July 8, 2004

Philip Morris International announces 12-year cooperation agreement with the European Commission and 10 EU member states to combat counterfeit and contraband cigarettes

Philip Morris International today announced the signing of a 12-year agreement with the European Commission and 10 member states of the European Union to work together to combat the illegal trade in cigarettes worldwide.

"This cooperation agreement represents a major step forward against the common enemy of counterfeit and contraband cigarettes," said André Calantzopoulos, President and CEO of Philip Morris International.

"The efforts of Philip Morris International, along with those of governments in the EU, to prevent the diversion of cigarettes into contraband channels have borne fruit. As the agreement recognizes, over the last few years, the incidence of genuine contraband Philip Morris cigarettes has been greatly reduced. But the trade in counterfeit cigarette brands - especially Marlboro - is rapidly growing. We, like the European Commission and the member states, are losing hundreds of millions of euros in revenue because of these fake cigarettes," added Mr Calantzopoulos.

Philip Morris International has agreed to make funds available for this anti-contraband and anti-counterfeit agreement. The payments could, subject to several variable factors, total approximately $1.25 billion over 12 years, and would be payable over those years in varying amounts.

"The key markets of Europe have become the target of huge volumes of counterfeit cigarettes that are either sold in, or transit through, European countries. Philip Morris International, the Commission, and the member states must build on our joint efforts to eliminate the illegal supply chain that threatens legitimate market operators, distorts competition and undermines government policy," said Mr Calantzopoulos.

"The initiative builds on a number of policies and procedures that have been in place at Philip Morris International for a number of years," added Mr Calantzopoulos. "Under the agreement, we will expand our existing efforts to collaborate closely with governments, our customers, and others to protect the supply chain and ensure to the maximum extent possible that tobacco products are sold only within legitimate channels."

The agreement also brings to an end all prior disputes between the parties relating to historical contraband, including civil litigation brought by the EC and 10 member states of the European Union against Philip Morris International, and a related case brought by PMI against the European Commission.

"By ending disputes about the past, we can achieve the full benefit of cooperation," said Mr Calantzopoulos. "Indeed, a comprehensive, collaborative approach is the most effective way to protect our business against all forms of counterfeit and contraband."

For more information

Please call the Philip Morris International press office on +41 (0)21 618 4500 or send an email to pmi.pressoffice@pmintl.com.

About philip morris international inc.

PMI is the world’s leading international tobacco company, with six ot the world’s top 15 international brands and products sold in more than 180 markets. In addition to the manufacture and sale of cigarettes, including Marlboro, the number one global cigarette brand, and other tobacco products, PMI is engaged in the developement and commercialization of Reduced-Risk Products (RRPs). RRPs is the term PMI uses to refer to products with the potential to reduce individual risk and population harm in comparison to smoking cigarettes. Through multidisciplinary capabalities in product development, state-of-the-art facilities, and indusrty-leading scientific substantiation, PMI aims to provide an RRP portfolio that meets a broad spectrum of adult smoker preferences and rigorous regulatory requirements.

For more information

See pmi.com and pmiscience.com

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