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                                  EXHIBIT 99.1
                  TO THE R. J. REYNOLDS TOBACCO HOLDINGS, INC.
                                  ANNUAL REPORT
                                       ON
                                    FORM 10-K
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 8, 2000

                         EXPANDED LITIGATION DISCLOSURE
                           TOBACCO-RELATED LITIGATION


      Overview. Various legal actions, proceedings and claims are pending or may
be instituted against R. J. Reynolds Tobacco Company ("RJR Tobacco") or its
affiliates, including R. J. Reynolds Tobacco Holdings, Inc. ("RJR"), or
indemnitees, including legal actions claiming that lung cancer and other
diseases as well as addiction have resulted from the use of or exposure to RJR
Tobacco's products. During 1999, 147 new actions were served against RJR Tobacco
and/or its affiliates or indemnitees and 273 such actions were dismissed or
otherwise resolved in favor of RJR Tobacco and/or its affiliates or indemnitees
without trial. On December 31, 1999, there were 541 cases pending, as compared
with 664 on December 31, 1998, 516 on December 31, 1997, and 234 on December 31,
1996. As of February 23, 2000, 539 cases were pending against RJR Tobacco and/or
its affiliates or indemnitees: 538 in the United States; and 1 in the Marshall
Islands. The U.S. case number does not include the 501 Broin II cases, which are
discussed below.

      The U.S. cases (exclusive of the 501 Broin II cases) are pending in 41
U.S. states and the District of Columbia. The breakdown is as follows: 109 in
West Virginia; 103 in New York; 43 in Massachusetts; 40 in Florida; 38 in
California; 28 in Louisiana; 18 each of Texas and the District of Columbia; 10
in Alabama; 9 in each of Iowa, New Mexico, and Pennsylvania; 8 in each of
Illinois, Mississippi, and New Jersey; 7 in each of Ohio and Tennessee; 6 in
Minnesota; 5 in Nevada; 4 in each of Indiana, Michigan, and Missouri; 3 in each
of Arkansas, Georgia, North Carolina, North Dakota, Oklahoma, South Dakota, and
Wisconsin; 2 in each of Arizona, Connecticut, Hawaii, Maryland, New Hampshire,
Rhode Island, South Carolina, Utah, and Washington; and 1 in each of Colorado,
Kansas, Kentucky, and Maine. Of the 538 active U.S. cases, 146 are pending in
federal court, 387 in state court, and 5 in tribal court. Most of these cases
were brought by individual plaintiffs, but many other cases seek recovery on
behalf of third parties or large classes of claimants.

      Theories of Recovery. The plaintiffs seek recovery on a variety of legal
theories, including strict liability in tort, design defect, negligence, special
duty, voluntary undertaking, breach of warranty, failure to warn, fraud,
misrepresentation, unfair trade practices, conspiracy, aiding and abetting,
unjust enrichment, antitrust, Racketeer Influenced and Corrupt Organization Act
("RICO"), indemnity, medical monitoring and common law public nuisance. Punitive
damages, often in amounts ranging into the hundreds of millions or even billions
of dollars, are specifically pleaded in a number of cases in addition to
compensatory and other damages. 6 of the 539 active cases in the United States
(plus 501 Broin II cases) involve alleged non-smokers claiming injuries
resulting from exposure to environmental tobacco smoke ("ETS"). Forty-five cases
purport to be class actions on behalf of thousands of individuals. Purported
classes include individuals claiming to be addicted to cigarettes, individuals
and their estates claiming illness and death from cigarette smoking, persons
making claims based on alleged exposure to environmental tobacco smoke,
African-American smokers claiming their civil rights have been violated by the
sale of menthol cigarettes, purchasers of cigarettes claiming to have been
defrauded and seeking to recover their costs, and Blue Cross/Blue Shield
subscribers seeking reimbursement for premiums paid. Approximately 65 cases seek
recovery of the cost of Medicaid payments or other health-related costs paid for
treatment of individuals suffering from diseases or conditions allegedly related
to tobacco use. Nine, brought by entities administering asbestos liability, seek
contribution for the costs of settlements and judgments.


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      Defenses. The defenses raised by RJR Tobacco and/or its affiliates
(including RJR), where applicable, include preemption by the Federal Cigarette
Labeling and Advertising Act of some or all such claims arising after 1969; the
lack of any defect in the product; assumption of the risk; contributory or
comparative fault; lack of proximate cause; and statutes of limitations or
repose. RJR has asserted additional defenses, including jurisdictional defenses,
in many of the cases in which it is named.

      Industry Trial Results. Juries have found for plaintiffs in nine smoking
and health cases in which RJR Tobacco was not a defendant, although, to date, no
damages have been paid and most of the verdicts have been overturned on appeal.
Most recently, on November 1, 1999, the Florida Supreme Court heard the
plaintiff's appeal in Carter v. Brown & Williamson Tobacco Corp., a case in
which a Florida Appeal Court had reversed a jury's 1996 verdict in favor of the
plaintiff in the amount of $750,000. In another Florida case, Widdick v. Brown &
Williamson Tobacco Corp., a Florida Court of Appeal on January 29, 1999,
reversed a jury verdict in favor of the plaintiff in the amount of approximately
$1 million in compensatory and punitive damages and ordered a new trial in a
different location. On February 9-10, 1999, in Henley v. Philip Morris, Inc., a
San Francisco state court jury awarded an individual smoker $1.5 million in
compensatory damages and $50 million in punitive damages. On April 16, 1999, the
trial judge reduced the punitive damages award to $25 million, but otherwise
denied Philip Morris' motions. Philip Morris is appealing the verdict. On March
30, 1999, in Williams v. Philip Morris, Inc., an Oregon state court jury
returned a verdict against Philip Morris in the amount of $800,000 in actual
damages, $21,500 in medical expenses, and $79.5 million in punitive damages.
Although the judge in this case reduced the punitive damages to $32 million,
Philip Morris is appealing this verdict as well. In the most recent verdict in a
non-Company individual case, Steele v. Brown & Williamson Tobacco Corp., a jury
in Missouri federal court found on May 13, 1999 that Brown & Williamson was not
liable for the death of the plaintiff.

