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CORPORATE AFFAIRS FIVE-YEAR PLAN 1993 - 1997 V0090MM

Corporate Affairs Mission/Objectives 1993 - 1997 ---------------------------------------------------------------------------- Coroorate Affairs Mission It is the principal goal of Philip Morris Companies Corporate Affairs organization to favorably position with key audiences Philip Morris as the world's most successful consumer packaged goods company. ssosMEZOz

Organization In pursuit of this goal, Corporate Affairs at Philip Morris Companies is organized into five groups: • Public Affairs • Washington Government Relations • Communications • External Affairs • Policy and Administration Each group has its own specific goals and objectives all designed to favorably position the company and to contribute to the mission of Philip Morris Companies Inc. 9so9MEZOZ

CorporateAffairs Trends 1993 - 1997 During the planning period major changes are likely to occur around the world that will impact our businesses. Leadership changes are approaching in France. Additional changes will occur in Asia, where almost every new head of government has come to office within the past two years. Looking at their standing today, we can assume that new heads of government will come into office during the plan period in Canada, Britain and perhaps Germany. It is increasingly doubtful that Yeltsin will survive in office, suggesting changes in Russia and the CIS countries. Here in the United States we will go through two congressional elections and a presidential election. It would not be surprising during the planning period to see the leadership of the Senate change at least once and a new president elected in 1996. It is reasonable to ask, with this magnitude of change, whether it is possible to project any meaningful trends during the plan period. To the extent it is possible to forecast critical issues, the following issues are offered because they seem to have relevance regardless of who holds major public office across continents. 46090M%0%

Central issues for the planning period: • FundinQ the Public Sector. Governments around the world are seeking additional revenues for increasingly costly services, especially health care. Without rapid economic grow rates, the need for added tax revenues will put strong pressure on governments to acquire additional revenues through various consumption based taxes. Not only are we vulnerable across the board to many of these tax schemes, we may be required to bear a larger burden through the imposition of so called sin taxes that would be placed on tobacco and beer products. Health Care. There is no reason to believe that public concern about health issues will abate. The health industry is large and growing and it is supported by a large and aggressive health care lobby. All of our products are likely to come under ever closer scrutiny by health advocates.. Here we are vulnerable to adverse regulation that might restrict what we market and how we market it. We are also vulnerable to taxes designed as much to modify behavior as they are meant to raise taxes. Indeed, no tax threat is as great as being included in some way in a health care funding program. • Environmental Activism. Environmental issues tend to receive less attention when the economy does poorly. As it improves during the plan period, look for more activism in this area. Throughout the US recession, there was serious focus given to the nation's solid waste problems. This issue will grow in significance at both the state and federal levels in the US which is behind many European nations in managing the growth of solid waste generation. Solutions to the problem will present serious challenges to all lines of our b usiness. 86490%M0%

• Trade Policy ChallenQes. As we enter the planning period, slow growth is evident in key markets; however, few are looking for rapidly accelerating growth rates in any region other than Asia. This suggests that managing trade relationships will continuing to be a significant challenge as countries seek to protect markets on the one hand while expanding international trade opportunities on the other. We will need to constantly build strategic relationships in the countries in which we do business to manage international trade tensions. And, in some countries, gaining consumer acceptance will be a second priority to gaining less restricted access to the consumer. • DeterioratinQ Attitudes About Smoking. During the plan period we assume that attitudes about the use of tobacco will continue to deteriorate among the smoking and non-smoking populations. This assumption may present one of our most significant challenges. At the end of the planning period it is likely that smokers will elect to smoke only in designated smoking areas when in public or at home or the homes of friends who smoke. It is also likely that only a fraction of workplaces will allow smoking at all inside buildings. These assumptions are based on an analysis of well established trends. [SEE APPENDIX A.] • Unabated Activism. We must assume that the activists will continue their assault on smoking. The pattern of adverse change in state and local laws escalating at a more rapid pace is expected to continue during the plan period. [SEE APPENDIX B.] ssosozCzoz

