are equally divided between those that focus on the impacts of products and those that focus on the impacts of business operations.

Business Model and Value Chain Description

PMI's value creation model relies on a wide array of inputs, encompassing human, intellectual, natural, manufactured, social, and financial capital, which it acquires and seeks to develop. PMI leverages the extensive skills and expertise of its global and diverse workforce, fostering an environment of collaboration, continuous education and growth to enhance human capital. Innovation, driven by extensive research and development efforts supports PMI's intellectual capital. PMI's approach to natural capital management seeks to emphasize responsible procurement practices and efficient utilization of raw materials. Its manufactured capital, comprising among others of manufacturing facilities and expansive distribution networks, underpins the effective production and delivery of PMI's product portfolio. Social capital is secured through stakeholder relationships, adherence to regulatory compliance, and active participation in multi-stakeholder initiatives, such as the World Business Council for Sustainable Development (WBCSD). Financial capital is strategically allocated to drive sustainable growth.

PMI's outputs and outcomes manifest in tangible and intangible benefits for its consumers, investors, and other stakeholders. Adult consumers who use PMI's smoke-free products benefit from scientifically-assessed, better alternatives to continued cigarette smoking. Investors can expect robust financial returns underpinned by efficient resource allocation. PMI's stakeholders more broadly benefit from its commitment to transparency, ethical practices, and sustainability.

By integrating these diverse forms of capital and focusing on delivering outputs that can benefit PMI and its stakeholders, PMI is seeking sustainable growth, long-term value creation, bolstering its transition towards an entirely smoke-free business.

Value Chain in Detail

The PMCR group's value chain supports its two main finished product categories: smoke-free products and cigarettes, and covers both manufacturing and commercialization related activities.

Consolidated Sustainability Statement

UPSTREAM

Other direct Tobacco leaf materials used to growing & produce / pack processing products

Electronics

Other supplies (machinery, spare parts, services)

OWN OPERATIONS

TRANSPORT/ WAREHOUSING (INBOUND/ OUTBOUND)

Cigarettes production

Philip Morris

CR a.s.

PMI centralized functions

PMI manufacturing Kutnâ Hora sites factory

Commercialization of products on local markets

Smoke Free

production

Philip Morris Slovakia s.r.o.

Wholesalers Key Accounts

Indirect

Retail

Consumers ñ End Users

Direct

Retail

e Commerce

LOGISTICS

POstcosumer

35

‌Upstream Activities and Main Business Actors

The PMCR group's upstream value chain involves suppliers who provide direct materials used in products, including tobacco leaf, and other direct materials used to produce and package products (such as cellulose acetate tow, paperboard, non-tobacco agricultural products, etc.), as well as suppliers of electronics. It also involves suppliers providing materials and services necessary to run our internal operations, such as manufacturing equipment, spare parts and other operating materials, as well as a wide variety of services.

The PMCR group is an indirect subsidiary of PMI, thus PMI's supply chain and direct operations form a significant portion of its upstream value chain. This portion includes other PMI's manufacturing sites producing products for Czech and Slovak markets or semi-finished products used in the local factory, as well as other PMI entities providing consolidated services (e.g., tolling, research and development, tobacco, and other direct material procurement, etc.).

Own Operations

The PMCR group operates a manufacturing site, located in Kutna Hora in the Czech Republic, producing cigarettes and other tobacco products for around 40 PMI's markets. Production is provided as a manufacturing service to PMI. In 2025, we started investing in the expansion of our factory announced in 2023, with the aim to build a new manufacturing capacity for ZYN nicotine pouches in Europe. This is a key milestone in transforming our factory in line with our vision for a smoke-free future. The commercial production of ZYN nicotine pouches is planned to start in the first half of 2026. We describe additional details with respect to the factory transformation in the Company Profile and Selected Events section of this Annual Financial Report.

The PMCR group commercializes PMI's products in the Czech and Slovak markets, while these products are purchased from PMI regardless of which PMI's manufacturing site produced them. Activities include selling strategies' development, business model adjustments, pricing decisions, direct retail operation for smoke-free products, management of key accounts and wholesalers, as well as local stakeholders engagement, consumers activation, events planning, etc.

