424B3 1 DPS PLAN HANDBOOK Rule No. 424(b)(3) Registration No. 33-10218 33-13210 33-40110 GET IN TOUCH WITH YOUR FUTURE [GRAPHIC - Dollar signs] DPS Plan Handbook Your Guide to New Features and Choices [GRAPHIC - Telephone keypad with index finger pointing at keypad] Deferred Profit-Sharing Plan LOGO PHILIP MORRIS NEW DPS PLAN SERVICES AT A GLANCE Effective Date New Phone System To Manage Your Account June 1, 1995 [GRAPHIC - Telephone receiver] An automated voice response system (VRS) lets you use a Touch-tone phone to manage your DPS Plan account. You can check your account balances, change your personal contribution rates, change your direction of investments -- even apply for loans, withdrawals and distributions -- over the phone any day of the week. New Investment Options July 10, 1995 [GRAPHIC - Dollar signs] Three new investment options bring your total investment options to seven. The new options are a balanced fund, a growth equity fund, and an international equity fund. For descriptions of the new funds, see pages 24-25. New Daily Valuations July 10, 1995 [GRAPHIC - Fluctuating plot line with rising arrow] Now the market value of your DPS Plan accounts will be determined at the end of each business day. This means you can check your account for up-to-date values, and more, daily. New Financial Planning Information Ongoing [GRAPHIC - Newsletters] The Financial Mentor newsletter from Bankers Trust provides you with financial and retirement planning information. You will receive a copy with each DPS Plan quarterly Statement of Account. TABLE OF CONTENTS Introduction................................................................ ii New DPS Plan Service Center................................................. 1 VRS Menu at a Glance........................................................ 5 Account Balance Information................................................. 6 Contributions............................................................... 7 Direction of Investment for Future Contributions............................ 9 Transfer of Current Fund Balances........................................... 11 Loans....................................................................... 13 Withdrawals and Distributions............................................... 16 Rates of Return............................................................. 20 Personal Identification Number (PIN)........................................ 21 Plan Information............................................................ 22 Plan Information Menu..................................................... 22 Requests for Forms and Brochures.......................................... 23 Voice Response System Instructions........................................ 23 Your DPS Plan Investment Options............................................ 24 Investment Guide............................................................ 27 This handbook is a supplement to a prospectus covering securities that have been registered under the Securities Act of 1933. The date of this supplement is May 15, 1995. I INTRODUCTION Getting in touch with your future will soon be easier. New services coming to the DPS Plan will change the way you manage your account. This handbook will help you: 1. Learn how to obtain balances and manage your DPS Plan account by using the phone; 2. Understand your investment choices -- including three new funds; and 3. Plan savings strategies to help you reach your financial goals. -------------------------------------------------------------------------------- Keep this guide! It's your road map for the DPS Plan's new way of serving YOU and your financial future. Important: Whenever you call the DPS Plan Service Center, there are several things you should always have handy: 1. Your Social Security Number; 2. Your four-digit DPS Plan Personal Identification Number (PIN); 3. This handbook; and 4. A pen and paper. With these things at hand, you'll help ensure that your call is quick and easy and that you'll have all the information you need. -------------------------------------------------------------------------------- II NEW DPS PLAN SERVICE CENTER Fast, Easy Access with a Touch-tone Phone The Philip Morris Deferred Profit-Sharing Plan Service Center (DPS Plan Service Center) now allows you to manage your DPS Plan account conveniently over the phone. Voice Response System A toll-free call to the DPS Plan Service Center connects you to an automated voice response system (VRS). [GRAPHIC - Telephone keypad] With VRS, you can use the buttons on a Touch-tone phone to check your current DPS Plan account balance and get DPS Plan information any day of the week. VRS Cuts Your Paperwork The VRS telephone system leads you step-by-step through account transactions that used to require paperwork. Now you can change your personal contribution rates, change your direction of investments, transfer current fund balances -- even apply for loans, withdrawals and distributions, if you are eligible -- over the phone. You should always use VRS to perform your DPS Plan transaction or inquiry. [GRAPHIC - Telephone receiver] 1-800-872-3777 -------------------------------------------------------------------------------- DPS Plan Service Center: [GRAPHIC - Clock face] Hours of Operation Access to your DPS Plan account is available any day of the year using the new automated voice response system (VRS) with a Touch-tone phone. (Remember, not all push-button phones are Touch-tone.) VRS Hours of Operation: Monday-Friday: 6 AM - 2 AM (Eastern Time) Sat., Sun., Holidays: 6 AM - 9 PM (Eastern Time) If you don't have a Touch-tone phone or if you can't get the information you need, you may direct your call to a dedicated team of Service Representatives, who are available on the following schedule: Service Representatives: Monday-Friday: 9 AM - 6 PM (Eastern Time) Sat., Sun., Holidays: NOT AVAILABLE From outside the U.S., you can reach a Service Representative by calling 615-835-3013 collect. -------------------------------------------------------------------------------- 1 NEW DPS PLAN SERVICE CENTER Service Representatives Need help? Don't have a Touch-tone phone? Have a question about VRS? Calling from outside the U.S.? The DPS Plan Service Center is staffed by trained Service Representatives who can help. Here's How VRS Works Step 1: Call 1-800-872-3777 from a Touch-tone phone. Step 2: After a greeting, VRS asks for your Social Security Number and Personal Identification Number (PIN). After confirming your PIN, VRS gives you the total market value of your DPS Plan account. Important: Your PIN will not be activated for use in personal account inquiries or transactions if you haven't returned your signed Transaction Authorization Card (TAC). See "Personal Identification Number (PIN)" on page 21 for more information. VRS Guides You Step-by-Step VRS guides you through a menu of options you can choose from. The "Main Menu" presents your first level of choice. Once you make that selection, VRS then offers you additional choices. -------------------------------------------------------------------------------- Your PIN Won't Work without a TAC. Having a problem accessing your DPS Plan account information or performing a transaction? Perhaps your Personal Identification Number (PIN) has not been activated. The DPS Plan Service Center can activate your PIN only after receiving your signed Transaction Authorization Card (TAC). [GRAPHIC - Hand writing with pen with arrow pointing to mail] Your TAC was mailed with your PIN. If you haven't returned yours yet, please mail it soon. -------------------------------------------------------------------------------- 2 NEW DPS PLAN SERVICE CENTER You Pick from the Menu Options If you Press 1: Account Information and Transactions, VRS will offer to help you -- . Check the market value of your account(s); . Check or change your personal contribution rates; . Check or change the direction of investment for your future contributions; . Transfer your current account balances from one fund to another; . Check loan balances; or . Apply for a new loan, withdrawal or distribution. If you Press 2: Rates of Return, VRS will help you check the rates of return for all funds or for the fund(s) of your choosing. If you Press 3: PIN Code Change, VRS will help you change your four-digit PIN to a more easily remembered number, like the PIN for your bank ATM card. If you Press 4: General Plan Information, VRS will offer you the choice of -- . Listening to descriptions of DPS Plan provisions; . Requesting forms and brochures; and . Listening to instructions for using VRS. If you'd like to hear something again, Press # and VRS will repeat your menu choice or other information. If you want another set of choices, Press * and VRS will return you to the Main Menu outlined above. If you Press 0, you can reach Service Representatives during the hours they are available. As you read other parts of this handbook, you will find references to your VRS menu options that can help you complete particular transactions quickly and easily. 3 NEW DPS PLAN SERVICE CENTER Overseas Employees In most countries outside the U.S., Touch-tone and toll-free "800" phone services and technologies are not available. However, if you are outside the U.S., you can still take full advantage of all these improved services by calling the DPS Plan Service Center at 615-835-3013, collect, during the hours Service Representatives are available. Your call will be directed to a Service Representative who will assist you, allowing you to make all account inquiries and DPS Plan transactions. Important: Even though you can't access VRS directly from outside the U.S., you will still need your Social Security Number (or identification number) and an activated PIN to perform account inquiries and transactions through a Service Representative. So, when you get your TAC, be sure to sign it and return it as soon as possible. -------------------------------------------------------------------------------- You Can Move Through VRS Quickly. Once you become familiar with VRS, you can move quickly through the system by using a few shortcuts -- . Press the appropriate keys over the voice; you don't have to wait until the speaker is finished. . Use the "VRS Menu at a Glance" on the next page to go directly to your selection without listening to the intervening instructions. For example, you can press 1, then press 4 immediately, to go directly to "Loans" for your transaction. -------------------------------------------------------------------------------- 4 VRS MENU AT A GLANCE [GRAPHIC - Telephone receiver] 1-800-872-3777 Step 1: Call 1-800-872-3777 using a Touch-tone phone. Step 2: When prompted by the system, enter your Social Security Number and PIN. Once this information is confirmed, the system will tell you the total market value of your account. If you want additional information or want to make a transaction or account change, simply enter the numbers corresponding to the desired function in the Main Menu listed below. Main Menu 1 Account Information and Transactions 1 Account Balance Information 2 Personal Contribution Rates and Direction of Investment for Future Contributions 3 Transfer of Current Fund Balances 4 Loans 5 Withdrawals and Distributions Main Menu 2 Rates of Return 1 Rates of Return for All Funds 2 - 8 Rates of Return by Fund Main Menu 3 PIN Code Change Main Menu 4 General Plan Information 1 Plan Information Menu 1 Description of Investment Funds 2 Contribution Rate Information 3 Direction of Investment Information 4 Transfer of Current Balance Information 5 Loan Information 6 Withdrawal and Distribution Information 2 Requests for Forms and Brochures 1 Transaction Authorization Card 2 Hardship Withdrawal Application 3 Quarterly Statement 4 Statement of Your Account 5 Investment Fund Information 6 Rollover Contribution Form 7 VRS Menu Diagram 3 Voice Response System Instructions At any time # to repeat menu or other information * to return to Main Menu 0 to transfer to Service Representative 5 ACCOUNT BALANCE INFORMATION What You Hear First: Market Value of Your DPS Plan Account VRS makes it easy to check the value of your account. After you enter your Social Security Number and your PIN, VRS immediately gives you two important pieces of information: 1. The Valuation Date, and 2. The total market value of your account. The Valuation Date tells you the last date that your DPS Plan records were valued -- usually the preceding business day. The total market value combines your Company and Personal Accounts as of the Valuation Date, not including any outstanding loan balances. If you want a more detailed breakdown of the market value of any or all of your DPS Plan accounts, you can use VRS to get that information, too. [GRAPHIC - Telephone keypad] VRS Tips To get account balance information: Main Menu 1 Account Information and Transactions 1 Account Balance Information VRS will provide account balance information for any of the following that may apply -- . Before-tax Account; . After-tax Account; . Company Account; . ESOP Rollover Account; and . Rollover Account. This information will be useful if you want to transfer current account balances or to change direction of investment for future contributions. 6 CONTRIBUTIONS Plan Facts Personal Contributions Generally, you can contribute up to 8% of your eligible compensation (base pay plus overtime) on a before-tax or after-tax basis, or a combination of both. Before-tax contributions are deducted from your paycheck before federal taxes are withheld; after-tax contributions are deducted after taxes are withheld. Your contributions can total no more than 8% of pay and no more than $9,240 (in 1995) in before-tax contributions. This dollar limit is subject to change by the IRS in future years. A notice stating the IRS dollar limit for the year will be distributed to all employees. If you reach this limit during the course of a year, your before-tax contributions will automatically be stopped for the remainder of the year. If you pay your medical and dental premiums on a before-tax basis, your total DPS Plan before-tax contributions are limited to 7%. They will be further limited if you participate in the Dependent Care Flexible Spending Account. Changing Your Current Personal Contribution Rates You may change your personal contribution rates as often as you like. You may also stop your contributions at any time. However, any contribution rate change you make will become effective in the next possible pay period. Company Contributions Each year the Company contributes to each eligible plan participant's Company Account an amount based on each operating company's earnings. You can invest these contributions in any of the funds available under the Plan. If you don't make personal contributions, you still may maintain a balance in the Company Account. ESOP Rollover Account The ESOP Rollover Account reflects amounts that have been transferred for former participants in the Philip Morris Employee Stock Ownership Plan. 7 CONTRIBUTIONS Rollover Contributions The Rollover Account reflects amounts you may have "rolled over" from a previous employer's qualified retirement plan or a conduit Individual Retirement Account (IRA). Rollover contributions maintain their tax-deferred treatment. Rollover contributions may only be made by money order, cashier's check or a check from your prior plan. Lump-Sum/Catch-up Contributions If you have not always contributed the maximum amount of after-tax dollars allowed under the DPS Plan, you may be able to "catch-up" on contributions you did not make in the