Tobacco Documents Online

.1 u t1 z .- 19,94 pALLp,S MORNING NEWS JUN 2 0 1994 Philip Mom*s Ctu resi~ls ~ Ana N7sts ~g =t to 5~a s~~~ t to spin off fcod. b~.~ilr1m hEEW ; GI2K - 7L.e surprtsir;g 7e~iguauoil of :4ic;.;a,-1 ?vitla5 us citu:~ :•,.:n nd „uief exec• utive of °hilip Morr-.s Cos, iol[oY,l a rift ae- twectt hirn and the ~u~ o er ti'~: company's dircrt:on, analysLtisafd. The board, IIItetis+g alt:ir ~`ty ill what a sx,kes ,tan descrilxW as an "emergency" ses- sion, eirctrd R. tbiititu.u Marray ts chairman a.nd Geoffrey C. Bible as rresident and LRO. Mr. ?~Lie:s, M:. Murray and Mir, Pible weren't avaiiable for con-ment Mr. Aike3, ,54, resigned f rn:a the New York- i?8,k.,Ci tobacco a.nd foo{j co?rakinY ~*'ild gPCfw• in5 g;:verntner,t scrutir.- of .ohxr::w c.o upa- nics, cont}K;'Ution from. des:ount cigarettes and press,ure from sh,areaoi4teEs to restruc- tur e. P~nt111I ~~CiaTl,$ ftf C.'S 1vr8, I i?o1 Cf C.Sgd- rettes, Kraft brand foods atld'd.iller beer. Soxurities ana'.ysts who track the company have been vocal in their bclief that a move to sptit ttre toi~c<o unft apart from 1116 food businc~ won;dmcre.ase the value of the food bus'ittc.~~' and raise Philip Morris' long•ailint; slock price. Mnny shareholders had urged such a breakup to shield the food operations from the possihility of liability lawsuits. Many analysts expected tUis decision to be made at 1'hilip Mon is' bc,ard meeting In May. Jt wusu'1 Mr. Miles "was invited to leave tlle board wceting and the insidets kept the meeting golnf; fo,• several hours after he left," said I•'rtderic I)icksorl, an analysi at D,A. Davidson iv Co. in Gi eat Falls, NUnt. ",t said to me that the battle had to bc vt,xy, very he:ted over tiic strategic direc tion of lhc com;,:ny," Tony Vento, of I:;d..,ttrd S). Jones & Co. in St. I~ouis, said many ruiaiysts believed that "Mr. M.i1eS had wanted to sTlit up the food and tobacco busiccssLs He v.•,ss wicltr a iut of pruz-~ure to bchzs; the va] ue of the stock" "if h:r, !iiles thoubiit spiitting the co;n- pany was the best way to enhance shar4 holder vaiue," he would have felt suNs!entiat Ple~ see P1ff LLiP tit0;21~ iS on Page 4D. "frtuttraluon" vAt.h the board for its txk of support, said Jeffrey Omohundro uf '*NI.E. Hilltard & Ca, in A~Iysts aa.id Suno'ay they expect Pwlip morr`is' new Ieadersb.ip will soon e.nnounce that the company wiil begin buying back its saares as a gesture of support designed to bc,V~,t the price of tise stock Mza.na; ile, Pla.ilip Morris tried to d.i~spai the nction thA: a rift between ~L". Wes and tue buar~ compelled ldm to l:.ave the k,b he had held. since _Septembt.~r 1991. He JoiIIed P'ai.lip jc4oi-iis in 1988, svhen t~':e cum- Wy acqt:i.red :nraft General Foods Inc. tusisting that Mr. Miles was not ptl4hed out by the 1v-;te25oTi Doard, P?icholas M. Ro'Li, a;?hiL'p Morris spakesman, said: "He decided to leave on hfs own, for his own per- Sonal rea3ons." in any event, the moves occurred swiftly. Mr. Rolli said the matter of Mr, Miles' seuignation was first dis- cussed by the directors by telephone tate Priday sfternoon. "The formal resignation was ac- cepted on Saturday morn.ing at an emergency meeting," Mr. Rolli said. "We were quite d.isappointed after the last board meeting." said analyst Marvi;t Roffcna.n of Roffman-Mi11er A9sociates in Philadeiphia. "We were looking for a break-up or a share- holder repurchase. A significant amount of value is locked up in the fond business. If you break the com• pany up, you can release that value." To the analysts, the timing of the announcement indicated that Mr. Mites had become too frustrated to continue in his posts. "It's interesting the announce- ment came out on a Sunday," said Mr. Dickson of DA Davfdson. "My initfal sense when I first beard it was basi• cally the board meeting of a couple of weeks ago was still being played out behind the saenes, nnd off-stage Behind the scenes, it was clear you had a cha.irman that was looking at options, trying to best protect the company from the possibility of fairly severe legal fallout t'egarding domestic tobacco liability." (OtFler caverage ava(iabfe upon uques't.)

