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BROWN & WILLIAMSON TOBACCO CORPORATION PRELIMINARY FIVE YEAR PLAN 1993 - 1997 RESTRICTED OCTOBER 1992 690951884

pRELIMINAR¥ pLAN 1993 - 1997 TABLE OF CONTENTS II. ~MZSTZC IV. V. VI. Corporate ResponslbiliSy and Financial Overview Key strategic Issues Domestic Environmental Overview, Assumptions and Forecmmz Develop KOOL Grow Value-for-Money Other Significant Domestic IssueB INTEF.NATION~L VII. International Enviror~ental Overview~ ABs~p~lons and Forecast VIII. Expand and Grow Internationally STRATEGIC OPERATIONS IX. Manufacturing Capacity X. Other significant Operations - Engineering, Manufacturing and R&D IsBums XI. Improve Management Strength XII. InfQrmation Technology XIII. Consumer satisfaction and Quality Focus ~IN~2~CIAL pERFOPd~%NCE 1 2 2 5 6 7 7 8 9 i0 11 11 690951885

1991 1992 Act ua[ Estimate Brown & WilHamson Tobacco Summary Five Year Plan Performance U.K. Basis (Units In BiKl~on$; Dollars in Mirlions) 1993 1994 1995 1996 Dome~ 566 60.6 Unit Volume 7+0% % Change Vs. Last Year 11.1% 12.2% Market Sham 2,~39 2,888.0 Gross Turnover 8,8% % Change Vs, Last Yur 867.0 932.5 Profr~ Contribution 7.6~,~, % Chan,qe Vs LAst Ylar CGR 1997 1992-1@97 66.5 66.7 66,3 ~.3 65.6 1.5% 8.7% O.~P~ -0.6% 0.1% -1.2% 13.6% 14.3% 14.6% 15.1% 15.5% S,370,7 8,549,4 5,702,8 5+903,5 4,(~7,0 6,9% 16.'P,~ 53% 4,3% 5.4% 5,4% 1,007.7 1,104.6 1,170,4 1.254,1 1.285,9 6,6% 5,1% 56% 6,0% 7.2% 2,5% IntemaSonat 59+1 46,9 UnR Volume 20,1% % Change VS. Last Y~r 684,8 793,3 Gross Turnover 15+8% % Change Vs+ Last Year 215¸8 235,7 Prom Con~'ibubon 7.2% % Chan~e Vs Last Year Tofal Brown & Wil{~amson ~,2 107,9 Unit Volume 12,1% % Change Vs La~ year 3,473.4 5,526.0 Gross Turnover 51.8 5~.0 63.9 69.0 75.5 10.0% 10.4% 12.0% 10.2% 5.2% 5.2% 812,1 1,037.9 1+165.2 1,293.5 1,426.4 12.5% 1S.0% 13.8% 12,6% 11.0% 10,~'~ 261,O 293,8 525,7 354:7 380,9 10.1% 10 "P~, 12¸6% 10~'~ 0,9% 74% 118,7 125.2 130.7 136~' 141,5 5.6~ 10+0% 5.5% 4,4% 4,7% 3+5% 4+438,5 4,746,5 5,024,0 5,356~ 5,626,1 8,C~,~ % Cf~ange Vs. Last yiBr 832.6 (~0.1 Tm cEing Profit 6.2% % Change Vs. LIst ymlr 24,~ 23.3% % of Gross Turno~teT B32,5 ~0.1 Trad'mg Profit Adjured Fon - FAS 106 1+5 BJ~.T Notat;onat Adjustments -- 832,5 891+7 Adjust~ Trading Pr~it 7+1% % Change Vs, Last Year 24,0% 23.3% % of Gross Tumovt r 16.0% 5.9% 5.6% 8,6% 5.0% 946,0 1,043,5 1+123.2 1~23.2 1,2~,5 8.4% 10.0% 7.6% 5.9% 5.'/% 21.3% 22.0% 22¸4% 22¸8% 225% 946,5 1.043.5 1,1232 1,223,2 1,268.5 16.9 184 20,1 21.'$' 23,5 4,4 8+5 17.2 26.6 3~,0 9~.1 1,070.7 1,160.5 1,271.5 1,330.0 5.6"% 10.(P,~ 8.4% g.9% 4,6% 21 ~P/~ 22,6% 23,1% 23,3% 23.6% 7.5~ 5.3% 690951886

I. CORPO~TE ~JESpoN$1B|LI~-f ~ FINANCI~d~ O~RVIS~4 CORpOF-%TE P~SPONSIBILITY - Brown & Willi~son Tobacco Corporation is responsible for the management and development of B.A.T'S tobacco interests In the USA and for promoting and managing the sales of U.S. international brands worldwide thrQugh e~ports and through licensees within and outside the group. B&W will deliver consistent and projectable earnings growth as required by its shareholder. FINANCIAL OVERVIEW - Achievement of higher than planned volumes for KOOL, the dr~atic growth in GPC volume, and progressive bugin~ss in Japan will anable B~W to grow volume 12.1% in 1992 to 107.9 billion units, 1.9% above plan. Trading profit will reach $89D.I million, representing a 6.9% increase over 1991. H~wever, this is $61.0 million less than plan due to the dramatic increase in domestic consumer downtradingf the Impact of the price reduction on RALEIGH Extra/VICEROY, strong price competition and unfavorable mix lhlftl internatlonallp~ Looking forward, the financial p~oJections included in B&W'~ Preliminary Plan reflect continuing strong volume growth in the U.S. and in international marketB. But profit growth will be constrained domestically by the impact of continued consumer downtrading, increased price competition and continued load reduction. similarly, the outlook internationally recognizes the matoring of the Japanese USIB market, limited feasibility of price increames in 3span and growth opportunitles in China and Eastern Europe where margins are lower. While underlying profit growth of 8.3% is below the g~ideline and the level reflected in the prior plan, it representm a ~aJor ~hallenge, glven the c~rrent envlroru~ent° The Sununary Five Year Plan Perfo~an=e Schedulm rm~onciles the un~erlyin~ p~ofit growth to reporte~ trading profit ~r~w~h of 7.3~. Price increases on Domestic full revenue products and high cp~ality VFM offerings will result in the continuing dramatic growth of the VFM segment. B&W's VYM volumes are anticipated to in~rease 24.0% durin~ 1993 on the Btrength of GPC, RALEIGH EXTRA and SAVANNAH, and then experience slower growth as profitability improves. Full revenue volumes are expected to decline ~t a CGR of -10.6%, in line with the see~ent. B&W's ability to maintain share in the full revenue menthol segment with KOOL will be key to achieving a 6.6% CGR in domestic profit contribution over the plan period. Ex~e~ted lower price in=reases in the VFM segment, cot0bined with the July 1992 price reposltioning of VICEROY and RALEIGH EXT., will reiult in reduced levels of discounting in 1993. over the balancl of the plan period B&W'S dimcount mpending will increame based on increased VFM volume and requirements to compete with expected competitive net price positioning. Media and promotion spending plans have been increased to improve KOOL's trend and to develop a point of diffez~nce for VICEROY as a quality value alternative to full revenue products. A mensitlvity presents the financial implications of • 1994 rollout of a new ca~palgn ~o morm drastically revltalizm KOOL. International export volumes are estimated to increase at • 10.4% CGR over ~he plan pezlod as the maturing Japanese USZB market will constrain overall ex~ort growth ratla. International profit contributio~ will increase st an innual rate of 12.5% including notational adjustments. MOre rapid growth will be constrained by an increasingly competitive pricing environment worldwide. 690951887

-2- II. ~y ST~T[QIC ISSUES B&W'u Preliminary Plan focuses o~ five major strategic issues. B&W'8 strategies address performance imsues and provide short- and long-term performance improvements. DEVELOP KOOL - ReduciNg the decline rate of KOOL and developing strategic options to stabilize the brand lodger ter~ i8 B&W's top priority. K(~DL remains B&W*S flagship brand, contributing over 65.B% Of total domestic brand contribution in 1992. B&W'S Preliminary Plan includes reduced discounting and restoring media an~ image-based promotion spending to levels that historically achieved improved performance for the brand. Test marketing of a third revamped tOOL revitalization cau~paign is being glve~ major emphasis based on laarnlng from thl two 1992 test markets and positive COnB%h~er EeB~nSe. GROW VALUE-FOR-MONEy - VFM remains the major domestic growth opportunity as consumer downtrading c~ntlnuel. This se~ent offers B&W an opportunity to grow vol%u~ep share and profits in the highly profitable U.S. market, where growth in the lowelt priced offerings has accelerated. B&W's Preliminary Plan concentrates resources behind those brands which offer greatest demonstrated long-term potential and allow participation at each price positlonl,g. Phasing out poor performing brand style~ and reallonatlo~ of resources will Qnhance B&W's marketplace cc~npetitivenesB. The VFM segment will offer major long range profit opportunities. Improved VFM profltability is a key element of the plan. EXPAND AND GROW INTERNATIONXI~ST -- Expanding and opening International markets, including a growing demand for USIBs, offers elgnlficant future opportunity for vol%h~e and profit growth. B&W'B Preliminary Plan concentrates resources on selected priority markets to improve the c~pany's C~pe~itive position and increase return o~ Its lo~g-term investment. Asia, as well as emerging opI~0rt~nitles In Eastern Europe, the M~ddle East and Latin ~unerica have management focus. Consistent management of strategic brands is central to lo~g-te~ growth. MA~FACTURING CAPACITY - Providing manufacturing capacity to meet all profitable global market opportunities will present s critical challenge over the plan period with the major international growth opportunities, shift to box styles, and growth of domesti~ brands. Reserve capacity mu~t be put in place to provide flexibility should demand exceed volume ex~ctatio~s. IMPROVE MANAGEMENT ETRENGTE -- B&W will continue to up,rode the lkilll and capabilities of itl human ~esourCel and ensure an appropriate organizational stz~4cture, to be ~le to tak~ advantage Of future marketplace opportu~itleB, Byste~B and technologies. This will all~ the company to increase productivity, mfficiency and overall performance. The entire organization will be reexamined and aligned to ensure superior consumer satisfaction and flexibility in the marketplace. SiX. ~)M~STIC ~VIRON~AL OVERVIEW, ASS~/IOMS ~ FOREC/tST K~Y ASSUMPTIONS - Over the next five years, the U.S. tobacco industry Is exacted to confront an even more aggressive &~d h0Btile envizonment On legislative, regulatory and social fronts. Anti-smoklng initiatives at all levels of government will escalate. Cigarette consumption will decrease a~ an increasing rate and competition among the manufacturerl will increase, particularly at retail. B&W's plan assls increased state and local taxes~ f~rther restrlctlonl on consumer oppor~unlties to smoke, more restrictlonm on salel and marketing, and potential lSmltatlonl on manufacturers' ability to export cigarettes from the U.S. The Federal Excime Ta~ . 690951888

