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neither does your cola." The success of these tests led to expanded LIKE distribution during the summer and fall. L/KE is now available in approxi- mately 40% of the United States. Seven-Up's Packaged Beverage Division, consisting of company- owned bottling operations, had an excellent year in sales and profits. Two major operations, each with a full line of franchised soft drink brands, were acquired in San Antonio, Texas, and Ottawa, Canada. The company now has nine facilities in the United States and three in Canada. The Food Products Division's operating revenues increased over 1981. Warner-Jenkinson, the industry leader, achieved record sales and profits in the food color business. Oregon Freeze Dry Foods gained in revenues, won government contracts for military provisions, and introduced several new products. Ventura Coastal increased its capacity to service the frozen orange juice business by ac- quiring Southern Gold, a Florida proc- essing plant. Seven-Up International, which is under the direction of Philip Morris International, slightly increased vol- ume overall despite instability in one of its most important markets, Argen- tina, where industry sales of soft drinks fel130%. Unit sales, excluding the Argentine market, increased ap- proximately 10%. In Great Britain, the division entered into a franchise agreement with Beecham Group Ltd., a leading consumer-goods company, for distri- bution of all Seven-Up products. A new franchise agreement was also signed in Venezuela. Ongoing momentum is good, providing opportunities for growth in present markets and successful entry into new areas. Philip Morris Industrial In 1982, Philip Morris Industrial con- tinued with its plan to concentrate on the tissue, paper, and packaging markets. As part of this strategic re- structuring, the companies which made up the Chemical Group were divested on July 31, 1982. Wisconsin Tissue Mills results were impacted by pricing pressures and start-up costs associated with a major expansion to enable the com- pany to become a full-line supplier to its markets. The start-up, still in progress, to date has been timely and successful. New converting facilities, an automated warehouse, and a new paper machine are all now operating. Nicolet Paper Company and Plainwell Paper Company had a diffi- cult year attributable to reduced de- mand and severe pricing pressures. Koch Label Company and Colo- nial Heights Packaging reported im- proved results due to greater volume and increased efficiencies. Mission Viejo Company In the worst housing market since World War II, Mission Viejo operated profitably, outpacing most of the na- tion's homebuilders in 1982, Operating revenues, however, declined 20.4%. Although Mission Viejo was one of the few homebuilders in the nation to record a profit in 1982, operating in- come declined 74.0% from 1981. In Mission Viejo, California, the company offered prospective home buyers a variety of new financing pro- grams designed to cushion the effect of high interest rates. A 73-acre site was sold for development as a busi- ness park within the 10, 000-acre com- munity, and construction began on a 94,000-square-foot commercial center on the shore of Lake Mission Viejo. In Colorado, the New Town of Highlands Ranch, a 12,000-acre planned community, is being built on the historic 22, 000-acre Highlands Ranch near Denver. The Highlands Medical Center commenced opera- tions, and construction began on the first retail center. Ultimatel y, 30, 000 homes will be built on the ranch, with approximately 60% of the property preserved for non-urban uses. The first residents of Aliso Viejo, a 6,600-acre planned community near Mission Viejo, moved into their new homes during 1982. In its first phase, Aliso Viejo is offering houses designed and priced for first-time homebuyers. Phiiip Morris /ndustrial - Operating Revenues Philip Morris industrial Operating /ncome Mission Viejo Company Operating Revenues While PhiHp Morris Industrial's operating revenues decreased in 1982. its revenues from conunuing operations increased 12..50e over 1981. Philip Morris Induslrfal's operating income from continuing operations declined 57.7% in 1982, Mission Viejo Company's operating revenues declined in 1982 due to adverse conditions in the .homebudding markett Millions of Dollars - MillionsolDollars MiilionsolDollars - 270 240 210 180 50 120 90 60 30 0 10 18 16 12 10 6 0 73 74 75 76 77 78 79 80 81 82 73 74 75 76 77 78 79 80 81 82 Mission Viejo Company Operating Income While Mission Vie%Dompany had a~ substantial operating income reduction in 1982 from 1981, it was one of the few companies in the homebudding industry which showed a proht in 1982 . MillionsofDollars I 80 36