LOS ANGELES TIMES JUN 2 0 1994 Philip. MorrisCEO Quits; 2 O~~rs to S~~~~ ~~ Duti~ 0y STt1.'.RT S!i tfg%sTEts a T!1.er.a 3TAiF VQiTr.t The i•tead o= r'hiifR '~nrr±z_ t^.r~3. YtL'ri+t7t3y, ^quit Uve: 'tPC sH~L't{Fis~ 2!! @ 11iur,nir tr angkt -s:;i at ti1C na:ion'ft biggrat wbxc conr.crn. ; h~lrrn:n and i.hief ExCCuttvc idichxci n. ;ri,lu8, o vaterarl of ti:r, comfsony'~ food '7~iraah who haa been criucfrxti by tob"Icco r.rti- sarie far b•:;)ib :,nrFsfa;o-frive ` IIti3ck: on tiiR clg-'.~L' ir~ifl:atry, in bcing rt•piaccd hy two eacc;ii;vea with lond expcsricncL :;n tiie totzc• co side oFtad btblr:c.'m The Changryt at the hclrn ct: °itr'V York•basi2Ci Nhili;o Morris come scs the entire C:,S. tobacco indtig7try is recling from aeuults by -4tit>-c!anf and an!!•crt:okin4 acuvista. .4bac• co camr,any prc:fita aat; nave suf- IcrC(i u'1",til I'C.c.^.rttly irJi21 apTlce war fucled by Phi;ip b.iorri: t year wher, lt siaai,ed the prSce of i" Mari boTo cl;garttt€3. "v'n W, thC ehake-'tif, a: P;'ltitp Morriic !avora thi tGhaoct! :.Cie of t.he coYnFa,ny over its vat&> .cw-Y? and b e.- operations, which M nc uuc and Miller Brewing Cao, . ilcs, b-i, w t~o 4y• atepping down after ncarly thre8 yr,ars 8: t;o head of Philip Misrris, was the first noru;noker to run the company and was Kraft'e chief cxccutive when the food proce¢r!- inA giant was acquired by the tobacco concern in 1H$8. By contrast, Miles' replacc- mcrns-R. William Murray, 59, and Geoffrey C. t31b1e, 5F-arc both IongUmc tobacco cxecutivea, with a combined 50 years of experience at Philip Morris, Murray, Philip Mnrris' presidenl and chief operat- ing officrr until he was named vice chairmars for food 1ut month, now becomrs chairman of the entire i'te,>,te set SHAKE-UP, Af5 cnnti)atty. zlit:it•, wha huti If;K.)1 vive ch,tir m:u1 nf Wilharm. wru" etcvulocl tu Irrrvicit:nt ;lnd c:hlcf oxt,rutivn nf tiw cnti!r r.cu)tltalt,v, Aitttt,urh t}e tiiic c,f (:I,:f) wnulcl gt,};g"l that J31lric ts now thr /cn4,st frc,w(•rfitl ('XCYtlltivc` ;it 1'lrilii) R4nrrut, I t'Ur,r- ;,atty rt~crkcunm.;n ,u!ci t1vIt zr will !•rtx3rt tJ aftfrrty, ir) a kcit(:r of rctiit:uuti<rii tc;i,lnii tf`ti IZit` Pt'iti;ly s)ilt r:nt tii. t.;4ec':1 hy i=h niii) >>ifil`2' )k`2')k U1)t:! 1tiut;tuly, 1i1lCa r~lici hc,. ia ic:,ying witds "iuti ctlnfi. tit,,c" thai I.he cist"l4iiYiQ tn;tclc dt)ring r,~x t:^n,irr. "wi11 tyc; ,,rnven #Ight by ci:.~ iesLit,3 iri iWj and, btyond," "rti,'c3w, ho4veyer, ivitl't the reas:u- ao..us of our U.& tU~ux,c :iu.:,inou 'a.:, : t`,e c.ontir,:tcd ytrong ,growtl: In i,rtcrrintionai tobacao, tt mitices serwe to agaut have a caN;er Philip 'aorrLq z*xacutiYe in tiic to~ ynh," he ad:±f3ti. N cii,hcr [S;,~a nor htr £uccc-.,ac~rb could be rczchcd fnr ,-ortt- '7nc:nt. 53;oka3tr.en for Oic torr.;iar,y xaid idacai was not ;;ro"t:red to '4rrlve. but ht< ts wi:j:ay Lialieved t:.i ~h8ve rtin into stTor-4 op" ition f-om othcr t"ircctor, and r;lnicir -fnvetstnrs. l.ia , tmfn nemczie ;r.ay ;,avc : ecn Pntli* 'rl'corris' forr.,er c:hairtnnn, fii9fi M8..''w~el'., who is mit1 to hAvc pluiSg.H back Iniu the comnn- dy's u,-x.~r.ttlurs rec.et.tiy. t7Jhen a propo-sal bcticvcd to have bccn puuched by Mi/ea to Rpl,t i'niiip Marris' tod,aer; and food operstiotts Waa conxidert*d by the board last 'tsionth, pdaxwell is believed to have Payed a itrong rolc irt shooting it down. Splitting the company had fans on Wail Street, whcrr e inveatrr.ent community hoped ch a movo would both yield resitQr v>alue for sharcholdcrs and taulutc a• tzcparate food busincsa m tobacco tiability. Philip Morris stock is One of merica's mnst widoly held und i.. cluded In many pension funds. he company'r aharca climbed m about $80 wher. Miles ct~nk ver ln September, 19$1. to a high f;`LiBt over $86 a ; ear later, but they h:vc ylttngntf aittcu-thoy cinar.ri nt VrT.37i, on I"I'idtty--cost• ii1f; itivc-sUs,-r= uu!!Y> thatl t.'30 I,illic,t! ainc.P iS!+}2. Inrltlatrywide tt)rmnti y,t,>_s lllt:ca: cif tnc bltit))c, huwever. 'I'ilc clvrri!I" v;;llic c;i thc cnlnlur- uy u:f W;,ll tiirtc•t Nii by t,cul'ly $13 itiliiua onc diiy liist ycar, aftcr invr.Xtnm. were caught off guurd hy ac!1 ullnuuncesncnt thut the curnluw !ly WaK AiaKhirtg prtmium r.iqarvttc trrtc:cR tn R!avr c,ft ct,mpr.t?tlnn frr,!n Ct~CiitJC~c 'tU.~/~t28. Altiruu; h Miiv.r' drpl;trturc dc.;csi ncst try,,x•yr in 1w% clirr-ctly rclatnl to ril'iitil, ;,rut< rax F.!v at!N-!trnUkini: activiata, he is belicvcd to have 'rttKiruirci thcaQa clr,cr to thr cclln l);aty with hiu ty;lrely vitt'st,lv prufilc In ihr, r»rrnnt nntit,nr.l ck,h;tte. hlilccu rarely (;ivt;x itttct'vicwti trs titt' new.x nzc,flsl or iircnkrs trc^fr,rv Wnll StrcvI ai!ulyxt.r w1!u follow thc• Cutrtls~tny'c fitock. 1lut John C. MaxwcU .1r., a+r atiatl}'st with WhCtlt il'irfit tit:vurr• ticrt in lticlimnl'Id, Va., M,id hr 'vt'l:uvVt: thW t:ct)ltl,aily ifi pcnitiunccf t(i t)n wrli itn t•rrrninK yn;1rH-•unlesxv i;ic(>.atctlti;ti )rcw ta!a-x or othcr ~ 4trntti, rcgutc)tttry rcrntrc!!K /trr jll'ui.t i i,il lU[43Ct:U tialt.'Y.