current or previous years. If you are interested in this option, Press 0 and speak to a Service Representative. [GRAPHIC - Telephone keypad] VRS Tips To get your current personal contribution rates: Main Menu 1 Account Information and Transactions 2 Personal Contribution Rates and Direction of Investment for Future Contributions VRS will tell you how much you are contributing to each Personal Account -- one account for contributions you make "before taxes" and another for those you make "after taxes." Then you can -- . Change your personal contribution rates; . Stop all personal contributions; . Start personal contributions to the DPS Plan; or . Change direction of investment for future contributions. -------------------------------------------------------------------------------- Hold On! Be Sure You Get a Confirmation Number! When you call VRS to request a transaction, it's important to wait until VRS gives you a confirmation number. The confirmation number verifies that your transaction was completed and accepted. If you hang up before you get it, your transaction may be cancelled. Write down your confirmation number in case you have any questions later about your transaction. A written confirmation of your transaction will also be sent within 10 days to your home address. Don't forget: When you finish -- WAIT for that confirmation number. -------------------------------------------------------------------------------- 8 DIRECTION OF INVESTMENT FOR FUTURE CONTRIBUTIONS Plan Facts Direction of Investment Direction of investment for future contributions can be made for the Before-tax, After-tax, Company and Rollover Accounts. VRS will prompt you for your direction of investment elections. Direction of investment for future contributions can be made in increments of 1% and must total 100%. If you do not pick a direction of investment for an account, all of your contributions to that account will be invested in the U.S. Government Obligations Fund. Change Your Direction of Investment You may change the direction of investment for your future contributions and loan repayments as often as you like. Your contributions and loan repayments will be invested based on the direction of investment on file as of 2 PM, Eastern Time, on the day the money is credited to your account. Your personal contributions and loan repayments will continue to be credited to your account on a monthly basis. Important: Changing direction of investment for future contributions does not move any current account balance into another fund. If you wish to do that, see "Transfer of Current Fund Balances." -------------------------------------------------------------------------------- Make Sure DPS Plan Mailings Reach You -- Let Us Know When You Move The DPS Plan Service Center makes it easy for you to reach your account. But that does not mean anything if the DPS Plan cannot reach you. Your Statement of Account, your written confirmation of transactions, and your requests for printed information are all mailed to your home address of record. But these important communications cannot reach you if your address is not up- to-date. If you move, be sure to stop by your local Benefits Office and fill out a Change of Address form. -------------------------------------------------------------------------------- 9 DIRECTION OF INVESTMENT FOR FUTURE CONTRIBUTIONS What is a "Change in Direction of Investment"? The following example shows how John Doe used VRS to change his direction of investment. Example VRS tells John that he is currently contributing 5% of pay (currently $100 a month) before taxes to the DPS Plan through payroll deductions as follows:

Fund U.S. Gov't Obligations 0% $ 0 Equity Index 30% 30 Interest Income 50% 50 Philip Morris Stock 20% 20 ---- ---- Total 100% $100

To invest some of his future contributions in the new funds, John calls VRS which prompts him to enter his new direction of investment percentages from 0% to 100%.

Fund U.S. Gov't Obligations 0% $ 0 Equity Index 0% 0 Interest Income 35% 35 Philip Morris Stock 10% 10 Balanced 40% 40 International Equity 7% 7 Growth Equity 8% 8 ---- ---- Total 100% $100

Your direction of investment must total 100% for each account. [GRAPHIC - Telephone keypad] VRS Tips To change your direction of investment for future contributions: Main Menu 1 Account Information and Transactions 2 Personal Contribution Rates and Direction of Investment for Future Contributions VRS will tell you into which of the DPS Plan's investment options your current contributions are directed. Then, if you want to change your direction of investment for future contributions, VRS will lead you step-by-step through the process. When you finish, always wait for your confirmation number. -------------------------------------------------------------------------------- Note: While you can use VRS to change your direction of investment after June 1, 1995, the three new investment funds will not be available until July 10, 1995. -------------------------------------------------------------------------------- 10 TRANSFER OF CURRENT FUND BALANCES Plan Facts Transfer of Current Fund Balances You can request transfers of your current DPS Plan fund balances in increments of 1% (as long as they total 100%). You are not limited in the number of transfers you can make in a year. Philip Morris reserves the right to limit the number of transfers in the future should participants' use of this feature become excessive. Important: Transferring a current balance from one investment fund to another does not affect the direction of investment for future contributions you make. See "Direction of Investment for Future Contributions." -------------------------------------------------------------------------------- Timing of Transactions Direction of Investment for Future Contributions Changes in your direction of investment for future contributions completed prior to 2 PM, Eastern Time, on a day when stocks are traded on the New York Stock Exchange are processed that day and are effective when the money is credited to your account. Future contributions refer to any future contributions made on a before-tax or after-tax basis, the Company contribution or any future rollover contribution. Transfer of Current Fund Balances Any transfers of current account balances between funds completed prior to 2 PM, Eastern Time, on a day when stocks are traded on the New York Stock Exchange will be valued as of that day. If your call is completed after 2 PM, Eastern Time, the transfer of monies will not be effective until the next business day. Loans, Withdrawals and Distributions Loan, withdrawal and distribution transactions can be requested daily using VRS. However, the transaction is pended (that is, not processed) until the last business day of the week. Therefore, if you request a loan on a Wednesday, the transaction will be processed that Friday and a loan check will be released the following week. You have until 2 PM, Eastern Time, on the last business day of the week (generally Friday) to complete your loan request in order to receive a check for the next week. -------------------------------------------------------------------------------- 11 TRANSFER OF CURRENT FUND BALANCES What Does "Transfer of Current Fund Balances" Mean? The following example shows how Jane Doe used VRS to transfer her current fund balances. Example VRS tells Jane that she currently has a Before-tax Account invested as follows:

Current Fund Balances U.S. Gov't Obligations $15,757 Equity Index 21,252 Interest Income 15,351 Philip Morris Stock 0 ------- Total $52,360

Now, Jane decides to invest her current Before-tax Account in some of the new funds. VRS prompts her and she enters the new investment percentage for each fund from 0% to 100%, resulting in the following investment mix.