      The Company ultimately has prevailed in every individual case that has
gone to trial. Most recently, on May 10, 1999, in Newcomb v. R. J. Reynolds
Tobacco Co., one of three individual cases consolidated for trial in Tennessee
state court, the jury refused to award damages against RJR Tobacco and Brown &
Williamson. The same jury found that the tobacco company defendants in the other
two cases were not liable. On June 2, 1999, in an environmental tobacco smoke
case, Butler v. Philip Morris Co., Inc., the jury returned a defense verdict. On
July 9, 1999, a Louisiana state court jury found in favor of RJR Tobacco and
Brown & Williamson, in an individual smoker case, Gilboy v. American Tobacco Co.

                                 BROIN II CASES

      Numerous individual Broin II lawsuits have been filed (mostly in Florida)
by flight attendants for personal injury as a result of illness allegedly caused
by exposure to secondhand tobacco smoke in airline cabins (the "Broin II
cases"). These lawsuits follow the settlement of the Broin class action, under
which the industry agreed to contribute to a fund to research secondhand smoke
issues, and further agreed that individual lawsuits might be brought on behalf
of any or all of the Broin class members. In these lawsuits, each individual
flight attendant will be required to prove that he/she has a disease caused by
exposure to secondhand smoke in airplane cabins, and that they are legally
entitled to recover damages from one or more United States cigarette
manufacturers, including RJR Tobacco. As of February 23, 2000, 502 such suits
have been served upon RJR Tobacco. One of these cases, however, was voluntarily
dismissed on February 8, 2000.

                                  CLASS ACTIONS

      Lawsuits have been brought by individuals purporting to act as
representatives of classes of plaintiffs against cigarette manufacturers,
including RJR Tobacco, and, in some cases, its parent company, RJR, and others,
in state and federal courts across the country during the past six years.
Plaintiffs request that the lawsuits be certified as class actions, allowing
them to prosecute claims on behalf of a specified class, usually for personal
injury or death allegedly resulting from diseases associated with cigarette
smoking. The first of these cases was the now-dismissed nationwide Castano class
action, which was filed in federal court in Louisiana in March 1994. The Castano
case was decertified by the United States Court of Appeals for the Fifth Circuit
on May 23, 1996.

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      Trial continues in Engle v. R. J. Reynolds Tobacco Co., Circuit Court,
Dade County, Florida, Case No. 94-08273-CA-20, in which a class consisting of
Florida residents or their survivors who claim to have diseases or medical
conditions caused by their alleged "addiction" to cigarettes has been certified.
The trial is divided into three phases. On July 7, 1999, the jury found against
RJR Tobacco and the other cigarette manufacturer defendants in the initial
phase, which included common issues related to certain elements of liability,
general causation and a potential award of or entitlement to punitive damages.
The second phase of the trial, which currently consists of the claims of three
of the named class representatives, began on November 1, 1999. In addition, the
trial court has ordered that the jury shall determine punitive damages, if any,
on a class-wide basis if there is a finding of liability in any of the three
cases being tried in phase two. The Company and certain other defendants
appealed this order to the Florida Third District Court of Appeal, which left
the order intact. On October 29, 1999, RJR Tobacco and certain other defendants
filed a petition asking the Florida Supreme Court to review the appropriateness
of determining punitive damages on a class-wide basis. On November 3, 1999, the
Florida Supreme Court agreed to address the issue and asked for further briefing
by the parties. On December 27, 1999, the Florida Supreme Court decided not to
review that issue at this time. The third phase will address all other class
members' claims in individual trials before separate juries.

      Compensatory damages, if any, would not have to be paid to any plaintiff
until the end of his or her trial and the appellate process. As currently
structured, punitive damages, if any, will not be awarded to any individual
plaintiff until the completion of both the second and third phases of Engle. The
Company does not believe it would be necessary to post bond to stay execution of
any judgment awarding punitive damages until a judgment is entered awarding
punitive damages to an individual plaintiff. However, in a worst case scenario,
at the end of the second phase, the court could enter a judgment for punitive
damages on behalf of the entire class in an amount not capable of being bonded,
resulting in the possible execution of the judgment before it could be reviewed
on appeal. The Company believes that the entry of a judgment for punitive
damages on behalf of the entire class would be contrary to U.S. and Florida law
and will take all appropriate actions to prevent this scenario from occurring.

      Immediately prior to the Fifth Circuit's decision in the Castano case, a
nicotine-dependence class action was filed in Indiana state court against United
States cigarette manufacturers, including RJR Tobacco, and its parent company,
RJR. In June 1996, defendants removed the case to federal court. Plaintiffs'
motion to remand the case to state court was granted. Norton v. RJR Nabisco
Holdings Corp., Superior Court, Madison County, Indiana, Case
No.48D01-9605-CP-0271.

      In May 1996, a physical injury and nicotine-dependence class action was
filed in Maryland state court against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. The case was removed by
defendants to federal court and was subsequently remanded to state court.
Richardson v. Philip Morris, Inc., Circuit Court, Baltimore City, Maryland, No.
96145050. On January 28, 1998, the Circuit Court for Baltimore City granted
plaintiffs' motion for class certification. The Maryland Court of Appeals is
reviewing defendants' petition for a writ of mandamus which seeks reversal of
the class certification decision.

      In May 1996, a nicotine-dependence/medical monitoring class action was
filed in Louisiana state court against four United States cigarette
manufacturers, including RJR Tobacco, and its parent company, RJR. Scott v.
American Tobacco Co., Inc., District Court, Parish of Orleans, Louisiana, Docket
No. 96-8461. On April 16, 1997, the trial court granted plaintiffs' motion for
class certification on behalf of Louisiana residents who require medical
monitoring. In the class certification ruling, the court also dismissed the
wholesaler defendants from the action. The remaining defendants removed the case
to federal court on April 16, 1997. On December 2, 1997, plaintiffs' motion to
remand the case to the Civil District Court of Orleans Parish was granted. In
November 1998, an intermediate appellate court affirmed the trial court's
certification of the medical monitoring class. In February 1999, the Louisiana
Supreme Court declined to hear defendants' appeal of the class certification
ruling. A hearing regarding trial plans was held on December 20, 1999. A
scheduling order setting a trial date is expected to be entered soon.