-12- _.~ ADVERTlSING AGE, JUNE 20, 1994 What MOrray brings to Kraft Industry speculates his role is as caretaker pending PM breakup By Patricia Gallagher Philip Morris Cos.' decision to bring in a tobacco man to run Kraft General Foods has investors and Kraft followers wondering what's in store for the mammoth food company. With his new job_.of vice chair- man for worldwide food, R. Wil- liam Murray gives up half his re- sponsibilities and takes more direct control of KGF at a time when Philip Morris is poised to separate its food and tobacco businesses. "I think they are positioning it for a cleaving," said J. Bruce Har- reld, Boston Chicken president and former KGF executive, echo- ing a theory of dozens of investors and observers. Mr. Murray, 58, spent 21 of his 24 years at Philip Morris selling cigarettes-and three oversee- ing both food and tobacco-as president and chief operating officer. He also moves into the KGF position at a time when growth of food earnings has fallen from the mid-20% range in the late 1980s to about 7% last year. So who is the man who could end up in charge of a free standing, $30.3 billion food giant that would rank No. 13 on the Fortune 500? Industry sources, including some former KGF executives, characterize Mr. Murray as a strong administrative and op- erational executive with close ties to former Philip Morris Chairman Hamish Maxwell. He also provides a liaison to top Philip Morris management, the board and Wall Street. But Mr. Murray is viewed by some as a caretaker at KGF, having virtually no direct expsri- ence manaaing food businesses. He's "solid and trustworthy," said one source, but "really doesn't add much," said another. What Mr. Murray does bring is impressive international business experience. The Australian native joined Philip Morris in 1970 as a finance manager in Switzerland, later holding jobs as president of the Benson & Hedges brand in Can- ada, president of the company's Europe/Middle East/Africa divi- sion and president-CEO of Philip Morris International. He brings that cosmopolitan background to Kraft General Foods at a time when the company's phenomenal growth overseas has slowed. Just four years ago, KGF's in- ternational sales were growing 66% annually and operating in- come was surging nearly 80%. By last year, the pace had slowed dramatically, with revenue up 8% and operating income up 3%. Mr. Murray's new focus also co- incides with increased invest- ments overseas. Last year, KGF bought Freia Marabou, a Scandi- navian candy company, for $1.3 billion, and Terry's Group, a U.K. candy concern, for $295 million. The company also expanded its coffee business in the Czech Re- public and China, its cheese busi- ness in Poland and other food cat- egories in Australia, Turkey, Ar- gentina and Brazil. As Europe's fourth-largest food company and the Asia/Pacific's leading U.S. food marketer, Kraft General Foods International gen- erated $1.11 billion in earnings on $9.43 billion in sales last year-12% and 15%, respectively, of Philip Morris' totals. International expertise aside, some observers say Mr. Murray's lack of food industry depth is a detriment. But his impact will be significantly buffered by a thick J UN ? 0 1994 laver of seasoned KGF executi•es, experts sav. ` As long as he and [Mike; Miles work together, I think they 'll be a good team." said Bruce Gregory. R. William Murray, Kraft General Foods' new boss, brings loads of inter- national business experience but no direct experience in the food category. portfolio manager for Progressive Partners, a New York money man- agement company pushing for a breakup. Mr. Murray continues reporting to Philip Morris Chairman-CEO Michael A. Miles, as he did as president. Under a breakup, though, KGF might lose Mr. Miles, its former president, as a safety net. Only he-and presum- ably, his board-knov,• whether a split will occur. The investment community is pushing that scenario. After a board meeting late last month, Philip Morris said it would take no action on plans to consider separating its businesses. A day later, the company said it didn't anticipate the board would take up the issue again "in the foreseeable future." But Philip Morris hasn't com- pletely closed the door on tearing apart the tobacco and food busi- nesses, and management re- mained flexible on the subject in a meeting with six large institu- tional investors. "They have indicated a willing- ness to meet," said Anne Hansen, deputy director of the Council of Institutional Investors. =' Ms. Gallagher is a reporter for Crain's Chicago Business.

