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PROXY STATEMENT his proxy~staterhent is furnished by the Board of Directors (the "Board") of Philip Morris Companies I`nc., 120 Park Avenue, New York, N.Y. 10017, in connection with its solicitation of proxies for use at the annual meeting of stockholders to be held on Thursday, April 26, 1990, at 9:30 A.M., at the Philip Morris Manufacturing Center, 3601 Commerce Road, Richmond, Virginia, and at any and all adjourn- ments thereof. Mailing of the proxy statement will commence on or about March 15, 1990. Holders of record of Common Stock, $1 par value, at the close of business on March 15, 1990 will be entitled to one vote for each share held on all matters to come before the meeting. On March 6, 1990, there were outstanding 925,606,752 shares of Common Stock. A proxy on the enclosed form may be revoked at any time before it has been exercised. Unless the proxy is revoked or there is a direction to abstain on one or more proposals, it will be voted on each proposal and, if a choice is made with respect to any matter to be acted upon, in accordance with such choice. If no choice is specified, the proxy will be voted as recommended by the Board. The proxy will also serve to instruct the administrator of the Company's dividend reinvestment and voluntary cash payment plan and the trustee of any defined contribution plan sponsored by the Company how to vote shares held by it for a stockholder or em- ployee participating in any such plan. As used herein, the term "Company" includes Philip Morris Companies Inc. from July 1, 1985 and Philip Morris Incorporated prior to July 1, 1985 and, where appropriate, their subsidiaries. ELECTION OF DIRECTORS (Proposal 1) General Information The Board has the responsibility for establishing broad corporate policies and for the overall perfor- mance of the Company although it is not involved in day-to-day operating details. Members of the Board e kept informed of the Company's business by various reports and documents sent to them each ~onth as well as by operating and financial reports made at Board and committee meetings by the Chairman of the Board and other officers. Regular meetings of the Board are held each month, except July. The organizational meeting follows immediately after the annual meeting of stockholders. The Board held 11 meetings in 1989. Committees of the Board Various committees have been established by the Board to assist it in the discharge of its responsibili- ties. Certain of these committees are described below. The biographical information on the nominees for director, which begins on page 3 of this proxy statement, includes committee memberships currently held by each nominee. The Audit Committee meets with management, the Company's independent accountants and its internal auditors to consider the adequacy of the Company's internal controls and other financial reporting matters. The Audit Committee recommends to the Board the engagement of the Company's independent accountants, discusses with the independent accountants their audit procedures, including the proposed scope of the audit, the audit results and the accompanying management letters and, in i • , i 1

, connection with determining their independence, reviews the services performed by the independe' accountants. This committee, which also monitors compliance with the Company's Business ConduL~ Policy, consists of seven non-management directors and met four times in 1989. , The Committee on Public Affairs and Social Responsibility focuses on the Company's policy with respect to major public issues. The Compensation Committee, consisting of six non-management directors, held six meetings in 1989. This committee determines cash remuneration arrangements for senior management and admin- isters the Company's Stock Unit, Stock Option, Incentive Compensation and Long Term Incentive Plans, recommending to the Board in the case of the Incentive Compensation Plan the amount to be credited to the Incentive Compensation Plan Reserve. The Corporate Employee Plans Investment Committee oversees the investment of certain em- ployee benefit plan assets. The Executive Committee has authority to act for the Board on most matters during intervals between Board meetings. Six directors have been designated members of this committee. The Finance Committee monitors the financial condition of the Company and advises the Board with respect to financing needs and dividend policy. The Nominating Committee consists of eight non-management directors and met three times in 1989. This committee reviews the qualifications of candidates suggested by Board members, management, stockholders and other sources, considers the performance of incumbent directors in determining whether to nominate them for reelection and recommends to the Board a slate of nominees for election as directors. 4 The Nominees It is proposed that 21 directors be elected to hold office until the next annual meeting of stockholders and until their successors have been elected. The Nominating Committee has recommended to the Board the persons named below as management's nominees and, unless otherwise marked, a proxy will be voted for such persons. In accordance with the Company's retirement policy, Howard L. Clark and William P. Tavoulareas are not eligible for reelection. All of the nominees currently serve as directors, with the exception of Richard D. Parsons. All incumbent directors, except for Michael A. Miles and Rupert Murdoch, were elected by the stockholders at the 1989 annual meeting. All nominees attended at least 75% of the aggregate number of meetings of the Board and all committees of the Board on which such nominees served during 1989, except John S. Reed, who attended 72% of all such meetings. Although management does not anticipate that any of the persons named below will be unable or unwilling to stand for election, a proxy, in the event of such an occurrence, may be voted for a substitute 2 2o4si8lo~5

