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PHILIP MORRIS COMPANIES INC. 0 INTER-OFFICE CORRESPONDENCE 120 PARK AVENUE, NEW YORK, N.Y 10017 Dist$ibutic?fi oATE. November 13, 1989 Rd 1990 A'hnuaZ Meetincf: Shareholder Proposals Dona we have received four shareholder proposals for inclusion in the Company's 1990 proxy statement. These proposals, copies of which are attached and are also summarized below, were timely received. It is anticipated that we will file no- action requests with the Securities and Exchange Commission with respect to all four proposals. I. The Sisters of Saint Francis Proposal This proposal would require the Company to make available to requesting shareholders a-report listing for each year from 1985 to 1989 the total number of persons, the monies expended, and any and all organizations and trade groups funded by the Company that were involved in lobbying efforts (i) to influence domestic and foreign legislation restricting cigarette advertising as well as smoking in public places in the United States and elsewhere, and (ii) to open foreign markets to American tobacco products. Counsel have advised that a strong case can be made that the proposal is excludable from the Company's proxy statement since a registrant may exclude a proposal and any supporting statement "if the proposal deals with a matter relating to the conduct of the ordinary business operations of the registrant." However, the SEC staff has not applied this exclusion consistently and typically provides no analysis to support its conclusions; consequently, the likelihood that this argument will prevail frequently is difficult to predict. Nevertheless, a long and fairly uniform line of no-action letters concludes that proposals dealing with specific lobbying efforts that relate directly to the registrant's ordinary business activities may be omitted from the registrant's proxy statement. II. The Evangelical Lutheran Church in America Proposal This proposal calls for the formation of a review committee (the "Review Committee") to report to the Board of Directors by September 1, 1991 its findings regarding (i) the impact of promotional practices and sampling on children's decisions to smoke the Company's brands, (ii) evaluation of how promotional techniques such as advertisements and sponsorships, paid product placements and free sampling affect children's purchases of the Company's cigarette products, (iii) what policies/practices the Company might implement to insure that minors not be targeted with the

foregoing, and (iv) consideration of adoption of a policy that "profits realized by the illegal sale" of the Company's cigarettes be transferred to public health organizations for anti-smoking campaigns geared to minors and enforcement of laws to insure that the Company's cigarettes not be sold to minors. The proposal further resolves that "the Review Committee's recommendations, along with management's implementation plan, be available to all requesting shareholders" by January 1, 1992. • • The proposal may be excludable because of the proponent's possible failure to meet the eligibility requirement of having been a shareholder for at least one year. We will prepare a written request that the proponent deliver appropriate documentation of its eligibility or, in lieu thereof, that the proponent withdraw the proposal. If the proponent responds with appropriate documentation of its eligibility, we will prepare a no-action request on numerous grounds. This may be the most troublesome proposal of the four since many of our arguments may be overcome by changes of language in the proposal. III. The Adrian Dominican Sisters Proposal This proposal requires that the official description of the purposes of the Company (presumably in its articles of incorporation) be amended to add the phrase: "except for the production, marketing, and sale of cigarettes anywhere in the world by the year 2000." The proposal requires the Board to take the necessary steps between now and then to implement this change. Counsel have advised that a no-action letter should be granted permitting exclusion; in 1988 we received a no-action letter with respect to a proposal that would have required the Company to cease the production and sale of cigarettes "since it appears to deal with a matter relating to the conduct of the Company's ordinary business operations (i.e., the decision to cease advertising and abandon a particular line of business)." IV. The Province of Saint Joseph of the Capuchin Order Proposal This proposal requests the Board to initiate the process of amending the Company's articles of incorporation to provide that the Company shall not conduct any business in tobacco or tobacco products. The proposal is quite similar to the Adrian Dominican Sisters proposal and should be excludable on the same grounds. In addition, the Company should be able to treat this proponent_as a co-proponent with the Adrian Dominican Sisters since the proposals are substantially similar. In any event we should not be required to include both proposals III and IV.

/ • DF:tg 156 Attachment Distribution: G. J. M. W. C. T. H. I. Bible Breedlove Bring Campbell J. E. Dollison Houminer G. G. L. R. Knox Lewis P.-A. Malzac her__ H. Maxwell H. Millington J. A. Murphy W. R. Murray J. R. Nelson F. S. Newman L. Pollak G. L. Smith H. G. Storr 0