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)bier"ne. 3,..:churc. and te brands t-rrng '1s a v core business ;n )nfectioner,,. In 199(l), KGF (nterna- )na('sother core busi- ,sses in coffee, cheese, :d viscous lressin;s l showed volume ;rowth. )osted by geographic :pans inn and ' i r.e e titen- ms for key brands. tccessfut new product troductions included ieddarie spread. vitalite ;ht maraarine, and Max- ell House Classic premium ~eze-dried coffee in the -tited Kingdom: HAG )lombian Supremo cDffee Germanv; Kraft y,1a%,Oli%-a ayonnaise and Saimaza emium soluble coffee in )ain: Kraft cholester_4 free avonnaise in Beljium: ~vaiia Premium soluble )ffee in Norwav: Ve-,emite nales in Austraiia: and ::e,,v wors of Philadelphia Brand eam cheese in several )untries. We also widened some Dt ;r major regional busi- ~sses, bringing Miracoii tlian sauces to Germanv .d our y,iaxpat coffee vend- Q system to Spain. New oduct development, dis- bution and marketin; nerQies, the continuing te;ration of European arkets, and increasing osperity in the Pacifi+_ Rim ill drive KGF International's rther orowth. Most of KGF's food ': ol- ne, sales, and proFtts main in North America. non; the Kraft General ods operating companies i the Continent, General Fi"DC':s in r; )Irt- ,~tanci;:~ -erft-,rmanw. ~.lati.~e:: '"'.r-:,z' ,1r~(i )ur ~tf:er c:oifees :eturnt: l to protaaiJii;t,.; cnntinued ~~l:alrt~~ anQ aC'.?'rtisi f`,l improve::-;e.n,ts ::eipir :; to buI1C7 .i:e _-uslr'.ess. f )tit cereais :~creas e, v( )I Ime " share ^aci er .1 ,. T he irn:rcve-:ents -.vere at.re :o superior -:;aricetina )f core Post *:Draf.--s :uc:: as ;rape- `+uts, Pea:D;es. ~c,ney Bunc:~:es ,r Dats. 3nci the introduc:ion -D(`.larsn mailow. ~ha-3its. Kc~ei .-.ic: bra~,; p( ),.%dered .~'ie`..-. ;. Jru,me ~ . ' ,l are ot maitaai-:7 an the ~c ~ v e 7._~t drink cat- e'~~r` pr,rct:: e!~e t , ,uur the iar;est -e:a;in catep)ry 3ains in _,ver ' .ear,. The exDansiCr, of E-trnm,tnn's fat :ree a-:c c::,_~iester,)I tree baKer`- .I:-:e aelz _._, r, ) increaSc _-alier',.. ,Jlitlne neari,.-?=- in i,17,-,.](). itr))ng -oi.:::;e ;alns ;r"M ~ hke Top -;tut=:n;. ~~:akc'., Bake, and L ~ Cabi: syru-. as well as the e7ic ,a! ir•)tr -,du(~t.ion ,f Kraft .':licrnwave Entrees, also cOntriDuteQ to General Foods L'S.A's per.`_~rmance. At Kraft L:SA, new product introduc`ions iZe!ped to increase : ;e appeal 4 lead- ing Drar.cs. ':n c!:eesz, vol- ume _re°.v -.vith ~`e intn.duc- tior. : f s 7 net.~, prodlucts aJ Spreacerv Jr r :ad able cheese. Cracker Barrel fla- vors, arr1 :-.v [a,-=heeties such as Kraft Light Singles and Kraft Light tiaturals. Volume for Philadelphia Brand cream cheese also 'r accet~-, _oread Krait s assorted cneeses. se,•.ed Oscar b'a~er ard L;L,s RIc- Urcrecr, ^-eats.

