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OVERVIEW: INTERNATIONAL STATUS REPORT February 1994 Total Export shipments in February were 213 million units, up 16% from 184 million in February 1993. Year to date February shipments were 343 million units, down 29% from 480 million last year. Note: Commercial Exports, as a group, is no longer shown. In an effort to improve on the content of this report, individual countries are grouped by region. Thus, Russia is shown in Eastern Europe, Chile in South America, and so on. 300 250 ,~ 20¢1 ~, 150 109 50 296 130 1993 Jan 199~ Export YTD1994; 243 milton PrlorYr: 480 % Chg: -29% 213 Feb 200 iBO 160 .~ 140 120 tOO 8O 4O 2O 0 40 1993 1994 Ash 180 124 Middle East Africa Export YTD 147 119 ~aslem Buropc Tax Freo & C~obc~n Ig 3auth AmeHca

Intematlonal Stalus Report February 1994 ASIAN MARKETS Year-to-date shipments were 36 million units versus 134 million last year. Year-to-date sales to the retail trade were 73 million units, down 16% from 87 million last year. CARLTON s~fles remain under heavy competitive pressure from Frontier (LT.) and Next (P.M.). Geoff Miningham is currently in Japan to review the situation. In consultation with Rothmms, efforts are underway to improve the competitiveness of our CARLTON lmg. offer. Consumer product testing in Jap~m wilt be initiated in March to benchmark our current product and provide clear direction for further product development. Alternative packaging design, addressing the need to lighten the CARLTON ling. pack,sing, is in parallel development. We have also reached agreement with Rothmans to introduce a CARLTON Menthol Slims product in view of" the significant size of the slim, light menthol segment and the continued growth of CARLTON 100's menthol Packaging is being progressed concurrently with the new CARLTON King Size lmg. packaging. A successful ent~ in this segment could represent a major volume opportunity for ATCo. MID EAST MARKETS Year-to-date shipments were 124 million units down 31% from 150 million in 1993. This volume is a reflection of the continued inventory adjustment by Gallaher preceding Ramadan; the forecast for the year remains unchanged. The initial 4 million units of Firtas has arrived ill Saudi Arabia and Cignlah is quite satisfied with its packaging, design and smoking characteristics. Further orders from Cigelah for this product are expected. We still look forward to a mid-year launch of COMPASS in the gaudi Arabian market, in the low price category. EASTERN EUROPE MARKETS Poland Agropol Warsaw was advised that we wish to terminate our brokerage agreement with them effective date will be the end of March 1994. Meanwhile, in additton to looking into the possibility of Rothmans manufacturing our products in Polmad under license, we are also investigating the possibility of having a similar relationship with Tahaea]era - Madrid, Spain, who currently have a relationship with Radom Stale Factory. Anticipate that in the month of April we will have something to report on further developments.

Intsrn~ion~l Sletlls Repo~ Febmary 1994 Continuing our conversations with International Trade, Bulgaria, to see what can be done to bring in a smail amount of U.S. manufactured COMPASS and or MALIBU. Should it be feasible, we will support the importer with a limited amount of point-of-purchase signage and promotional items. Russ~ Year-to-dete shipments were 147 million vs. 84 million last year, up 75%. In mid-February, we shipped 85 million traits to S.G.S. Moscow warehouse for ultimate sale to Asrta International - Zurich, Switzerland. This is a large importer of Brown & Williamson and BAT products. Since the arrival of the product in the market, Astra has paid for and withdrawn 20 million units by the end of February. We anticipate another 40 million units will be purchased in the month of March. Arrangements are being made to back up this new importer with stock in the new Tabaknatie Antwerp warehouse. Additionally, we have prepared an exclusive importers agreement for review and discussion by ATCo. and Astra. In the month of February, we met with the Mospecbat kiosk group to make arrangements to have +/- 100 kiosks in Central Moscow painted with the AMERICAN livery by May l. Lighted indoor signs and US - supplied single pack rack with riser card will be installed at the same time. The Moscow office is off to a successful start and the two retail salesman have improved the distribution in the 150+/- Mospechat kiosks dramatically. In addition to the Astra International group, we continue to talk to various other cigarette importing and distribution groups with the aim of finding a reputable, sufficiently financed importer/distributor to handle our other product lines on an exclusive basis in Russia. We continue to work with Joseph Friedman International group on various projects, among them is our business with Mospechet as well as a project for Kiev which involves Molodsportloto and their kiosks. WAREHOUSES We are in the process of phasing out the Rotterdam warehouse as well as re-evaluating the facility at Kotka, Finland. Present inventor/ in Rotterdam, Kotka and Cyprus is 47 million units of AMERICAN and COMPASS of which 21 million COIVIPASS has been committed, awaiting receipt of ftmds.

lniemafional Status Report Febluaty I994 U.S. TAX $'REE Free Year-to-date 5 million units were shipped down 33% versus last year due to the loss of LUCKY STRIKE and PALL MALL - our major entries in this market. Shipments of AMERICAN, MISTY, and MONTCLAIP, are expected to help offset the loss of LUCKY STRIKE and PALL MALL particularly on the Mexican Border where low price Brands are a factor. U.S. Overseas Military year-to-date 2 million units were shipped, down 58% from last year. This decline is due in part to a signific~mt reduction in the number of troops assigned to overseas military bases. Despite the gradual loss of overseas installations, the broadening of our Brand offerings will give this market some stability for the near term. We anticipate th~ Europe end Far East shipments of low price brmlds in the second quarter will largely offset volume declines we are experiencing in the first quarter. Puerto Rico 6.3 million units were shipped in Februar~ 1994, whereas zero volume had been shipped during the first two months of 1993. Two-thirds ofthls total or 4.2 million units were AMERICAN Full Flavor Kings Box and P-dVIEP, A Full Flavor Kings Box as we continue their island-wid~ introduction, Since our offerings in this market are now consistent with the fact that it is 92% box, we expect a much better performance in Puerto Rico in 1994. Clu'l~ We shipped 18 million units of COMPASS in February to Chile. This marks ATCo.'s first shipments to this important South American market. We maticipete continuing COMPASS shipments and expect MALIBU King Size Box shipments to begin in the second quarter. sm~r~*~tmz