Transfer New Fund Percentage Balances U.S. Gov't Obligations 0% $ 0.00 Equity Index 10% 5,236.00 Interest Income 15% 7,854.00 Philip Morris Stock 10% 5,236.00 Balanced 50% 26,180.00 International Equity 8% 4,188.80 Growth Equity 7% 3,665.20 ---- ---------- Total 100% $52,360.00

The total of all transfers for a particular account must equal 100%. [GRAPHIC - Telephone keypad] VRS Tips To transfer current fund balances: Main Menu 1 Account Information and Transactions 3 Transfer of Current Fund Balances VRS can transfer all your current account balances into the same fund(s) or transfer each account (Before-tax, After-tax, Company, etc.) balance into any fund(s) you choose. This enables you to select different investment mixes by account. VRS will ask you to enter the percentage(s) you want transferred into each fund. You may transfer your current account balances as often as you like. Transfer requests made before 2 PM, Eastern Time, will be valued at the end of each day when stocks are traded on the New York Stock Exchange. When you finish, always wait for your confirmation number. -------------------------------------------------------------------------------- Note: While you can use VRS to transfer your current fund balances after June 1, 1995, the three new investment funds will not be available until July 10, 1995. -------------------------------------------------------------------------------- 12 LOANS Plan Facts In General The DPS Plan loan feature allows you to access a portion of your account balance while you continue to save. You may borrow from your DPS Plan account in the following amounts: Minimum loan amount: $1,000. Maximum loan amount is the lesser of: . One-half of your account balance at the time of your new loan request; or . $50,000 less your highest total outstanding loan balance during the 12-month period preceding your new loan request. The interest rate is based on the prime rate as published in The Wall Street Journal. The rate is adjusted quarterly, or more frequently when the prime rate changes by more than 1/2%. However, it is fixed for the term of the loan. If you have a loan outstanding you may continue to contribute to the Plan. Spousal consent is no longer required when you apply for a loan. The DPS Plan allows only two loans outstanding at a time. You may have one General Purpose loan and one Home Purchase loan outstanding at the same time. However, six months must pass from the time you take your first loan until you take your second loan. VRS will tell you how much is available for a loan based on your account balance. Then it leads you step-by-step through the loan application process. -------------------------------------------------------------------------------- Find the Loan that Works Best for YOU. VRS lets you "try out" a loan amount and payment terms that best meet your financial needs -- before you actually accept the loan. As you complete your loan request, VRS will tell you what your monthly payments will be, based on the loan amount, the repayment period you select and the current interest rate. Then, VRS offers you the choice of accepting, changing or cancelling your loan request. If you want to change your request, you can enter a new loan amount or a new loan period. VRS will then calculate your new monthly payments. Caution: Once you "accept" your General Purpose loan request on VRS, you cannot change or cancel the loan. So act wisely. -------------------------------------------------------------------------------- 13 LOANS General Purpose Loans With VRS, you complete your General Purpose loan application directly on the phone. The repayment period for these loans is from two to five years. VRS will process your loan and send a check to your home address. Home Purchase Loans A Home Purchase loan must be used for the purchase of a primary residence. The repayment period for these loans is from two to 25 years. To receive a Home Purchase loan, you must provide current documentation to verify the estimated cost of your residence. Upon request, VRS will mail the necessary paperwork to your home with complete instructions. Documentation must be completed within 30 days from the date of your loan request or your request will be cancelled. You will receive a check after completing all the necessary documentation. Your loan request will be approved or denied within three business days following review of your documentation. You will be notified in writing of this decision. Based on the current interest rate, you may apply to recalculate the payments on a Home Purchase loan once it has been outstanding for five years. Repayment of Loans When you take a loan as an active employee, you repay your loan through automatic payroll deductions. As you repay your loan, your principal and interest will be credited to the various investment funds based on your most recent direction of investments. In effect, you are repaying the loan, principal and interest, to yourself. If you miss a partial repayment, you must call the DPS Plan Service Center to get a loan coupon for this repayment. If you miss a full repayment, a loan coupon will be automatically sent to you. Similarly, if you are repaying a loan and go on a leave of absence without pay, or transfer to a non-participating company, you will be sent a coupon booklet to your home address on file within 10 business days for continued repayment of your loan. Each month you must mail your loan coupon with your repayment to the DPS Plan Service Center. Mailing labels will be provided. 14 LOANS Defaulting on Loans If you miss three full monthly payments your loan will default and you will be ineligible for future loans. Caution: Defaulting on a loan also means that the unpaid balance will be treated as a taxable distribution and you will be responsible for paying all income tax amounts and, if you are under age 59 1/2, applicable tax penalties. Prepayment of Loans The VRS allows you to prepay a loan quickly and easily. Once your loan has been outstanding for 12 or more months, you may prepay your loan in full at any time. If you separate from service or retire, the entire balance remaining must be paid in order to prevent it from becoming taxable income. To request prepayment of a loan, you must speak to a Service Representative who will send you a coupon. No prepayment will be accepted without a loan coupon. Note: When you make a prepayment, one last monthly repayment will be taken. Only after that final repayment is credited to your DPS Plan account (usually the following month) will the loan be considered closed. You can then apply for a new loan. [GRAPHIC - Telephone keypad] VRS Tips To request a loan: Main Menu 1 Account Information and Transactions 4 Loans VRS will help you -- . Check your outstanding loan balance(s); . Verify information such as principal balance outstanding and the number of payments remaining; and . Find out how to prepay your loan. If you are eligible, you can apply for a new loan. VRS will -- . Give the current interest rate on loans; . Explain repayment terms; and . Summarize loan rules. You must use the VRS for all new loan applications, since Benefits Offices will not accept loan applications. When you finish, always wait for your confirmation number. 