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Product Listing Philip Morris Incorporated Philip Morris U.S.A. Miller Brewing Company Marlboro, Benson & Hedges 100's, Merit, Virginia Slims, Miller High Life, Miller High Life Genuine Draft, Lite, Parliament Lights, Players, Cambridge, Saratoga, Philip Lowenbrau, Meister Brau, Milwaukee's Best, and Plank Morris Commander, and English Ovals cigarettes. Road beers, Magnum malt liquor. Philip Morris International The Seven-Up Company Asia: Marlboro, Lark, Parliament, Philip Morris 100's, 7UP and Diet 7UP lemon-lime and Like cola carbonated Virginia Slims, Philip Morris Lights, Chesterfield, Four soft drinks, JuiceUp frozen juice concentrates, Nouvelle Square, Red & White, K-2, Cavanders, Select, Monterey, soups, Mountain House freeze-dried food products, other and Shelton cigarettes. food and beverage products. Australia: Peter Jackson, Alpine, Marlboro, Black & White, Chesterfield, and Viscount cigarettes, Lindemans, Rouge Homme, and Leo Buring wines. Canada: Benson & Hedges, Mark Ten, Belvedere, and Viscount cigarettes. European Economic Community Countries: Marlboro, Muratti Ambassador, L&M, Merit, Raffles, Philip Morris Light American, Philip Morris Super Lights, Diana, and Multifilter 100's cigarettes. EFTA, Eastern Europe, Middle East & Africa: Marlboro, Muratti Ambassador, Philip Morris Extra, Brunette, Bel- mont, Bond Street, Merit, L&M, and Link cigarettes. Latin America/Iberia: Marlboro, Galaxy, Lider, L&M, Rubios, Derby, Colorado, Nacional, Merit, Chesterfield, Fortuna, Baronet, and Delicados cigarettes, La Aurora cigars, Bohemia and Presidente beers, Castillo rums, Larios spirits. 20 TIMN 440941

MILLERBREWIN With its Lite and Miller High Life brands, Miller Brewing has the second- and third-largest-selling beers in the United States.

Philip Morris Incorporated Philip Morris Incorporated had another excellent year in 1985. Operating income rose 14.2% above the level of 1984 to $2.7 billion, on a 3.8% gain in operating revenues to $14.3 billion. The U.S. tobacco business was the largest contributor to our income advance, and results improved in most of our other businesses as well. Effective July 1, 1985, we sold substantiaiiy all of the Philip Morris Industrial operations (principally Plainwell Paper Co., Inc. and Wisconsin Tissue Mills Inc. to Chesa- peake Corporation, and Nicolet Paper Company to Ham- mermill Paper Company). The total sales price of $250 million produced an after-tax gain of $38 million. We divested these profitable operations because they were no longer significantly integrated with our major busi- nesses and were removed from the branded consumer products industries. Philip Morris U.S.A. Philip Morris U.S.A. increased its sales volume to 213.6 bil- lion cigarettes in 1985, up 1% from 211.6 billion units in 1984. Our gain contrasted with a decline for the U.S. industry from 600 billion units in 1984 to approximately 595 billion units last year. Market share for Philip Morris U.S.A. thus rose 0.6 share points in 1985 to approximately 35.9%, widening our leadership position in the industry. Operating income for 1985 climbed 17.5% to $2.1 billion. Operating revenues were up 7.8% to $6.6 billion. Philip Morris Incorporated Operating Revenues 6 Philip Morris Incorporated Operating Income Another strong performance by the Marlboro family paced our success in 1985. Marlboro-the nation's num- ber-one brand-posted a 3.3% volume gain to 133.3 billion units and approximately a 22.4% market share. Marlboro Lights again was the best-selling low-tar cigarette in the United States. Marlboro Red and Marlboro Lights in full-priced king size 25's packs were launched nationally in January 1985 and contributed to the overall volume gain for the brand. Virginia Slims, the leading cigarette marketed to women, was another of the industry's established brands that grew in 1985. Virginia Slims in a longer, 1 20mm ver- sion was nationally introduced in the fourth quarter and contributed to growth. In addition, Merit and Benson & Hedges 100's maintained their leading positions in their segments. Philip Morris U.S.A. will continue to concentrate on "full price" cigarettes. However, consumer acceptance of brands in the lower priced or "value" category has cre- ated additional opportunities for us to pursue. We launched Players Lights 25's nationwide in December to position ourselves in this segment. New products are central to our growth philosophy. As we identify opportunities in the marketplace, we develop and test products designed to meet them. Our objective is to continue to develop process improvements that result in better quality cigarettes as well as greater efficiencies. We are backed by the most  i: S CGgarette injusvy „ri.t Sa:es .Philip Uiorr,s Share of L S 1~.custry (%! U.S. Cig arette Industry Unit Sales °TININ 440927

