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Financial Highiights (in millions of dollars. except per share data) . 1990 1989 1988 1987 1986 Operating revenues $51,169 $44,080 $31,273 $27,650 $25,542 Net earnings 3,540 2,946 2,337 1,842 1,478 Net earnings per share 3.83 3.18 2.51 1.94 1.55 Dividends declared per share 1.55 1.25 1.01 .79 .62 , Percent Increase Over Prior Year Operating revenues 16.1% 41.0% 13.1% 8.3% 58.1% Net earnings 20.2% 26.1% 26.9% 24.7% 17.7% Net earnings per share 20.4% 26.7% 29.4% 25.0% 18.3% Dividends declared per share 24.0% 23.8% 28.6% 27.3% 23.8% Operating Revenues Domestic tobacco $10,370 $ 9,474 $ 8,491 $ 7,640 $ 7,053 International tobacco 10,720 8,375 8,085 .7,004 5,638 Food 26,085 22,373 10,898 9,481 9,372 Beer 3,534 3,342 3,177 3,037 3,005 Financial services and real estate 460 516 622 488 474 Total operating revenues $51,169 $44,080 $31,273 $27,650 $25,542 Operating Companies Income Domestic tobacco $ 4,206 $ 3,606 $ 3,087 $ 2,715 $ 2,366 International tobacco 1,394 1,007 774 582 492 Food 2,648 2,138 849 773 741 Beer 285 226 190 170 154 Financial services and real estate 197 173 163 68 32 Other 20 (10) Operating companies income 8,730 7,150 5,063 4,328 3,775 Gain on sale of Rothmans International p.l.c. 455 Restructurings of food operations (179) (348) (71) Amortization of goodwill (448) (385) (125) (105) (112) Unallocated corporate expenses (336) (252) (193) (162) (126) Interest and other debt expense, net (1,635) (1,731) (670) (646) (772) Earnings before income taxes $ 6,311 $ 5,058 $ 3,727 $ 3,344 $ 2,765 Compounded Average Annual Growth Rate 1990-1985 1990-1980 1990-1975 Operating revenues 25.9% 17.9% 19.3% Net earnings 23.0% 20.5% 20.6% Net earnings per share 23.9% 21.4% 20.6% Certain prior years' amounts have been reclassified to conform with the current year's presentation. See Note 2 of the notes to consolidated financial statements regarding the acquisition of Jacobs Suchard AG in 1990 and Kraft, Inc. in 1988. Consolidated results of the company include the operating results of these companies since their acquisition. See Note 3 of the notes to consolidated financial statements regarding 1989 and 1988 restructuring charges of food operations and the 1989 sale of the company's equity investment in Rothmans International p.l.c. 2060566937 See Note 10 of the notes to consolidated financial statements regarding the company's 1988 adoption of the method of accounting for income taxes prescribed by Statement of Financial Accounting Standards No. 96. In 1986, operating companies income for financial services and real estate was reduced by $71 million resulting from the effects of the Tax Reform Act of 1986 and certain related leveraged lease renegotiations. 1

` Dear Stockholder: Your company is continuing its solid growth in a rapidly and radically changing world. Political and economic developments are creating new opportunities for us. The borderless Euro- pean Community planned for 1992, together with Eastern European countries now experimenting with free market systems, will constitute a larger market than North America. We are well positioned to prosper from these changes. We have had a major international tobacco presence for more than 20 years. We have been the largest cigarette company in Europe since 1983, and in 1990 we widened our lead. We took an important step to strengthen our competit iveness in European food markets by acquir- ing Jacobs Suchard AG, a Swiss-based coffee and confectionery company. This $4.1 billion purchase makes us the third-largest food company in Europe, and brings us brands and distribution channels in countries where we needed to broaden our business. The consolidation of European markets is not the only key to our growth. Although the cigarette market in the United States is declining slightly, we continue to gain volume and share. Our business in Asian cigarette markets, particularly Japan, is building rapidly. And in September 1990, we reached a major agreement to export cigarettes