• EnQaQinQ in Public Challenges. With the near universal acceptance of smoking risks by the public, it will become more difficult for the industry to mount public policy challenges which move public opinion. Indeed, public debate tends to reinforce positions people hold and raise new issues on which some people have not previously focused.. Nonetheless, when threatened in a fundamental way, such as by punitive excise tax increases, the industry must close ranks and mount a campaign. • Strengthening Credibility and Stature. During the plan period, Philip Morris Companies will be viewed more positively when it is understood to be a truly great global company. Continuing to state the c-ompany's established position regarding risks associated with smoking and the desirability of a com mon courtesy approach to accommodating the choices of smokers and non-smokers will build both credibility and stature. At the same time it will be important to expand understanding of the company's diverse operations in food and beer around the world. • DevelooinQ and Maintaining Respect From flpinion Leaders. While many of our messages will be difficult to communicate effectively to the general public, it will be increasingly important to build support for the company and our positions among opinion leaders.. Opinion leaders who influence public policy and media coverage affecting the company will be very important throughout the plan period. • Communication Fundamental.. During the plan period, the company will face many changes and challenges. It is critical that the internal and external communications effort manage the com munication process in a way that insures our internal and external audiences understand the company's position and direction. This will require understanding and adapting rapidly changing technology by which people will acquire information in very reduced time frames. 00Z90%M0Z

StrateQic Objectives During the plan period, each of the functional groups within Philip Morris Companies Corporate Affairs will pursue strategic objectives meant to fulfill the mission. The following general strategies will guide each group's activities: • Protect Marketing Options and Consumer Choices. Of paramount concern is the ability of the company to market our products around the world to consumers who are free to choose which combination of our products they wish to consume. Laws and regulations that restrict either the company's ability to market products or the consumers ability to buy and use them will be opposed. • Purs-ue Policy of Aggressive De-escalation. Evidence suggests that the more attention is drawn to a public debate on smoking the more likely attitudes about smoking among both smokers and non-smokers will worsen. It is time to de-escalate - - the public debate while at the same time moving aggressively to get third party sources and key opinion leaders to challenge anti-smoking and other initiatives designed to limit the use of our products. This suggests a program of "fighting smarter" and not engaging in public debate unless absolutely necessary. • Develog Strategic Relationshios/Alliances. Wherever in the world we are working in support of the Company, we will be more effective by working with a network of strategic relationships. Identifying and building these relationships is critical during the plan period in key locations around the world. ZoT9o%EZOz

• Sunoort Operating Companies. The corporate affairs staff found in the operating units around the world are on the front line every day. Giving them strategic support and collaborating with the operating units on issues of company-wide significance is essential. It is -also important to develop the best talent possible in the operating units. While always standing ready to assist, it remains important to have as many tasks as possible dealt with by the corporate affairs staff at the operating level. • Develon Research Base for Actions Taken. Our strategies and our action plans in corporate affairs will be based on the best available research and a clear evaluation of options. Part of any implementation plan should be a program for evaluation in order to understand the extent to which our efforts are achieving the expected results. It is also the case that research should be aci,ionable . I zoisonz0z

Public Affairs Objectives The Public Affairs group within Philip Morris Companies focuses on Contributions, Public Affairs Programs and International Public_ Affairs.. The staff in each of these areas is committed to enhancing support for the company's pursuit of favorable public policies and efforts to improve our standing with opinion leaders throughout the communities in which we do business. Opinion leaders judge the greatness of a global company, in part, on the extent to which it gives something back to the communities in which they operate. Public Affairs fulfills this objective for the company across a diverse set of key opinion leaders and select audiences. During 1993 and the remainder of the plan period, specific objectives for the Public Affairs Group include the following: • Insure that Public Affairs activities are more fully integrate -d into the other corporate affairs functional groups and that priorities are commonly understood, especially with regard to activating support among constituency groups for government affairs objectives. • Develop offsetting relationships among groups that are often used by the "antis" suggesting they are victims because they use the company's products. The relationships developed are designed to insure that our case is understood, thus undermining the opposition's ability to organize against the c.ornpany's interests with leading community organizations. Eo19o=Oz