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      In June 1996, a nicotine-dependence class action was filed in New York
state court against RJR Tobacco, RJR, The Tobacco Institute, and The Council for
Tobacco Research. Hoskins v. R. J. Reynolds Tobacco Co., Supreme Court, New York
County, New York, Case No. 96110951. Plaintiffs filed similar cases against the
other manufacturers on or about the same time. In December 1996, defendants
filed motions to dismiss the complaint and to deny class certification. On
October 28, 1997, the trial court denied defendants' motions to dismiss and
granted plaintiffs' motion for class certification. On July 16, 1998, the New
York Supreme Court Appellate Division reversed the class certification decision
and dismissed all claims. Plaintiffs appealed the decision. On October 26, 1999,
the New York Court of Appeals affirmed the appellate court's decision dismissing
the case.

      In June 1996, a physical injury and nicotine-dependence class action was
filed in the District of Columbia against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. RJR has been voluntarily
dismissed from this case. Reed v. Philip Morris, Inc, Superior Court, District
of Columbia, Case No. CA-05070-96. Plaintiffs' motion for class certification
was denied on August 18, 1997. Plaintiffs filed an amended complaint on July 17,
1998, and renewed their motion for class certification. The trial court again
denied class certification on July 23, 1999.

      In August 1996, a nicotine-dependence class action was filed in
Pennsylvania state court against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR, and was subsequently removed
to federal court. Barnes (formerly Arch) v. American Tobacco Co., Inc., United
States District Court for the Eastern District of Pennsylvania, Case No.
96-5903-CN. On August 22, 1997, Judge Clarence Newcomer granted plaintiffs'
motion for class certification for medical monitoring. The class definition was:
"All current residents of Pennsylvania who are cigarette smokers as of December
1, 1996 and who began smoking before age 19 while they were residents of
Pennsylvania." Defendants filed a Motion for Summary Judgment on August 25, 1997
based on plaintiffs' claims for medical monitoring. On October 17, 1997 Judge
Newcomer granted defendants' motion for summary judgment against each of the six
class representatives (five on statute of limitations grounds and one on a
medical monitoring issue). Judge Newcomer also decertified the class, finding
that plaintiffs' claims of nicotine-dependence and theories of negligence and
strict liability raised too many individual issues for class certification. In
November 1998, the United States Court of Appeals for the Third Circuit upheld
the trial court's decertification of the class and dismissal of the case. In
March 1999, plaintiffs filed a petition for writ of certiorari to the United
States Supreme Court. On May 17, 1999, the United States Supreme Court refused
to hear plaintiffs' appeal.

      In August 1996, a nicotine-dependence class action was filed in Alabama
state court, on behalf of Alabama and North Carolina residents, against four
United States cigarette manufacturers, including RJR Tobacco. In September 1996,
the case was removed to federal court. Lyons v. American Tobacco Co., Inc.,
United States District Court for the Southern District of Alabama, Southern
Division, Case No. 96-0881-BH-S. Plaintiffs' motion to remand the case to state
court was denied. There has been no activity in this case since the hearing on
May 15, 1998 to consider transfer of the litigation for coordinated or
consolidated pretrial proceedings.

      In August 1996, a nicotine-dependence class action was filed in Ohio state
court on behalf of Ohio residents against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. This case was subsequently
removed to federal court in September 1996. Chamberlain v. American Tobacco Co.,
Inc., United States District Court for the Northern District of Ohio, Case No.
1:96CV2005. Plaintiffs' motion to remand the case to state court was denied.
Plaintiffs' motion for class certification was denied. Afterward, defendants
filed a motion to dismiss the individual complaints, which was granted on
November 22, 1999, with the exception of fraud claims.

      In September 1996, a nicotine-dependence class action was filed in
Minnesota state court against four United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. The case was removed by
defendants to federal court in September 1996. Plaintiffs' motion to remand the
case to state court was denied. Thompson (formerly Masepohl) v. American Tobacco
Co., Inc., United States District Court for the District of Minnesota, Third
Division, Case No. CV3-6-888. On November 22, 1999, plaintiffs' motion for class
certification was denied by the trial court.

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      In September 1996, a class action was filed in Tennessee state court
against four United States cigarette manufacturers, including RJR Tobacco, on
behalf of all individuals and entities in the United States who have paid
premiums to a Blue Cross or Blue Shield organization for medical insurance. The
complaint alleges that defendants' actions have resulted in increased medical
insurance premiums for all class members and seeks recovery under various
consumer protection statutes as well as under theories of breach of special duty
and unjust enrichment. This case was removed by defendants to federal court.
Plaintiffs' motion to remand the case to state court was granted. Perry v.
Philip Morris, Inc., Circuit Court, Coffee County, Tennessee, Case No. 27,960.
Defendants have asked the court to defer ruling on their pending motion to
dismiss until the Tennessee Court of Appeals rules in a related case -
Steamfitters Local Union No. 614.

      In October 1996, a nicotine-dependence class action was filed in New
Mexico state court against four United States cigarette manufacturers, including
RJR Tobacco, and its parent company, RJR. RJR has been dismissed from this case.
Connor v. American Tobacco Co., Inc., District Court, Bernalillo County, New
Mexico, Case No. CV-96-9422. A hearing was held on January 24, 2000, on
defendants' motion to consolidate this case with the Jimenez case, also pending
in this court.

      In October 1996, a nicotine-dependence class action was filed in federal
court in Puerto Rico against four United States cigarette manufacturers,
including RJR Tobacco. Ruiz v. American Tobacco Co., Inc., United States
District Court for the District of Puerto Rico, Civil Action No. 96-2300.
Plaintiffs' motion for class certification was denied on March 17, 1998. This
case was dismissed and judgment entered in favor of defendants on January 19,
2000.

      In November 1996, a nicotine-dependence class action was filed in federal
court in Arkansas against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Hansen (formerly McGinty) v. American
Tobacco Co., Inc., United States District Court for the Eastern District of
Arkansas, Western Division, Case No. LRC 96-881. Plaintiffs' motion for class
certification was denied July 21, 1999. Plaintiffs appealed this ruling to the
United States Court of Appeals for the Eighth Circuit, which denied plaintiffs'
request to appeal. On December 15, 1999, defendants filed their motion to sever
the individual cases which is currently pending before the trial court.