15 WITHDRAWALS AND DISTRIBUTIONS Plan Facts In General Although the DPS Plan is designed to encourage savings for retirement, withdrawals or distributions may be available under a variety of circumstances. Withdrawals or distributions from your DPS Plan account may be subject to tax withholdings and tax penalties. The IRS requires a 20% federal tax withholding (and applicable state tax withholding) on any taxable portion of a withdrawal or distribution, unless it is directly rolled over to an IRA, another qualified plan or paid over a period of at least 10 years. If you are an active employee under age 59 1/2 and take a withdrawal, the taxable portion may also be subject to a 10% penalty tax. Also, if you take a distribution and you are a terminated employee under age 59 1/2, or retired under age 55, the taxable portion will be subject to a 10% penalty tax. If you have a loan, the amount available for a withdrawal may be limited due to the DPS Plan's requirement to collateralize your loan. There are several types of withdrawals available to active employees. After-tax Withdrawal There are two types of after-tax withdrawals: . A non-taxable after-tax withdrawal, which may be taken if you made after-tax contributions to the DPS Plan prior to 1987 and have not yet withdrawn all of these contributions. . An after-tax withdrawal including taxable earnings, which may be taken if you made after-tax contributions or a rollover contribution to the DPS Plan at any time. The taxable portion of the withdrawal will be subject to a mandatory 20% federal income tax withholding and may also be subject to a 10% penalty tax and applicable state tax withholding. 16 WITHDRAWALS AND DISTRIBUTIONS Hardship Withdrawal The IRS has strict guidelines regarding the withdrawal of before-tax and Company contributions. The DPS Plan allows active employees to withdraw certain monies only if they are over age 59 1/2 or are experiencing a financial hardship as defined by the Plan. Taxable portions of Hardship withdrawals are subject to mandatory 20% federal income tax withholding and may be subject to a 10% penalty tax and applicable state tax withholding. Certain Hardship withdrawals will also result in a suspension of all personal before-tax contributions to the Plan for a period of 12 months. Partial Withdrawal A partial withdrawal from your account may be taken if you are age 59 1/2 or older, you have been a participant in the DPS Plan for less than five years, and you have made personal contributions to the DPS Plan. The taxable portion of the withdrawal will be subject to a mandatory 20% federal income tax withholding unless you directly roll over the distribution into an IRA or other qualified retirement plan. Full Withdrawal You may make a full withdrawal from your account if you are age 59 1/2 or older and have been a participant in the DPS Plan for five or more years. The taxable portion of the withdrawal will be subject to a mandatory 20% federal income tax withholding unless you directly roll over the distribution into an IRA or other qualified retirement plan. -------------------------------------------------------------------------------- Need Money From Your Account? A loan -- . Provides you a way to use a part of your DPS Plan savings while you continue to save for retirement; . Lets you avoid making a withdrawal, which can deplete your retirement savings; and . Helps you avoid the additional taxes and tax penalties that might come with a withdrawal or distribution. In effect, a DPS Plan loan allows you to borrow from yourself. With a DPS Plan loan, the repayments you make -- both principal and interest -- are credited back to your DPS Plan account. And with a loan, you can continue to contribute to your account. So, if you need access to your DPS Plan funds, think about a loan. -------------------------------------------------------------------------------- 17 WITHDRAWALS AND DISTRIBUTIONS Distributions You may elect to receive a lump-sum distribution of the value of all your DPS Plan balances if you retire or separate from service. Any outstanding loan balance that exists at the time you separate from service will be treated as taxable income unless you elect to prepay the balance within six months of your separation date. You may elect to take the money invested in the Philip Morris Stock Fund in cash or in Philip Morris common stock. If your DPS Plan balance is less than $3,500 when you separate from service and you do not make a distribution election within six months, you will automatically receive a final lump-sum distribution representing the entire amount of your DPS Plan account. If your DPS Plan balance is equal to or greater than $3,500 when you separate from service, you may elect to receive a full distribution of your balance or, instead, you may leave your balance in the Plan until April 1st following the year in which you reach age 70 1/2. If you leave your balances in the Plan upon separation, you may elect at any time to take a full or partial distribution of your DPS Plan account balance. You may elect to have all or any portion of the taxable distribution paid directly to you or directly rolled over to another qualified retirement plan or IRA. If you retire or separate from service, installment payments may be available to you. You may elect to receive installments quarterly, semi-annually or annually. And, at any time, you may elect to take any remaining balance left in your account. -------------------------------------------------------------------------------- Retiring or Terminating? You Can Defer Your Payment Election. When you retire or terminate your employment with the company, you no longer have to decide how you want your DPS Plan account paid to you when you leave. Instead, if your account balance is $3,500 or more, you can wait to make your decision. When you decide you want a distribution, a rollover to an IRA or installment payments, simply call VRS to make your election any time before age 70 1/2 that's good for you! -------------------------------------------------------------------------------- 18 WITHDRAWALS AND DISTRIBUTIONS In the event of your death, your designated beneficiary will receive information concerning distribution of any remaining balances. The federal government requires that you begin to receive DPS Plan payments before April 1st following the calendar year in which you reach age 70 1/2 even if you are still employed. [GRAPHIC - Telephone keypad] VRS Tips To request a withdrawal or distribution from your DPS Plan account: Main Menu 1 Account Information and Transactions 5 Withdrawals and Distributions VRS will tell you what amounts, if any, you have available for withdrawal or distribution. Because of certain restrictions on withdrawals and distributions, you can take them only in certain circumstances. VRS will also briefly explain tax consequences of, or restrictions on, your transaction. If you qualify, VRS will then help you complete your transaction and mail you the appropriate application or direct you to a Service Representative. Certain Hardship withdrawals will also result in a suspension of all personal before-tax contributions to the Plan for a period of 12 months. When you finish, always wait for your confirmation number. 