to the Russian Republic, the largest republic in the world's third-largest cigarette market-the Soviet Union. Both developments add impetus to the continued expansion of our international tobacco operations. We are devoting ever increasing resources to the building of our food businesses. By pooling the research and talents of people in different parts of Kraft General Foods and applying them to a shared challenge, we accelerated the introduction of fat free foods in seven categories this past year. We have announced introductions in still more categories in 1991. In 1990, we increased our dividend by 25.1%, to an annualized rate of $1.72 per share, marking the 23rd consecutive year of dividend increases. Through our stock repurchase program, we spent $221 million in 1990 to repurchase Philip Morris common stock, at an average price of $38.88 per share. 1990 Results Consolidated operating revenues of $51.2 billion were 16.1% higher than in 1989. Our 1990 perfor- mance includes operating results from Jacobs Suchard since its acquisition. Our operating companies income grew 22.1% to $8.7 billion. Net earnings were $3.5 billion, up 'hilip Morris management visiting Masuo Fukujin, a Tokyo retailer. .eft to right: Hamish Maxwell, Michiko Egawa (Philip Morris apan), Michael Miles, William Murray, Nicolaas Kuijpers (Kraft aeneral Foods International), Mr. Fukujin, and John Keenan. 20.'2'!4>, and net earnings per share reached $3.83, 20.4% higher than in 1989. Our tobacco operations enjoyed continued sales and profit growth. We sold one billion more cigarettes in the United States in 1990 than in 1989, while U.S. industry volume, based on shipments, declined 1.8 billion units. Outside the United States, we sold 368.1 billion units, 15.5% more than in 1989, bringing our tobacco factory utilization rates around the world close to full capacity. At Kraft General Foods, volume grew by 6.5% for the year. Excluding Jacobs Suchard, volume grew by 3.3%, while revenues and operating companies income continued to grow strongly, and operating margins also improved. Including t full year of 1990 Jacobs Suchard results on a pro forma basis, our food companies would have con- ributed approximately 52% of our revenues and 31% of our operating companies income, while mploying 66% of our work force. Miller Brewing Company volume was up by 1.6 million barrels, or 3.8%, and operating companies ,icome advanced by 26%. Five years of steady growth, fueled by successful new product introduc- ions, have helped Miller build its position as a major competitor in the consolidating beer industry. lanagement and Board of Directors 1 April, Richard D. Parsons, Chairman and Chief Executive Officer of the Dime Savings Bank of few York, FSB, joined the Philip Morris Board of Directors. Also in April, two members of your Board, Howard L. Clark and William P. Tavoulareas, retired in ccordance with our policies. Each had served with distinction on the Board of the General Foods orporation prior to its acquisition by Philip Morris in 1985. Their wisdom, experience, and insights Operating Revenues Billions of Dollars  Domestic Tobacco I International Tobacco Food 7 Beer • Financial Services & Real Estate ill 86 87 88 89 90 Operating Companies Income Billions of Dollars  Domestic Tobacco .1 International Tobacco Food I Beer ' Financial Services & Real Estate 7 Other g.o 75 N 55 ~ 50 45 40 35 30 25 Ii

have contributed great value to Philip Morris during their years of service on your Board. Social and Legislative Issues We market more than 3,000 products to millions of consumers around the world. Our activities involve us in a host of public policy issues in every country in which we do business. Among all these social issues, the relationship between smoking and health is the most controver- sialpJe have acknowledged that smoking is a risk factor in the development of lung cancer and certain other human diseases, because a statistical relationship exists between smoking and the occurrence of those diseases. Accordingly, we