Downstream Activities and Main Business Actors

Distribution and use phase

Beyond direct retail of smoke-free products, the PMCR group distributes PMI's products within the Czech and Slovak markets utilizing its warehousing and extensive distribution network that enables the delivery of its products to a wide range of customers. The commercialization of cigarettes follows a business-to-business model and is managed via wholesalers, key accounts, and indirect retail channels. The commercialization of smoke-free products follows in addition a business-to-consumer model, utilizing various widely expanding retail channels, either physical (e.g. partner stores) or through e-commerce.

The use phase is comprised of consumers using commercialized PMI's products. The engagement with consumers is mainly focused on customer support services, device repair and troubleshooting services for smoke-free products.

End-of-life phase

Within the downstream value chain, the PMCR group is going even further, with selected suppliers we are providing post-purchase services to our consumers and performing activities addressing post-consumer waste.

Logistics Activities

Warehousing and transportation are happening across all parts of the value chain. Storing tobacco leaf and inbound transportation of materials to manufacturing sites is part of Upstream, internal logistics and storing materials within our manufacturing site is part of our Own operations, outbound transportation, storing our products in our distribution centers and shipping the products to our customers and consumers is part of Downstream.

Interests and views of stakeholders

The PMCR group regards stakeholder engagement as fundamental to the creation of shared and sustainable value. Actively seeking open dialogue with our stakeholders allows us to understand their expectations and respond appropriately, steering our strategic direction. This section of the report describes the processes and mechanisms through which we integrate stakeholder engagement into our business model and strategy.

Stakeholder Engagement Strategy

To achieve its vision to build a future on smoke-free products that, while not risk-free, are a far better choice than cigarette smoking, the PMCR group engages with a diverse set of external stakeholders. Its stakeholder engagement incorporates both structured and ad hoc interactions. PMI's stakeholder engagement strategy, which the PMCR group is party to, aims to evolve continually to reflect the changing dynamics of its business environment and stakeholder expectations. Above all, it is guided by transparency, integrity, and respect, and is governed by PMI's Code of Conduct and its accompanying policies (Principles and Practices). An overview of PMI's stakeholder engagement is available on PMI.com and an overview of the PMCR group's is provided below.

Engagement with employees is facilitated through town halls, regular surveys and feedback sessions, which provide a platform for voicing concerns and suggestions while fostering a culture of openness and transparency. We organize and participate in supplier forums and events, perform visits, and hold regular meetings with key supply chain and business partners to foster collaboration and partnership. We host the annual shareholder meetings to maintain dialogue with our shareholders, investors and other finance community actors. We engage in conversations with regulators and expert community, while also participating in relevant forums and events or public consultations. We build partnerships with NGOs and contribute to community projects to engage with local communities and understand their perspectives.

These engagements serve to gather insights and feedback, proactively respond to concerns, stay abreast of global trends and market expectations, foster collaboration and partnerships, identify areas for improvement and innovation, and find common solutions to complex challenges. The outcomes of these engagements are actively reflected into our business strategies. This includes increased transparency to showcase the pace and scale of our business transformation to increase awareness of our business partners, the incorporation of feedback gathered from our consumers into product development and service improvement, collaboration on community development projects to strengthen our position as responsible corporate citizen, and the formulation of practices and strategies based on stakeholder insights.

Looking ahead, we have charted out a series of steps to further align our business operations with stakeholder expectations. After publication of the Statement we plan to organize a stakeholder engagement dialogue to get their feedback and further shape our sustainability strategies.

These efforts are aimed at strengthening the relationship with and better incorporate the views of our stakeholders as we design and implement initiatives, fostering strengthened trust and collaboration.

Informing Administrative and Supervisory Bodies: At the PMCR group, we keep our bodies informed of the views and interests of affected stakeholders concerning our sustainability impacts within the framework described in General section of this Statement (GOV-2).

We describe how the views and interests of our own workforce, workers in our value chain, and consumers inform our strategy and business model under respective topical standards in the Statement.