19 RATES OF RETURN [GRAPHIC - Telephone keypad] VRS Tips To get the rates of return you want: Main Menu 2 Rates of Return 1 All Funds 2 U.S. Government Obligations Fund 3 Equity Index Fund 4 Interest Income Fund 5 Philip Morris Stock Fund 6 Balanced Fund (beginning July 10, 1995) 7 International Equity Fund (beginning July 10, 1995) 8 Growth Equity Fund (beginning July 10, 1995) The rate of return on a particular investment tells how that fund performed during a specified period of time. After you make your selection, VRS will report the rates of return for the following periods*: One month, Three months, Twelve months, Three years, and Five years. Note: Past performance of any fund is not a guarantee or an indication of future returns. *The new funds will only have rates of return from July 10, 1995, forward. You may, however, request additional performance information on these funds through VRS. 20 PERSONAL IDENTIFICATION NUMBER (PIN) Your PIN is Important You need a valid Personal Identification Number (PIN) to make account inquiries or perform DPS Plan transactions. VRS uses the combination of your Social Security Number and your activated PIN to verify that you are the person who owns the account. If you do not return your signed Transaction Authorization Card (TAC), your PIN will not be activated, and you will have only limited access to some general information. With your activated PIN, you can use the full range of VRS services. Important: Your PIN won't be activated if you haven't returned your signed TAC. See "Your PIN Won't Work without a TAC" on page 2. Computer Generates Your PIN To protect your privacy, your original PIN was randomly generated by the DPS Plan Service Center computer and then mailed directly to you. As a result, no one at Philip Morris (or anywhere else) knows your PIN. Only YOU can use it to retrieve your account information. [GRAPHIC - Telephone keypad] VRS Tips To change your PIN: Main Menu 3 PIN Code Change VRS will lead you through the steps to change your PIN to another four-digit number using the phone. -------------------------------------------------------------------------------- Keep it Confidential! Protect Your Privacy -- Don't Give Out Your PIN. Your Personal Identification Number (PIN) protects your privacy and keeps your account information secure. No one at Philip Morris or at the DPS Plan Service Center knows your PIN. The only one who knows your PIN is YOU. Keep your PIN confidential so that no one else has access to it. File your PIN Card in a secure place. If you need to change your PIN, call VRS at 1-800-872-3777 and press 3 ("PIN Code Change") at the "Main Menu." VRS will help you change your PIN on the phone. If you forget your PIN or can't locate your PIN Card, call 1-800-872-3777 and follow the VRS instructions for a lost PIN. But since DPS Plan Service Representatives don't know your PIN, you must wait until you receive your new PIN Card in the mail before requesting account transactions. -------------------------------------------------------------------------------- 21 PLAN INFORMATION General Plan Information VRS is an important source for DPS Plan information and forms, brochures and other written material. Main menu 4, General Plan Information, offers three levels of inquiries and requests. They are -- Main Menu 4 General Plan Information 1 Plan Information Menu Overviews of general plan provisions. 2 Request for Forms and Brochures Most DPS Plan forms and related printed material. 3 Voice Response System Instructions [GRAPHIC - Telephone keypad] VRS Tips To get a brief overview of DPS Plan provisions: Main Menu 4 General Plan Information 1 Plan Information Menu 1 Description of Investment Funds 2 Contribution Rate Information 3 Direction of Investment Information 4 Transfer of Current Balance Information 5 Loan Information 6 Withdrawal and Distribution Information -------------------------------------------------------------------------------- You Must Order Forms Through VRS -- Benefits Offices No Longer Supply Them. VRS eliminates the need for many forms. And when you do need a form, VRS handles it directly. Your local Benefits Office will no longer supply DPS Plan forms, with the exception of the Beneficiary Form. As you use it, VRS will automatically direct you to any forms or information you need to complete your transaction. Or if you want a specific form or information, you can order the form or document directly from VRS. Either way, the material you request will be mailed within two business days to your home address. Remember, you can get the DPS Plan forms and written information you need ONLY through VRS. -------------------------------------------------------------------------------- 22 PLAN INFORMATION [GRAPHIC - Telephone keypad] VRS Tips To order documents, forms or other printed information: Main Menu 4 General Plan Information 2 Request for Forms and Brochures 1 Transaction Authorization Card If after June 1, 1995, you have not yet returned your Transaction Authorization Card (TAC), this selection lets you order one. 2 Hardship Withdrawal Application Use this selection to order the application that outlines the restrictions involved in taking a Hardship withdrawal. 3 Quarterly Statement If you've misplaced your regular DPS Plan quarterly Statement of Account, you can order a copy of your most recent statement with this selection. 4 Statement of Your Account This selection lets you order a statement of your account which provides, in written form, the account summary information you can hear on VRS, as of the most recent Valuation Date. Main Menu 4 General Plan Information 2 Request for Forms and Brochures 5 Investment Fund Information A fund prospectus will automatically be mailed to you when you invest in the Philip Morris Stock Fund, the Balanced Fund or the Growth Equity Fund. Use this selection if you wish to order a prospectus for one of these funds before investing. 6 Rollover Contribution Form Participants in the DPS Plan use this form to roll over funds from a previous employer's qualified retirement plan into the DPS Plan. 7 VRS Menu Diagram With this selection, you can order a diagram of the VRS Menu to help you find what you want quickly and easily. 3 Voice Response System Instructions This selection gives you a brief guide to using VRS and the hours of operation for both VRS and Service Representatives. 23 YOUR DPS PLAN INVESTMENT OPTIONS It's up to you to decide where and how to invest your DPS Plan account. Below, you'll find brief descriptions of the seven available funds, including three new ones. Please refer to the current Summary Plan Description (SPD) and prospectus for a complete description of the Interest Income Fund, Equity Index Fund and Philip Morris Stock Fund. Each of the DPS Plan funds is managed by Bankers Trust Company, except the Growth Equity Fund which is managed by Twentieth Century Investors, Inc.