designated by the Board. However, in lieu of designating a substitute, the Board may amend the By- Laws Laws to reduce, the number of directors. I Elizabeth E. Bailey Dean of the Graduate School of Industrial Administration of Carnegie-Mellon University, Pittsburgh, PA Dr. Bailey assumed her present position in 1983. She had pre- viously served from 1981 to 1983 as vice chairman of the Civil Aeronautics Board to which she was appointed a commissioner in 1977 and held various positions with Bell Laboratories from 1960 to 1977. Dr. Bailey also served as adjunct associate pro- fessor of economics at New York University from 1973 to 1977. Dr. Bailey serves as a director of the College Retirement Equi- ties Fund, CSX Corporation, Honeywell Inc., and National West- minster Bancorp Inc. She is a member of the Audit Committee and the Committee on Public Affairs and Social Responsibility. Director since January 1989 Age: 51 Murray H. Bring Senior Vice President and General Counsel Director since 1988 Age: 55 Alfred Brittain III Retired; former Chairman of the Board of Bankers Trust New York Corpora- tion and Bankers Trust Company Director since 1966 Age: 67 First employed by the Company in 1988, Mr. Bring had previ- ously been a partner in Arnold & Porter, Washington, D.C., from 1967 to 1988. He became Associate General Counsel of the Company on January 1, 1988 and assumed his present position on July 1, 1988. He is a member of the Committee on Public Affairs and Social Responsibility. Mr. Brittain served as chairman of the board of Bankers Trust New York Corporation and Bankers Trust Company from 1975 to 1987. He serves as a director of Bankers Trust New York Corporation and Bankers Trust Company. Mr. Brittain is a mem- ber of the Audit, Compensation and Corporate Employee PItrt~ Investment Committees. (n~ i,-;• 3

Harold Brown Consultant; Chairman of the Foreign Policy Institute, School of Advanced International Studies, The Johns Hopkins University, Washington, DC Director since 1983 Age: 62 J. A. Cordido-Freytes Member of Betancourt, Cordido and Associates, Caracas, Venezuela, attorneys William H. Donaldson Chairman and Chief Executive Officer of Donaldson Enterprises Incorporated, New York, NY, private investing Dr. Brown served as president of the California Institute of~ Technology from 1969 to 1977, as the United States Secretary of Defense from 1977 to 1981 and as Distfnguished Visiting Professor at The Johns Hopkins University from 1981- to 1984. He is a director of AMAX Inc., CBS Inc., Cummins Engine Co. Inc., International Business Machines Corporation and Synergen, Inc. and a member of the board of directors of the Council on Foreign Relations. Dr. Brown serves on the Com- pensation, Corporate Employee Plans Investment, Finance, Nominating and Public Affairs and Social Responsibility Com- mittees. Dr. Cordido-Freytes has practiced law in Caracas, Venezuela, for more than 30 years. The firm of Betancourt, Cordido and Associates has performed and can be expected to continue to perform legal services for the Company and its subsidiaries and affiliates. Dr. Cordido-Freytes serves as a director and president of Banco Exterior, S.A., as a director and vice president of Financiera Exterior, S.A. and as president of C.A. Tabacalera Nacional, an affiliate of the Company. He is a member of the Nominating and Public Affairs and Social Responsibility Com- mittees. Mr. Donaldson was dean of the Graduate School of Manage-t ment of Yale University and the William S. Beinecke Professor in Management Studies from 1975 to 1980, having formerly served as United States Undersecretary of State and counsel to the Vice President of the United States. He was a founder and served as chairman and chief executive officer of Donald- son, Lufkin & Jenrette, Inc. from 1959 to 1973. He serves as a director of Aetna Life and Casualty Co., Honeywell Inc., London American Ventures Trust p.l.c., Comstock Partners Strategy Fund, the Carnegie Endowment for World Peace, the Lincoln Center for the Performing Arts, Inc. and the New York Commu- nity Trust and as a trustee of St. Lawrence University. Mr. Don- aldson is chairman of the Corporate Employee Plans Invest- ment Committee and a member of the Audit, Executive, Fi- nance and Nominating Committees. 20481310/207