      In January 1997, a nicotine-dependence class action was filed in West
Virginia state court against United States cigarette manufacturers, including
RJR Tobacco, and its parent company, RJR. Despite the fact that RJR Tobacco and
RJR had not been served, they joined with other defendants in removing the case
to federal court in February 1997. Blankenship (formerly McCune) v. American
Tobacco Co., Inc., Circuit Court, Kanawha County, West Virginia, Case No.
2:97-0204. Plaintiffs' motion to remand the case was granted on January 30,
1998. The West Virginia Supreme Court transferred all tobacco cases, including
Blankenship, to Judge Recht in Wheeling, West Virginia. Judge Recht has set a
class certification hearing for July 17, 2000, and a tentative trial date of
October 2, 2000.

      In February 1997, a nicotine-dependence class action was filed in Hawaii
state court against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Peterson v. American Tobacco Co., Inc.,
Circuit Court, Hawaii, Case No. 97-0490-02. Defendants removed this case in
March 1997. Plaintiffs' motion to remand this action back to state court was
granted on October 6, 1999. On December 29, 1999, the court granted a motion to
designate the case as complex.

      In February 1997, a nicotine-dependence class action was filed in Kansas
state court against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. This case was removed to federal court in
March 1997. Emig v. American Tobacco Co., Inc., United States District Court for
the District of Kansas, Case No. 97-1121. In December 1998, the court denied
plaintiffs' motion for class certification. This case was voluntarily dismissed
on March 9, 1999.


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      In February 1997, a physical injury class action was filed in federal
court in Oklahoma against United States cigarette manufacturers, including RJR
Tobacco. Walls v. American Tobacco Co., Inc., United States District Court for
the Northern District of Oklahoma, Case No.97-CV-218-H. On December 9, 1998, the
federal court refused to certify for class treatment a number of claims, and
certified five questions of Oklahoma state law to the Oklahoma Supreme Court.
The Supreme Court of the State of Oklahoma has not yet issued its opinion
regarding the certified questions of law.

      In March 1997, a physical injury class action was filed in state court in
West Virginia against United States cigarette manufacturers, including RJR
Tobacco. Defendants removed this case to federal court in April 1997. Plaintiff
filed a First Amended Complaint on September 26 1997, dropping plaintiff Ima
Jean Ingle. On March 2, 1998, the case was remanded to state court. Muncy
(formerly Ingle and formerly Woods) v. Philip Morris, Inc., Circuit Court,
McDowell County, West Virginia, Case No. 1:97-0336. The West Virginia Supreme
Court transferred all tobacco cases, including Muncy, to Judge Recht in
Wheeling, West Virginia.

      In March 1997, a nicotine-dependence class action was filed in state court
in Nevada against United States cigarette manufacturers, including RJR Tobacco,
and its parent company, RJR (added via amended complaint). Defendants removed
the case to federal court on March 21, 1997. Plaintiffs filed, but withdrew, a
motion for remand. Selcer v. R. J. Reynolds Tobacco Co., United States District
Court for the District of Nevada, Case No. CVS-97-00334 PMP. On June 1, 1999,
the court entered an order certifying certain issues to the Nevada Supreme Court
and staying all motions for class certification pending a ruling by the Supreme
Court of Nevada on the issues certified. The parties are awaiting oral argument
before the Supreme Court of Nevada.

      In April 1997, a physical injury class action was filed in Wisconsin state
court against United States cigarette manufacturers, including RJR Tobacco.
Defendants removed the case to federal court in May 1997. Plaintiffs' motion to
remand the case to the Circuit Court for Rock County was granted August 27,
1997. Defendants removed the case on diversity grounds on April 17, 1998, and
plaintiffs' motion for remand was denied on June 10, 1998. Insolia v. Philip
Morris, Inc., United States District Court for the Western District of
Wisconsin, Case No. 97-CV-230J. In December 1998, the court denied plaintiffs'
motion for class certification, and summary judgment was granted on all claims
but one. Plaintiffs dismissed the sole remaining claim and appealed to the
United States Court of Appeals for the Seventh Circuit. Oral argument was heard
on January 19, 2000.

      In April 1997, a nicotine-dependence class action was filed in state court
in New Jersey against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Cosentino v. Philip Morris, Inc., Superior
Court, Middlesex County, New Jersey, Case No. L-5135-97. This case was
consolidated for class certification purposes with Kirstein, Lippincott,
Piscitello, and Tepper. On October 22, 1998, the court denied plaintiffs' motion
for class certification. Plaintiffs filed a motion for leave to appeal on
February 26, 1999, which the court denied on April 12, 1999. On July 15, 1999,
the judge entered an order requiring plaintiffs to file amended and severed
complaints within 45 days or the case would be dismissed. Plaintiffs Cosentino
and Lanterman did file amended individual complaints.

      In May 1997, a physical injury class action was filed in federal court in
Texas against United States cigarette manufacturers, including RJR Tobacco and
others. Cole v. The Tobacco Institute, United States District Court for the
Eastern District of Texas, Case No. 1:97-CV-0256. This case is stayed pending
final disposition in another smoking and health related lawsuit - Sanchez v.
Liggett & Myers, Inc.


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      In May 1997, a physical injury class action was filed in the state court
in New York against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Geiger v. American Tobacco Co., Inc.,
Supreme Court, Queens County, New York, Case No. 010687. In July 1997, the court
certified an interim class of all New York smokers with lung and/or throat
cancer and their survivors. On July 6, 1998, the New York Appellate Division
(Second Department) reversed the trial court's class certification order and
remanded the case for discovery and a hearing on class certification. On June
23, 1999, the trial court denied class certification. On October 15, 1999,
plaintiffs appealed the court's decision denying class certification.
Plaintiffs have six months to perfect the appeal by filing a brief.

      In May 1997, a nicotine-dependence class action was filed in state court
in Tennessee against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Defendants removed this case to the
federal court in June 1997. Anderson v. American Tobacco Co., Inc., United
States District Court for the Eastern District of Tennessee, Case No.
3:97-CV-1441. Plaintiffs' motion to remand was denied. The case has been stayed
since January 29, 1998.

