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We have designed this Web site to share information about the Altria family of companies, our growth and development, and issues of interest to our stakeholders. Therefore, although we are very proud of our tobacco companies, we have not included any cigarette brand advertising in this online version of the 2003 Annual Report, because it is not our intention to market, advertise or promote their cigarette brands on this site.

Philip Morris International Inc.

International Tobacco

Philip Morris International Inc.’s (PMI) volume increased, and share was higher in many key markets, while operating companies income grew significantly.  Shipment volume increased 1.8% to 735.8 billion units, as gains in key markets and additional volume from acquisitions were partially offset by declines, primarily in France, Germany and Italy. Operating companies income rose 10.9% to $6.3 billion, aided by $469 million in favorable currency and higher pricing.

PMI increased its share in the top income markets of Argentina, Austria, France, Germany, Greece, Japan, Poland, Russia, Singapore, the Slovak Republic, Spain, Turkey, Ukraine and the United Kingdom.

In Western Europe, PMI took actions to address adverse industry dynamics in France, Germany and Italy, and volume decreased 6.5% during 2003. PMI’s total market share in Western Europe was down 0.8 points to 38.8%, but excluding Italy, where there is intense price competition, share advanced 0.5 points to 35.3%. Volume grew in Spain and Austria, and Marlboro share increased in Austria, Portugal, Spain and the United Kingdom.

In Central Europe, PMI acquired the Greek cigarette company Papastratos and a controlling interest in Duvanska Industrija Nis, a formerly state-owned cigarette company in Serbia. Volume increased 5.9%, as gains in Romania, Greece and Serbia were partially offset by declines from intense price competition in Hungary and Poland, and in Lithuania and the Slovak Republic, due to tax-driven price increases.

In Eastern Europe, the Middle East and Africa, volume grew a strong 11.5%, due to continued robust growth in Russia, Turkey and Ukraine. In Russia, Marlboro, L&M, Chesterfield, Optima, Parliament, Next and Virginia Slims continued to perform well. In Turkey, PMI’s share increased 4.8 points to 32.3%, with double-digit volume growth driven by L&M and the launch of Muratti
Ambassador. In Ukraine, volume increased 21.6%, driven by the continued strong performance of Marlboro, L&M, Bond Street, Optima and Next.

In Asia, volume decreased 0.5%, as declines in the Philippines and Indonesia more than offset gains in Japan, Korea, Taiwan and Thailand. In Korea, volume and share improved significantly, driven by Lark and the introduction of Virginia Slims Ultra Lights. In Japan, share rose 0.4 points to a record 24%, driven by Marlboro and Lark. Japan Tobacco Inc. (JT) and PMI announced in 2003 that they had mutually agreed that JT’s license to manufacture and sell Marlboro brand cigarettes in Japan would not be renewed when the term of the agreement expires in April 2005.

In Latin America, volume rose 2.9%, due primarily to a strong gain in Argentina, driven by Marlboro, L&M and the Philip Morris brand, and to gains in Mexico, where Marlboro continued to grow.

PMI supports meaningful and effective tobacco regulation in every country where it does business.  It is taking voluntary actions to ensure that its products are marketed responsibly and is communicating proactively with consumers regarding important tobacco issues.

PMI’s strong brand portfolio, proven strategies and global scale and infrastructure position it for continued growth in volume and operating companies income over the long term.

André Calantzopoulos President and Chief Executive Officer