-3- will increase by $.04 to $.24 per pack January I, 1993. The plan assumes no additional FET increases, although an incre&se in 1996/1997 is posalble. However, risk of incremental Industry volume dgcline8 due to a ~ederal tax increase is viewed sl minimal. ZC0~0My - The U.$. econDmy i8 expected tD remain s 81Qw-growth e.vir0rd~ent, Brief periods o£ higher economic growth will occur, but are not expected to be sustainable due to shattered consumer confidence. Real GNP growth will be limited to 2.0-2.5~ per year, inflation will bl llightly higher than 1992"s 2.9% but below 4.5%. Unemployment will continue st high levels throughout the plan period. Interest fates are expected to rise modestly in the out years of the plan. PRICING aSSUMPTIONS - B&W projects continued significant list price increases, (particularly for full revenue brands) and that retail prices will remain at a moderate level compared to world s~andards, based on conc~usiDnm of a recent pricing study. Philip Morris and R.J. Reynoldl both require substantial price increases to fund corporate strategies and fulfill profit growth expectations. Lels aggressive price increases are anticipated for low price and extra low priced offerings to maintain relative retail price spreads aJ~ong the price tiers and attempt to moderate discounting over the plan period. Future levels of discounting are expected to continue to increase, but at a slower pace with a significant portion of price i~crea~e8 flQwing through because of financial performance requirements. Any VFM price increases above the plan ass~ptions that would change the pric~ spread would more than likely be offset by discounting, DOMESTIC FORECAST - Industry shipments for 1992 are projected to decline 2.8% after sdjustmen~ for the year-to-year effects of trade loading. The decline for 1992-1997 is forecasted ~o increase each yeaz at a 3.1% compound ~ate. However, industry decline is marginally more optimistic than forecasted in the prior plan. Overallp factors driving the industry decline ~nclude legislation restricting consumers' opportunity to smoke, taxation and continued anti-smoking social preleures. MQderating these pressures £i the continued growth of the value se~men~ with availability of cigarettes at deep discounts to full revenue prices. XAJOR DO)(~ST~C SEG~ PROJZCTIOMS Price Segen%l - Full revenue share of the market is projected to decline from 71% in 1992 to 48% by 1997t despite manufacturers supporting key full revenue brands with higher levels of promotion to sustain volume. The rapid growth Of VFM el being driven by rising retail prices, quality VFM offerings, and aggressive net prioing of VFM pEoducts. The greatest share growth is pro~ected fo~ the E~P segmentw which his established a wide and growing price differential versus all Other price segments. prf©e se~le~t proje¢l(~ (Shire o( ~rkei %) @utt Rtv~ 7~.0 71.0 47.7 -23.3 glL~-For-M~y ~.0 29.0 S).3 +~.3 L~U Prl~e t8.$ 17.9 ~0.(. + ;L5 Extra Lc.~ pri)e 6.5 ll.1 )119 +)0,~ 690951889

-4- Other Segmsmtmtion - The menthol segment is expecte~ to continue its gradual long-term share ~@cline from 25.9% in 1992 to 23.4% in 1997. The shift to lower tar delivery products will continue as will the trend to 100mm products and box packaging. Box share of market is projected to Increase from 26.4% in 1992 to 32.7% in 1997. The profile of the smoker population is projected to skew increasingly toward ~emale, oldert and lower i~come ConsLh~ers. DOMZSTIC CO~ETITION - C~pmtltio~ in the domeltic tobacco enviror~ent will continue to intensify as competitors attempt to limit share declines of full revenue products while at the same time aggressively participating in the expanding VFM segment. Anticipated competitive focus includes: I~res$~ c~nc~tra~i~ Of re$~rcs$ behi~ key ~uI[ rev~ bramds. LI~ ex~ s~ ~r0du~t m~h~e~e~ of existi~ full rev~ ~t$. I~rti~ effQrI$ t~ c~trsL diEtr~tI~ ]~rsa$~ rslia~e om ma~fDsturers~ LI~t prices 0~ l~i ~s sf C0u~i~ to infl~cmce r©tli[ prlce$. ]~re~s~ ELP c~mpe~iti~ f~r ~$, ~e~&IL s~¢e m~ di$~ri~i~, philip Morris - pM,s domestic tobacco business is under additional pressure for esrnings ~row~h due ~o slow earnings ~row~h in foo~. This comes at a difficult time as pM'B flagship brand, Marlboro, has begu~ to show some weakness. Full Eeve~ue volume declines are severely l lmit~ng domestic profit growth even with aggressive price incrmases. TO combat the problem, PM has adopted a three pronged approach. First, the c~pany is increasing mpend and concentrating promotional suppor~ on key full revenue brandE. Second, through the Distributio~ a~d Retail Masters progra2~$, ~M is attempting to leverage its market power to dominate distribution. Finally, PM im resorting to line extensions a~d increased i~ventory levels ~o p~gh prod~ct into the distribution chann~l. Moweve~, eve~ wi~h these efforts~ PM will have a difficult time obtaining the domestic earnings growth necessary to support their ~orporate 20% EPS ~rowth expectations. PM continues to develop its International business s~pported by hi,her lev~l~ of spend and i~vestme~t to assure sourcin~ capabilities. R.J. Reynolds - R~-R's financial strength has improved dramatically due to capital restruct~rings. However, d~estic full revenue 8hare declines for Winsto~ and Sal~ continue to be a major probl~. Recent product enhancements such as J~mpr~ved blends and the "Flavo~Seal" packaging combined with substantial promotional support have done llttl~ to arrest historic decline trend~. Pr0~pe~ts for RJR continue t~ be much of the same - high promotlon levels in an attempt to arrest full revenue share declines and increased emphasis on VFM and Intermatlonal ~rowth. RJR is the competitor viewed as m0B~ likely t0 make a dramatic/unexpeate~ move in the market place, as operating i~com~ premiere8 i~crease. Lorillard & ~u~erisan - Lorillard and American will continua to follow cash and profit ~ptimization strategies with Increased emphasis upon VFM and International opportuni~lel. Lorillard will increase Newport support levels as the company becomes even more dependent on Newport contribution to achieve operating ear~inga growth. Liggmtt - Liggett will lose financial flexibility during the plan period au serious flnan~ial problems at their parent, Brooke Group, extend downward. Cash constraints aze ~xpected to further limit promotional programw and the possibility of significant new product introductions. Pri~e promotion will be difficult for Liggett. 690951890

-5- japes Tobacco inc. - Over the last couple of years, JTI has become aggressive in developing its export business and manufacturlsg capabilities. AS s result, today iTS is highly profitable and • more formidable competitor, as evidenced by the plowing gro~th of Japanese ~ports and gro~h of their ow~ ex~orts. There is s ri.k that JTI could acquire Lorillard or Liggett to gain a fOOthold in the H.S. market. They would likely choose to be • strong competitor in VFM to grow share. WHOLZSALE/RETAIL TRENDS - Higher cigarette prices continue to drive thB consist towards pack purchases and shift vol~e fr~ supermarket/grocery to convenience and gas outlets. Brand and style proliferation and marginal brands will increase. There will be more conversion to no,-self ssrvlce merchandlJing and consolidation of wholesale accounts. Future distribution issues and alternativls will be closely monitored as changes in the system contlnue to evolve. IV. ~T~OlC ISStFE 1~ DK~P KOOL pERFORMANCE OBJECTIVES - AS B&W's large|t brand and most importa,t p~oflt contributor, KCOL'S decline rate must be minimized while achieving acceptable profit levels. The plan objective is for Keel to hold share of the full revenue menthol Be97Nent° SITUATION ANALYSIS - The menthol segment will continue to decline slowly. Since 198B, full revmnue ~nthol has declined by 5.5 share ~ints as VFM menthol entries have experienced steady growth. Extra low priced menthol styles have been particularly successful, growing from 1.2 share ~ints in 1991 to 2.2 ~hsre pointm in 1992. KCOL'B decline has continued to be driven more by its low rate of attracting ~ew and com~titivm smokers than by its outflows. Deterioration has been greatest among key young adult (21 years and older} and Black smoker groups. XOOL plan strategies are designed to maintain KeeL's position in the full revenue menthol s~ent while continuing to evaluate revitalization options, which offer improved long-term perfo~snce. Resources will be focused behind buildlng brand and advertising awareness, with support behind image/awareness building promotions designed to appeal to both franchise and competitive smokers. Price discounting will be reduced and used sparingly, primarily as a competitive business building tactic in urban markets. Keel spend plans are based upon • level of sup~rt behind image-based advertising and promotIQn that have proven successful in holding share of the full revenue menthol segment, as demonstrated by the bra~d's performance in 1989 and 1991. Alternate Keel plan~ were considered, including a short-term profit maximization strategy. However, these failed to meet the g~ideline and had significant negative impacts on long-term profitability because they exacerbated KeeL'S decline by putting it at a severe dlsadvantage to key menthol ¢~petition. Revitalization of Keel is a top priority. The two existing KeeL revitalization tests have both mhotm promise and will oontlnue to be evaluated, with both receiving maintenance level of spend. In addition, plans are underplay to open a third tRst market that incorporates the learning gained from the exlmting tests. Like Cleveland a~d Ric~u~ond, the new test will he monitored through a cogitation of measures, including brand~ ad and pro~tion awareness, trial and conversion rat~s~ and consumer cormnents~ i~ additio~ tD voles/share measures. The new test market will begin in early 1993. A Keep rmvitallzation roll out is included as a sensitivity. 690951891