      In May 1997, a nicotine-dependence class action was filed in state court
in New Jersey against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Kirstein (formerly Enright) v. American
Tobacco Co., Inc., Superior Court, Camden County, New Jersey, Case No. 699. On
October 14, 1997, the case was transferred to Middlesex County Superior Court,
and consolidated for class certification purposes with Cosentino, Lippincott,
Piscitello, and Tepper. On October 22, 1998, the court denied plaintiffs' motion
for class certification. Plaintiffs filed a motion for leave to appeal the
Superior Court's ruling on February 26, 1999. This motion was denied on April
12, 1999. On September 15, 1999, the parties stipulated to a dismissal of this
action.

      In May 1997, a nicotine-dependence class action was filed in state court
in New Jersey against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Tepper v. Philip Morris, Inc., Superior
Court, Bergen County, New Jersey, Case No. L-4983-97-E. On October 14, 1997, the
case was transferred to Middlesex County Superior Court, and consolidated for
class certification purposes with Cosentino, Kirstein, Lippincott, and
Piscitello. On October 22, 1998, the court denied plaintiffs' motion for class
certification. Plaintiffs filed a motion for leave to appeal on February 26,
1999, which the court denied on April 12, 1999. On July 15, 1999, the court
ordered that plaintiffs file amended and severed individual complaints within 45
days of this order. Matthew Tepper and his son, Scott, remained plaintiffs under
this original docket number. Four of the original plaintiffs were severed, and
two of these - Bruce Shortino and Patricia Watkins - filed individual amended
complaints against tobacco manufacturing defendants other than RJR Tobacco.

      In May 1997, a physical injury class action was filed in federal court in
Illinois against United States cigarette manufacturers, including RJR Tobacco,
and its parent company, RJR. Clay v. American Tobacco Co., Inc., Case No.
97-4167-JPG. The court entered an order voluntarily dismissing this case on
August 9, 1999.

      In May 1997, a physical injury class action was filed in Michigan state
court against United States cigarette manufacturers, including RJR Tobacco, and
its parent company, RJR. Taylor v. American Tobacco Co., Inc., Circuit Court,
Wayne County, Michigan, Case No. 97-715975. On January 10, 2000, the trial court
denied certification of the class.

      In June 1997, a physical injury/nicotine-dependence class action was filed
in state court in New Jersey against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. Lippincott v. American
Tobacco Co., Inc., Superior Court, Camden County, New Jersey, Case No.
L-4702-97. On October 14, 1997 the case was transferred to Middlesex County
Superior Court, and consolidated for class certification purposes with
Cosentino, Kirstein, Piscitello, and Tepper. On October 22, 1998, the court
denied plaintiffs' motion for class certification. Plaintiffs filed a motion for
leave to appeal on February 26, 1999, which was denied on April 12, 1999. On
July 15, 1999, the court ordered that plaintiffs file amended and severed
individual complaints within 45 days of this order. On September 15, 1999, the
parties stipulated to a dismissal of this action.

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      In June 1997, a physical injury class action was filed in state court in
Iowa against United States cigarette manufacturers, including RJR Tobacco, and
its parent company, RJR. The case was removed to federal court. Brammer v. R. J.
Reynolds Tobacco Co., United States District Court for the Southern District of
Iowa, Case No. 4-97-CV-10461. There was very little activity in this case in
1999, other than parent companies being dismissed from the lawsuit.

      In June 1997, a physical injury class action including those who desire to
participate in smoking cessation programs was filed in state court in California
against United States cigarette manufacturers, including RJR Tobacco, and its
parent company, RJR. Brown v. American Tobacco Co., Inc., Superior Court, San
Diego County, California, Case No. 711400. A hearing on class certification is
scheduled for March 23, 2000.

      In July 1997, a nicotine-dependence class action was filed in state court
in New Jersey against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Piscitello v. Philip Morris, Inc.,
Superior Court, Middlesex County, New Jersey, Case No. MID-L-7378-97. On October
14, 1997, the case was consolidated for class certification purposes with
Cosentino, Kirstein, Lippincott, and Tepper. On October 22, 1998, the court
denied plaintiffs' motion for class certification. Plaintiffs filed a motion for
leave to appeal on February 26, 1999, which was denied on April 12, 1999. On
July 15, 1999, the court ordered that plaintiffs file amended and severed
individual complaints within 45 days of this order. On October 27, 1999, the
parties stipulated to a dismissal of this action.

      In July 1997, a physical injury class action was filed in state court in
Illinois against United States cigarette manufacturers, including RJR Tobacco,
and its parent company, RJR. Defendants removed the case to federal court in
December 1997. Denberg (formerly Daley) v. American Brands, Inc., United States
District Court for the Northern District of Illinois, Case No. 97L07963. Class
certification discovery is beginning in this case.

      In September 1997, an ETS class action was filed in federal court in New
York on behalf of federal prisoners against United States cigarette
manufacturers, including RJR Tobacco, and its parent company, RJR. Nwanze v
Philip Morris Cos., Inc., United States District Court for the Southern District
of New York, Case No.
97-CIV-7344.  RJR Tobacco has not been effectively served.

      In September 1997, a physical injury/nicotine-dependence class action was
filed in federal court in Texas against United States cigarette manufacturers,
including RJR Tobacco. Bush v. Philip Morris, Inc., United States District Court
for the Eastern District of Texas, Case No. 597CV180. An order granting the
parties' joint motion for a stay is in effect.

      In October 1997, a physical injury class action was filed in federal court
in Tennessee against United States cigarette manufacturers, including RJR
Tobacco. Newborn v. Brown & Williamson Tobacco Corp., United States District
Court for the Western District of Tennessee, Case No. 97-2938. On September 23,
1999, the court entered its judgment dismissing this case with prejudice.

      In October 1997, an ETS class action on behalf of casino workers was filed
in federal court in Nevada against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. Badillo v. American Tobacco
Co., Inc., United States District Court for the District of Nevada, Case No.
CV-N-97-00573-DWH. On June 1, 1999, the Court entered an order certifying issues
to the Nevada Supreme Court, and staying all motions for class certification
pending a ruling by the Supreme Court of Nevada on the issues certified. The
parties are awaiting oral argument before the Supreme Court of Nevada.

      In November 1997, a physical injury class action was filed in federal
court in South Carolina against United States cigarette manufacturers, including
RJR Tobacco, and its parent company, RJR. Aksamit v. Brown & Williamson Tobacco
Corp., United States District Court for the District of South Carolina, Case No.
6-97-3636-21.  The hearing on class certification is scheduled for May 2000.