Worldwide Coffee & International Products Last year was difficult for this business, which contributes about one-third of our operating income. We were able to hold earnings stable despite the strong U.S. dollar and a rundamental shift in the way we market coffee. To increase the importance of product quality and con- sumer marketing, Maxwell House cut the list prices of regular ground coffees and reduced trade promotion spending. Coffee volumes declined temporarily as the grocery trade reduced inventories that had been built to take advantage of prior price deals. The cost of green coffee jumped at year-end due to a severe drought in Brazil, and retail prices have followed upward. As a result, 1986 is likely to show unusual coffee consumption patterns. Maxwell House quality improvements have helped to keep us the number-one U.S. coffee company. A major improvement in 1985 was Fresh Lock, a small packet inserted to protect taste by removing oxygen and moisture. Our coffee business outside the United States had a good year. Kaffee HAG in Germany continued its leader- ship as Europe's best-selling brand of decaffeinated cof- fee. Our Saimaza brand in Spain lengthened its lead of the roast coffee market to a 23% share. In Canada, we began a major drive into premium coffee, including Heri- tage, the first instant to contain fresh ground coffee. Coffee continues to be a major growth business in the populous Asia/Pacific region. Our joint venture in Korea with Dong Suh Foods posted its fifth straight year of growth exceeding 30%. In Japan, our Ajinomoto-General Foods joint venture opened its fourth freeze-dried coffee plant. Construction began in India on a soluble coffee and powdered beverage plant, the first facility of our Kothari-General Foods joint venture. We also entered two joint ventures in the People's Republic of China in 1985 and introduced Maxwell House instant coffee there. Nearly all of our non-coffee businesses outside the United States are market leaders, and most held or increased share in 1985. Through our Hostess brand, we consolidated our posi- tion as Canada's number-one producer of potato chips James L. Ferguson Chairman and Chief Executive Officer General Foods Corporation 11 and other snack foods. Hostess now has a 34% share of market, more than twice that of our nearest competitor. Other important national franchises include Hollywood, which has more than 80% of the chewing gum market in France; Simmenthal, Italy's leading brand of canned meats; Kibon, the best-selling ice cream in Brazil; and Bird's, a leader in dessert products in Britain. Our growing food service business markets coffee and grocery products in the United States and internationally to restaurants, airlines, schools, and other institutions. Volumes, revenues, and earnings increased substantially in 1985. Crystal Light drink mix did particularly well in its first full year of national food service distribution. Processed Meats Contributing about 15% of General Foods' operating income, our processed meats business.benefited from good volume growth and improved margins in 1985, raising earnings significantly. Both the Oscar Mayer and Louis Rich brands maintained strong share leadership of every major-category in which they compete. Oscar Mayer strengthened its top position in sliced luncheon meat with the national introduction of Select Slices, a new premium line. The company increased its share of the overall bacon market and successfully test marketed Center Cut Bacon, a leaner premium brand. Louis Rich processed turkey products registered higher income on a 12% volume gain, the 15th straight year of double-digit growth. Louis Rich luncheon meats are now the number-two national brand behind only Oscar Mayer. Turkey's appeal as a low-fat source of protein continues to stimulate consumer demand. The year 1985 was one of accomplishment for General Foods-and even more confidence in our strategies and people. Our commitment to quality and convenience continues in 1986. We expect to have another good year. TIMN 440932