-S- V. STRATEOIC ZSS1/I~ 2I GROW VILLI~-FOR-MO~y pERFORM2~NCE OBJECTIVES - B&W ~st continue to participate in this strong growth segment to ensure long term p~ofitabiiity. A key challenge is to manage the VFM portfollc under B&W,s new priceposttioning through a combination of discounting and list prlceI go that a strategic brand is positioned at each price point and diltlnct relationships between price megments are established and maintained. B~W*s VFH portfolio is forecast to grc~ from 6.8~ market share in 1992 to ll.g% share in 1997. A primary objective is to improve brand unit and total profitability. SITUATION ~WMJ~yS~S - Consumer acceptance of VFM brandl continues to grow as the price differential between full revenue and VFM offerings expands. The prlJnary element of VFM marketing has been pries discounting through carton/pack couponing. Although discounting will continue to be an important element, it is anticipated that the newly e~tablished list price differentials versus full revenue will take on more importancet relieving some of the pressure for further discounting. This should provide a~ opportunity for more traditional marketing tools - advertising, display progrD~ms, Bigness - to take On greater importance in VTM marketing. It should be noted, however, that a more aggressive discounting approach by key competitors may necessitate a retur~ to the heavy discounting levels observed in recent years° The key dyn~ic that has occurred in VFM in recent yearo iJ the exceptional growth of Extra Low Priced offerings, which has doubled in size during 1992 to 11.1 share points. Growth is expected to continue through the plan period as: consumers become i~creasingly price conscious, retail cigarette prices outp&ce inflation, ELP brands continue to deliver on the promise of price/value, and the price gap between ELP and Full Revenue grows. ~s VFM branded offerings find it increasingly difficult to compete with ELP offerings on purely price, they will be forced to find other means by which to differentiate themselves and compete. Thust JJnagery and quality reassurance ere expected to become increasingly im~rtant for branded VFM entries. VICEROX - Based on its heritage as a mainstream non-menthol brand, VICEROY is felt to have considerable potential as the "Low Price Alternative" to current smokers of competitive full revenue non-menthol brands (i.e., Marlboro and winston). Central to this strategy is the ability to u~unlcate VICEROY's quality and value message. Key elements of the VICEROY plan are devoted to media, direct mail end value-added promotions, that are designed to enhance awareness and create a positive image. In addition, significant opportunities should be available through development of new VICEROY styles - BOX and Ultra Lights. Along with these image and awareness building activities, a moderate level of discounting spend is planned to ensure that VICEROY maintains its differential releb£ve to full revenue brands over the plan period to deliver ¢0nsistent price~value to increasingly prlce-conscious smokers. - The primary strategy behind H~LEIGH EXTRA is to maintain the brand at GPC's llst price level, thus providing a price advantage versus other branded VFM products. Supporting this strategy will he limited on carton/pack discounting spend, targeted primarily at outlets that do not carry GPC. Additional discounting will alIow RALEIGH EXTRA to compete head on with the aggressive positioning of PM/RJR offerings and in selective markets where the brand has been traditi0nally ~trong. Merchandising and display support remain critical el~ments of the RAlEiGH EXTRA plan to ensure effective retail presence and price c~unicatlon. 690951892

-7- Gp~- GPC has shared in the explosive growth of the lowest priced segment of the business, plans for the bra,d will focus on maintaining its distribution base while improving profitability. Volume is projected to grow only modestly from current levels. TO accomplish this, discounting spend will be required to offset the $5/M price disadvantage that GPC has vers~s most other ELP offerings and heavy levels Of competitive promotional spend. Retail efforts will focus on communiclting Gpc's price proposition to the consumer and building an increased level of brand equity. Unit profitability is projected to almost triple over the plan period to $13.60 per thousand. Mowever, it will be difficult to improve profitability further in the competitive marketplace since it is likely that competitive entries would be introduced below Gpc's price positioning to take advantage of those substantial margins. During the first half Of 1993, a redesigned GPC package will be test marketed to provide greater insight regarding the potential of increasing SPC brand equity among consumers. S&Vpd~NAH - SAVA/~NA~ was rolled into approximately 34% of the U.S. in 1992 and plans are to complete national rollout in 1993, but only after validating that recent positive trends continue, primary focus will be to position SAVANNA~ as an everyday low price, high quality VFM Slims entry that can appeal directly to smokers of Virginia Slims as well ms to smokers of competitive VFM slims products. Progra~ elements will focus on gaining awareness and trial with limited discounting support planned. VI. OTHER SIGNIFI~ ~STIC ISSUES CAPR~ - Since the slI~s segment has remained basically stable at 6% of the market, CAPRI plans focus on growing its smoker base through the expansion of the ~20's into the remainder of the U.5. and the introduction of CAPRI Ultra Lights. Apart from these introductions, support behind CAPRI will be a continuation of image-based advertising and promotions. Due to its unique product characteristics, CAPRI has not experienced significant VFM defections, and the impact of SAVANNAH on the CAPRI franchise is expected to be minimal. SALES ~RD DISTRIBUTION - A critical element required to implement B&W'S plan is the Field Sales Force. Plans include additional manpower increases and reevaluation of call frequencies to help gain competitive advantage in high opportunity retail locations, Expanded strategic use of the handheld computer (particularly regarding pricing and discounting), enhanued distribution programs and increased package contracts are high priorities. NEW PRODUCTS -- Development Of new products will be required during the plan period to build the iong-ter~ profitability of the business. The current portfolio will need to be updated with products designed to exploit niches or changing consumer demands. This new product focus will intensify later in the plan period after achieving superiority goals. VII. I~TERNATIOMAL L~VIROMME~TAL OVZRVIEW, ~SSUMP~IONS RRD ~RBCAST Overall, world economic c0ndltlons and inflstlon are expected to i~prove modestly. Interest rates are antlclpated to remain higher than in the U.S. and the Yen is expected to continue to show itrength Igalnst ~he dollar. International ass~mptlons are generally in llne with B.~.T'S Future Business Environment paper. ~iobaI opportunities for U.S. brands will be excellent over the plan period° World cigarette volume is expected to grow at a 1.2% ¢ompeund rate even in the face of increasing worldwide smoking and marketing restrictions, tax increases and social pressures. Much of the growth will c~e from China, the CIS and Eastern Europe, • 690951893

-8- U.Sm Inters~tlonal 8rends will grow from 461 billion unit8 in 1992 to 554 billion u~it8 at the end of 1997 (CGR 3.?,). U.S. cigarette export volume for 1992 will be down somewhat from 1991"g 179 billion units, primarily ~ue to lower males by PMI and RJR to CIS. Growth resume8 in 1993, with the rate Of g~owth in out yBa~8 impacted as competitors' U.S. export production 18 transferred to local markets through jolnt ventures. However, thig could be moderate~ is there is potentially aome excess competitive capacity in the U.S. later in the plan. BecauBe of the current opportunltiel, ~nternatlonal cigarette markets will be g~b~ect to increagingly Itrong price c~petltio~. PMI, RJR and JT~ are mll expected to market valuB off,ring8 &gg~esgively, particularly in emerglng marketm to gain a itrong foothold. PMI will cent•hum w~rldwide Btrateglc management of Marlboro and their other key brandg, especially Parliament ~nd Merit, while evaluating alternative Conumu~icationl. pMI will gtroNgly g~pport key market8 of Germany, Italy, Japan, France and Mexico, while exploiting new cpportunitieA in Asia, CIS~ Eastern Europe and South America. R~R will maintain a mtrategy focusing on the Asian, ~uropea~ and Eastern Europe Reglon8 add key B~rategic braN~s of Camel, Win~to~ a~d Salem. JTI will con~in~e to purmue businesl outside of Japan a~d even Lorillard is attempting to develop opportunities outnide the U.S~ VIII. STRATEGIC ISSUE 3z ~xF~ Ah~ GROW IF~ER~ATIONALLy PERFORMANCE OBJECTI~FES - The gtrategic drive to expand and grow the International b~ines8 generat~ a f~recasted profit co~tributlon ind expQrt/~ntract volume increase from $219.4 million/46.9 billion in 1992, to $394.7 million/75.5 billi~n in 1997. This represent8 an 12.5% compound profit contribution growth rate (i~c~uding B.A.T notational adju~tmentJ) combined with significant investment and a 10.4% export volume compo~n~ growth rate. KEy B&W IMTERWATIONAL STRATEGIES C~ti~ue ~[o~m~n~ o~ str~t~Ic bra~ (L~ $T~I~* KENT. 8aRCLAT. ~APKI). a~ ~r~iti~te ~ut[7 in the ~ro~1~ Li0h~ ~e~e~t. E~t~b~h standav~ ~or PAiL ~LL a~ • It~a~I~ ~•~. ~i~ ~o c~trate reserves ~ ~vel~i~ bu~i~ss in key A~i~ turkeys; inves~ se[~ti~y in ~rt~Ity ~In~e ~o •~r~n~th~ ~he In~er~nL ~rg~Jz|~l~ ~ ~ure ~e human reserves are •viSibLe ~o expID~ t ~r~ies. T~et~er wlth other Grou9 ~pa~ie$. ~L~ • ¢~di~t~ •~r~¢h ~o the ~ur¢~ ~,d mrketi~ of Group bra~ i~ ~rk re, ¢~*%~Iet~n~ re[i~ve ~cI~ o~ ~tcmt~ic br•~ In di~e~ ivke~$• * ~ork ~th BATCO•/~T-Chi~ ~o ~tlmiz• the ~L~m~n~ Q~ ~4 brands m~ ~r~ pro~it~iLi~7 i, ~he F•r |8~$. A~ress the i~re6s~ty price ¢~tltI~ ~i¢~t ~ ~rk1~ with Group ¢~ni~ to i~?ove Ir|i~ Zhwu~h ~rm~ ~er•~e. KEY ~NTERN~TIOWAL BRANDS - B&W'8 portfolio Of strategic and ~actical U.S. International brands is po~itloned to ~ompete within the total USlB aegment. Thin approach ~upports the group 8tr&tegy to provide a portfolio of competitive alternativQJ to ~mokerm of ~SIB8 worldwide. KENT i8 a mild U.S. cigarette for self-assured adults who want a more styllJh, sociable end mature image than offered by Marlboro. LUCK~ STRIK~ in a high quality, full flavor U°S. cigarette f~r young adult male•. It provide• a contemporary, ma~oullne image of freedom, adventure an~ independence. BARCLAy £s the U.S. lower tar ~garette offering clalsic smoking pleasure through product innovation for 690951894