-13- RTf 06/17 1606 Philip Morris <MO.N>, others cut by Salomon NEW YORK, June 17 (RZ~uter) - Salomon Brothers analyst Diana Temple downgraded tobacco stocks Philip Morris Cos Inc, RJR Nabisco Holdings Corp <RN.N> and BAT. Industries Pic <BATS.L> to hold from buy, citing extensive news coverage of the industry. The analyst left a buy rating on American Brands Inc <AMB,N>, saying she believes B.A,T. Industries will close its deal to buy the U,S, tobacco unit and will indemnify the U.S. company against the litigation risk. "We believe the tobacco industry is being tried by the press and mass media which.will make it difficult for the tobacco industry to get a fair hearing in court," Temple said. REUTER Lhcrtcw~ork~iins~s SATURDAY JUNE 18, 1994 Date: Goodbye Cyclicals,' ` Hello GrOivth Stocks I Or So the Analysts SayrapY any time sooR . . By SUSAN SCHERREIK Quite a few mone mana ers are gushing about~te prospec for large-company growth stocks, a group that has languished for two and a half years. The cyclical stocks, in the -auto, steel, rail and other economically sensitive industries, have had a heady surge but are running out of steam, the argument goes. The Fed- eral Reserve, in its zeal to keep infla- tion in check, will ultimately slow economic growth. When it does, the cyclicals will be replaced by big growth companies, which record con- sistent earnings gains even in a slug- gish economy. ."The next major move in the eco- nomic cycle is going to favor growth stocks; ' said John D. Gillespie, man- ageF of the $2 billion T. Rowe Price Growth Stock Fund. t ou it is hard to pinpoint economic transi- tions, the growth-stock followers ex- pect a shift over the next six months. Naysayers, of course, point out that just last week, a blue-chip growth stock --P~e ps~ico - headed south on a report at the company's second- quarter earnings would be flat. Other food and beverage stocks fell as well. The decline raised concerns about whether growth stocks could stage a growth stocfts will come arourxi, the investment advisers in- sist But something else is afoot as wq~p - a drastic change in the catego- . "The 1990's will largely redefine growth stocks," predicted Shelby Da- vis, rtfolio mana er of Selected Amencan ha s, a mutua un vested primarily in large companies. Some old die-hards are giving way to new favorites. Quality growth companies, which have hefty market shares and strong bajance sheets, typically post 10 to 20 percent increases in earnings year after year. Because they plow most of their earnings into operations for fu- ture growth, they pay skimpy divi- dends, if any at all. Like Energizer btmnies, they keep going even when the economy languishes because they sell goods and services that people buy no matter what. Consumer products companies % ~ u N 4.'. u Iyy't dominated the growth category in the late 1980's. Their brand-name prod- ucts, whether small-ticket items like soft drinks, cigarettes and cereals, or essentials, like drugs, found a ready market. But in the early 1990's, con- sumers turned frugal, and price com- petition squeezed profit margins for food, tobacco and dru,g companies. inc u tng e a~z ila . orns and Merck. Pepsi cited similar competi- on and price pressures in its latest earnings forecast. "The traditional growth stocks are showing signs of age - their profit= ability is stowing," said Ron Ognar, who runs the ~trong Growth Fund, which invests in growth compantes of all sizes. "Newer, fresher companies will have an easier time." Although it is premature to con- clude that Pepsico will be displaced as a blue-chip growth stock, many companies no longer fit the mold, said David Shulman, chief equity strat- egist at Salomon Brothers. What managers inter- viewed in recent weeks pointed to companies that help consumers and businesses cut costs and save money. Financial services companies, like Charles Schwab and tvSerriil Lvnch are ezpect"~to flouns a"-~s bab boomers focus on saving for retire- ment. Companies that help business- es raise producuvity - by using tech- nology or by taking over routine tasks - should also deliver double-digit earnings growth. Among the manag- ers' favorites: Automatic Data Pro- cessing, which processes company payrolls, and Motorola, a leader in wireless communicauons products. Many of the new growth companies will add to earnings by muscling into foreign markets. Mr. Davis dubs the American International Group "the Coca-Cola of insurance" because of ffs o a straTcgy. 1 ,Y~er,trd}

GROWTH COMiNG l«~;ACK? Total annual returns for Stocks and stocks. The New Yor1e 71arcs And not all the old-line growth stocks will fade. Gillette and Procter d~ Gamble, for example, are expectea to thrive in large part because of their international positions. Investors who coliect these stocks will be rewarded over the next three to four years, said Mr. Ognar of the Strong fund. For support, the fund managers, point out that the party is ending fortcyclical stocks. The cyclicals have, been the market leaders for 22' months, while their typical spurt is just 18 months, said Michael A. Ham-: ilt.on, a financial analyst with the Leuthold G roup, an equity research! group in Minneapolis. What's more, investors can find exceptionally good deals in the growth sector. Growth stocks usually sell for a premium, reflected in high . price-to-earnings ratios. But the P/E ratios of many issues are near theiri lowest levels in several years. , One way to spot issues ihat are welf ~ priced is to compare a stock's P/E, with the annual earnings gains fore•1cast for the next five years. If the P/E; ratio (the price of a share divided by~ its per-share earnings for the next 12~ months) is equai to or less