The Outlook We expect Philip Morris to post con- tinued earnings gains in the future based on the growth potential in our established businesses. We believe we can expand our share of markets through our present lineup of brands and by the introduction of new prod- ucts. Moreover, your company is well positioned to take advantage of changes in market structure, tech- nology, and general economic conditions. In 1982, we completed con- struction of our largest international cigarette plant, in Bergen op Zoom, the Netherlands, and began building a major addition to our Louisville plant. We started operating our new cigarette manufacturing facility in Cabarrus County, North Carolina, in January 1983. Construction will continue in 1983 on another Miller brewery, the company's seventh, in Trenton, Ohio. By the end of 1983, fully four-fifths of all Ph, ilip Morris plant and equipment will be eight years old or less. Few of our world competitors are so well positioned. As 1983 begins, we still face uncertain times. We believe we have the momentum to cope with all eco- nomic conditions. We have demonstra- ted a consistent record and believe our dedication to excellence in every- thing we do is appreciated by a stead- ily widening group of consumers. We are motivated to be the best-in technology and manufac- turing, as well as in finance and mar- keting-and to having the best people. We are net exporters to the world while facing little or no foreign competition in our major market-the United States. The steady improvement in per- formance by our brands will lead to higher profit margins. The installation of technologically advanced equip- ment will produce productivity gains. The adoption of LIFO accounting resulted in reduced earnings but enhanced our cash flow. A rising level of internally generated funds will allow us to further reduce debt resulting in a stronger balance sheet overall. Such fundamental improvements offer the best means of ensuring the future. Philip Morris has a record of thriving under adverse and highly competitive conditions. Our results for 1982 were in keeping with that record. Our industries will not become any easier to succeed in, but we confi- dently expect that Philip Morris-with its dedication to quality; an enthusi- asm for innovative research, manufac- turing, and marketing; and total commitment to excellence-will con- tinue to thrive. We think it is worth repeating that our achievements would not have been possible without the great dedi- cation and skill of all our employees around the world. They are the future of your company. George Weissman Chairman of the Board and Chief Executive Officer Ross R. Millhiser ' Vice Chairman of the Board Clifford H. Goldsmith President George Weissman, chairman of the board and chief executive officer (seated center), meets with other members of the Office of the Chairman (left to right): Ross R. Milihiser, vice chairman; Hugh Cullman, group executive vice president; John A. Murphy, group executive vice president; Clifford H. Goldsmith, president; Hamish Maxwell, executive vice president. 11

Philip Morris U. S.A. In millions Operating Operating Revenues /ncome 1982 $4,330.1 51,101.6 1981 $3,761.6 S 905.7 1980 53, 272.1 S 786.1 1979 S2,767.0 S 701.3 1978 $2,437.5 $ 568.1 12 <,o 9 As taxes and business factors drive up the 9~Fti retail price of our products Philip Morris ~% , y U.S.A. is committed to attaining even Fo higher quality standards than those for ~~qG which we have trationally been recog- nized. Company and consumer alike benefit from the relationship between highly developed brand identification and consistent product excellence. A singular brand personality-Merit's rich taste and low-tar delivery; Virginia Slims' appeal to women; Benson & Hedges' length and distinctive packaging; Marlboro's unique personality and rich flavor-motivates the smoker to try the first pack. Unsurpassed quality builds loyalty through repeat sales. 0q1 r1o ~ 0 0 0 ~ ~ v ~ ~ J

Hu h Cullman Chairman and Chief Executive Officer Shepard P. Pollack President and Chief Operating Officer W. Wallace McDowell Executive Vice President, Operations James J. Morgan Executive Vice President, Marketing R. Nelson Beane Senior Vice President, Finance and Administration Fred J. Laux Senior Vice President, Personnel James A. Remington Senior Vice President, Manufacturing Albert J. Blssmeyer 111 Vice President, Merchandising W. John Campbell Vice President, Plant Operations Hawes B. Coleman Vice President, Field Sales Robert H. Cremin Vice President, Sales 0. Witcher Dudley Vice President, Leaf Robert A. Fitzmaurice Vice President, Brand and Promotion John J. Gillis Vice President, National Accounts Dr. Max Hausermann Vice President, Research and Development Alexander Holtzman Vice President and General Counsel J. Paul Jeb Lee Vice President, Marketing Services F Robert Kurimsky Vice President, lnformation Services William G. Longest Vice President, Leaf Operations Richard D. Robertson N Vice President, tT{ Environment and Ecology ~ Stanley S. Scott ~ Vice President, ~ Public Affairs .~+ ~ George W.B. Taylor ~1 Vice President, Engineering ~ James L. Thompson, Jr. Go Vice President, Media Harry G. Steele Controller Douglas H. Nelson Treasurer and Director of Finance