Paul W. Douglas Chairman and Chief , Executive Officer of The Pittston Company, Greenwich, CT, coal and transportation services Director since 1980 Age: 63 Jane Evans President and Chief Executive Officer of Interpacific Retail Group, San Francisco, CA, retail specialty stores Director since 1981 Age: 45 Robert E.R. Huntley Counsel, Hunton & Williams, Richmond, VA, attorneys Director since 1976 Age: 60 Mr. Douglas assumed his present position in 1984. He also serves as a director of The New York Life Insurance Company, Phelps Dodge Corporation and U.S. Trust Corporation. Mr. Douglas is a member of the Compensation and Executive Com- mittees. Ms. Evans assumed her present position in May 1989. She served as president and chief executive officer of Monet Jewel- ers, Inc. from 1984 to 1986 and from 1987 to 1989 as a general partner of the Shansby Group (formerly Montgomery Consumer Group). Ms. Evans serves as a director of Edison Brothers Stores, Inc. She is a member of the Nominating and Public Affairs and Social Responsibility Committees. Mr. Huntley served as chairman, president and chief executive officer of Best Products Co., Inc. from 1987 to November 1988, having served as chief operating officer from 1984 to 1987. He became counsel to Hunton & Williams in December 1988. From 1968 to 1983, he had been president of Washington and Lee University. Mr. Huntley serves as a director of Centel Corp. He is chairman of the Audit Committee and a member of the Fi- nance and Public Affairs and Social Responsibility Committees. The firm of Hunton & Williams acts as counsel to the Company. 5

Hamish Maxwell Chairman of the Board and Chief Executive Officer Elizabeth J. McCormack Adviser to members of the Rockefeller Family, New York, NY Director since 1986 Age: 67 Michael A. Miles Vice Chairman of the Board and Chairman and Chief Executive Officer of Kraft General Foods, Inc. Director since December 1989 Age: 50 First employed by the Company in 1954, Mr. Maxwell becamer- a Vice President in 1969, Senior Vice Presideni;,in 1976, Execl utive Vice President and President of Philip,Morris International in 1978, President and Chief Operating Officer of the ,C,ompany in 1983 and Chairman of the Board and Chief Executive Officer in 1984. He serves as a director of Bankers Trust New York Corporation and Bankers Trust Company. Mr. Maxwell is chair- man of the Executive Committee and a member of the Finance Committee. Dr. McCormack has acted as a philanthropic adviser to certain members of the Rockefeller family since 1976. She serves as a trustee of Alliance Capital Reserves, Inc., Alliance Government Reserves, Inc. and Alliance Tax-Exempt Reserves, Inc. and as a director of American Savings Bank and Champion Interna- tional Corporation. She is a member of the Compensation, Nominating and Public Affairs and Social Responsibility Com- mittees. f First employed by Kraft, Inc. ("Kraft") in 1982 as President and Chief Operating Officer, Mr. Miles became President and Chief Executive Officer of the Kraft General Foods Group, now Kraft General Foods, Inc. ("Kraft General Foods") in March 1989 and Chairman and Chief Executive Officer of Kraft General Foods in December 1989. Mr. Miles is a director of Capital Holding Corporation, First Chicago Corporation and The Lyric Opera of Chicago and serves as a trustee of Lake Forest College.