Fund Risk/Return Profile Investment Goal U.S. Government Short-term: Low to Moderate -- returns will fluctuate Competitive rates of return through interest Obligations Fund with interest rates income and capital gains; high creditworthiness; Changed Long-term: Moderate to High -- returns tend to barely low or small risk of negative returns (effective stay ahead of inflation July 10, 1995) Interest Income Fund Short-term: Low -- returns are stable Capital preservation, stable returns consistent Long-term: High -- returns tend to barely stay ahead with the preservation of principal and liquidity of inflation Balanced Fund Short-term: Moderate -- the mix of investments balances Capital growth and current income New the price changes at any given time, (effective spreading risk July 10, 1995) Long-term: Moderate -- the mix of investments balances risk and return Equity Index Fund Short-term: Moderate to High -- the prices of even the Capital growth and income from investments in the blue chip companies that make up this fund companies in the Standard & Poor's 500 Stock Index can rise and fall Long-term: Low -- diversified stock funds have shown higher gains than inflation throughout history Philip Morris Short-term: High -- the return depends entirely on the Capital growth and dividend income from Stock Fund performance of a single stock investments in common stock Long-term: Moderate -- the return depends entirely on the performance of a single stock Growth Equity Fund Short-term: Moderate to High -- these stock prices can Capital growth through investment in stocks of New change quickly U.S. and foreign companies with a history or (effective Long-term: Low -- diversified stock funds have commitment to regular dividend payments July 10, 1995) historically outpaced inflation International Equity Short-term: High -- prices of foreign stocks and Capital growth through investment in common stocks Fund currencies can change quickly of foreign companies that make up the Europe, New Long-term: Low -- diversified foreign stock funds have Australia and Far East (EAFE) Index (effective historically outpaced inflation July 10, 1995)

24 YOUR DPS PLAN INVESTMENT OPTIONS When making investment decisions, you should consider the fund's risk profile which is made up of short-term and long-term risk. Short-term risk measures the potential decrease in the value of your investment. Long-term risk measures the fund's performance against inflation.

How it Invests Why it Invests this Way Obligations of the U.S. government (e.g., treasury U.S. government and agency obligations and insured deposits offer current notes, bills) and its agencies (fully guaranteed as income with a lower level of fluctuation in value than equity funds. to payment of principal on maturity), or fully insured deposits Note: The average maturity is now 5 years; was formerly less than 2 years Investment contracts with insurance companies or Because these securities promise to repay both principal and a rate of financial institutions, mortgage-backed and asset- interest, they provide a predictable return on investments. They are not backed securities, corporate bonds and U.S. risk-free, however, because the principal is not protected if the issuer of government securities a security defaults on the obligation. U.S. and foreign stocks, investment grade bonds and A mix of investments helps reduce risk within a specific investment sector, money market issues yet offers opportunities for current income and capital growth. The fund "balances" investments in the following amounts: (40-70% in stocks, 20-55% in bonds and 0-25% in money market instruments). Common stocks of U.S. corporations listed in the Investing in a mix of such stocks provides the opportunity for returns Standard & Poor's 500 Index based on the success and stability of large, established companies. Common stock of the Company Investing in Company stock makes employees owners and allows them to share in the Company's success. Note: You are responsible for voting the shares held for your benefit directly with the Trustee U.S. and foreign common stocks that are committed to Investing in the stocks of medium and smaller-sized companies with paying dividends and that are believed to have better- significant potential for growth or expansion provides the opportunity for than-average potential for long-term growth; these significant increases in their long-term market value, but with a higher stocks represent companies that are smaller in size risk of short-term loss. than those found in the Equity Index Fund The approximate allocation of the stocks in the fund Investing in a mix of foreign companies' stocks provides opportunities for are 50% in Europe, 3% in Australia and 47% in the Far significant capital growth and greater diversification. In addition to East (including 37% in Japan) offering greater growth potential, foreign stocks can carry greater risk than U.S. stocks since they can be affected by currency fluctuations, political and social instability, differing securities regulations and accounting standards, and limited public information.