insist that the decision to smoke, like many other life- style decisions, should be made by informed adults. We believe that smokers around the world are well aware of the potential risks associated with tobacco use, and have the knowledge necessary to make an informed decision.l The U.S. cigarette industry is both mature and highly competitive. Outside the U.S., most ciga- rettes are made and sold by government-owned enterprises; we are competing-for instance- against the elected governments of Japan, Italy, and France. Our competitors throughout the world are just as eager to attract our customers as we are to attract theirs. It is against this competitive background that we engage in marketing programs designed to persuade existing smokers to use our brands. We believe that such programs affect brand choices, but not the decision to smoke. Many experts and studies-including those cited by the U.S. Surgeon General and the U.S. Environ- mental Protection Agency-remain divided over the relationship between environmental tobacco smoke and human health. We favor policies which accommodate and, if necessary, segregate non- smokers and smokers in the workplace and in confined public spaces. We do not believe that the prohibition or unreasonable regulation of cigarette use in such places is justified, and we will, there- fore, continue to oppose such proposals. Cigarette product liability is the most publicized legal issue we face. By the end of 1990, the num- ber of product liability cases pending against the U.S. cigarette industry dropped to 51, continuing a decline from a peak of 151 in 1986. We view this trend as a positive development for both your com- pany and the U.S. tobacco industry. The Outlook Our goal is to be the world's most successful consumer packaged products company. We will con- tinue to judge that success not only against our own past performance but against that of our competitors. Moreover, we will measure success not merely in terms of income and volume growth and in overall returns to our stockholders; we also aim to be the best in anticipating and providing for the needs of our consumers and customers and in accepting and fulfilling our responsibilities to the communities in which we live and work and to the environment in general. No company can take these for granted. The war in the Persian Gulf, together with slowing eco- nomic growth in many countries, added to the risks and uncertainties of doing business. Fortunately, our products are consumer staples, and our businesses are relatively resilient. To improve our effectiveness in each of our core businesses, we will continue to expand and fill in gaps while taking advantage of manufacturing, marketing, and distribution synergies. Acting on this strategy in 1990, we purchased a cigarette manufacturer from the former East German state; announced a marketing and manufacturing joint venture with the largest Hungarian coffee and con- fectionery producer, BEV; and acquired majority ownership of Negroni S.p.A., a specialty meat company in Italy. To assure consistency, quality, and availability of our brands, we are investing in our production processes. In 1990, our capital expenditures set a new record of $1.4 billion. We anticipate that from 1991 to 1995 they will amount to another $9.0 billion. We are also addressing increasingly urgent environmental concerns, even as we continue to find new ways of satisfying consumer desires for convenience, nutrition, and variety. Our greatest competitive assets are not manufacturing facilities or brand franchises, however, but the talents, energies, and dedication of all our employees. We are only as strong as our employees are ambitious for our businesses. We thank them for all their past contributions and we count on their continued efforts to help us realize our potential to be the best consumer packaged products company in the world. Net Earnings Billions of Dollars 88 89 90 3.5 3.0 2.5 2,0 1.5 ,o 0 Dividends Declared Per Share Dollars 1.75 86 87 88 89 90 Cash Flow Per Share From Operating Activities 7 Net Earnings Per Share Dollars 6 5 4 3 2 , - _. 0 86 87 88 89 90 Hamish Maxwell 3 Chairman of the Board and Chief Executive Officer