than the' annual growth rate, then the stock represents good value. Mr. Gillespie of T. Rowe Price fa- vors the Federal Home Loan Mort- g~2e Mort gage Coroora tion. Its stoc has a P/E of 10 based on 1995 earn- ings projections, and its annual earn- ings growth is expected to be 15 per- cent. At the end of March, the mort- gage company was the largest hold- ing in Mr. Gillespie's growth fund - a stark change from five years ago. At the end of 1988, the fund's biggest holding was j,B.M., no longer a growth stock by any definition. -14- JtlN-2 0 1994 OR State Investments-Tobacco, 5~t,s7^ OreQo1"i Public T: =5tmen~ Mcnac~ers '_---c.,. A;^_.,.... "Obd~~O StoCKs PORTLAND, Ore. (AP) The prospect of anti-smokina lecislation has state retirement fund mar.aaers reconsiderina more t.an a half billion dollars invested in tobacco companies. The Business JOurnal, a Portland week'_y, said the si.^.g1e largest state investment in tobacco is 1',45-j million worth of stock in RJR Nabisco Holdings Corp., the makers of Winston, Salem and ocher cig_arette brands. ''The thing that's really overhang'ng the _ndustry •~s what's aoina on in Washinaton, 'said John Maxwell Jr., an analyst with Wheat First Butcher & Sinaer 'i_n Chicaco. MaxweLl noted that David Kessler, commissicner ~_ the U.S. Food and Drug Administration; Surgeon General JGycelyr. E_^ers and U.S. Rep. Henry Wdxman, D-Calif., are leading a f1Q 3•Tai^:St STiGCing. Waxman, who heads the health and environment subcommittee, hauled seven tobacco industry chief executives before the panel in March as part of his effort to ban public smoking. Kessler said this spring he's willing to Consider classifying nicotine as a drug to put tobacco under FDA authority. As a result, OregOn Treasury Oii_C_a1S regueSted _n writing this spring that four of its mone_v managers justify their investments in tobacco stocks as a part of the state's $18 billion investment portfolio. Jay Fewel.Jr., the state Treasury's equities investment officer, said the state bought RJR stock at $5.50 a share five years ago but it has gone nowhere, trading about the same level this week. But the state could not dump its RJR holdings even if it wanted to sell because Kohlberg Kravis Roberts & Co. is the managing partner of the state's portfolio and the Treasury is a limited partner without any legal right to interfere. Past KKR investments have been hugely profitable lor the state, includin_a returns in excess of 20 percent for the buyout of the Portland-based Fred Meyer Inc. retail chain. The state could dump the rest of its tobacco industry holding, estimated to be worth nearly $75 million in Philip Morris, American Brands and US Tobacco. But none of the state's four money managers indicate they are selling tobacco stocks despite the state's inauiry. •'I'm not speaking for them, 'Fewel said, " but based on their actions, they must feel that there's greater upside potential than downside risk. " Copyright (c) 1994 The Associated Press Received by NewsEDGE/LA.'V: 6/17/94 4:06 AM

USA TODAY • MONDAY, JUNE 20, 1994 Follow-the-leader can be dangerous for investors Even pros stumble: Soros makes $10 million gaffe NEW YORK - Even smart guys who think they have the ' inside track do dumb things. 'Igke globe-trotting George Soros, 63, skipper or $10 billiori Soros Fund Management Financial World magazine- . reports the Investment whiz per9onally made more than $L billion last year. . - Whether that's so Is anybody's _ guess. But his brm ` - In its stock ac- tivities - is said to have pulled a blunder on the short side (a bet on falling stock prices) on Qswi- tec~,l , a biotech leader. Given the size of Soros' fund, the loss is no big deal - about $10 mil- lion, I'm told. But there's a les- son tor investors: It's dumb to get involved in a stock just be• cause Soros is a rumored play- er in it. And many investors have been doing just that. . Biggest stock holdings About half of Soros' assets are in stocks. At top of list: Company Friday ciose Holding value (millions) Shares owned March 31 Newmont Mining $41 $471 8,461,000 Deere & Co. $743/e $135 1,569,000 Perkin-Elmer $31 % $68 2,036,000 Tektronix $281/4 $57 1,869,000 Phili M $50% $41 808,000 Lege~~n $281/4 $34 1,321,000 LIN Broadcasting $119t/2 $33 304,000 Anadarko Petroleum $531/e $32 700,000 Host Marriott $11 $31 3,054,000 General Motors $537s $30 562,900 Source: Federal Filings How George Soros is playing the U.S. stock market A rundown of Soros Fund Management's top first-quarter stock purchases and sales, ranked by dollar value. BIGGEST PURCHASES ... ... AND BIGGEST SALES Friday Shares Bought in Held Friday Company close 1 st Gl '94 March 31 Company close Georgia Gulf $34 800,000 800,000 Home Depot $433i6 Southern Pacific Rail $201/4 950,000 950,000 Kemper $585/e LIN Broadcasting $1191/'2 185,000 304,000 Motorola $471/6 Phili Morris 3/e 371 000 808 000 Sears Roebuck $483/4 Western t as $47 , 402,000 , 402,000 , Newbridge Networks $34% UAL $1233/e 125,000 125,000 DSC Communications $201/z Stone Container $15% 1,118,000 1,118,000 Burlington Resources $441i'2 Valassis Communications $141/2 800,000 800,000 American International Group $951/4 FlightSafety International $38% 345,000 355,000 General Re $1163'a McCaw Cellular Communications $521Y6 224,000 224,000 Goodyear Tire & Rubber $391/4 Source: Federal Filings Shares Bouslht in Held 1st Q'94 March 31 1,665,000 0 950,000 194,000 498,000 9,000 762,000 0 659,000 361,000 537,000 114,000 592,000 0 272,000 25,000 205,000 0 507,000 8,000 9'i+tVQTQ%0z