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increased. Following suc- cessful test marketing, Kraft's first nonfat process cheese product, Kraft Free Singles, has begun to expand geographically. The national introduction of Kraft Free nonfat salad dressings boosted the entire Kraft pourables line, build- ing share to 41%; in a rare new product achievement, the Kraft Free line included three of the five best-selling products in the entire pour- able dressing category. Both Miracle "Nhip salad dressing and Kraft mayon- naise increased their shares. We expect improvements from the introductions of .Miracle Whip Free nonfat dressing and Kraft Free non- fat mayonnaise dressing, two fat free products announced in early 1991. Volume and share for 1{r-aft and Parkay tablespreads M Oscar.Mayer introducec: tur- key bacon, and a range of light, thin-sliced, and `.ow- salt meats. We look to these and other product introduc- tions for future growth. Kraft General Foods Frozen Products defended and built on its franchises. Volume for dairy products, which contributed more than half the group's operat- ing revenues and income. continued to grow, led 'ov strong advances in the cultured products and top- pings categories. New products such as Sealtest Free nonfat frozen dessert. Brevers frozen yogurt, Cooi Whip Lite whipped topping, and Light ri Lively Free non- fat yogurt all helped generate category share gains for thte dairy division. Al l :american Gourmet built its volume in 1990 bv introducing Kraft Eating Csca. a.er =acpet :as T,crowa•e snac.Ks ::raruec to r -.:ne :arget in 1990. 0 -'X_1_5o- 1 1. ?M ::~igr,t :rozen entrees and Buc,et Gourrnet Light and ;'-'ealthv Dinners, while Birds Eye improved its product mix w emphasizing its ve?etable-ar,d-sauce offer- !ngs. Aided by the introduc- :ion of "soft" bagels and Dther markecing efforts, -ender's volume grew al- :nost 9°,0, with category share :.limbing to 1 ~0,6. Tombstone pizza continued :o increase volume while expanding ;eograp,icallv, and :s ;;ow Sold ;n'?5 --:,tes. :ombstone is the leader in _he frozen pizza markets it now serves. :<raft General Foods Canaca posted strong :esuits across most of its major product lines, with oiume gains helped by ^ew product launches. Lunchables lunch combina- :ions, Maxwell House Filter Packets, Cheese Pot cheese f -,.:Az;: ~ -,.- ~/3t~;,°~ VeGemite cOnt~nues tc Oe ~-re :' -~~stra,,a s most ooou.ar C'_cUcts 3rd fat free products are aiso teirg o"ereo ® You can have your cake and eat !t too-without fat or cholesterol, from Entenmann's. also rose, and TOUc~ st Butter e>::~andeC nationally. ~olume'cr Kraft side ishes and dinr.ers g ret.v by 3 -`9; new shaces and t1avors. as well as microwave offerin,s, are being 'ested for intro- duction irt :991. Totai --scar Mayer •.'olume rose due _o new products such as '_::nc:-tables :unch combinat:ons and Louis Kemp surimi seafood. Partially .:ue to higher red meat com:roditv costs, oper- ating companies income declined. Oscar ',laver brand's num- ber one _-_~sition. to~iether with Louis Rich's leadership position ::? _he growing tur- key segn:erlt, accounted for 3-k'1o of the market for lun- cheon meats and a record I4°,o for ^acon. We also have an 18'~ s^are of the hot dog market. To address c!-tanging consumer -.references, Left: Chocolate from Jacobs Suchard works its magic on a discerning consumer n Bern Swltzerlard 2060-1566953 17

,pread, Honev Bunches of )ats cereals, Kraft Free salad Iressings. and the Jell-O igglers promotion all con- ributed to volume and share rowth in key categories. ~raft packaged dinners, the )est-selling dry grocery item n the country, introduced uper Mario Bros. Pasta and :heese in the children's seg- nent, and achieved a 1-1?b olume improvement. Coffee olume grew almost 6',~, ided by successful iunches of General Foods iternational Coffees and laxwell House 1892. KGF anada also expanded its uccessful regional direct )odservice business to a ,adin6 position with the cquisition of Groupe Cafe 1 March 1990. Volume increased in both ivisions of Kraft General )ods Commercial Products. raft Food Ingredients berie- ted from strong perfor- iances in the