-9- adults who want the image of personal success and contemporary sophistication. CAPRI is the U.S. superslim low tar cigarette offering the female smoker a statement of contemporary feminine style, pail W-~ is an ~eriran-blended product with a high qualfty full flavor heritage which competes with mainstream USIBS, usually on a value platform. A range of tactical brands will be employed to complement the strategic portfolio and provide increased flexibility in dealing with unique market situationn. REG]ON~JL/KEy M~T ~A~ySIE Far EASt - The Far East contimues to be the most significant region in te~s of volume growth and profit potential. ExpOrt/contract volumes are expected to grow to 37.0 billion units (OGR 8.3q) and represent SS.8q of regional contribution in 1997. Japan continues to be a top priority marketI although slower growth in the total market and import segmRnt is mxpected over the pla~ years. In 1997, exerts to Japan will represent 21.6% of BWI's total expozt/contract volume. China is a market with slgnfficsnt potentialt but polltfcal stability and continuation of refo~ efforts are keyu to develo~ent. Export volume in the Hone Kong Group is projected to grow at 9.2% per annum, increasing 54% by 1997. Europe - Eastern Europe and fo~nmer Soviet union represent pr~/~e opportunities for longer te~ growth as the USTB legment ie expected to steadily develop over the plan period. Support of key brands is essential to building consumer franchises. Howevert volltile political, economic, and social factors are sensitivities which must be considered within the context of the plan. Current ~lans forecast growth in exgor~/contract volume to Europe of 24.7% per a,num from 1992 through 1997. Regional contribution is projected to increase at 14.4% per annum. M/ddlo East/Afrlca - Middle East/Africa volumes are forecast to grow slightly over 19~3-97. Regional contribution is projected to grow at a compound annual rate of 15~1%, reflecting Improved pricing. Business in the Middle East will continue to be concentrated in the Levant region where official im~rts are expected to increQse. Americas - USIBS will maintain their popularity and achieve additional growth in the ~er~cae. Although progress towardl proposed free t~ade agreements is limited, interim activities such as the re0uction of tariff~ and duties as well ae increasing investment from Nor£h America will enhance economic development and provide a~dltional opportunities for exports into the region. Export/contract volumes will grow to 4.0 billlon units (15.1% CGR) over the plan period with contribution growing a~ 23.7% per annum to $37.7 million in 1997. ZX. STP.AT~GIC ISSUZ 4z M2J,~'ACTURING CAPACI~"/ pRODUCTION FACILITIES - Capacity fDr cigarette manufacture (including reserve) remalng a critical iegue as total forecasts continue to 9row rapidly, reaching an estimated 142 billion per year for 1997 with even higher requirements in Primary. B&W'e overall plan iB dependent upon its ability to produce elgnifisantly higher volumes with greater flexibility, cost competitiveness and ~uperior quality. Over the plan period, this wile require major investment to up~a~e mnd expan~ Macon. 690951895

-10- Plans for Macon include capacity increases in both Primary and Fabrleation~ including additional redrying capabilities. Phase II will raise Primary capacity to ]IOB per year in early 1993S and a program under development would further rails capacity to ~50B in 1995 and add additional redrylng capability. Planned Fabrication capacity expansion involves the purchase of sufficient new modules to meet forecast requirementsa a 15% reserve capacity far soft cup products and 20% reserve for box products. 5% of the reserve will come from up to ~2 ~vertime Saturdays per year. Productivity, flexibility and quality gains will accrue through upgrades to higher speed equipment. Operations in Wilsonj Winston-Salem and Lancaster will also be upgraded to meet production, productivity and quality targets. Environmental lesuel will remain prominent in relation to the workplace, raw materials and products. Z. OTHER SIGNIFICANT OPERATIONS - E~GINEERINOt MA~FACT~ZNO A~ R&D ISSDI~S - A requirement for B&W'B SUCCess Is delivering products and services that are superior based on consumer preferences and perceptions. R&D'I focus IB superior smoking and product q~ality. Smoking superiority goals have been set for priority brands and styles relative to competitive offerings ~ong targeted smoker groups. B&W'S objective to develop and test a KS full flavor product preferred over Marlboro has continued to be successfully progrmssed. Development of superior menthol products will also remain a critical motivity. Plans include all aspects of product recipe and design incorporating new product engineerlng and materials technology with OPT testing in 1993. Continued improvement work i| planned through the Worldwide Best project with initial internatlonal CPT rlsultm during early 1993. SUCCeSsful technologies and recipes will be incorporatmd in melected Domestic and International brands, following testing. B&W's plans include continued leadership to provide group coordination of information throughout the B.A.T group regarding practices for worldwide superiority progra/~s and products. Engineering/Manufacturing will continue to develop programs and processes that address consumer q~allty require~entm and continue to reduce defect rates. Key to this effort are programs that ~ve quality toward total product validation and "Best Practices" Zeadership. New technologies supporting improved quality and achievement Of objectives will he investigated and implemented in Manufacturing Operations. Plan6 include improved process control, product visio~ systems, foreign matter removal systems, and improved raw materials quallty. PRODUCTIV/~ - Productivity improvement is a significant issue to remain cost competitive with other major c~panles. For Macon, productivity targets of 30,000 cigarettes per man-hour in 1993, and 36,000 for 1997 have been established. Programs include Primary processing upgrades, Fabrication machinery speed-up and replacement, efficiency improvement, new technology in Shipping and Supply, and improved logimticl and operating efflclencies. Wilmon's key projects include material handling, threehlng, and automated searching. OTHER - B&W will pursue development of plans end alternatives to relocate R&D and the Development Center to Macon IAter in the plan period. This move would facilitate new product development and transfer of new ~echnologieg into production, al well is promote efficiency. 690951896

-11- XI. $T.qATEOIC ISSt, Z$ 5: 1MP~O~ M.~qAGEMEKT ST~GTU Over the plan perlod, B&W will place more emphasis on increasing the capability of the total work force with particular attention to the technical areas, InternAtional, Domestic Sales snd Marketing, &nd Quality. Selection, development, training, appraisal and award syBt~s will all be key elements of the improvement. Comprehensive review of B&W'I organization structure add staffing will bB done In 1993 to ensure that resources Bre focused on business building activities such as Sales and achieving superior consumer satisfaction. B&W will increase efforts to strengthen management depth and to sustain a highly motivated work for~e in the face Of an increaslngly hos£11e anvirorueent. PI&~B arm in place to aBgure that the relationshipe with the unionized work force contribute to B&W's ability to achieve productivity goals at • competitive cost. XZI. IRFORMATION 'I~CH~OLOQy B&W'B cDmputer systems and information technology plans concentrate on strategic businels applications. A key Plan thrust Is to identify tha major opportunities for ~echnology to help drays B&W'm business. Resources will be focused on applications Needed to gain competitivl advantage •~d support Btratmglc growth, such as in Marketing an~ Sales, International, and Operations. The degree of emphasis of this resource focus represents a Bignificant change for all Cow.rate systeml users and will be managed through the cooperati0n of u0erl and MIS. XIIZ. CONSU~R SATISrACTIOM /dfD ~U~.~ZTY FOCUS AGhievement of superior consumer satisfaction is the underlying key to B&W'S SUCCESS. Over the last five years, B&W has made mignificant progress in its quality efforts as evidenced by improved smoking and manufactured product quality, higher IIvell of Bervic~ to ~ and Inter~al COns~merl and customers~ grQltQr solicitation of and responsiveness to consumer feedback, and higheE levQls of employee participatlon and involvement. The t~tal quality process embodying productlon quality verification; comprehensively understanding conlumer needs; designing products to meet thesl needs better than competitive products; aggressively reacting to cons~er feedback; employee suggestion systems; and te~ problem solving will continue as a top priority. 92preptn.~p 690951897

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~992 PRELIMTN~Ry FIV~-YEAR~ ~Y ~INA~CIAL ASSUMPTIONS (DOLLARS IN MILLIONS1 DOMESTIC SALES VOLUMES 1992 Industry shipments arg forecast to decline 2.8% from 1991 to 495~I billion, &nd continue to da~line at a ComI>~und rate af 3.1%, aB continued gro~h of Extra Low Price productB is more than offset by declines for Full Revmnue and Low price brands. 1997 IBdumtry ghi~ents are formcaBt to be 423.9 bil1~on. B&W'B domt$~ic volume is forecaBt to increamm from 60.6 billion in 1992 to 65.fi billion in 1997, for a com~und grow%h rate of 1.6%+ DOMESTIC V~IABLE ~L%RGIN The following assumption £I made for domestic cigarette selllng price increases pe~ M (January 1 and July I each yBar): ~3-1997 Full Revenue $3.00/$3.00 LOW Price Branded $2.00/$2.00 Extra Low Price $3.00/ -0- The recent $2.00 per M increase in GPC would Bignificantly improve GPC'S profitabil~ty if the asBumed $3.00 increaBe in January 1993 can also be achieved. The ~otential impact is included an a sensitivity to the plan. Federal ~xclse t~xe~ will incrmaBe January l, 1993, by $2.Q0 per M t~ $12.00 ~r M. It £m &g~umed ~his incr~&ge will be pa~sed through, and will be in addition to the pri~e increases ~ot~d above. NO further federal ~xcise tax i~eases were asstu~d for the remainder ~f th~ Plan ~riod. LBa~ and other maN~facturin~ materlal pric~8 are fQre~ast to in~rease at rates below general inflation rate aBsumptionB in ~993. For the yearl beyond 19~3, material price~ aro generally in line with Inflation. DOMESTIC MAR~TING Speclf£~ br~n~ mpend~ng iB consi~ten~ with brand Btrategies and provldeB fundin~ for DO~Btic retail pri~e discounting. Non-lpecific marketing ~xpenses ar~ ~pacte~ by • 199~ flel~ sales manpower expansion mnd related mpen~ing. Spending also reflects a new ~iltributor incentive program, i~troduced during 1992, which is offset by the el~inati~n of rebates for all brands excsp% GPC Approved. All ~ther Belling f~eld and non-specific spend are generally a~umed to in~rea~ ba~ed on £nflation. ~ NTERN~T~ Exert v~lumes Of 39.6 billion for ig92 are f~reca~t to increage at • cc~i~und rate of 10.4% to a 1997 exp~rt volum~ level of 65.0 billion. Co~ined exp~rt an~ contrac~ wclu~es are forecasted to grow at a 10.Q% compound rate, ~992 thraugh 1997. The Yen IB assumed to Btrengthen evenly fr~ Y125 ~ $1.~D in 1993 t~ Yll3 $i.00 in 1997. 690951899

