Finance Assets, net:

In 2003, PMCC ceased making new investments and began focusing exclusively on managing its portfolio of finance assets in order to maximize its operating results and cash flows from its existing lease portfolio activities and asset sales. Accordingly, PMCC’s operating companies income will fluctuate over time as investments mature or are sold.

At June 30, 2014, finance assets, net, of $1,783 million were comprised of investments in finance leases of $1,825 million, reduced by the allowance for losses of $42 million. At December 31, 2013, finance assets, net, of $1,997 million were comprised of investments in finance leases of $2,049 million, reduced by the allowance for losses of $52 million.

PMCC assesses the adequacy of its allowance for losses relative to the credit risk of its leasing portfolio on an ongoing basis. PMCC believes that, as of June 30, 2014, the allowance for losses of $42 million was adequate. PMCC continues to monitor economic and credit conditions, and the individual situations of its lessees and their respective industries, and may increase or decrease its allowance for losses if such conditions change in the future.

The activity in the allowance for losses on finance assets for the six months ended June 30, 2014 and 2013 was as follows:



	For the Six Months Ended June 30,
	2014			2013
	(in millions)
Balance at beginning of the year	$	52		$	99
Decrease to allowance	(10		)	(47		)
Balance at June 30	$	42		$	52

During the six months ended June 30, 2014 and 2013, PMCC determined that its allowance for losses exceeded the amounts required based on management’s assessment of the credit quality and size of PMCC’s leasing portfolio. As a result, PMCC reduced its allowance for losses by $10 million for the six months ended June 30, 2014, and by $47 million and $27 million for the six and three months ended June 30, 2013, respectively. These decreases to the allowance for losses were recorded as reductions to marketing, administration and research costs on Altria Group, Inc.’s condensed consolidated statements of earnings.

All PMCC lessees were current on their lease payment obligations as of June 30, 2014.

The credit quality of PMCC’s investments in finance leases as assigned by Standard & Poor’s Ratings Services (“Standard & Poor’s”) and Moody’s Investors Service, Inc. (“Moody’s”) at June 30, 2014 and December 31, 2013 was as follows:



	June 30, 2014		December 31, 2013
	(in millions)
Credit Rating by Standard & Poor’s/Moody’s:
“AAA/Aaa” to “A-/A3”	$	434	$	464
“BBB+/Baa1” to “BBB-/Baa3”	782		927
“BB+/Ba1” and Lower	609		658
Total	$	1,825	$	2,049