‌Description of the process to identify and assess material impacts, risks and opportunities

In 2024, PMI conducted a double materiality assessment in accordance with the ESRS and CSRD covering both impact materiality and financial materiality. This process is referred to in this Statement as "sustainability materiality assessment". In 2025, PMI conducted a relevance evaluation of the results from its 2024 consolidated PMI sustainability materiality assessment. In both instances, PMI's activities were then cascaded down to the local level to account for the local circumstances of the PMCR group. The PMCR group also performed its own local relevance evaluation in 2025. The results of the PMCR group's localized sustainability materiality assessment, confirmed by the local relevance evaluation, form the basis of this Statement.

2024 Sustainability Materiality Assessment Process Description

PMI's consolidated PMI sustainability materiality assessment process

As part of the sustainability materiality assessment, PMI evaluated the impacts it has on people and the environment, as well as the risks and opportunities on business performance generated by sustainability-related matters. PMI has developed an internal sustainability materiality assessment handbook that outlines the specific rules, practices, and procedures guiding its assessment. Regularly updated, this internal handbook incorporates internal controls designed to maintain the integrity of PMI's processes. Accompanied by an external expert consultant, PMI used the following five-step approach for the sustainability materiality assessment.

1. Preparation phase: PMI began by setting key components to guide the execution of the sustainability materiality assessment. More particularly, it started by mapping its value chain into four key steps (upstream, own operations, distribution and use phase, and end-of-life), which were connected with primary activities and key processes to support the identification of impacts, risks, and opportunities (IROs). PMI also developed a stakeholder engagement plan to integrate the views of stakeholders affected by its activities as well as of stakeholders who are users of PMI's reporting. Its approach to stakeholder engagement for the sustainability materiality assessment heavily leveraged its continuous stakeholder engagement program described above, complemented by specific engagements organized solely for the purpose of the sustainability materiality assessment. During this preparation phase, PMI also developed a methodology for the assessment of IROs, defining criteria for the assessment of impacts and criteria for the assessment of risks and opportunities. PMI defined a procedure to score the IROs and PMI's Sustainability Committee (composed of the Group CEO PMI and members of PMI's executive management) predetermined materiality thresholds accordingly (both for impacts and for risks and opportunities). The criteria used for this prioritization guided PMI in determining which sustainability matters are material for reporting purposes.
2. List of potentially relevant sustainability matters: PMI listed potentially relevant sustainability matters (i.e., topics, sub-topics, and sub-sub-topics) across its value chain based on insights from the ESRS, prior sustainability materiality assessments, insights from stakeholder engagement, and industry benchmarking and standards.
3. Definition of impacts, risks, and opportunities: PMI catalogued key impacts, risks, and opportunities (IROs) connected with the potentially relevant sustainability matters. It considered both the direct and indirect impacts on people and the environment, arising from its own operations and those resulting from its business relationships. These impacts can be positive or negative, and actual or potential; they may occur in the short, medium, or long term and pertain to activities across PMI's value chain (impacts were assigned alongside the simplified four value chain steps). PMI also catalogued risks and opportunities that affect or could affect business objectives. It compiled the list of IROs by consulting with internal experts and performing desktop research leveraging external and internal information. PMI sought for the sources used to reflect stakeholders' views. For instance, for social matters, it leveraged prior human rights saliency mapping and human rights impact assessments that had been compiled based on consultation with right holder groups. Considering the global reach of PMI's strategy, business model, product portfolio and value chain, in this process it aimed at covering different activities, business relationships and geographies, while keeping a particular focus on the health impact of cigarette smoking - the most significant negative externality PMI aims to address.
4. Assessment of impacts, risks, and opportunities: After describing sustainability matters in terms of impacts, risks, and opportunities, PMI assessed them. It did not consider how PMI has or might remediate or respond to negative impacts and risks after they happen. However, it accounted for proactive and preventive work already ongoing in PMI to mitigate or avoid the manifestation of risks or negative impacts.
   • Inward risk and opportunity assessment to determine financial materiality: PMI leveraged its enterprise risk rating methodology to assess the risks and opportunities related to sustainability matters. This integration into PMI's Enterprise Risk Management (ERM) framework helped to ensure that sustainability-related risks were assessed in a consistent manner with other types of risks and to foster a culture of proactive risk management that is aligned with PMI's sustainability objectives. PMI evaluated the magnitude (or "impact") of risks and opportunities and their likelihood of occurrence. The assessment of magnitude considered financial, operational, reputational, and business strategic effects.
   • Outward impact assessment to determine impact materiality: PMI assessed the severity of negative impacts based on scale, scope, and irremediably criteria. Positive impacts were assessed based on scale and scope. For potential impacts, likelihood was also considered. A 4-point scale was used to assess the scale, scope, irremediability, and likelihood to ensure uniformity between the