T. Justin Moore, Jr. Counsel, Hunton & WilliaMs, Richmond, VA, attorneys Director since 1973 Age: 64 Rupert Murdoch Chief Executive of The News Corporation Limited, New York, NY, publishing, motion pictures and television Director since August 1989 Age: 59 John A. Murphy President Director since 1971 Age: 60 Mr. Moore served as chairman of the board of Dominion Re- sources, Inc. from 1983 until his retirement in 1985, having previously served as chairman of the board of its subsidiary, Virginia Electric and Power Company. He is a director of Central Fidelity Banks, Inc., Dominion Resources, Inc. and GTE Corpo- ration and serves as a trustee of the Colonial Williamsburg Foundation and the Virginia Foundation for Independent Col- leges. Mr. Moore is chairman of the Nominating Committee and a member of the Finance and Public Affairs and Social Respon- sibility Committees. Mr. Murdoch became publisher of News Limited of Australia in 1954 and in 1959 assumed his present position as chief execu- tive of the subsequently formed parent company, The News Corporation Limited, the interests of which include TV Guide and Twentieth Century Fox in the United States and The Times, Sunday Times and Sky Television in the United Kingdom. Mr. Murdoch also serves as a director of Reuters Holdings p.l.c. First employed by the Company in 1962, Mr. Murphy had previ- ously been a partner in the law firm of Conboy, Hewitt, O'Brien & Boardman (now Hunton & Williams). He became a Vice Presi- dent in 1967, Executive Vice President in 1976, Group Execu- tive Vice President in 1978 and President in 1984. From 1971 to 1984, he served as Chief Executive Officer of Miller Brewing Company. Mr. Murphy serves as a director of National West- minster Bancorp Inc. and as a trustee of Marquette University and North Shore University Hospital. He is chairman of the Fi- nance and Public Affairs and Social Responsibility Committees and a member of the Corporate Employee Plans Investment and Executive Committees. 7 Gc` ~ t, s w:~

Richard D. Parsons President and Chief Operating Officer, The Dime Savings Bank of New York, FSB, New York, NY Age: 41 John S. Reed Chairman of Citicorp and Citibank, N.A., New York, NY Director since 1975 Age: 51 First employed by the Company in 1970, Mr. Murray served{ Philip Morris International in various executiue bap~cities from 1973 to 1987, attaining the position of President and Chief Executive Officer of Philip Morris International in 19$3; having first become a Vice President of the Company in 1976. He assumed his present position in 1987. Mr. Murray is a member of the board of trustees of The Alvin Ailey American Dance Theater, the American Museum of Natural History and the Polytechnic University and a director of the International Ten- nis Hall of Fame. He is a member of the Finance and Public Affairs and Social Responsibility Committees. Mr. Parsons assumed his present position in July 1988. From 1979 to July 1988, he had been a partner in the law firm of Patterson, Belknap, Webb & Tyler. Mr. Parsons serves as a director of American Television and Communications Co., the College Retirement Equities Fund, The Dime Savings Bank of New York, FSB, Federal National Mortgage Association, The M.S.B. Fund, New York Zoological Society and the Rockefeller Brothers Fund and as trustee of Howard University. Mr. Reed assumed his present positions with Citicorp and Citibank, N.A. in 1984. He also serves as a director of Monsantot Co. and United Technologies Corporation, as a member of the , Corporation, Massachusetts Institute of Technology, as a trustee of The Rand Corporation and the Russell Sage Foun- dation, as a member of the board of managers of the Memorial Sloan-Kettering Cancer Center, as a vice chairman of the Amer- icas Society and as a director of the Spencer Foundation. He is chairman of the Compensation Committee and a member of the Audit, Corporate Employee Plans Investment, Executive, Fi- nance and Nominating Committees.