GENERAL FOOD General Foods sells its products under more than 60 major brand names, inc Maxwell House coffe% Post cereals, and Ent

General Foods Corporation U.S. Grocery Products Post cereals, Log Cabin syrups, Entenmann's baked goods, Oroweat specialty breads and rolls. Kool-Aid and Crystal Light soft drink mixes, Country Time lemonade flavor drink mix, Tang instant breakfast drink, Instant Postum cereal beverage. Jell-O brand dessert products and frozen novelties, D-Zerta brand desserts and topping mix, Cool Whip whipped toppings, Dream Whip whipped topping mix, Minute brand tapioca, Baker's chocolate and coconut products, Calumet baking powder, Certo and Sure-Jell brand fruit pectins. Birds Eye quick-frozen vegetables and fruits, Minute rice, Stove Top stuffing mix, Shake 'n Bake seasoned coating mix, Good Seasons salad dressing mix, Open Pit barbecue sauce, Ronzoni pasta. Worldwide Coffee & International Products Maxwell House, Maxwell House Master Blend, Yuban, Sanka, Brim, and General Foods International coffees. General Foods brand name coffees, cold beverages, des- serts, and other food products for the food service industry. Canada: Maxwell House, Sanka, and Chase and Sanborn coffees, Jell-O desserts, Baker's chocolate, Hostess potato chips and snacks, Kool-Aid drink mix, Tang flavor crystals, other food and beverage products. Europe: Maxwell House, Gevalia, HAG, ONKO, Bird's and Saimaza coffees, Bird's desserts, Tang beverage mix, Hollywood chewing gum, Krema candies, Simmenthal processed meat, Mareblu fish, other products. Latin America: Maxwell House and Cafe Oro coffees, Kool-Aid and Tang beverage mixes, Kibon ice cream, Jell-0 desserts, Rosa Blanca soups, other food products. Asia/Pacific: Maxwell House and Maxim instant coffees, non-dairy creamer, Tang and Kool-Aid beverage mixes, other food products. Processed Meats Oscar Mayer and Louis Rich luncheon meats, franks and wieners, Oscar Mayer bacon, sausage, and ham, Louis Rich fresh turkey cuts, Claussen refrigerated pickles. Oscar Mayer, Louis Rich, and Chef's Pantry meat and turkey products and Claussen pickles for food service and deli customers. TIMN 440942 21