     assessment of impacts and the assessment of risks and opportunities. Further, the applicable time horizon(s) was assigned to each IRO, highlighting the time horizon(s) when the IRO was deemed to be of highest relevance.

     The evaluation of IROs involved a mix of quantitative and qualitative methods. Internal expert consultations and judgment, supported by a range of input parameters (including data sources such as internal databases and past impacts and risks assessments, industry reports, government publications, etc.). formed the backbone of the analysis. PMI performed targeted external stakeholder interviews seeking deeper insights into specific areas where available information and data was limited. PMI ensured a constant flow of feedback loop along the assessment to understand the connections between its impacts and dependencies and the arising risks and opportunities.

5. Formulation of the materiality overview: After assessing the IROs, PMI applied the pre-determined thresholds to separate material and non-material IROs. It considered a matter to be material if it met the threshold from either an impact perspective, a risk and opportunity perspective, or both. PMI considered risks and opportunities assessed with "major" or "severe" impact coupled with "likely" or "highly likely" likelihood as material. It considered impacts with a score of 3 or above (all applicable dimensions for each impact being assessed on a 4-point scale and then averaged) as material. PMI consolidated results at the sub-topic level for the sake of presenting the information in an easy-to-understand manner, assigning to each sub-topic the score of the highest scored IRO pertaining to that sub-topic. The review and validation of the sustainability materiality assessment methodology and outcome followed PMI's overall management process for sustainability. In meetings with members of PMI's Sustainability Committee and PMI's Board of Directors, the outcome of the consolidated PMI sustainability materiality assessment was discussed and validated.

The PMCR group's localized sustainability materiality assessment process

Following the completion of PMI's consolidated PMI sustainability materiality assessment, we localized the consolidated PMI sustainability materiality assessment results for the PMCR group, considering that there are no major differences in PMCR and PMSK operating model. Accounting for the homogeneity in terms of business model, value chain activities, key stakeholder groups and product portfolio, we expected limited differences in material IROs between PMI and the PMCR group.

Accordingly, we leveraged the outcome of the consolidated PMI sustainability materiality assessment to the PMCR group through a structured localization process. This process involved a review of the IROs by local internal experts leveraging available local datasets, analyses, and insights from ongoing stakeholder engagement efforts. This process enabled the re-calibration, amendment, addition or removal of IROs, as relevant, to account for local circumstances and specificities. The outcome of the PMCR group's sustainability materiality assessment localization was discussed and validated by PMCR's Board of Directors and shared with PMCR's Supervisory Board, in line with the process agreed for the preparation of the Statement at local level.