-16- ADVERTISING AGE, JUNE 20, 1994 JUM 2 0 1994 Actor Tsutomu Yamazaki helps introduce Merit's lower tar content in a spot featu`ring a traffic jam caused by turtles. PM is pinning high hopes on low-tar cigs in Japan By Jack Russell TOKYO-With a two-prong strat- egy to turn around its ailing ultra low-tar brands, Philip Morris Inter- national isn't just blowing smoke. The marketer lowered Merit's tar content by 33% to 4 milligrams and began a new campaign, helping slow sales declines by volume to 14% last year from 20% in 1992. The brand's market share hovers around 1 % by volume. And Philip Morris also expects a new campaign for Next to pay off big with a threefold sales increase to $175 million this year. Unlike many global markets where cigarette consumption is down, the Japanese market has risen four years running. The To- bacco Institute of Japan reported sales climbed L.6`o to $36 billion for the fiscal year ended March 31. Ultra low-tar brands, classified as those with 6 milligrams or less, are showing exceptional growth in this massive market. James A. Scully Jr., Philip Morris director of marketing, said ultra low-tar cigarettes now hold 2t3?6 of the overall cigarette category by volumc and will likelv roach a 35"0 share by 1995. Merit sales in 1993 wero ~*Sa2 mil- iio~n and ;lre projec: oci tu cieciine about 3.3°,o in '94. Philip Mnrrts' to- tal ~r31es last Vrar VcerO 51 4 htllinn Merit virtually created the ultra low-tar segment in 1987 with a'I'V. print and transit ad campaign from Leo Burnett-Kyodo, using the slo- gan "Thirty-three percent less tar than Japan's leading lights and it tastes better." "We woke up Japan Tobacco," Mr. Scully said. In fact, Philip Morris caught Ja- pan Tobacco by surprise, forcing it to reduce the tar content of its lead- ing smoke, Mild Seven Light, by 33% to 6 milligrams. Mild Seven Light and its higher-tar sis- ter brand Mild Seven domi- nate the indus- try, with vol- ume shares of 15.6% and 10.9%, respec- tively. But by 1992, about a dozen brands had crowded into the field. The pro- fusion sent Merit's sales falling, and for '92, volume sales were down 20%, Mr. Scully said. Merit suffered a disadvantage because it was priced at $2.38 a pack, 14% more than the $2.09 charged for Mild Seven and most othe'r rival brands. Instead of lowering the price, however, Merit created a new point of difference by dropping tar con- tent to 4 milligrams. The change was her,3lde<I in a TV, ne~vspaper, transit and magazine campaign that began earlv this year. starring actur Tsutom u Yamazaki. In one 30-second mini 1r.3ma. o conservative father of the bride re- fuses to pose in the wedding pic- ture. Mr. Yamazaki comes on the scene and says, "For the time being, I wish you happiness," and offers him a~dlerit. The father joins the photo session, the bridegroom's toupee falls off and the bride faints. In another spot, the actor smoothes the ruffled feathers of motorists in a fender-bender by of- fering them a Merit. While Merit has been battling back from sales declines, Philip Morris' 1-milligram Next has per- formed more evenly. Japan Tobacco opened this even lower-tar niche in the early 1990s with 1-milligram Frontier Light, leaving Philip Morris to challenge the brand last September wtth Next. Within one year, the 1-milligram tar niche quickly racked up 3% of the total market, including 1% for Frontier Light and 1•o for Next. Lightness is the overriding theme in Burnett's Next campai);n, begun last fall. The spots, a:30 split into two :15s, use animated fingers. The finger with a male voice asks, "The No. 1 lightest, please'" Another fin- ger with a female vntce, represent- ing the retailer, says 'Tho lightest with the great taste The male voice then savs. "Next' "1'h,,t',;E;re_at Next with 1 milligrams picase.'In the second h.3if u( ihe sl~r,t, Ihc male finger im<is the 'iightest, ' which is Next at avon<3ing ma- chine i]

-17- UtxNEAPUn srAR MC 7Ri&M JUN 18 04 Btowing . smoke 250 miUion strong; China's market for cigarettes has, its share of quirks, High prices and low output keep brands like Blue Panda out of the average smoket's reach. jtastw `10 a i b ~ dties, where eona;ricw Ia ~a' oue consumoon has becoau a liib- etyie far a few and a hotly yarcuod drnat for the rest, there us foma thia=s that the local cumenc,~y s>ii1 cannot buy. "Puld1 bruid? The one that (Datl. mount leader Aenjj Xitoping tnsalros? You ean't buy them any- wfi?"o one te1L thtm," a 20-ytar. old who peddle: cigarettes in one of Beijin:'t darh alleyi whiipered oon- tp"torialty, looivnS around to mab ture nd one wu watchia= or lIttezr ins, Deag is officially reported to hava siven uP 4w_kL~Lx faw yrui w. The Poddler lata coatided thRt ba could secure a"Blue Paadti" P.ckei of 20 at the bladc•raarhat rate of 529, more thast 10 timtt the cost of Chi- na's. otbar przai3ar brznda euch aa Chunjhaa, produced by the aame ~ PartQry in 92inthsi. ~The Hlue Panda brand is supplied only to Bei1to the ceatu au- . thontiea and the uate council, and only by requett for top offlcial etsta functions," a tPotieitnaA at the Chiu Tobaroo Shan4hu Corp. told Reatm in a telephone mterv". Prcasod for detu'lt abo= ..hsrm the tobacoo that :oes into the Paada is Srewa, tus com tian iad mamtha ~' ~ ~t.« uatrY seo'et. He aLn declined to disdaa t2se prioe. "It is prialas; we produce only a very,. vtry small quantlty t;rCry YeAr: "It rrou3,i deflnitely be flla if you f3.nd it in theopen maricet, or fn the black riarlctt. You cannot buy it." One•fburth of Qini's 1.1 biZlioa people are amoYrn, m countr., tha worid's bignt trillion msrket. 