, In millions Operating Operating Revenues Income 1982 $3,563.7 5446.0 1981 33,400.3 $396.6 1980 $3,205.4 $318.0 1979 $2,581.3 $260.6 1978 $1,810.9 $188.6 Philip Morris International Philip Morris International provides the finest quality cigarettes for its discerning smokers worldwide. Through a broad range of international, regional, and national brands, a selection of which is illustrated on these pages, we are able to satisfy many different taste pref- erences around the world. High-quality tobaccos go into the manufacture of our brands which are produced on equipment incorporating state-of-the-art technology. The company's products are manufactured and marketed in more than 170 countries and territories through subsidiaries and affiliates, licensed or other contractual arrangements, and area export sales organizations.

Hamish Maxwell President and Chief Executive Officer R. William Murray Executive Vice President Car/os E. Sa/guero Executive Vice President Richard L. Snyder Senior Vice President, Administration Geoffrey C. Bible Vice President A/eardo G. Buzzi Vice President William 1. Campbell Vice President Mary W. Covington Vice President Andreas Gembler President, Seven-Uplnternational John G. Gibson Vice President Marc Goldberg Vice President Staffan Gunnarsson Vice President Ehud Houminer Vice President Richard A. Hutchinson, Jr. Vice President Thomas M. Kearns Vice President, Finance Lee Pollak Vice President, Planning George D. Riemer Vice President, Personnel Walter Thoma Vice President Jose de la Torriente Vice President William H. Webb Vice President Andrew Whist Vice President, Corporate Affairs ra 0 a 0 ~ 0 ~ 0 0

Miller Brewing Company In millions Operating Operating Revenues Income 1982 52,928.6 5158.8 1981 $2,837.2 $115.6 1980 $2,542.3 $144.7 1979 $2,236.5 $181.0 1978 $1,834.5 $150.3 In 1982, the brewing industry failed to grow for the first time in 25 years. In this recessionary climate, Lite, which dominates the low-calorie segment, andLowenbrau,MillerBrewing's super-premium price product, both registered volume increases. And, while Miller High Life had a decline in volume, High Life and Lite maintained their respective positions as the second- and third-largest-selling brands in the United States.

John A. Murphy Chairman and Chief Executive Officer William K. Howell President and Chief Operating Officer Lauren S. Williams Executive Vice President Thomas 8. Shropshire Senior Vice President and Treasurer Dr. Vincent S. Bavisotto Vice President, Brewing and Research William W. Catlin Vice President, Brand Management Warren H. Dunn Vice President and General Counsel Alan G. Easton Vice President, Corporate Affairs ThomasA. Fulrath Vice President, Personnel Leonard J. Goldstein Vice President, Sales Larry K. Neuman Vice President, Material Flow William A. Saupe Vice President, Planning and Development Allen A. Schumer Vice President, Plant Operations Georgy L. Tarala Vice President, Engineering Charles A. Whipple Vice President, Director of National Retail Sales Ronald R. Strain Controller Raymond E. Jones, Jr. Associate General Counsel and Secretary William G. Schmus Assistant Secretary Carroll A. Bodie Assistant Secretary

The Seven-Up Company In millions Operating Operating Revenues Income 1982 S530.6 S(1.2) 1981 $432.1 $(1.7) 1980 5353.2 S(7.1) 1979 S295.5 $ 7.0 1978 S274.8 540.3 The Seven-Up Company's brands achieved increases in both sales and market share in the soft drink industry. Through the dramatic "No Caffeine" theme, 7UP and Diet 7UP gave con- temporary meaning to a traditional product attribute-and saw sales move up to an all-time high in response. ' The introduction of LIKE, a 99% caffeine-free cola, was a major event in the soft drink industry last year. Following an outstanding reception in test markets, LIKE began moving into national distribution-and Sugar Free LIKE was introduced as a line extension.

! Edward W Frantel President and Chief Executive Officer Gerard J. Martin Executive Vice President J. Stewart Bakula Vice President, General Counsel and Secretary Edward P Callahan Vice President, Administration William A. Fagot Vice President, Corporate Planning and Development Arnold F Larson Vice President, Packaged Beverage Division George R. Lewis Vice President. Finance Charles W. Schmid Vice President. _ Franchise Division Guy L. Smith IV Vice President. Corporate Affairs