oil products -id Specialty Ingredients usinesses. Kraft Foodser- ce volumes for cheeses, ils, shortening products, Id sauces also grew. Future )odservice performance ains will depend on an nproved food-aw•ay-from- )me market, greater pen- ration of new accounts, id further efficiencies from -oadline distribution )erations. Our strong overall perfor- ance at KGF was made )ssible by a broad array of tared innovations and mar- ~ting strategies to meet tanging consumer tastes. Our established products ill have significant growth potentiai. as shi)wn by the improvements at Maxwell House und Post. In addition, the Jell-O Jigglers promo- tion, one of the largest gelatin promotions ever, made desserts a "top- of-mind" snack tior children, boostinz r_'.S. sales by 13°0 in 1990. As we deveop and laund~ new products and promo- tions, .ve are '-.enefiting from a unique set of svnergies. Most of our savings through -hese svnergies and productivity improvements ,.vere reinvested: for -aur goal is not to avoid `;pending, but to spend •.visely. vur most importan: synero;ies create incremental business. Our `at ;ree products are a good etiample of how we are becor:-Eina mure than the sum of our comuanies. We recognize :hat ,onv-er fat and cholesterol ncw head the list of consumers' r. tetarV con- cerns. and nearly evers one of the KGF operatina com- panies is replacing fats with other naturai in •redients in at least one of its products- from cheeses and pourable salad dressings to cakes and frozen desserts. These inno- vative fat free products alone accounted for more than S2; S million in revenues in 1990. We first introduced fat replacement technology in our U.S. markets, and now vce are pooling our experi- ence to bring new• fat free products to Canada. Europe, and Australia. %tie had fat free products in more categories than any other company in 1990, and we are F.'~ 1 r41L ~411ApEIrHL( MiuAELwi ~ttaat ~.~ Philadelph a Brand cream cheese is ore of cur strcngest nterna[honai tDrands, sold in the Un ted States, Gerrnany-ar.d 35 otFer countr,es around the world

Our `ood oroducts on sale !n Korea -c:ude biaxim and other ..o'r`ees, as .vell as Post cereais. Above. Cscar'Aayer appieC 7re Linchables conceot to develop new Louis R cr ;.,.nch Breaks, cco,:ar and convenient for parents and chil- dren alike, cp right our'cccsernce division supplies U S restaurants, hosp tals, ard 3ther nsht ;.e s;nt i Kraft General Foods and other orod- uc;s Rigrt cerven,ert Pvtaxr:e "ouse Filter ?acks heiped our U S :ot`ee cus ness etur- ;_. _`,tao i,ty

veloping still more `at free -.)ducts this year. In fact, crossing operating mpany borders to nnd nergies, KGF answered mand for nutrition, conve- ~nce, and variety by intro- 'cing more than 300 new -)ducts in the United States ring the year, and was med the new product mpany of the year by ?pared Foods.Nagazine. We bolstered our brands th double-digit increases marketing expenditures in 30 and plan similar :reases in 1991. Our Holi- y Homecoming promotion the United States, featur- ; 31 of our leading brands December 1990, was other notable example of w our companies are irking-and spending- ;ether to build our siness. We are backing up our Investrnents in new markets, products. and packs~ings by investing in our reople We are eniisting all our employ- ees in a drive :or continu- ous improvement in every company :~rocess, trom pur- chasing and research to manufacturing and market- ing, to ser;e both customers and consumers better. Only by aiming for excellence in each aspect of our business can we !ead our competition and begin to satisfy our own high standards. Kraft General Foods recorded solid business gains in 1990. `.be are deter- mined to deliver steadily bet- ter operating results over the years to come. Beer in 1990, for ,he hfth consecu- tive vear, volume ~Iruwth at ,Miller Bre,,ving Company outperformed the U.S. brew- ing industry. Our .otai ship- ments of 43.5 million barre!s, including Sharp's and exports, were up nearly 1 for the year. Our share of the total U.S. malt beverage industry grew to a record 22%. Our export volume rose more than 6%. Operating revenues and operating