25 INVESTMENT GUIDE A Supplement to Your DPS Plan Handbook What's the key to good investing? Knowing when to sell? Knowing which investments to buy or sell? The key is diversification, or the spreading of your money among several different types of investments to create an asset mix. Studies show that investment mix is the single biggest factor in determining the overall success of your investment program. The DPS Plan and its investment options are designed to make saving and investing for your retirement effective and easy. Step 1: Determine Your Mix The DPS Plan offers you several types of investment funds for creating your mix. The building blocks of these funds are Bond/Fixed Income investments and Equities (stocks). Bond/Fixed Income investments seek steady earnings with relatively small changes in value. They generally do not outperform inflation. Equities seek higher returns and have generally outperformed inflation over the long run. However, Equities involve more price fluctuations and risk of loss, particularly over the short term. You can build an investment mix of Bond/Fixed Income investments and Equities that will be conservative, aggressive or somewhere in between, depending on what's right for you. Time The biggest consideration in selecting your mix is your time frame -- the amount of time you have until you need your money. In general, the more time you have, the more aggressive your mix can be. Why? Because you probably have the time to assume more short-term risk (that is, fluctuations in the value of your investments) to achieve potentially higher long-term returns. On the other hand, the less time you have until you need your money, the more conservative your mix should probably be. 26 INVESTMENT GUIDE Risk Once you have determined an appropriate mix based on your time frame, consider your tolerance for risk. Remember, you should consider the fund's short-term risk (that is, the variability in the value of your investments) against the fund's long-term risk (that is, the risk that the fund's performance will not keep pace with inflation). If your time frame leads you to a mix with more risk than you are comfortable taking, you might choose a more conservative mix. But before you do, be sure to consider the trade-off you are making between higher return potential on the one hand and greater stability on the other. You don't want to run too much of a risk of falling short of your retirement goal, either. Step 2: Select YOUR Funds Based on your time frame and your risk tolerance, consider the sample investment approaches on the following page. These samples are intended only to serve as guides to helping you create an investment mix that meets your personal situation. -------------------------------------------------------------------------------- Financial Mentor and Booklet Series Can Help You Reach Financial Goals. Do you want more information and help with financial planning for your retirement? The Financial Mentor newsletter prepared by Bankers Trust can help. Each issue carries articles about such topics as retirement income needs, time horizons, risk, asset diversification and allocation. Financial Mentor also tells you how to order free booklets that discuss specific retirement or investment concepts in more detail. You'll receive Financial Mentor with your DPS Plan quarterly Statements of Account. Watch for it. -------------------------------------------------------------------------------- 27 INVESTMENT GUIDE Sample Investment Mixes

Investment Mix Bonds/Fixed Income/1/ Equities/2/ Time Frame Investor Profile Goal Conservative 65-85% 15-35% 5 years or less Close to retirement Protect principal, [GRAPHIC - Pie chart] but keep up with inflation Conservative/ 50-80% 20-50% 6-15 years Approaching retirement, Balance growth with Moderate* [GRAPHIC - Pie chart] but retirement not protection of immediate principal Moderate/Aggressive 40-70% 30-60% 16-25 years Relatively long time Focused on making [GRAPHIC - Pie chart] until retirement savings grow Aggressive 25-50% 50-75% 25+ years Can afford considerable Maximum growth [GRAPHIC - Pie chart] short-term risk to achieve higher, long- term returns

/1/ Bonds/Fixed Income: U.S. Government Obligations Fund, Interest Income Fund /2/ Equities: Equity Index Fund, Philip Morris Stock Fund, Growth Equity Fund, International Equity Fund * You may also consider the Balanced Fund as an investment option because it best approximates this investment mix. 28 INVESTMENT GUIDE Step 3: Put Your Plan into Action Once you determine your investment mix and choose your investment funds, you need to apply the strategies to your DPS Plan account. First, you will want to change your direction of investment for future contributions from this point forward. Then, you should consider gradually transferring your current fund balances to match your investment mix. You can do both transactions -- change direction of investment for future contributions and transfer current fund balances -- through VRS. Be sure to reexamine your mix of investments regularly -- at least once a year - - or as your investments grow and your personal financial situation changes. Important: This handbook is intended to provide general educational information and sample investment strategies. It does not constitute in any way specific advice about which investments to select or how much to invest in the options available through the DPS Plan. For more information on how to invest, speak to a financial advisor. -------------------------------------------------------------------------------- For More Information . . . Before you invest, you may want to read written summaries of the investment options under the DPS Plan. VRS makes it easy to order these summaries. Dial 1-800-872-3777. Press 4 at the "Main Menu" to access General Plan Information. Then, press 2 for Requests for Forms and Brochures. Finally, press 5 for Investment Fund Information. VRS will then complete your order and the summaries will be mailed within two business days to your home. -------------------------------------------------------------------------------- 29 The information presented in this handbook is intended to be an overview of the general provisions of the Philip Morris Deferred Profit-Sharing Plans. For more detailed information concerning the four existing investment funds and the information in the "Plan Facts" sections of this handbook, you should refer to your Summary Plan Description and other DPS Plan announcements and updates. If there are discrepancies between the information presented in this handbook and the formal plan documents, the formal plan documents govern. The DPS Plans are intended to be plans described in Section 404 (c) of ERISA, and the regulations of the Department of Labor. This means that the fiduciaries of the Plans may be relieved of liability for any losses which are the direct and necessary result of your investment directions. The Investment Committee is responsible for compliance with Section 404 (c) of ERISA, including the information that may be provided upon request. This handbook is a summary of material modifications to the Summary Plan Descriptions for the following Philip Morris Deferred Profit-Sharing Plans: Plan Information Philip Morris Deferred Profit-Sharing Plan Employer Identification Number: 13-3260245 Plan Number: 002 Philip Morris Incorporated Deferred Profit-Sharing Plan Employer Identification Number: 13-1607658 Plan Number: 009 Philip Morris Incorporated Deferred Profit-Sharing Plan for Craft Employees Employee Identification Number: 13-1607658 Plan Number: 010 Shares of BT Mutual Funds are distributed by Signature Broker Dealer Service, Inc., which is not affiliated with Bankers Trust Company. Shares in the Funds are not deposits or obligations of, or guaranteed or endorsed by Bankers Trust Company and the shares are not federally insured by the FDIC, the Federal Reserve or other agency. PM/B727/0595