COC Manufacturing reflects the impact of capital mtrategles including major expanslon eapenditures for Macon, and continuation of the equipment overhaul program. Con~mon Operating Costs other than manufacturing are influenced, beginning in 1993 by the estimated incremBntal effect of adopting the U.S. accounting standard for post-retirement benefits other than penmions which effectm 1992 ~omparative trading profi~ by a range of $16.9 million in 1993 %0 $23.5 million in ig97. NET INTEP~ES~ Trade accounts are assumed to be mold in 1992, and this form of financing £t assumed to discontinue for 1993 - 1997 (receivablel sold year-end 1992 are $326.7 million). Commercial paper rates are projected to average 4.20% in 19~2 and range from 3,40% to 6.10% over the Plan period. CAPITAL SPENDING Capital ex~nditures incorporate major expanmion expenditures for Macon. To~al fixed asset additionm are shown belOW. 1994 199__5 199~ 1997 1993 - 1997 $148.7 $182.0 $157.7 $103~6 $75.9 $667.9 Seginning in 1993~ all Batue Boldings distributable cash is a~sumed to be dividended to B.~.T (aftur adjusting for the accounts receivable financing change ~n 1993). Conse~en~ly, consolidated debt remain8 constant for lg93 throughout the Plan period. NOTE: Any presentation in this report of the income of BATUS and its consolidated U.S. Dubsidiaries usln~ an inventory accounting method, on a basis other than LIFO, is suppllmental to the primary U.S. income statements. 690951900

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FINANCIAL SCHEDULES

Brown & Williamson Tobacco (Consolidated with BATUS Holdings) 1993-1997 Preliminary Five Year Plan Statement of Trading Profit and Profit After Tax U.K.Basls (Unitt in Billions; Dolblrt in Millions) 1991 f~e2 CGR Actual Eitj~te ~ 1994 19@5 1996 1997 1992-19977 56,6 60.6 Domestic E6.5 66.7 66.3 ~16 3 r~s.6 1.8% 0,6 0.4 M~ - CXer~u= 0.5 0,5 0.5 0,5 0.5 2.3% 39.1 4~.9 IntemaSoPaT $1.8 5B~0 63.9 698 75~5 10¸0% ~.2 107.9 Total Sales UnK= 118.7 125.2 130.7 136.7 141.5 5.6% 3.6% 12.2% % Change VS. Last y~r 10.0% 5.4% 4.4% 4.6% $.6% Gro~¢ T~movar 2L6539 2,1B8~.0 Domestic $.3?0,7 3,549,4 3.7(;2.8 3,fit~.5 4,037.0 6~',f, 16.7 13,4 Mi1~ry - Overseas 14,7 16.2 17.4 18~6 19.8 8.1% 684.8 "F~33 Lnter'~atJonal 912.1 I,C~7,g 1,163.2 1,293.5 11425¸4 12.8% 118,0 131.3 ELT lLe=$ IntercomF:any) 141,3 143.3 138¸6 140¸4 143.0 1.7% 3~473,4 ~,626 0 T~at Gn~ Tumowr 4,,~ 8 4,746.8 $,024.0 $,3,~6.0 5,626~f &0% 14¸4% 10.2% % Change VS. l.~sl Yea, r 16.0% §.2% 5.6% 6.6% 5.0% 667.0 ~2.5 Dome=EcPr~ICor¢~ut~n 1,007~7 1,104.6 1.170.4 1.254.1 112SS9 6.6% 94 7.5 Military Ovemeas Profit Co ntn~ ut;o n 7.2 7.8 7.9 8.2 8.4 2.3% 219.8 235.7 Inte mttlonar p rof'~t Co n~bv;]o n 261.0 293,8 325.7 3$47 380.8 10.4% 6.9 I0.0 ELT Pm~ Contrib~'ion 10-2 10.5 10.3 10.4 10.6 1.2% 272S ~95.5 C~rnmon Cos~ ~.3~.4 3/3¸2 3SI.1 404.3 417.3 71% 832,6 ~0.! Trad;ngPro~'ft-Toba~:o ~.5.8 ~.043.5 1,123.2 1,~2 ~.~'~.8 73% 6.6% 5.9% % Change V=. Last Year 64% 10.2% 7.6% B.6% 3.7% 15.=l 4.9 -Other (5.0) lilt0} (5.21 (5.4) (5.6t 827.3 ~5.0 TotjdTmdingProf'~-U=K. Basis 941.8 1,0GB,5 1,118.0 1,217.8 1.262.9 7.1% 421.8 372,5 Net Interes~ Paid 3~6 3763 3896 3~4.9 391.8 1.0% • 0~,0 6~.4 ProOf ~¢~ore Ta~ ~.2 (~2.2 728.4 ~,22.g 871.1 108% 13.83 192,6 TLY, atio n 2P.51 2440 268.5 ~03.2 $19.7 107% 267.7 ~29.8 Profit/~,f~er Teu< 3,~01 418.2 459.9 .519.7 551,4 10¸8% I f~ote: Trading Profit has been u dye ~,el~ impacted by ~ A.T Notlt.~r, al Adjus~er~ =u¢ follows: = 1 6 B,~.T Notatlonal Adius~rnents 4.4 8.8 1"/,2 3~0 690951903

Brown & Wiiliamson Tobacco 1993-1997 Preliminary Five Year Plan Domestic Profit Contribution U.S./U.K. Basis (Units In Billions; Dollar~ in MillJonl) 1991 1992 CGR Actual Estimate 1993 1994 19_~ 199(5 1997 t992-1997 296 60.6 Un~ Volume 669 66,7 663 66.3 66.6 1.5% 5.3% 7.C~% % Change Vs Last Yur 9.7% 0.3% -~.3% 0.1% - 1.2% 2,674.0 2,910.0 Dome=6¢ Revenue 3,396.3 3,576.0 3,730.9 3,~¢33.2 4,066~ 6.9% 18,8% 8,3% % Change Vs. Last Yur 16.7% 5.3% 4.3% 5.4% 3~4% 1,6323 1,720~9 VarbbleMargin 2,001.8 2,159.4 2,294.7 2,4~83 2,5927 78% 205.3 290.8 Disco~rr~ng 291.3 312.3 353.7 207~5 441~ 8.7% 1,4270 1,4~00 Variable Margin less D;scount~ng 1,720.5 1,843,1 1,941.0 2,070.8 2,191.7 7.6% 82.0 43.5 Med~a lOEt.O 101.7 107.9 114.6 121.4 22¸6% 158¸9 167.1 All ot~er S~oec ~c B ra r,d Expe nso 21B.8 211.9 214.1 ~'/.7 242.7 7.8% 1,186.2 1,279.5 BrandCon~outJon 1.203,7 1,529,6 1,619.0 1,729,9 1,787.7 6.9% 7.7% 7.9% % Char~ge Vs, Last Year 8.9% 9.8% 5.B% 6.6"% 3,4% 299,7 293¸7 Non - Spec~x: MarkeUng F~pens~s 329.$ 382.9 383,6 4~7 429.3 8,6% 855.2 920.1 Domest¢ Prol-~ ContT~utlon - U.S. B=$i$ 201.1 1.084.9 1,149~9 1.~J-36 1,265.5 6.6% 11.0 124 U.K Adjustments 16~ 20,1 20.S 20.5 204 8o-/.0 932.5 Domest~cPrl:x-rtConT~ib~con-U.K. Bas]$ 1,007.7 1,104.6 1,170¸4 1,254.1 1,289.9 66% 7~0% 7.6% % Change VS. tJ~t Year 8.1% 9.3% 6.3% 7.2% 2.5% 690951904

