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LABELLING INITIATIVE PLAN REVIEW December 13, 1991 (REVISED)

CONTENTS o Label status Page 1 o Latest competitor reaction Page 2 o Markets affected Page 3 o Implementation plan Page 4 o Company Statement Page 5 o Plan Timetable Page 6 0 Questions and Answers Page 7

LABEL STATUS VOLUME % OF TOTAL (Billions) PM INT'L PM WORLDWIDE Sales without H/W (Dom.) 23 6.3 3.9 Sales without H/W (D.F.) 40 10.9 6.8 Total Sales without H/W 63 , 17.2 10.7 Total PM Int'l Sales 368 Total PM Worldwide Sales 589 (Int'l & U.S.) Notes 1) 1990 Volumes used for calculations 2) "without H/W" refers to those sales which would, except for the initiation of this project, be produced without health warnings in 1992. r) 03 0 ~ - 1 - tr~ oN N

LATEST COMPETITOR REACTION RJR In favor B&W In favor BAT Do not yet know (to be contacted by Rothmans) ROTHMANS In favor

MARKETS AFFECTED DOMESTIC MARKETS RECEIVING CIGARETTES WITHOUT HEALTH WARNINGS ASIA/PACIFIC EEC EEMA LATIN AMERICA * *Philippines *Andorra (has not yet indicated whether it will join with EC regulations) Rumania *Lebanon Turkish Cyprus Angola Burundi Cape Verde Central African Republic Comores Islands Dj ibouti Gabon *Guinea Ivory Coast Mali *Morocco Togo Zaire *Dominican Republic Antigua Barbados Cayman Islands Dominica Haiti Montserrat St. Kitts St. Maarten Tortola Turks & Caicos Islands PM volume over 500 million per year *Yugoslavia Syria Afghanistan Benin Cameroon Chad Congo Ethiopia Gambia Guinea Bissau Liberia Mauritania Niger Uganda Aruba Belize San Andres Grenada Jamaica St. Barthelemy St. Lucia St. Vincent - 3 -

IMPLEMENTATION PLAN o Artwork preparation started o Converting items with lowest materials duration first First completed items January/February First 20 items changed by U.S.A. (of total 181) represent 64%. of all U.S. volume to be changed o Associated costs (USA, EEC, EEMA) By April 1, 60% of production will be converted and the remainder by the end of 1992. The materials obsolescence cost is approximately $1 million. The production development cost is approximately $4 million. N) ur 0 0 ~ ~ ON 01~ 4 - 07

COMPANY STATEMENT Philip Morris will place the U.S. Surgeon General's health warning on all cigarette packages worldwide which do not currently require a warning. This initiative applies to brands manufactured in the United States for export, as well as those produced overseas by Philip Morris affiliates and affected licensees. Although we believe that consumers are well aware of the health claims made about smoking, the Company has decided to take this initiative, because the lack of a label on the relatively small number of packages involved has become an issue out of proportion to its importance. The vast majority of our products already carry labels. Ninety per cent of all the Company's cigarette packages sold worldwide carry a label, and that number is increased to 96% when sales in international duty-free shops are excluded. The Company's decision addresses concerns about labelling which have been expressed by some shareholders, members of Congress and government officials, and will hopefully mitigate an unnecessary controversy. Implementation began in November and will be completed by the end of 1992. INJ tn a 0 ~. ~ - 5 - C) ~ m

LABELLING INITIATIVE PLAN TIMETABLE TASK RESPONSIBLE DUE DATE o 0 Implementation Identify company spokespersons LG MW Pre-production underway Completed 0 Prepare communications strategy MW Completed 0 Circulate revised Q & A/Statement MW 12/13 0 Approval of Q&A/Statement Mgmt 12/ 17 0 Discuss with competition MB/DSD 12/ 18 0 Present decision to the Board RWM 12/18 0 -- Prepare draft Notify PMI Regional staff: MW Mgmt completed 12/18 o o o Operations/marketing Corporate Affairs Legal Notify Crosby and request withdrawal of proposal Notify Washington contacts Regional line mgmt notification of local parties as required: LG MW LP DF/DB MW/DG Underway After 12/18 After 12/18 After 12/18 After 12/18 government authorities field mgmt key monopolies field mgmt licensees field mgmt government purchasers field mgmt general export customers field mgmt After 1/1/92 After 1/1/92 After 1/1/92 After 1/1/92 After 1/1/92 o o o Draft Annual Report language Respond to outside inquiries Communicate decision to other parties MW MW TBD Dec/Jan As needed As needed DB - Dede Bartlett LG - Leslie Greher N CA 0 DF - Don Fried LP - Lee Pollak C7 C7 DG - David Greenberg RWM - R. William Murray ~ DSD - Dinyar Devitre MW - Matthew Winokur 0 c+~ V - 6 -

QUESTIONS AND ANSWERS 1. Q. Why has Philip Morris decided to do this-now? A. Refer to Company Statement 2. Q. Isn't this merely an effort to silence critics rather than respond to social concerns? A. No. We do not expect that the labelling initiative will silence the more extreme critics of our industry who would be satisfied with nothing less than the elimination of the cigarette industry itself. Refer to Company Statement 3. Q. If the Company is really serious about informing consumers, why aren't labels being printed in indigenous languages, rather than English? A. Frankly, we expect that this initiative may motivate national authorities to establish local labelling requirements consistent with worldwide trends. Thus the English language labels may well amount to an interim step." In addition, English is already used on the rest of the package and the majority of the packs affected will be sold in duty-free outlets where most consumers speak English. .~ c ca 0 4~- © tr o1~ OD 7

4. Q. The Company has frequently noted that only a small minority of its exports go to less developed countries which do not require a warning label and where literacy is generally low as well. If the company is serious about warning smokers in these markets, wouldn't it be more effective to use a universal warning symbol such as a skull and crossbones? A. No message will satisfy everybody. If national authorities wish to consider and select different messages for smokers in their countries, then it is their privilege to do so. We disagree with the message that a skull and crossbones implies. Cigarettes are a legal product and are often-manufactured by governments themselves. We do believe our initiative responds to concerns expressed by certain shareholders, members of Congress and government officials. 5. Q. How are you going to address the need to inform smokers in poorer countries where cigarettes still are sold by the stick? A. We believe our initiative responds to concerns about the labelling issue. As a company, we must defer to national authorities to consider and select alternative means for communicating information on smoking as is fitting from country to country. - 8 -