1t produced 1.7- retset :att year. Forty biltion wera export+'d to Ruula, Soutberst Aa~ and ott:a' rtsions. Thert ara is0C~r et:e factorlet in Chias Ectept in the far wpt, at leaat one $:tory an be found in avery provin'x The hupe market is sean u fl<rtiL ~nd for US. b'aco ` ad soa~ Pacin4ircrrssitu~~' a ttrlcticni at homa, U.S. nanu$cittt- ers an lookiat; at A" the Indian subcontinrat and yarts of Europe aa stew m u4cett. o divi:icn o abit id arom itt Nort#s na uarten that It har op. erttior.t in China on a ver~+ unaIl scale. It c~pened a plant theto m I933 in a jcint venture with the Chines. sovernment. Each year it producra 3 billion a&cs of Ca.nui. Wuuton und a local brand called,Mden Hridje in a 1.7 trillion• itick rnarket, accordin~ to Brenda Pollmi r, director of publfs ztlation: for R: Tobacco Iaternatiosal. She said tt,e cmrap'aay~would like to•1qc.d patid 9ut the Chinese jIIvQlbnlent has no: atlowed it M' 11s its Marlboro c- Ehill rettea o spCCial ImIZZ Wt ments of foreign currency stores. But ipo{cesw»man Elizabetls Chu said "We atver discuas the luture." Mover.tent: againtt smoldnj urn few and ffr between in these overseu rasrfcc,x, espcciillY where smoklar is } een as a iign of affJuevce arxi, espe- ciilly f'or women, aocial }iberasion. "Althcugh China's pvernmeat it ditcovcy~n$ its people from amoh. in=, and mnsu on .raralng labels on c*retx bozet, the production of dr. arettd tsss bean rtabte ~in the Lst &* ears s:nd ti not likely to hil shtrp` ti ~aaal ~ axo Corp. in &ulj* told Reuters. J UN 2 0 1994 "Poople 1uu do nat trajce ttp ia the m0miDS and decida not to s ... ~ ~~~t?a~em," >s. asid ~~ , ~~w~ Value C'Epr" oo:ninued normally oott between 60 cents and $3 for a nach of 20 - h,u =ona back to the etae eaffe:Y In taxq, Total s2 pertent~las: uct tax - rtood at m~ae isrhio~wrbtesimMof i~u p~ ulaoe are cDtilv !br lbreip braadi such as SSS and Marlboro, which is birt~'~txand in tL~s Unitod stata. But beau~e of tts exclutfveneaa Chi. na'6 top Panda brand it, notsu~ F intdy. ttill iturouaded~y a raytbicay aura for the ordinary Chine.e. "It (the Pa.Xda tobax. some hflthlaad wh t5e tU ] ie jrotvn~ ere cool and pnrs. No pollutantu from the envfrottment They also don't al- low aay paiiddp and }bn=idba, ADd only a very amall qtuIItity ia produced, maybe for 100 People in a11 vf Ch1na. Even minittert may not aet to smoke them," nid a 33-yatr, tobiC4o-Connoiiseur, a senior oil ex- ecutivo ia 9etni. While the Blue Panda's qrioe puu it almost entirely out of rcach of Chi• na'a 250 million smokers, the coun. try't tobacco author3tied havt not been ahy to riah in on its Tnytterioui lustrs on spedai occaiiona. Yellow Ptnda, a cousin of the Blue Panda, was specially created for Dub- lio iale during the 1990 Aaian Games in Csina, a spoicesmaa at Cniina ?da- tional Tobacoo said. "It was then sold to the public at 700 ~~ j a~~ n," pr;8 for a China's th?A,rae moinpo pular br =ds - Chunjhwa, Yun Yan and Hon~ Ta Shan - now retail for S10 to $ZS per carton.

-18- JUN201994 0 ADVERTISING AGE JUNE 20, 1994_ Investment, not ads, soaring in Vietnam By Laurie Freeman and David Butler Investment spending in Vietnam is going through the roof, but ad spending hasn't kept pace. U.S. companies including Visa International, American Express Co., Coca-Cola Co., Pepsi-Cola Co., Mobil Corp. and Gillette Co. almost quadrupled their invest- ment spending in the span of a month-to $78 million in May from $20 million in April, accord- ing to Vietnam's State Committee for Cooperatioh & Investment. . The rise comes after February's lifting of the U.S. trade embargo, with the U.S. now ranking as the country's 18th-largest investor. No. 1 Taiwan was far ahead with $1.5 billion and Hong Kong with $1.4 billion. But the big bucks foreign com- panies are investing don't extend to advertising, estimated at less than $5 million total this year by local agency executives. "You go in and expect to see big billboards all over the place, but there aren't that many" in Viet- nam, said an agency executive based in Thailand. "The truth is there is not that much to buy. [An advertiser] can get good national coverage for $50,000 a month." The exceptions are the cola gi- ants. Both Coca-Cola and Pepsi are using splashy, big budget ad campaigns including TV, radio, print and point of purchase. AmEx is limiting advertising, to outdoor boards, one in Ho Chi Minh City and another in Hanoi, handled by Ogilvy & Mather Thai- land, Bangkok. The boards have "a world cur- rency theme,'' said Elisabeth Coleman, VP at AmEx's Travel Related Services Co., New York. "Our thrust right now is to build an infrastruc- ture so we can provide high quality services to our corporate card and business travel custom- ers." AmEx accounts for 7 5 % of Viet- nam charge card purchases, she said. The card is accepted by 40% of the restaurants, hotels, car rental services and retail stores in the nation. Visa is using outdoor ads themed "Welcome to the world of Visa," said a spokesman in San Mateo, Calif. It's just a matter of time before other marketers follow suit. San Diego-based Vietnam Investment Information & Consulting held an April trade show in Hanoi, at- tracting 50 major U.S. marketers. Pepsi, Gillette, General Electric Co., Kraft General Foods, Carrier Corp" an tis evator Co. were among the exhibitors. More than 100,000 people at- tended the four-day show, said Richard Pirozzolo, whose Piroz- zolo Co., Wellesley, Mass., han- dled communications. The success spurred plans for a Ho Chi Minh City show. A Coca-Cola spokesman in Sin- gapore said the company is im- porting U.S. creative and has some ads created by McCann- Erickson Thailand, Bangkok. Outdoor boards are done locally through Vinexad, Ho Chi Minh City, Vietnam's state advertising enterprise. The campaign's theme is "It's great to be back." "This is a grass roots promotion that has gone on from" the day the embargo was lifted, the spokesman said. "We started in the centers of Hanoi and Ho Chi Minh City, and spread out to the suburbs. Now we're moving into the other cities and towns." Coca-Cola and Vietnam National Foodstuff Import-Export Co. are partners in a $20.4 million bottling plant being built south of Hanoi. Pepsi is also running a heavy schedule, with $1 million being spent on ads and promotion. Dur- ing a major sampling drive in February and March, 1 million samples were given away in Ho Chi Minh City and Hanoi. [I f