                                       8
<PAGE>   9

      In November 1997, an ETS class action was filed in state court in
Louisiana. Defendants removed this case to the United States District Court for
the Eastern District of Louisiana on December 12, 1997. Young v. American
Tobacco Co., Inc., Circuit Court, Orleans Parish, Louisiana, Case No. 97-19984.
The case was remanded to state court on February 2, 1998. The parties are
negotiating on a proposed case management order to submit to the court.

      In December 1997, a medicare payment recoupment class action was filed in
federal court in Texas against United States cigarette manufacturers, including
RJR Tobacco. Mason v. American Tobacco Co., Inc., United States District Court
for the Northern District of Texas, Case No. 7-97CV-293-X. There has been little
activity in this case since the September 19, 1999 order allowing plaintiffs to
voluntarily dismiss the claim in their complaint for relief under the Medical
Care Recovery Act.

      In December 1997, an ETS class action was filed in federal court in Nevada
against cigarette manufacturers, including RJR Tobacco. Dienno v. Liggett Group,
Inc., United States District Court for the District of Nevada, Case No.
CV-S-98-489-DWH (RLH) In December 1998, this case was consolidated with the
Badillo case. On June 1, 1999, the Court entered an order certifying issues to
the Nevada Supreme Court, and staying all motions for class certification
pending a ruling by the Supreme Court of Nevada on the issues certified. The
parties are awaiting oral argument before the Supreme Court of Nevada.

      In February 1998, a class action was filed in federal court in Utah
against United States cigarette manufacturers, including RJR Tobacco, and its
parent company, RJR. Jackson v. Philip Morris, Inc., United States District
Court for the District of Utah, Case No. 2:98CV00178B. The motions to dismiss of
RJR, The Tobacco Institute, B.A.T. Industries, British American, Batus Holdings,
Loews and American Brands were heard on January 27, 2000.

      In February 1998, a physical injury class action was filed against
asbestos manufacturers, cigarette manufacturers, including RJR Tobacco, and its
parent company, RJR. Parsons v. A C & S, Inc., Circuit Court, Kanawha County,
West Virginia, Case No. 98-C-388. This case has been stayed pending a final
resolution of the motion to refer tobacco litigation to the Mass Litigation
Panel. On February 21, 2000, a pretrial hearing was held.

      In March 1998, an unfair trade practices class action was filed against
RJR Tobacco, and its parent company, RJR, in state court in Pennsylvania,
alleging that the labels "light" and "ultralight" on certain of RJR Tobacco's
cigarettes are misleading. Oliver v. R. J. Reynolds Tobacco Co., Court of Common
Pleas, Philadelphia County, Pennsylvania, Case No. 000268. Class certification
discovery is underway, and a class certification hearing is scheduled for June
20, 2000.

      In April 1998, an ETS class action on behalf of casino workers was filed
in state court in New Jersey against United States cigarette manufacturers,
including RJR Tobacco, and its parent company, RJR. Avallone v. American Tobacco
Co., Inc., Superior Court, Middlesex County, New Jersey, Case No. MID-L-488398.
On April 13, 2000, the trial court denied plaintiffs' motion for class
certification. Plaintiffs filed a motion for reconsideration of the court's
class certification decision on May 10, 1999. On December 2, 1999, the court
denied plaintiffs' motion for reconsideration.

      In April 1998, a nicotine-dependence class action was filed in state court
in California against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Daniels v. Philip Morris Cos, Inc.,
Superior Court, San Diego County, California, Case No. 719446. The hearing on
plaintiffs' motion for class certification is scheduled for March 30, 2000.


                                       9
<PAGE>   10

      In April 1998, an ETS class action was filed in state court in Nevada
against United States cigarette manufacturers, including RJR Tobacco, and its
parent company, RJR. Defendants removed the case to federal court on May 20,
1998. Christensen v. Philip Morris Cos., Inc., United States District Court for
the District of Nevada, Case No. CV-S-98-00717-LDG (RLH). Defendants have never
been properly served. On June 1, 1999, the court entered an order certifying
issues to the Nevada Supreme Court and staying all motions for class
certification pending ruling by the Supreme Court of Nevada on the issues
certified. The parties are awaiting oral argument before the Supreme Court of
Nevada.

      In June 1998, a class action claiming fraud was filed against United
States cigarette manufacturers, including RJR Tobacco, and others. Cleary v.
Philip Morris, Inc., Circuit Court, Cook County, Illinois, Case No. 98L06427. On
February 3, 1999, the court denied defendants' motion to dismiss. On January 19,
2000, plaintiffs filed an amended complaint. A status conference is scheduled
for March 22, 2000.

      In July 1998, a nicotine-dependence and physical injury class action was
filed in state court in North Carolina against United States cigarette
manufacturers, including RJR Tobacco, and its parent company, RJR. Creekmore v.
Brown & Williamson Tobacco Corp., Superior Court, Buncombe County, North
Carolina, Case No. 98 CV 03403. On April 22, 1999, plaintiffs filed an amended
complaint. A stipulation of voluntary dismissal was filed May 11, 1999, that
dismissed RJR and several others. Currently pending before the court is a joint
motion, filed July 6, 1999, to recommend exceptional case designation -- the
case would be assigned to one judge appointed by the Chief Justice of the North
Carolina Supreme Court.

      In August 1998, a physical injury class action was filed in state court in
New Mexico against United States cigarette manufacturers, including RJR Tobacco.
Jimenez v. Brown & Williamson Tobacco Corp., District Court, Bernalillo County,
New Mexico, Case No. CV-98 08035. On January 21, 2000, the court heard oral
argument on defendants' motion to consolidate this case with the Connor case
(discussed above) and motion to strike peremptory challenge.

      In September 1998, a deceptive trade practices class action was filed
against RJR Tobacco for the marketing of lights and ultralights cigarettes.
Moree v. R. J. Reynolds Tobacco Co., United States District Court for the
Eastern District of Texas, Case No. 1:98CV1833. This case was voluntarily
dismissed by order dated June 2, 1999.