General Foods Corporation General Foods Corporation made good progress in 1985. Though overall volume rose in line with the industry growth rate, we were able to win higher market share for many of our major brands. More than 75% of 1985 sales came from brands that hold the number-one market position. During the last two months of 1985, General Foods had operating revenues of $1.6 billion and operating income of $116 million. New product activity during the year was strong, with nearly all of our businesses introducing or expanding sig- nificant new entries in the faster growing segments of their markets. U.S. Grocery Products This business, which accounts for just over half of General Foods' operating income, improved its earnings, particu- larly in powdered beverages and bakery products. Though the powdered soft drink market was down modestly, we gained share for our Kool-Aid, Crystal Light, and Country Time brands. At nearly 75%, our share is at a 12-year high. The Crystal Light brand gained further consumer acceptance in its second year of national distribution and became the leading sugar-free powdered soft drink. Con- venient ready-to-drink Kool-Aid Koolers with 20% juice were expanded to 25% of the United States. The product has already reached the number-two position in the fast- growing aseptic juice drink market. ?'6 ' 984aatadre`or',9771985t'.scalyears, '976'984dataarefor~ ,977~ 98Sfisca'.years, _•._~aoorcwmatey'Viarch 31 ended appro.ximately March 37 General Foods Corporation Operating Revenues . > . _,,- a's General Foods Corporation Operating Income Miilipr5 of Do:-lafs Our bakery business posted significant increases in vol- ume, sales, and earnings. Entenmann's, the leading U.S. producer of fresh baked sweet goods, continued its successful expansion to the western United States and plans to expand further this year. Entenmann's improved its position in the Northeast by introducing premium chocolate chip cookies and several new Danish pastry products. Oroweat, which is the largest producer of specialty breads in the western United States, also had higher volumes, largely due to new products and quality improvement. General Foods' dessert business continued to build on the Jell-O trademark for new products. Jell-O Gelatin Pops, for example, scored outstanding results in a nation- wide rollout. This product and Jell-O Pudding Pops have strengthened our leadership of the fast-growing frozen novelty market. The Jell-O brand of refrigerated Ready-To- Eat Puddings entered test market in 1985 with encourag- ing early results. We have maintained our premier positions in the Jell-O brand's original markets-gelatin and pudding desserts. We recently introduced sugar-free products in both seg- ments. Our 1985 share rose to nearly 78% of the gelatin market and nearly 74% of puddings. Our Birds Eye trademark is helping us to enter another dynamic market segment-prepared convenience meals. At the end of 1985, we began shipping into test market Fresh Creations frozen dinners from Birds Eye. They fea- ture high-quality ingredients and a unique cooking system that preserves fresh taste. Post cereals achieved significantly higher earnings for the year. Our key brands gained market share, even though our total share of the highly competitive cereal market declined. Two new varieties were added to our successful Fruit & Fibre line. New advertising and improved quality have revi- talized the growth of Grape-Nuts and Natural Raisin Bran. And in late 1985, Post introduced nationally Horizon Trail Mix, a new cereal for active young adults. TI-M.N 440931

Consolidated Balance Sheets (in mi:!ions of dollars) at December 31 1985 1984 Assets Cash and cash equivalents $ 156 $ 94 Receivables, net 1,797 854 Inventories: Leaf tobacco 1,882 1,796 Other raw materials 761 359 Finished product 1,184 498 3,827 2,653 Other current assets 113 39 Total current assets 5,893 3,640 Property, plant, and equipment, at cost: Land and land improvements 399 267 Buildings and building equipment 2,391 1,773 Machinery and equipment 4,461 3,316 Construction in progress 267 225 7,518 5,581 Less, accumulated depreciation 1,834 1,567 5,684 4,014 Investments in unconsolidated subsidiaries and affiliates 1,099 1,054 Goodwill and other intangible assets 4,457 547 Other assets 296 84 $17,429 $9,339 See notes to consolidated financial statements. 28 TIMN 440949

TOBACCO•• Philip Morris t1. S.a. and Philip Morris International pr flue-cured and burley tobacco leaf into Martboro and quality cigarettes for U. S and world markets.

Consolidated Statements of Earnings { C (in mi;!ions of dollars, except per share data) ~ ! for the years ended December 31 1985 1984 983 Operating revenues $15,964 $13,814 $12,976 Cost of sales: Cost of products sold 6,318 5,517 5,343 Excise taxes on products sold 3,815 3,676 3,510 Gross profit 5,831 4,621 4,123 Marketing, administration, and research costs 3,117 2,329 2,248 Operating income of consolidated companies 2,714 2,292 1,875 Equity in net earnings of unconsolidated subsidiaries and affiliates 82 54 83 Operating income of operating companies 2,796 2,346 1,958 Corporate expense 123 138 129 Interest expense 345 299 234 Facility write-down 280 Other (income) deductions, net (1) 22 10 Earnings before income taxes 2,329 1,607 1,585 Provision for income taxes 1,074 718 681 Net earnings $ 1,255 $ 889 $ 904 Earnings per share $ 10.47 $ 7.24 $ 7.17 See notes to consolidated financial statements. I I 30 TIMN 440951