-19- TOBACCO PHILIP MORRIS COMPAIr'IES INC. THE IVALL STREET JOURNAL MONDAY, JUNE 20, 1994 Ji1N 2 0 1994 The Insider Who CopiedTo'.bacco Firm's Secrets By EBEN SHAPIRO Staff Reporter of THE WALL STREET JOURNAL Merrell Williams Jr. is the tobacco industry's worst nightmare: an informed insider who has turned against the secre- tive industry. Mr. Williams, 53 years old, the sus- pected source of a trove of internal files that have been leaked to the media and Congress, may be the most damaging whistleblower in the annals of the tobacco industry. An attorney for Mr. Williams says he doesn't know if Mr. Williams leaked the documents. As a paralegal for Wyatt, Tarrant & Combs, the Louisville, Ky., law firm for the nation's third-largest cigarette company, Mr. Williams cataloged industry secrets. Beginning in 1988, when he joined the firm, and for nearly four years, he reviewed legal papers detailing Brown & Williamson Tobacco Co. executives openly acknowl- edging the addictive properties, of ciga- rettes and the health risks of smoking. Mr. Williams, who is being sued by Wyatt Tarrant in Jefferson County sta`-. court, is bound by a court order not to discuss the papers. He couldn't be located and his attorney, J. Fox DeMoisey, wouldn't make him available for this arti- cle. Mr. DeMoisey says Mr. Williams's reasons for laying low go beyond a court order. "He really has a fear that some Bubba that has been raising tobacco all his life is going to pull up next to him in a pickup truck and blow him away," he says. Nonetheless, in absentia, Mr. Williams has become a central figure in a period of unprecedented pressure on the tobacco industry. Mr. Williams's supporters say he copied confidential tobacco-industry docu- ments as a cleansing act of conscience. But Mr. Williams's case seems more complex. Court records and interviews with people in Kentucky who know NIr. Williams paint WHO'S NEWS a portrait of a bright but stymied man, a downwardly mobile holder of a Ph.D. in theater who increasingly was bent on using the courts when he felt he was wronged. The confidential papers "horrified" Mr. Williams, prompting him to quit smok- ing, according to his lawyer and court records. His lawyer says Mr. Williams "was shocked at the fraud and hoax being perpetrated upon the government and the American people" and began copying ~: ~- uments. In 1992, Mr. Williams was laid off, and the following year, he underwent major heart surgery. In court papers, Mr. Wil- liams blamed his heart ailment on the stress of "having critical information that should be make public and that would save countless•lives and stop children and young adults from smoking." He also said a lifetime of smoking Brown & Williamson, cigarettes contributed to his health prob- lems. In the summer of 1993, he retained Mr. DeMoisey, who returned a box of documents to the law firm with a letter demanding "recovery" for Mr. Williams's injuries. The law firm refused and filed a civil suit accusing Mr. Williams of theft. Brown & Williamson, which has joined the suit, has called Mr. Williams's actions an extor- tion attempt. Mr. Williams countersued, denying the allegations and seeking dam- ages for health problems he claims were caused by smoking and the stress of keep- ing the company's secrets. No criminal charges have been filed to support the allegations of theft and extor- tion, but the judge in the case has issued a broad order forbidding Mr. Williams from discussing the documents or conferring with his attorneys about his case. His attorneys have filed a motion to amend the order. The contents of the papers, which have been leaked to various news organizations, were first disclosed in an article last month in the New York Times. Officials of Brown & Williamson, a unit of B.A.T Industries PLC, are expected to appear before a congressional subcommittee this week to answer questions about the documents. Peggy Williams, Mr. Williams's mother, says, "He's done something for other people that not many people would do. He has suffered for years from knowing what he has known." Mrs. Williams says her son has always had a strong sense of justice and proudly recalls that he was once voted "citizen of the year" as a schoolboy in West Texas. Friends, former coworkers and his ex- wife describe Mr. Williams as a bright but frustrated man. He is widely described as articulate, intelligent and charming. A man who took great pride in his Ph.D. and once taught college, Mr. Williams held a series of jobs including car salesman and waiter. His ex-wife, Mollie Nickels, says Mr. Williams held more than 20 jobs in the dozen years they were together. Mr. Williams earned a Ph.D. at the University of Denver in 1971. In an ex- change during a deposition last year, Mr. Williams insisted that opposing attorneys note his educational accomplishments. When asked to identify himself, Mr. Wil- liams gave his name and added, "And that's doctor. I have a Ph.D. I'd like that on the record." After graduate school, his ex-wife says, Mr. Williams held several teaching jobs, but his teaching career ended in the early 1980s, when he was dismissed from a position in favor of a youn;,-er teacher. What Mr. Williams found particularly grating, Mrs. Nickels recalls, is that his replacement had inferior academic cre- dentials. V"