) This is Philip Morris Philip Morris U.s.A. Philip Morris International Inc. Craft USA Craft General Foods International ® 1talianl ® 0 .~,~+a8,n ~ Nmew ~'x i fheese . def;Pu/Ied€= Mgpshmallo~ Crat:lmr 6arrel h~~'ee~x~1l~~~~ ~lYZ. ' T~CHaBi~ DIrJIORt(iCt ~+4Y. ~ s±nuo,mwa rai tvnbiaf,CM s KRONUM. ® S(titliette xlyono fll{lAl1EiPNlA . „.,.,,.. ~ 0 ~ MN(IM - -- F.~ WHY `~s FIN _ lit ~~~ ~dI1J!@a EEI ® M erating companies income excludes Kraft General Foods, Inc:s headquarter items. 3ft General Foods International includes the operating results of Jacobs Suchard since acquisition. Volume and market share at Philip Morris U.S.A. have grown in each of the past 30 years, and Marlboro now accounts for 26% of all cigarettes sold in the United States. The company is expanding production capacity to han- dle increasing demand. Strong international brands, led by Marlboro, Philip Morris, Merit, and Parliament, combine with regional favorites like Lark, Muratti, and Peter Jackson to make us the world's fastest- growing international cigarette company. Millions 1990 1989 Operating Revenues $10,720 $8,375 Operating Companies Income $ 1,394 $1,007 Enjoying an outstanding year in 1990, General Foods USA has 30 leading brands, including Maxwell House cof- fees, Post cereals, Entenmanris bakery products, Kool-Aid powdered bev erages, and Jell-0 desserts. Millions 1990 1989 Operating Revenues $ 5,078 $4,817 Operating Companies Income $ 629 $ 433 The Kraft name now appears on both traditional and fat free cheese, mayon- naise dressing, and salad dressings. Other leading brands include Philadel- phia Brand cream cheese and Cheez Whiz pasteurized process cheese spread. Millions 1990 1989 Operating Revenues $ 4,783 $4,415 Operating Companies Income $ 842 $ 763 The acquisition of Jacobs Suchard brings to KGF International such lead- ing Jacobs coffees as Kronung and Night & Day, together with chocolates such as Milka, Toblerone, and Cdte d'Or. KGF International is now Europe's third-largest food company. Millions 1990 1989 Operating Revenues $ 6,061 $3,656 Operating Companies Income $ 672 $ 376 Millions 1990 1989 Operating Revenues $10,370 $9,474 Operating Companies Income $ 4,206 $3,606

Kraft General Foods Canada Oscar Mayer Foods Kraft General Foods Frozen Products Kraft General Foods Commercial Products With a host of popular Kraft General Foods retail brands and a large food- service business, KGF Canada is Canada's largest packaged foods company. Millions 1990 1989 Operating Revenues $1,327 $1,251 Operating Companies Income $ 235 $ 187 Already the leader in luncheon meats and bacon, Oscar Mayer also markets hot dogs, Louis Rich turkey products, Louis Kemp seafood products, Claus- sen pickles, and new Lunchables and Lunch Breaks lunch combinations. Millions 1990 1989 Operating Revenues $2,520 $2,270 Operating Companies Income $ 145 $ 168 KGF Frozen Products, the largest frozen food manufacturer in the world, intro- duced Sealtest Free nonfat frozen desserts, Breyers frozen yogurt, Kraft Eating Right frozen entrees, and Budget Gourmet Light and Healthy Dinners in 1990. Millions 1990 1989 Operating Revenues $2,155 $2,103 Operating Companies Income $ 169 $ 169 KGF Commercial Products has two divisions. Kraft Foodservice is the second-largest foodservice distributor in the United States. Kraft Food Ingre- dients is the country's leading processor of edible oils. Millions 1990 1989 Operating Revenues $4,161 $3,861 Operating Companies Income $ 118 $ 160 Miller is the second-largest brewer in the world. Miller markets four of the top ten beers in the U.S. market: Miller Lite, Miller High Life, Milwaukee's Best, and Miller Genuine Draft. Other brands include Sharp's, the country's leading non-alcoholic brew. N Millions 1990 1989 Operating Revenues $3,534 $3,342 Operating Companies Income $ 285 $ 226 Operating companies income is income before amortization of goodwill, unallocated corporate expenses and interest and other debt expense, net and in 1989, gain on sale of the company's equity investment in Rothmans International p.l.c. and restructuring of food operations. • 5