John M. Richman Counsel, Wachtell, ` Lipton, Rosen & Katz, Chicago IL, attorneys Hans G. Storr Senior Vice President and Chief Financial Officer and Chairman and Chief Executive Officer of Philip Morris Capital Corporation Director since 1982 Age: 58 Margaret B. Young Chairman of the Whitney M. Young, Jr. Memorial Foundation, Inc., New York, NY, and Consultant to the Company On December 1, 1989, upon his retirement as an officer of the Company, Mr. Richman became counsel to Wachtell, Lipton, Rosen & Katz, a law firm which has performed and can be expected to continue to perform legal services for the Compa- ny. First employed by Kraft in 1954, Mr. Richman served in various executive capacities, becoming Chairman and Chief Ex- ecutive Officer of Kraft in 1979. He served as Vice Chairman of the Board of the Company from December 1988 to December 1989 and Chairman of Kraft General Foods from March 1, 1989 to December 1989. Mr. Richman is a director of Continental Bank Corporation and Continental Bank N.A., R.R. Donnelley & Sons Company, USX Corporation and the Evanston Hospital Corporation. He is a trustee of Northwestern University. Mr. Richman is a member of the Corporate Employee Plans Invest- ment and Public Affairs and Social Responsibility Committees. First employed by the Company in 1955, Mr. Storr served Philip Morris International in various executive capacities from 1968 to 1978, including Vice President-Finance. In 1978, he became a Vice President of the Company and was named its Chief Finan- cial Officer in 1979. He was named a Senior Vice President in 1987. Since the formation of Philip Morris Capital Corporation in 1982, he has served as its Chief Executive Officer. Mr. Storr is a member of the American Institute of Certified Public Accountants and a director and treasurer of the International Tennis Hall of Fame. He serves on the Corporate Employee Plans Investment and Finance Committees. Mrs. Young is a director of The New York Life Insurance Com- pany, the Lincoln Center for the Performing Arts, Inc., the Met- ropolitan Museum of Art and the Whitney M. Young, Jr. Memo- rial Foundation, Inc. She is a member of the Audit, Nominating and Public Affairs and Social Responsibility Committees.

Compensation of Directors f Directors who are full-time employees of the Company receive no additional compensation for services as a director. Directors not so employed receive annually a retainer of $26,000 and 400 sharea of the Company's Common Stock and fees of $1,000 for each Board meeting attended, $1,000 ($2,000 for the chairman) for each meeting attended of the Audit, Public Affairs and Social Responsibility, Com- pensation, Corporate Employee Plans Investment, Executive, Finance, and Nominating Committees and $500 ($1,000 for the chairman) for each other committee meeting attended. The chairman of the Compensation Committee receives $10,000 for additional services rendered in connection with certain of the Company's compensation plans. Under the Directors' Deferred Compensation Plan, a director may elect to defer all or part of the payment of the retainer, meeting fees and any additional compensation until certain specified dates when payment is made in a lump sum or in monthly, quarterly or annual installments. Interest on deferred amounts accrues quarterly at a rate equal to the Company's average cost of funds. Under the Pension Plan for Directors, any non-employee director who ceases to be a director at his or her normal retirement date and who has completed five years of accredited service is entitled until death to an annual pension (payable monthly) equal to the annual cash retainer in effect on his or her retirement date plus 25% of attendance fees for up to 24 Board meetings earned during the two years before retirement. A non-employee director retiring before his or her normal retirement date but after age 60 and after completing five years of accredited service is entitled for a period equal to his or her accredited service to monthly pension payments. In the event of a change in control, a retiring director not otherwise eligible for a pension benefit will also receive monthly payments for a period equal to his or her accredited service. The Company has entered into employment agreements with each of its officer directors as described below under "Remuneration-Certain Agreements." ( Messrs. Huntley and Moore are counsel to Hunton & Williams, which acts as counsel to the Company. In 1989, the Company paid Hunton & Williams fees of $7,989,000. 10