companies income also set new rec- ords. Growth in premium- priced brands helped boost revenues 64'0, and lower costs contributed to a 2616 gain in operating companies income. Shipments of Miiler Genuine Draft grev by almost 30%, consolidating the brand's ninth-place posi- tion amonQ U.S. beers. Combined with Miller High Life, Genuine Draft's contin- ued success gave Miller i6'o of the more profitable full- calorie premium segment. Miiler L ite, the countr,: s second-best-selling beer. continued to gain volume, and accounted for more than ~60% of the premium low- calorie segment. We added to our presence in this seg- -rent by bringing Miller Genuine Draft Light into ten western states. In the above-premium se,iment, the company is represented by Lowenbrau, and we brought both Miller Reser~e, an all-barley pack- aged draft product, and .Miller Reserve Light, a low- calorie line extension, into test markets in 1990. In the below-premium categor,; volume gains by tiiilwaukee's Best made it the sixth-most- popuiar beer in the country. Miller Sharp's, nrst intro- duced in December 1989, :ueled the growth of the non- . alcoholic brew se~ment, which nearly doubled its Operating Revenues ve: The fuil r ch taste of Miller Sharp s cereftec `r~c 3n r.rc,,au\,e inology, and Sharp s became the courtry s best-se !'^g nor- ,holic brew. ?ight: Miller Genuine Drar! Lgrt, a cw-ca ore re exten- of M lier Genuine Draft, joined the Mii;er `amuy r'99C ~:ar • y^t ?r Genuine Draft, the country's ninth-rrost-pcc.,iar beer anc zre of :astest-yrowng premium beers :n the United S'ates

U.S. Mait Severage ind.aatsy $aree( Shipments 3 U.S. Malt Beverage Industry Barrel Shipmenta a Miiler Share of U.S. Malt Beverage industry ?5 : 38 39 1.rhiler exports to many countries around tre wond. Offering a,vide vanety cf crews, Mider increased its share of the U.S. malt be',eraye ndustry, ',iiller L:e s the second-n":ost- coculflr C°-ef !n :~e United States, and t c-crtnues :o oe the country's cest-3e,ra :Icnt DeeC

Financ~rg `rom Phiiip Morris Cap tai CorFerancr -e ps Miiler e str c;crs keep stcres well stocked. volume during i940. 3ha: :Ds finished the vEar in a leadership position, .citi,: 27116 of the market 'or non-alcoholic brews. Our steady progress enabled us to announce .'ze reopening of our Trenton, Ohio, brewery in 1991. Federal legislation passed in 1990 doubled the federal excise tax on beer, from S9 to 818 per barrel, or :rom 16 cents to 32 cents per six- pack, effective Januan- t. 1991. In spite of this discrim- :natorv tax increase, -,ve are determined to continue our solid growth in volume. rev- enues, and profitabiiity. Financial Services and Real Estate Consolidated operating oom- panies income from Philip Morris Capital Com-oration's financial services and real estate businesses rose 13.9°'0, despite a 10.9°,o drop in operating revenues, as Mission Vieio Company con- tinued to wind down its homebuildinc activities. Revenues from PNiCC's financial services operations crew 19.'?"o, while operat- ing companies income increased 27.-1"%. In 1990, PN1CC expanded its financ- ing programs for customers and suppliers of Philip Morris operating companies. The company also increased its investment in leasing transactions, building on its position as one of the coun- try's major equipment lessors. PMCC has a strong capital position, and its debt is com- ara[uve:y smail xr.en set a,a!nsz -ne ~nancial position o[ !ts parent. Phiiip.Morris GDmoar.:es Inc. In aadition, ?'.ICC's assets do not reflect si.-nincant exposure to iV.everaaed companies or ~rouc:eu industries. .ait iou,n he current eco- nornic cownturn introduces some .:::certaintiesr we F::r,ect ::;e company to con- :inue its oattern of sound revenue : nd income ;rowth. As Mission Vie;o phased out hor;:enuildinQ, operating -D reti-enues deciir.ea 2'7.20%. Operat:::a companies in- corr.e,,_-'e~-:ved from iand plannir.,. deti•elopment, and sa'.es, ir.creased 1.10%0. The Coloraco residential real estate market showed si6ns of :mprf:%ement, with Mis- sion Vie;,Ds Hi3hlands Ranch piannet. ,_om.munitv achiev- ina .he hi,hest market share for ne,,v :;ome sales in the Denver ti: ea. 23