,,Ve are :he !argest. °nost orontabie. and tastest- ;rowin-i international ciQa- rette c:ompam• in ,he svorld. Most vf our cains over the past,.'ecade have come from premium-priced 'arands in industrialized nations. Our Strona market positions in these countries provide a 5ase for continued profit Qro~~th. ln 1990, as the %vorldwide cigarette industrv expanded b~- 1.5',~, to reach 3.-1 trillion units, our total unit volume climbed 9.3"o. ~olume ,`or Marlboro. the xorld's best- selling consumer packaged Lroduct, rose h3"o. to reach 3-1-1 billion units. Our !-.'.3. business set nex records. `'olume, based on shipments. :;rew 5vone bil- lion ci;arettes, or 0.-l'';, in a market that declined by Above 'vlarboro s the best-se'lir.g ,:,or- sumer packagea product :n the vor!o r =rance. `,!ar boro s the country s oest- seiiing o,arl- r '.1orris _....A.J .'p~'ral.. _ _.='rt~.ie.~. ar.c :-Pertir., panies !r.c:[::e '7.7~.. ;iy .^.,Dw =„ _,:'unts ,.., : JI :he ..~. ~ ar'iCt. ~r :'';t~ Dne-:::irc' -_,r aii ruil-_r:ced :.ijare[.es ;~Did. Mar.- oro `tas =,rst in ... _.~. conse _vears. ~.L .:.. !ar, adui. z~mol:ers unCe." a;? ., is a SL":rl,'Jlat- c, r[:: :(Dr .--: er shar- ;ains. .yr.:ci. _ :1r )ther :! Drice.. _-ra::cs. Vir ::ia Slti:«. ,.iCr::, and 3C:-.,`.'J;t u' -ie~4- . _r-:ai:?ed ._-.:ers in t! ei. - -a:- - r:es. `:;~c u.~0 ~zmoii2 _--:~C ow nic~: ".: re ;orr a:, ns :o sa~, ~har.,;-< _nsume- dema:.~_. tl~~n In eveY" z 'ro:itaiJle ~Z -.'-.F'::: or the L'.5. :~tar':cet, espande_~ our :hare :: :-:e disc,-,unt catemx, : _._. ' . aided by :i,.e natior:a: introduc::on o( Buc::_'z the continuing succ._s _)f Cambrid,~e and 3r: s:-_ i. Our sales torce `.-:as '-_ern reoraanized and enablin(~ us to impr,_%= :::e presentatlon aP.d d%"a:.a=liii~, ot our } roducts at t: ~ ~'~ LC [ of sale. Unit volume grow:` at Philip Morris U.3. a.. increased its marke': ~::are by 0.3 share points This increase is unce:stat_ due to caan~es in tors' trade intientor. ::ac tices, .vhich de,-~resse~_:`?e!:- 1989 volume while aerating Philip `.lorr: _ U.3..a.'s 198 9 share. _- quentlv• ! _, ur 198 9 mar,:~t share rose an inr?ate,_- ~a't ?i~'BC U.S. Cigarette Industry Unit Sales 3 U.S. Cigarette Industry Unit Sales ?1 Philip Morris Share of the U.S. Industry ': .-.arp p:)ints. T~e more e i :n~[Lt lndlcator -( :vin _hare ;th ;s :r a%zra,e annual ;ain' )f ' ...are ^r?Ints ~Jver the ; .rsr neriod. t. ide the r"nited _,~tatew: ='hi:iz '•.Iorris lnternati _na~'s Operating Revenues Left `,,~3•~.~,~"' jntS ;Q S~y r ,. -. , , = : ^0' : •: -_ 7 a9 're Dest-:e'hn j `'F°-a3r;..r'_ ::~ ' ~ :rrj .'o^ g ,.p'Frc r -31Jn ,: ; i^a:r,.et n .. . . - - _ . ? . . . ?S "C'= a' a . . i' ;:are,te >3 ^

r:r, „ttt: renre~e~.te~; a ;ain %-er ;9S'?-our ni ghe,,t i;ercentage increase -ri:r' ~. ::aarette export init . i!:me '7re,•v near!y ' ir t()bacco rxp(Drts :rae t ,ross contrbution .)r e::rI• ~Diilion to the r_'.S. ai,ar.t - f aayments, and ;ur totai L'.S. ,ette t,`pi ,rts reached .59'~. 't'r.e'..~e trade de~-,c:t %could :-tave ~-en more than ~5 bif- ir~n hi,_,ller,.eithout :he nci~rr~' tobacco exports. MuriN)no further %videned ts :e~ttl,t~ :he'.e'nrld•s best- ,el1,n cI,arette'.~'lth a ;3)'n <a:e,~ ;n t i n overseas. Among ,,uccesses, Marlboro ti'e'.nD brand in .irvt, 1 tnd 'he best-selling nt-:r rrt )nal brand in the 1jr-r;r r E.-,st German`•. 1ts in Europe nc:ta a,d volume ,ains of n. i ~ ^,, in the ^i1 ~eth<r'.,tnu;. D in the'or- nerCermanv, and ;'i n 3e:,ium. Marlboro is .~„t,, thrnuahout Latin \meric.i. and now accounts Or ' if all ci;arette sales n : Marlboro ii the "iorlu•s best- el;in, international liaht A;arette, increased volume A'_' i zimatelv half (Dur outside the United ,tate- .