Brown & Williamson Tobacco 1993-1997 Preliminary Five Year Plan Domestic Unit Volume Analysis (Un~ in Billion=) 1991 1992 CGR Actual Estimate 1993 1994 1995 1996 1997 1992-1997 Industry Voluml 105.5 97.2 Fu[J Revenge - Me nl~ol B7.9 7~.0 70.4 62.3 54 5 -10.9% 3.81,9 351,6 Full Revenue 319,0 287.8 ~57,9 229.4 202.2 -10.5% Value For More~ 59,5 M,6 Lc:w Pdce 88.5 88.2 87,9 87.2 8~.6 -0.5% 67,8 549 ~ Low price 73.4 60,6 106.7 121.5 135¸3 19¸8% 127.3 143.5 TOLtl VFM 161.9 178.8 194.4 '~8.7 2218 9.1% 509.2 4~5.1 TO~I Indust~ Volume 480.9 466.6 452.4 438,1 4239 -31% L B&W Volume Full Revenue 23.5 21.7 Kcol 2.6 2.5 Cllprt 1.4 1.0 Raleigh 1,0 13.8 Bet=dr 0,9 0,7 Barclay 19.6 16.8 14.7 13,6 12.0 -11.2% 3.0 2.9 2.9 2.9 2.7 1.3% 0n 0,4 0.3 0.2 0,1 -34,1% 0.6 O,S 0.4 0.3 0,2 -2,5% 0,6 0.5 0.4 0.3 0.3 -18,4% 29,7 258 Total Fu[I Revenue Value For Mone£ &ow Prce 7A 7.4 Vmeroy 0.7 0,0 Beta# LPB 2.3 1~1 Rk=h~and 0.0 0,4 Savannah 24.9 21.2 18.7 17.2 15.3 -1D.6% 7.0 7,6 7J B.O 8,4 2.4% 0.0 0,0 O~ 0~ 0.0 ~A 0,4 0.0 O~ 0.0 0.6 ~A 1.6 2.9 3,1 3.4 3.5 ~.6% 1D.3 9.1 Total Low Pdee Ex~a Low Price 6.1 5,6 Raleigh Extra - - Richland 10,5 19.1 GPC Approved 16J5 24.7 Total Extra Low Price 8.9 10.5 10.9 11.4 11.8 5.3% 6.0 7,5 8.6 9,2 9.7 11.5% - 0.4 0.5 0.6 0.6 N/A 27.0 27.1 27.6 28.0 28.2 9.2% 33.0 35~ 36.7 37.7 38.5 93% 2~9 33.8 Tot~l Value For Money 566 60.6 T0t~l Domestic Unit Volume 11.1% 12.2% Total Share of Market 41,9 45.6 47,5 49.1 503 93% 665 166.7 60,3 66.3 65,6 13~'% 14.3% 14.6% 15,1% 15.5% 1,6% IndusW Vol=mes include Raleigh Extra in tl~ Low Price category f~rough August, 1992 • 690951905

Brown & ~lliamson Tobacco 1993 - 1397 Prel[mlna~ Five Yoar Plan Inlernation~ Profit ContTibut]on . U.S. I U. K. Basis (Un~ in BiCl~r~ / COI~nL ~ Mill~r~) 1991 1392 1993 C.G.R. % Aofual ~r~rnato ud~ 1994 139S .1~ 1997 1392-1397 Vorume~;: 33.2 393 Expo~ 44.0 43.7 54,3 60.1 65,0 10,4% 8.7 7,2 Contract 7,7 3.3 3.0 3,7 10.4 7.3% 0.1 0.1 FmFo~ 00 0.0 0.1 0.1 0.1 -3.8"/. 39.1 463 Total E.xpo ~Co r~a¢~,~ mpor~ 51.3 5,8.0 83.3 69.8 75.5 10.0% 36.6 39,3 L~cer~see 41.6 45.2 48.7 82.0 554 7.1% 73,7 86,1 Grand Total Volumes 934 103.2 1128 1218 130.3 8.7% 684.8 793¸3 Net~t~V~due 312.1 1,037~ 1,165.2 1,293¸5 1,426,4 12.4% 332.1 383¸5 Variable Margin 437.6 481.9 523.5 562.9 602.0 9.4,% 107.4 113¸I Msd~rProrno~ort 144.6 160.8 168.6 178,9 139.1 9./% 1,7 1.7 MaJket Base st ¢h - Sl:~Clf¢ 1.9 1.9 1.9 2.0 2.2 3.3% 104 11,4 Other 136 12:/ 13.1 143 13.1 5.3,% 232S 251.3 Expo~Co nttact Cont~ibu~on 277.5 306.8 339,3 367.1 395.2 9,5% 33.0 36.7 Licensee C~nt6bution 38.1 41~9 45,6 49.1 S3.1 7.7% 228 264 Selt~2 F'~lcr 26.7 2.33 30.3 22.1 34.2 5.3% 242.8 261.6 Rc,~r~r Con~bu~ion 288.9 320A 355.2 384.1 414.7 9.7% 15,8 18,1 [nter na~o naJ Br in d Mmr~a get'he nt 13.3 18.3 226 21,9 27,1 11,0% 2.0 2,0 Ma;ket Research - Nc~nspeclfm= 2.0 2.2 2.3 2.3 2.4 3.7% 33.6 25.7 G&AJTr adem~r~Othet 26.0 26.4 27.0 28,0 28,5 2.1% 201.6 217,8 Irder rmtior~al ProfR Contribution - U S Basis 242.4 272.0 3033 331.9 356.7 10.4% 18.1 1"/.9 U.K. Accour~tin2 Adjust merits 13:7 21,8 22.4 22.9 24-2 62% 219¸7 235¸7 Interramtior, sl Pro~'d Contributk:r~ - U.K. Basis 261.0 293.8 325.7 354.7 380.~ 10.1,% Note: P~ease see Supplemental Internitior.m] Profit Contribution s~atermmt for the effect of 2.~-T Not~tionaT ~justments. 690951906

Brown & Williamson Tobacco 1993 -- 1997 Preliminmy Five Year Plan InternatJonaJ Regions] I Key M~rket Conf~ibut~on 0J r~$ ~ Billpons J DolLars in Milbor~) 1991 1992 11)133 C.G.R. % Actual Est~n~te ~ 1994 19@5 ~ 1997 1992-1997 121 129 E, xpod Volu~e= --271 +8 3~2.1 Net Sales Vllue 169.3 120.0 Vmt Lable M~gin 88.5 752 S pec ~'~c Br~rd Expen~H 1.0 5.7 Other 136 14 4 15.1 15,7 16.3 4.'7% 3264 334.6 382 4 408.5 433.1 7-5% 2041 217.0 2295 240.9 251.2 5.7% 89.8 100.9 106.0 112.6 116,6 9.2% 7.4 7,7 §.0 84 18.7 9.8% 99.5 109.1 R~;onal Conbibu~ion Hon Kon Gtou 104 103 Expor~ Voluml'= 143 3 1 $39 Ne~ Sales Value 65.9 72.1 V~ble Margin 4.2 10.1 Spec ~=: B~and Experv~s (et) (11.1) o~er 62,8 73,1 Regicr~l Co nt~ibutpon Eastern Europe & Batkans 1.1 37 ExportJContract Volumes 19.5 488 Net Sales Vslue 10,9 17.7 V~able Margin 3,2 3.7 Specif¢ Brand Expenses 1.5 1.3 Other 106.5 1D8.4 115.5 120.3 125.8 2.9% 11.0 12.8 139 149 15.9 [I,2% 160.4 185.2 199.3 2120 226.5 8.1% 70.6 75:'/ 73.1 73.4 71~. -02% 11,0 12.4 19.1 19.7 134 5.8% (t 1,8) (t 2,8) (14.6) (1S.O) (161) 7.=% 71,4 76,1 77.0 75,7 74.1 0*3% 6,3 B8 11.6 13,1 1S1 323% 86,4 114.4 142.1 170A 19.89 32.6% 32.4 38.3 43.2 48.1 52.7 24.4% 10,3 11.1 12.2 132 14.3 31.0% 1.4 1.5 1.5 1.5 1.6 4.$% 6.1 12,7 Regional Do rffdbu'~ion 20.7 25,7 29.5 33A 3~ 8 23.8% 84 124 Expo d.,Co nt r a ¢~ m po~ Volumes 11~ 11.1 114 12.1 12.4 01% 91.1 123.6 Net SaTes Valve 132¸1 134.6 145.7 162,7 178,0 7.6% 31~ 26,4 Vat Lable MArgin 37.4 37.9 41.8 489 $4.5 15,8% 1.6 2.3 Speclr¢ Brand Expense,= 4.1 4,3 4,7 5.1 B.S 18.7% 6.4 1,9 Other 7.4 "/.4 7.7 24 94 51.9% 24.8 22.6 Reg~ral Contribution 25.8 26.2 29.4 34.4 40,1 11.2% othtr 7.1 7.5 EJcpo~Co~ r act-q m POr t VolLrrr~s 95 10.9 12.5 14,1 15.7 15¸8% ~9.1 165,0 Net Sales Vad~.m 206.9 249.1 295.7 339.8 389.7 10.8% 74.9 77.3 Vsr klble MarQin 93.1 113,0 133.6 151.6 171.7 17.3% 30.1 27.9 Specific Bta~d Expenses 29.4 91,8 33.6 35.8 39,4 72% 21 3.7 Other (04) (2.8) (3.6) 14.4} (5.4) N/A 42.6 43.8 Regx:r~l C<~ ntribu~on 64,1 84.0 103.8 120.1 137.8 25.8% To~ 39.1 4.6.9 EX po ~Cont r act/t mpo~ Volumes 51.8 580 63,9 69.8 75.5 10.6% 664,8 793.3 N~Ba)ezVslue 912.1 1,037.6 1,165.2 1,293.13 1,426,4 12,4% ~.21 ~&3.5 V~la~le Margin 437.6 481.9 523.5 562.9 602.0 9.4% 107,4 119.1 Specific ~nd F..J(pe~ 144.5 160.5 168.6 178.9 189.1 9.7% 1,2 2*0 Other 4.2 1.6 (0.5) (0.1) (1.7) N/A 242.8 261.6 R~gior, al Contributio n 288.9 320,4 3552. 364,1 414.7 9.7% Note: P ~.as~ see Supplemen~l Intematior'~ Reg~o n~d~ Mad(~ Contrib~ion for the effect of BJ~T No~tion~ idj~ttments. 690951907