      In October 1998, a medical monitoring class action was filed in state
court in Pennsylvania against United States cigarette manufacturers, including
RJR Tobacco, and its parent company, RJR. Defendants removed the case to federal
court on November 16, 1998. Sweeney v. American Tobacco Co., Inc., Court of
Commons Pleas, Allegheny County, Pennsylvania, Case No. GD98-16226. This case
was remanded to state court on April 28, 1999.

      In October 1998, a civil rights class action was filed in federal court in
Pennsylvania alleging that United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR, engaged in "discriminatory targeting of
tobacco products sales to Black Americans." Brown v. Philip Morris, Inc., United
States District Court for the Eastern District of Pennsylvania, Case No.
98-5518. On September 21, 1999, the court granted defendants' motion to dismiss.
This case is currently on appeal to the United States Court of Appeals for the
Third Circuit.

      In October 1998, a class action was filed in state court in New Jersey
against RJR Tobacco and RJR on behalf of New Jersey residents who purchased and
smoked RJR Tobacco's light or ultralight cigarettes on or after March 3, 1992.
Trombino v. R. J. Reynolds Tobacco Co., Superior Court, Middlesex County, New
Jersey, Case No. L-11263-98. RJR Tobacco filed its answer to plaintiffs' first
amended complaint on October 1, 1999.


                                       10
<PAGE>   11


      In November 1998, a nicotine dependence/physical injury class action was
filed on behalf of all California smokers in state court in California against
the State of California and other public entities, as well as against United
States cigarette manufacturers, including RJR Tobacco. Smokers for Fairness v.
California, Superior Court, Los Angeles County, California, Case No. BC 198123.
On June 10, 1999, the court granted plaintiffs' request for dismissal.

      In December 1998, a nicotine-dependence class action was filed in state
court in Missouri against United States cigarette manufacturers, including RJR
Tobacco. On January 20, 1999, the case was removed to federal court. Gatlin v.
American Tobacco Co., Inc., United States District Court for the Eastern
District of Missouri, Case No. 982-10021, Division 1. The parties stipulated to
a dismissal of this action on February 8, 2000.

      In December 1998, a nicotine-dependence class action was filed in state
court in Missouri against United States cigarette manufacturers, including RJR
Tobacco, and its parent company, RJR. Jones v. American Tobacco Co., Inc.,
Circuit Court, Jackson County, Missouri, Case No. 98-CV-30687. This case was
removed to federal court on February 12, 1999. On February 17, 1999, the court
remanded the case to state court. Plaintiffs have attempted to effectuate
service by mail. Defendants, however, have declined to accept service because
service by mail is not sufficient pursuant to Missouri law.

      In April 1999, a class action was filed in New York against United States
cigarette manufacturers, including RJR Tobacco. Simon (formerly Sturgeon) v.
Philip Morris, Inc., United States District Court for the Eastern District of
New York, Case No. CV 99 1988. A class certification hearing is scheduled for
June 12, 2000.

      In April 1999, a class action was filed in Alabama on behalf of all minors
in the States of Alabama who smoke, against United States cigarette
manufacturers, including RJR Tobacco, and its parent company, RJR. Julian v.
Philip Morris Cos., Inc., Circuit Court, Montgomery County, Alabama, Case No.
CV-1999-1245-GR. Defendants removed this case to federal court on May 19, 1999.
Plaintiffs filed their motion to remand the case on June 17, 1999, which the
court granted on August 26, 1999. The case has been inactive since the court's
remand ruling in August.

      In March 1999, a class action was filed in Massachusetts on behalf of all
persons having a history of smoking cigarettes which were purchased in
Massachusetts, against United States cigarette manufacturers, including RJR
Tobacco. Tobacco Consumers' Group Number 3 v. R. J. Reynolds Tobacco Co., United
States District Court for the District of Massachusetts, Boston, Case No.
99-CV-10950-GAO. Defendants removed this case to federal court on April 16,
1999.

      In November 1999, a class action was filed in Ohio on behalf of Salem
Lights smokers who do not have a claim for personal injury from smoking, against
RJR Tobacco, and its parent company, RJR. Nichols v. R. J. Reynolds Tobacco Co.,
United States District Court for the Northern District of Ohio, Case No. CV 99
11 4539. Defendants removed this case to federal court on December 10, 1999.
Plaintiffs filed a motion to remand on January 25, 2000. RJR Tobacco files its
opposition to remand on February 11, 2000.

                           WHOLESALER ANTITRUST CASES

      Plaintiffs in these lawsuits are tobacco wholesalers who are suing United
States cigarette manufacturers, including RJR Tobacco, and its parent company,
RJR, alleging that cigarette manufacturers combined and conspired to set the
price of cigarettes, in violation of antitrust statutes and various state unfair
business practices statutes, as a result of which plaintiffs suffered economic
injury. In all cases, plaintiffs are asking the court to certify the lawsuits as
class actions, and to allow the respective plaintiffs to pursue the lawsuits as
representatives of other persons in the United States, and throughout the world,
that purchased cigarettes directly from one or more of the defendants.


                                       11
<PAGE>   12

      A.D. Bedell Wholesale Co., Inc. v. Philip Morris, Inc., United States
District Court for the Western District of Pennsylvania, Case No. 99-558, was
filed in April 1999. Defendants' joint motion to dismiss the complaint remains
pending before the court.

      Buffalo Tobacco Products v. Philip Morris Cos., Inc., United States
District Court for the District of Columbia, Case No. 1:00CV00224, was filed on
February 8, 2000.

      Serrone v. Philip Morris Cos., Inc, Circuit Court, Wayne County, Michigan,
Case No. 00-004035 CZ, was filed on February 8, 2000.

      Lennon v. Philip Morris Cos., Inc., Supreme Court, New York County, New
York, Case No. 102396, was filed on February 9, 2000.

      Munoz v. R. J. Reynolds Tobacco Co., Superior Court, San Francisco County,
California, Case No. 309834, was filed on February 9, 2000.

      Romero v. Philip Morris Cos., Inc., District Court, Rio Arriba County, New
Mexico, Case No. D0117CV200000462, was filed on February 9, 2000.

      Withers v. Philip Morris Cos., Inc., Circuit Court, Jefferson County,
Tennessee, Case No. 17,194-I, was filed on February 9, 2000.