•i)mes from our many .tr, )c, .tnd grovving interna- iuna! rrademarks such as .ark. i,.trliament, Virginia ;lims. Mzrit, L&ti1• Chester- ie1,• ind the Philip Morris )ran"'.. its I.Ve1l as frr>m local ,ran-,'.s such as Muratti, .lulti-Filter. and Peter.lack- il.r;. .."iinr•rl .:rar:d .:J a .rclal:. -ase or ut;~re _r[)ansir:n. 1n une - _urc;Cean <<ommu- nit-v ; ':,ur a4gre;ate rnariiet share ir.cre: se _' .:') more thar. 22 '.. `n '::e reunir ed Germar, ,ve !ed `;-;e industrv -A-it`: a market share o f .3'2 .. .-; itaiti•• '.~e increased •.•ci'tirne ar.d ac'.;ieve,r a . _ . market share. `roiu:;re :n France -re,x ~ ., anc ac::IDUnt ror aimost a quarter of the rnar!:c,. '_'ur •.olume ~ ~ in S pain c:irr. ~,_ '?7 , and Dur ;narkc' share rose ;ro i,i'',. "Ve dso posted ,•(Diu:ne aair,s :r: 3e!,ium. ! u\e:T!Cou:'_ =.:.e :`:e Ner!;erLar.(:;. E:se%~i,ere :..:^e pear continen:. )ur mark-et share -eac:-,e:_- ::e3r'.• in S%~itzerlur.c. . ^.Cl `.vr.' re,7isterec ti; . r .oiur e in Austria anc `'.? L!) ntrnLC'_ o ',.')eroli irlil we1'. !n the % iic t:e East• particu!arly in -urkeE•. .~1:ere our •.•nlume inc°_ased 33 ~ ~. C."S ieril E:1." e anUti:e ;c:,viet L'nion :, „ether repre- sent ~he sec_)nc-!argest cigarette market in the world. Throu~;!:out the region, consumers have come t(D know -and want- 1•tarlboro, and J,ur other international trauemarks have sicinitcar.t -otential. `A'e are plartri:-., a~;ressi~-e erpansicin of -Jur business in this part,)( :^e •.vorld. 1n 199). %ve a;reed to supply more than 30 billion cigarettes tc the Russian Republic. We a:so doubled our business i:; both Poland and Y!l,oslavia. In addition, Ment s tne rrost pcpuiar yr; c,.:rette ri ita ,. vnere our snare :` tre market s _0"0

Philip Morris sn,oped more than 97 bi,hon o.garettes `•c^ tne United States in 1990, mak ng a^ross c~n.r'b~t neany 53 btlLor to the U S oaiance oi oayre^ts .,_•: se ..., .cc r Lark ard cctr , ,. _,aac c ..^-e r ,.car 's .. C Va' cc'G ;a' _, _"'?Ke'. ~ t _ J,:C?"_ _ ~ Philip Morris U.S. Cigarette Export jJolume

anci ;icrr:s2e a,reer"enti~ . :r .ne product:un r '.iariu r _ i anG ~'ther ~C~u"'.Cs i:~ s2`,'e'"a i.i Eastern ;vurr.'pean c-•)untr.es. in Asia. Our oxat volume ,rew almost IS '. -the :ar;est ~r:crease lor anv,)r •Dur re,i,Dns. .`•lluc~t ;r~j«til `.ba5 Qri~en .~• Jtr VnD aains in 1'aL,an. -.~ ~ere '_,ur volume rose more :han 2' All seven of our top brand= UOs teC: vol urne : ncreases, brim?in'g -,ur share of :he Japanese market to neari%; II'.-up from'.;''^ last vear. and more than all other'vr- eign competitors c,_mbineC_'. In Australia. L_ngbeac:: -k0s. introduced in pushed our market share above 36'., makinc, PhilipNiorris he industry ieader. In Latin.~me;ica.':olu, .e ~re'.v by more than :7). `.Ve are ~xell aos:ti,.med to pront 'urther from,,Jur lar,e _=rt o.:r 'J... 'cbacca ,us,ress :en! rues 'o yrcN '99G : e 3ad ~_re b.,r.cr ^,ore c:eareaas :ra^ 're /ear bB`_re a,g^t Var bcro more "'ar. Ceub'~eC ts share r t" e y-owir, ',1er~can mr',ot ;ver tre past sever• Years, ard becar^e ;he ,.ountr'/'s ead ry .:.,garette brand ~ 990 z:._- .....- a-,; ~:n Z.. _~er'lan.c ;L)r `!-:iliD ic ..5 ~. _::cs. -.ve c .~ntinued to :-_-,(ternize cur yic:<<:,ond 1i.... ie .'aCiilties. ...es:in, :n aCdit;onal ca~aca~.' :^ter~ailUnatl.. E,.. ... . ~i. .~e ar,ou::ced plw.., ._ '-_end more than ...:.::(Jn _,, expand .,Dur ',t-e expect to sE e:~ d .•. et:cess :,f ~'2 biaion ,,~er ::;e ::etit i4Xe vears •)n :apac::V !mprove_- T.e : ~ etpanslons. _. :-bacco is a ';el.• ;ac' _r .-: :::e .~ ,r:dti~ ide ref er=-.ce ..r ~.merican ci;a- „r =.=rasls 'Jn r : acc .'s nas :eai :Dbacco -rs -~!-)th ,o increase tef." ~,•are Df _,lhacco sold a .~ .... 's ~,- -- - - - - - supplti 'luaiit_, euf _. _:... pecitive prices ~.-D -.he `vVe also Jupp_'r:ec !es jisiation :o ~-.crease ~ _ duction of 5ur.e,; tobac :_. 6Vhlcl'i is in sl':ort around the sror;cBecause tC':e soc:ai environment ic ^;acr ~ ~-.- tries is becomina D cigarettes, %ve are aca-.-.i..- arrjulna for :oterar:ca. a.nc •'.e oppose neo-?-ohibic,.nis :-•. BudQet de^c:ts at a.. 'eV-.., of;overnme.