THIS PAGE LEFT BLAR~ INTENTIONPJ~Ly 690951908

Brown & W]]llamson Tobacco 1993 - 1997 PretimJnaTy Five Year Plan IntefnalJonal Unit Volume AnaJysls (Un~Ls In 8illiorm) 1~31 1992 lg~3 C.G.R. % Actu&l ~sUm4ll ~ ~ 19'95 1996 1997 !992-1997 ~r~C, ontracVlrnr>orl By Brlnd 132 20.0 Kenl 3.0 10.8 VIc~oy 3.5 9.1 Lucky Strike 1,5 42, P~ MaJI 1.0 1.2 Y, aol 0:t 0.7 Barclay 0.6 0.7 Ctpr~'~ne sse 0.0 0.0 Newport - - Ame~ic~m Club O.1 0.1 import Products 0.0 0.2 Other 21.3 23.7 25,3 27,1 30,9 7.6% 11.2 14.0 15.4 18.8 31.0 14.8% 105 11.4 12.4 13,5 14.6 9,6% 4.3 4~ 3.8 $2, $.4 5.1% 12. 1,5 1A 1.8 1,5 3.6% 0,5 1.2 1.5 I:T 1.3 20.7% 0-9 9.9 1.0 1.1 1.2 11.3% 0.0 0.1 0,1 0.1 0.1 17,5% 0.3 0.4 0,4 0.3 06 N/A • 0 0.0 0,1 0.1 0.1 -3,3% 02, 02 0.3 03 0 ,5 4.2% 39.1 46.9 Tot~ Ird't Unl~ Volume Ex Cohtrl rn rt Re ~n 24.1 24.3 F~ ~ 9.6 137 M;ddle EisVA~.a 3.2 §,0 Europo 1~ 3.0 An~r~.as 03 03 U.S. Operat~s 51,5 $8.0 63.9 69.8 75.5 10,0% 272, 30A 32~' 34.8 37.0 3+3% 13.0 13,1 13.8 15.0 13.3 9.9% 9.9 11.5 13,5 16.1 13.1 24¸7% 2,3 2:t 3.1 3*3 4.0 15,1% 0.3 0.3 0.4 0.5 0.6 13,1% 39.1 ~.6.9 Total Ur~ Volume Licensee Volumes 17.0 13,6 U,S~lr~er~tio~l Brands {1) 19,1 20.7 Non-U.3 Ir~ernatio~al Brands 313 $8,0 639 69-9 73,5 10.0% 19,5 21,5 23.7 25.3 2";'~) 3.3% ;[1,9 23.4 25.0 26.2 27.3 3 9% 366 39,3 To~l Un~ VoJumo 33.1 39.4 U.$. Exports BW]T (2) 179.4 1730 Indu~ry U.$. Exporls (3) 13.3% 22,3% B~,MT % U.9 Export Market 54.7 63,3 B'~..'IT U 5. Inlemailot',LI Brc~ds (3) 4430 461 0 Worldwide U.8 I~'1 Brawls (3) 12.3% 13.8% BW1T % U.$. [hlernatk:r,al Brsnds 41,5 452. 48.7 $2.0 55.4 43.3 49.5 34,7 53 -9 64,7 1116.0 202.0 219,0 233.0 248,0 23.3% 24,5% 25.0% 25.7% 26.1% 69.4 7"7.8 85,5 93.4 101.0 480,0 499.0 518.0 533¸0 554¸0 14,5% 15.6% 18.3% 17,5% 13+P'/. (I) Includes ~n-fil~er blyles (2} Excludes exports 1o U.S, MiIP~a ry, U,S. D~Jty FrH, Jnd U.S. Terr3ories & Posseclions (3) Ex:ludes non-Nter U,$.I.B,'s 7.1% 690951909

1991 t9g2 Brown & WUliamson Tobacco 1993-1997 Preliminary Five Year pl~zn Reconciliation to 1992 Plan U.K, Basis ('Lk't PLS in E~;tlonl, Dollars in Millions) Actual E.c~mi~ ~1.1 lg92 P~tn U K. Tnldm~q ~to~9~ Pro~ Con~ibu~on: fS.0~ k~ p~:~ = M=rgln ~ Volu~=( ('~.4) irn pe~ at Margin of ~a~es Prices 6.7 Iz'n pact ill M~r gin of VAr~bkl CoKts (41 4~ Domes~c Ds~Jr~ng 11.2 Specie Brand F.xpev~ 8.0 L.c~= On P~e~Jms (5¸3) Non- $pec~bc Market~g ~NS k~ternabona[ ;~m~r~ Con~bu~on: (1 6) Impact c4 BAT Nota~onal Adjus~ml~ i161) O~er Int~ r~ at~d P ro~ Cc~ bulx~ n 20 COC Manufac~ring ?9 NI O~er 1,019¸9 1,19a9 lr31(~3 I,~53 7"/.8 50.5 s3,g e6 • (16B) (41.2) ~.6} (1~.2) 15.5 27.7 $1=2 :1~7 253 24.? 41.4 728 (t¢~ S) (50.3) @5.3) (~7) 10S 2~.~1 294 321 (4d) (sa) (~7~ ('~e 3) (258) (e~5) (e3~ (754) (1 ~.z~ (2~3) (20.4 (1Sl) (76) (36) (25) o 3 (51 O) T~,al Changes 8326 890 1 I g';~3 Prelimina ~ P~n UK Tra0in9 Pro~ (731) (1514) (1~t} (54~ t) 94~ lrC435 1,1~,2 1r~2 1=~5 ~1~= ?~f% 1~2 plan's Vrdun'~e D~ne~c: Full Revenue 08 (0.Z~ 0,2 O~er F~I~ Revenue (1 4) V'~e my (Ol) ~.zwnna~ se G=C Approved 962 1106 1172 1226 IL~8 2.4 1079 0.4 mJ~ 123 T¢~I C;~mge ~ Dor~esl~c VoW'he 8g C;'~u~ ~ h Intern~tJcx~al Vck~me 0.1 I ~93 Prelirn~a~ plans V olur'ne 118 7 1,3 0.6 O~ 1.9 0.4 0,2 0.2 0+I 0.4 04 0.4 0,3 (2.2) (0.3) (=.;Q ~) te,~ (0.1) o.o o.o (0~) (0~ o.o o2 06 0.4 O0 14.3) (5.13 (5.~ 11,4 11.1 11.0 6.3 5.? S.1 1.6 24 29 12:52 1307 136.7 141 S 690951910

Brown & WiIliamson Tobacco (Consolidated with BATUS Holdings) 1993-1997 Preliminary Five Year Plan Supplemental Schedule (Oolla r= in Mil[iortl) 1991 1992 A ctuil E=t~te ~ 1994 1995 1996 1997 (1) 2~8.0 2~5.0 Dividend= 307.2 22S.3 376.6 444,B S'/S.g (3,32S,11 (3.2S4.7) Sha~ho;de~sEqu~ (3,211,4) (3,019.S) (2,936.2) (2,861,3) {2,~,5.8) 12.9 11.0 Exlernal Bo rrow~ngs 11.0 11.0 11.0 11.0 11.01 I~863.2 1,86.3.2 BA~F 1,863.2 1,863.2 1,563.2 1,863.2 1,863.2 2~167~I 2,339~9 BATCAP 2~666~6 2~6r.~6 2~6~6~5 2~666~6 2~£,~S 4~043~2 4~214~I Tot,tlBo~owing$ 4~540~IJ 4~540a 4~540~7 4,S40~B 4~540~'/ (1) Dividends in 1994 are reduced due to iPcrels~d intere$I pa~'menLt re,ted p rim= r;i'/to ~LX iud~ =rid higher &ssumld intere~ r&te$ 69095i911

Brown & WlIHamson Tobacco 1993 - 1997 PrelJminar~ Five year Plan SupplementsJ [nternat;onnJ Profit Contribution Including B.A.T NotatJon~ Adjustments U.S. I U.K. Basis (Ur.Jts in Bi[l~ rs / D~ IL.~s in MiO~rm) 1951 1992 15G3 C.G.R. % Aot~Jll E$t~matl ~ ~_ 1990 1596 1397 1952m1997 Vet urmss: 33,3 39.6 Export 44.0 49,7 54.9 60.1 650 10.4% 0.7 7.2 Contract 7.7 03 9.0 9.7 10,4 7.8% 0,1 0.1 Import 0,0 0,0 0,1 0.1 0,1 -38% 39.1 46.9 TotJJ Expor t/C~ ntrlc t~ roper ts 51.8 58 0 63.9 09.8 75.5 10.0% 36 6 39 3 LI¢¢nsee 41.6 452 48.7 52.0 55 4 7.1% 757 861 Grand TomLVcl~Jmes 934 103.2 112.3 121.5 13~.9 8.7% 6.54.5 ?94¸0 NetS~dHV~e 015.4 1.o45.0 1~180.0 1.317.2 1.460`8 12.9% 352.1 384.5 Varkhble Margin 440.9 485.0 538.3 586`8 636¸4 10.8% 107.4 119.1 MeO-~aJP ror';~o n 144.6 100.5 168¸6 175.0 189.1 9.7% 1.7 1.7 M,rk~d R¢smamh - Specie I J) 1.9 1.9 2.0 2.0 3,3% 10.4 11,4 01he( 13.0 127 13.1 14.9 15.1 5.5% 2325 252.5 F~:F~Co rdmct Co ntrt bution 280,8 313.9 354.7 390.8 4302 11.2% 33.0 37.0 Lk:ons.e~ Contrtbut~on ~K).2 43.6 48.0 52.0 56.7 B-q% 22.5 264 Selling F'~ld 267 20.3 303 52.1 34.2 5.3% 242.a 263.2 Regi~rml Conttibu0on 293.3 329.2 372.4 410,7 452.7 11.5% 10.0 16.1 Irderr~tinnaT Brand Mar~gement 18.5 19,8 22.0 21.9 27.1 11.0% 2`8 • 2,0 Market Research - Nonspec~ 2.0 22. 2.3 2.3 2,4 3,7% 23.0 25.7 Gt.ArTr ic~ i rnar ~Other 26.0 26.4 27.0 25.0 28.5 2.1% 201.5 215.4 Int, rr~tin hal P r ofit CO rd;ibU~O n - U.S. BLr.iS 246.9 280.5 320.5 330.S 394:7 12.5% 101 17.9 U.I.C Ace ou ntinjiA~u st rnenil 15.7 21.9 22.4 22.9 24.9 6.2% 219¸7 237.3 Inter;'at;ona} P roRi Contlibu~k~n - U,K. Basis 265.4 302(3 342¸9 381.3 415¸9 123% Note: Profit CordTibutinn [rcTudes BJk.T ~o~t;onal idlustrnents (i.e. prec, Srcr us~,. tnJe royalty rates ~tc.) and better reflects the comparison of the [nterPationa[ businet4 1~ th~ prior PkVl. 690951912