2025 Relevance Evaluation Process Description

PMI's 2025 relevance evaluation process

PMI understands that the nature of materiality is inherently dynamic, with sustainability matters and stakeholder concerns evolving in response to external trends, regulation, and PMI's plans, and that results of the sustainability materiality assessment require annual review. Accordingly, in 2025, PMI conducted a relevance evaluation of the results from its 2024 consolidated PMI sustainability materiality assessment. This evaluation aimed to ascertain the continued validity of PMI's 2024 sustainability materiality assessment by examining alterations in internal or external conditions. Conducted collaboratively across PMI, this review scrutinized internal elements like organizational restructuring, operational adjustments, financial performance, and risk management, alongside external elements such as regulatory shifts, industry trends, and evolving stakeholder expectations. The changes identified through this evaluation exercise were generally not perceived to significantly undermine the validity of the results from PMI's 2024 sustainability materiality assessment. Minor revisions were advised, reflecting the latest insights from PMI's environmental risk assessments. More precisely, a material inward risk connected to the topic of "Biodiversity and ecosystems" was reformulated, and the topic of "Water" was elevated to material status due to the heightened importance of two risks. These amendments were reviewed by PMI's Sustainability Committee, which affirmed the 2024 sustainability materiality assessment's validity and approved the suggested adjustments to the two above-mentioned topics, exercising the authority of their mandate to confirm that the overall PMI's sustainability materiality assessment outcome remained largely intact.

The PMCR group's 2025 relevance evaluation process

In 2025, the PMCR group conducted a relevance evaluation of its localized 2024 sustainability materiality assessment results, assessing internal and external changes in 2025, such as changes in organizational structure, operational model, risk management or new regulatory requirements, market trends, and stakeholder expectations, that could potentially affect the validity of the 2024 sustainability materiality assessment results. This assessment indicated no significant impact, thus confirming the ongoing validity of the PMCR group's 2024 sustainability materiality assessment results.

In addition to local relevance evaluation, the PMCR group adapted the amendments resulting from PMI's consolidated relevance evaluation for their local application. The minor modifications implemented by PMI were integrated into the PMCR group's localized sustainability materiality assessment outcomes, except for a PMI's material risk related to water in manufacturing operations, which was deemed immaterial locally as PMCR's manufacturing facility is not located in a high water stress area.

The outcome of the relevance evaluation process together with the localization of modifications introduced by PMI forming the PMCR group's localized 2025 sustainability materiality assessment results were discussed and validated by PMCR's Board of Directors and shared with PMCR's Supervisory Board.

We plan to re-assess the relevance of the PMCR group's localized sustainability materiality assessment outcome on an annual basis and refine the process as needed when executing future sustainability materiality assessments, incorporating new sustainability insights, feedback from stakeholders, and learning from past experiences.

We did not identify material IROs connected with the topic of "Pollution" (ESRS E2). Our assessment process for this topic was consistent with the methodology applied to all other subjects, as outlined above, and considered direct and indirect activities along our value chain. The primary sources utilized to identify and evaluate IROs for this topic included external sources such as the ENCORE tool and PMI's internal datasets (e.g., manufacturing sites monitoring data, tobacco supply chain data, etc.). Additionally, PMI conducted targeted interviews with suppliers within our electronics supply chain to assess potential and actual impacts, risks, and opportunities related to this topic in that specific segment of our value chain. PMI did not hold consultations with affected communities, but leveraged the expertise of internal employees responsible to manage this topic at PMI.

‌Material impacts, risks and opportunities and their interaction with strategy and business model

Material Impacts, Risks, and Opportunities Assessment Outcome

As an outcome of the PMCR group's localized sustainability materiality assessment, we identified several material impacts, risks, and opportunities. From an outward perspective, we identified actual and potential material impacts generated on society and the environment through our direct and indirect operations. The majority of these material impacts, which are both negative and positive, concentrate on our upstream and downstream value chain activities. Simultaneously, from an inward perspective, we identified a series of risks, that encompass potential supply chain disruptions, increasingly costly compliance with new and complex regulations on sustainability performance, obstacles in informing stakeholders about our smoke-free products, repercussions from competitors' activities, and proliferation of illicit products.

While our diligent efforts to foresee and mitigate potential adverse impacts and risks are currently and proactively preventing their materialization, we nonetheless identified certain challenges that are pervasive in our industry as material and mention them in the tables below, accounting for their potential significance should they materialize. We also identified opportunities, mostly centered on anticipating emerging regulatory requirements, increasing operational efficiency and business resilience, and improving competitiveness. The PMCR group's material IROs - in particular those associated with upstream and downstream activities - are highly consistent with and derived from material IROs identified by PMI's consolidated assessment given that the PMCR group operates within the broader PMI's value chain.