^.t :n the States are JrCmDtln; .i an '•' attempts to Increase taxes on ci;aret:es. . ~e Concressional 'oud;e: ment calls for ;n four cents per ~.adk :., . -.. and another f~ur-cent ;;i;;e .., 1993. `FVe are _-amQai':.r.l. = viaorouslv a~zainst :ur:I ner excise tax increases.-•v::ic- are regressive and :- above !n Turkev. ?ar'ia-ert =_rd ctrer ~Ihiiip',1orr s brarCs rave vcr ^ea' •, 70-~: .f the market fcr rrpcr,ec v;(,,areres 'Nor1d Cigarette Industry Unit Sales J World Cigarette Industry Unit Saies 2 Philip Morris Share of the World Market ' ..:..... .::Rdt,-:Ji :« r tnc:~mes. :n .. :t _ia:e 3i.1: z, ais to increase exc:se .aaes. verF' ~,'e are -,lso .1t:empts 'o Philip Morris International Operating Revenues

;etinq activities. As industry inalysts have pointed out, '.he-elimination of cigarette idvertising would do little to jiscottrage smoking. It ,voultl. however, reduce ,ompc~tition, and make it dif- icult f()r companies to ntroditce new products that night address the concerns )f both smokers and non- ;mokers. We believe that ~fforts to restrict our market- ng are not consistent with ree enterprise systems. We are supporting indus- ry and trade initiatives to liscourage underage con- ;umers from using our )roditcts. We also are sup- )orting legislation to ~stablish a minimum age of :8 for the purchase of obacco products in states :urrently without such a law. Over the past ten years, vorldwide cigarette industry -olume increased 20°l0- Operating Revenues 'erce•' A loaal Operating Revenues) during the same period our cigarette volume grew by 53%. Our 1990 volume gain is the largest we've ever had, and gives us the momentum to continue building our share of the growing world- wide cigarette market. The expertise we first acquired in the United States has helped us satisfy millions of consumers with a wide range of local, regional, and global brands. We are already a major force in most of the world's important tobacco markets, and developments in Europe and Asia offer even greater expansion opportunities. We envision large and profit- able growth for many years to come. Food In 1990, Kraft General Foods, Inc. continued to build on its brand and other marketing Kraft Free Singles and other cheeses were the first fat free cheeses available in the United States. strengths. Of our food oper- ating revenues, 72% came from number one or two brands in their category, and our revenue and income growth put us among the top companies in the food industry. For the year, volume grew 6.5%, while operating reve- nues were up 17%, and operating companies income increased 24%. Excluding the acquisition of Jacobs Suchard, volume rose by 3.3%, operating rev- enues by 10%, and operating companies income by 18%. The diversity of our food operations yielded solid benefits, as superior per- formance in most of our businesses more than offset softness in a few segments. Our unique combination of strong brands in growing markets, rapid product development, cost savings Consumer creativity. making JeA-O Jigglers, a gelatin finger food. 3 and business opportunities realized through synergies, and technological creativity fueled steady growth even as we invested for the future. The acquisition of Jacobs Suchard was consistent with our strategy of building an ever stronger portfolio of brands and markets, whether through development or acquisition-and whether inside or outside the United States. Including a full year of results from Jacobs Suchard on a pro forma basis, approximately 32% of KGF's 1990 revenues would have been generated outside the United States. With Jacobs Suchard, we are now Europe's leader in roast and ground coffee, the coffee segment with the greatest growth potential. Jacobs Suchard also increases our distribution capacity, while its Milka, The success of Post Honey Bunches of Oats helped bring Post cereals category share back over 11%. Right: With the acquisition of Jacobs Suchard, a Swiss coffee and confectionery company, Kraft General Foods Interna- tional is now the leader in Germany's coffee market.