Brown & V~l[iamson Tobacco 1993 - 1997 Pralimlneu'y Five yeel Pleul Supplemental International Regional / Key Market ~ontribution Including B.A.T Notational Ad]ustmenta (Units in Bill;ons/l~ol~ars ~ Miglo rs) 1291 1292 1~93 C.G.R. % Actual E|$ma~ ~ ~ 1395 19~5 1997 1992-1~7 12.1 123 Exl;ott V¢H~me~ 138 144 15.1 15:7 16.3 47% = "~71,8 302.1 Net Sales VaJu~ 326.4 354.6 3~24 ,k385 a~3.1 7.5% 169.3 190.0 Ysrb.ble Margin 204.1 217.0 229.5 240.0 2512 5.7% 68.6 75.2 Spe¢ h'x: B~and Expens~= 89.3 100.9 106.0 112¸0 116.0 0.2"/, 1.0 5.7 Other 7.4 7.7 8.0 04 0:7 liii% 99.S 109.1 Regior~l Co nvibution 106.8 10a4 115.5 120.5 125.0 2.3% 104 10.3 E~porl Volumes 11.0 128 13.g 14.8 153 g.9% 143¸3 155¸3 Net Sales V&I~ 164.5 193.7 215.2 238.3 264.5 11.2% 65.g 73.3 Variable Margin 74:F 84~. 92.0 39.7 109.1 8.2% 4.2 10.1 Specific Btir~ Expenses 11~ 12A 12.1 12:r 13.4 S.9% (S,1} (11.1) Other (11.5) (12.a) (14,0) (lS.0) (16.1) 7.9% 69.8 74.5 R e.g;oP.M Co ntril:,'Jtion 75.5 84.6 93.3 102.0 111JI 8.5% Elstam Europe $ Balkan= 1.1 3.7 Expo ~CO nt tact Volumes 33 3.B 11.0 13.1 15.1 323% 19.5 4.8.6 Net Sales Value 864 114.4 142.1 170.4 19~.9 320% 10.g 17.7 Var~ble Mmgin 32.4 38.3 43.2 48.1 52.7 244% 3.2 3,7 Specific Brand E,x,o4mses 10.3 11.1 122. 132 14.3 31.0% 1.5 1.3 Other 1.4 1.5 1.5 1.5 1.8 4.5% 6.1 12.7 Regi:~ll Contlibutiort 20.7 25.7 23.5 33.4 36.8 23.8% Levant Grouj2 84 12, Ex~o~Cor~r accruE>0 rt Volumes 11.4 11.! 11.4 121 124 0.1% 31.1 1236 Net $a~es Vslut 132.1 134.6 145.7 152.7 178,0 7.5% 31.~ 264 VLt~blt M~rgin 37.4 3"," J) 41,8 48.g 84.3 15.8% 1.0 2.3 Specific B[~nd F.~pe nses 4,1 4.3 4.7 5.1 5.5 13.7% 3 4 1.3 Other 7.4 7.4 73 9.4 9.4 31.9% 248 22.3 Rc.~onar Corttributjorl 25,0 26.2 29.4 34.4 4~.1 11.8% O~tmr 7.1 7.S Expo r t/Co~d r a¢t/lmporl Volu rues 35 10.3 123 14.1 15.7 13.9% 153.1 164.9 Ne; 5~les V,lue 2G6.1 247.7 293.5 337.2 386.4 18.6% 74.3 772 V~riable Margin 923 111,8 131:;' 143.0 168.4 16~W, 30.1 27.8 $F~c~¢ B~and Expense~ 29~t 31.8 33,8 35.3 33,8 7.2% 2.1 $.4 Other (1.3) (4.5) (S.31 (?.3) (S.0) N/A 42.6 44.0 Regional Contt~bu~on 64.4 84.3 104.1 120A 138.0 25.7% Total 33.1 46.3 ExporVCo r~ta c IJlm po~ Volumes 51.8 5.8.0 63.3 63.8 75.5 10.0% 684.8 794.6 Net~:.~esVmlu~ 915.4 1,043.0 1,180.0 1.317.2 1,4600 12.9% 352,1 384.3 Vmr~blt Margin 440.9 489.0 538.3 ,$86.6 636A 10.9% 107A 11g.1 S~¢ h~¢ Brand ~ 144JJ 160.5 168.6 1711~ 139+1 3.7% 1~ z.s ot~, 3.1 p.~ (2.~) (3.o} (3.3) Nt~ 242.8 263~ Reg~onaI Conttibutk:n 293.3 329~ 372.4 410.7 452,7 11.5% Note: The ibove ~r¢lude B .~I..T ~o~tlor~l idjusttnents (i.e. Frice increases, true toyllty ritN et¢) betlat ~etlect th~ ¢ompa~i=on of the Internat~r~al bu=in e~t to the wior P~J~ 690951913

pRELIMIN)ER¥ FIVE-YEAR pLAN 1993-1997 SENSITIVITIES ($ in Millions) XOOL ~EVITALI ZATIO~ The base pL|n reflect= =t~eteg~es ~nd ret,ted ,~ir~ ~o h0[d KOOL'= ,hare of the fur( revenue menthot segr~ent. Te,~ ~rke~ ~esut~i i~dicmt¢ proreise th|~ further Improvement| to KOOL'S ~erformnce can be • ¢hieved. & thlrd test mrket i~ Intruded in the Pt•~ for I~3. The estimtes of the possible flr~,~i•L impecl of p~Ling ou~ • s~ce~sfu[ revitallz|t~o~ program folLowing the ~iti~t test (intruded herein) reprtsen~ pre[Imi~ry prajecti¢¢~. T~IB ~cermrlo g~rate$ • =t~ong R01 uith ~e high ¢~ributi~ per N o~ KOOL. to,st Spe~d o~ti~ will be e~Ir~d to further improve prcfi~tlt¥. F~r~her ~v|[~ti~ ~itl be Volume lncreai~(5} ~.I ~.5 1.2 1.7 Incremental Mktg. Spend 3g.7 77.3 44.2 46.4 Contribution Increase (30.4) (44.4) 39.1 81.4 KOOL SRORT-TERN pROFIT MAXIMIZATION A strategy tD ~x{m~ze the =hor~ ter~ profitlb~l{ty~©•s~ fl~ fr~ K00L wl~ ¢or~si~r~, ~the impact bra~ e~itV n~ in~ermedi|~e a~ Loner-term profits ~s ~t ~¢epteb[e, Volume {B) (I.23) (2.29) (3.14) (3.80) (4.22) Reduced Mktg. Spend (86.5) (73.7} (81.I) (88.7) (96.6) Contribution 23.4 ($6.5] {114~4) (168.3) (211.8] DOMESTIC PRICING plm~ed J•nuary I~3 $3 ~r N i~re~se= Co~trlbu~io~ $49.3 $49.4 $50.2 $50.9 $51.3 Variable Margin £mpact per year of +/- $.50 per M per price in=tease, The Preliminary Plan a~sumes t~o increases per yeer for Full Revenue and Low Pri~e Bran~e@ ~nd one p~£ce increase at the beginning of each year f~r ~x~ra LOW Price. Sensitivity amounts discounting. are ~ot cumulative and dO not xefle~t any additional Full Revenue ~8.g 16.2 24.1 12.7 11.2 Low Price 4.g 7,7 ?.8 8.2 8.5 Extra LOW Price 17.4 16.8 17.4 17.8 18.2 690951914

R~EIOB EXTRA VOLD~ The Preliminary plan proiects ~i~nificant Rrc~th in ~LE]GH £xtr|'$ ~otum~ I~ profit ¢~tribu~io~ ~se~ it~ ~ price positi~i~ o~ the assumed ¢~n%in~ed r~pid Rrow~h Of the towes~ price SeR~nt. Pta~d dis¢~i~ is m~x~$~ ~th a f~ On i~roviP~ turgid. |~i$ Se~itivity esti~e r~lects voI~ ~X~Ur~. Volume (B) (1,49) (1.79) (2.01) (2.22) (2.35) Cont rlbut ion (23.5) (32.9) (42.2) (52.2) (61.2) D~LLAR VS 1finN EIC~GE P~T~5 ?he Ptmn reflects Continued ,tre~the~ir~ of the yen (by 3 Yen to th© dot~Jr) to 113 by 1997. A five wen ~¢ake~ir~ versus the Ple~ assumpti~ has the ~ll~i~ [~pa¢t. A further stre~R~henlng OF the Yea has approximateky the opposite po~i,ive imF~t* (9.a} (10.9) (12.0) (13.1) J&P~J~SE pRICE XNCR~S¢ The Plan asBumes ~o price increas~B in Japan, However, pricm increases will be taken if the competitive situation pe~nitB. A 1996 price increase of 10 yen per ~ack on all bra~ds would increase cont~ibutio~ as followl: 1993 1994 ~ 9~ Contribution ($M) - 52 55 C.%]PAC I TY EVALUATION A detaiL~ ar~ly',i~ of CDl;~¢i~y ~e~Jir~n~'~t$ ~ the fiP.arciB[ beneflts ~ incr*~,c~t|t wotu~e i$ under~ay wit~ be co,~teted for the "~irmt plan. lh~ l~t~timiP,~ry plan assumes ~hat Cmpaclty wltt be ~ t~ h~dte at[ d~Itic ~r'*~ interna~Io~t bus~nes~ that il j~dRe4 to be il¢>ortant fro,~ elther • ~hoPt'o~ lom|-t~rm prof i~abi ti~y st ~rcIpoint. R&D RELOCATXON "the possil~it~'cy ef reloca~i~l R/.~ to Macon i~ • sn~tivlty %o the P[~ flrmPcia[ projec%1~. ~urthe~ di~cussioP.~ ~Ith thlrcJ pertle£ are recesss~7 f:o reaso~abty aspirate ~he l'iPanciat Impact, l(oMfVert 690951915