      Quickle v. Philip Morris Cos., Inc., Circuit Court, Brooke County, West
Virginia, Case No. 00-C-28-RI, was filed on February 12, 2000.

      Ludke v. Philip Morris Cos., Inc., District Court, Hennepin County,
Minnesota, Case No. MC-00-1954, was filed on February 14, 2000.

      Faherty v. Philip Morris Cos., Inc., Superior Court, Cumberland County,
Maine, Case No. CV00-117, was filed on February 16, 2000.

      Shafer v. Philip Morris Cos., Inc., District Court, Morton County, North
Dakota, Case No. 00-C-1107, was filed on February 16, 2000.

      Vetter v. Philip Morris Cos., Inc., Circuit Court, Hughes County, South
Dakota, Case No. 0056, was filed on February 16, 2000.

                              TOBACCO GROWERS' CASE

      DeLoach v. Philip Morris Cos., Inc., United States District Court for the
District of Columbia, Case No. 1:00CV00294, was filed on February 16, 2000. The
class action complaint was filed on behalf of an estimated 520,000 tobacco
growers and quota holders in the United States. The complaint alleges that the
major tobacco companies conspired among themselves, and with fourteen attorneys
general and one individual, to subvert and undermine the longstanding regulatory
system administered by the U.S. Department of Agriculture, pursuant to federal
statutes and regulations governing the production and sale of cigarette tobacco
in the United States. The suit asserts claims for violation of Section 2 of the
Sherman Antitrust Act, breach of fiduciary duty, and fraud. The plaintiffs seek
damages, including treble damages under the antitrust statute, totaling $69
billion.


                                       12
<PAGE>   13

                      HEALTH CARE COST RECOVERY LITIGATION

      In certain of the 65 pending proceedings, various local government
entities and others seek reimbursement for health care expenditures allegedly
caused by tobacco products. The claims asserted in these health care cost
recovery actions vary. Generally, plaintiffs assert the equitable claim that the
tobacco industry was "unjustly enriched" by plaintiffs' payment of health care
costs allegedly attributable to smoking and seek reimbursement of those costs.
The plaintiffs also assert one or more of the following additional claims: the
equitable claim of indemnity, common law claims of negligence, strict liability,
breach of express and implied warranty, violation of a voluntary undertaking or
special duty, fraud, negligent misrepresentation, conspiracy, public nuisance,
claims under state and federal statutes governing consumer fraud, antitrust,
deceptive trade practices and false advertising, and claims under federal or
state RICO statutes.

      Each plaintiff seeks reimbursement of health care costs. Other relief
sought by some, but not all, plaintiffs includes punitive damages, treble
damages for alleged antitrust law violations, injunctions prohibiting alleged
marketing and sales to minors, disclosure of research, disgorgement of profits,
funding of anti-smoking programs, disclosure of nicotine yields and payment of
attorney and expert witness fees.

      The defendants, including RJR Tobacco, raise a variety of defense,
including: failure to state a valid claim, lack of benefit; adequate remedy at
law; "unclean hands" (namely, that plaintiffs cannot recover because they
participated in, and benefited from, the sale of cigarettes); lack of antitrust
injury; federal preemption; and lack of proximate cause and statute of
limitations. In addition, defendants argue that they should be entitled to
"set-off" any alleged damages to the extent a governmental entity benefits
economically from the sale of cigarettes through the receipt of excise taxes or
otherwise.

      Defendants also argue that all of these cases are improper because
plaintiffs must proceed under principles of subrogation and assignment. Under
traditional theories of recovery, a payor of medical costs (such as an insurer)
can seek recovery of health care costs from a third party solely by "standing in
the shoes" of the injured party. Defendants argue that plaintiffs should be
required to bring an action on behalf of each individual health care recipient
and should be subject to all defenses available against the allegedly injured
party.

      The following cases are health care cost recovery suits filed against RJR
Tobacco, and, in some cases, its parent company, RJR, that were active in 1999.
These cases have been further broken down as to the type of plaintiff involved.

                              STATE OR COMMONWEALTH
                            HEALTH CARE COST RECOVERY

      On November 23, 1998, major tobacco manufacturers entered into a Master
Settlement Agreement with attorneys general representing 46 states, the District
of Columbia, Puerto Rico, Guam, the Virgin Islands, American Samoa and the
Northern Marianas (collectively referred to as the "settling states"). The MSA
resolves the various health care cost recovery actions brought by the
states/commonwealths/territories, and their various political subdivisions, and
contains releases of certain additional present and future claims.

      The MSA became final on November 12, 1999 when over 80% of the settling
states approved the MSA. As of February 23, 2000, 46 settling states had
approved the MSA.

                                    TERRITORY
                            HEALTH CARE COST RECOVERY

      The Republic of the Marshall Islands v. American Tobacco Co., Inc., High
Court, Marshall Islands, Case No. 1997-261, was filed in October 1997. On
January 7, 2000, plaintiff filed a second amended complaint. Discovery is
ongoing, and trial has been scheduled for October 1, 2000.

                                       13
<PAGE>   14

                                   CITY/COUNTY
                            HEALTH CARE COST RECOVERY

      Claims similar to those advanced in the state attorneys general actions
have also been asserted by cities and/or counties in separate actions. In
addition to the variety of substantive defenses described above, it is the
industry's position that recovery in any such actions (if any) should be subject
to the offset provisions of the MSA, and therefore, beyond the potential cost of
defending these actions through trial, there should be no additional financial
exposure as a result of these cases.

      Certain of the city/county cases have been dismissed in light of the
approval in the relevant jurisdictions of the MSA. Others, however, were active
during 1999, and remain pending to date.

      San Francisco v. Philip Morris, Inc., United States District Court for the
Northern District of California, Case No. C-96-2090 DLJ, was filed in June 1996.
On February 2, 2000, the parties stipulated to a dismissal of this lawsuit.

      California v. Philip Morris, Inc., Superior Court, San Francisco County,
Case No. 980864, was filed in September 1996. On June 10, 1999, plaintiffs'
request for dismissal was accepted by the court.

      Davis v. R. J. Reynolds Tobacco Co., Superior Court, San Diego County,
California, Case No. 00706458, was filed in July 1996. On February 25, 1999,
plaintiffs voluntarily dismissed certain defendants, including RJR Tobacco.

      City of New York v. The Tobacco Institute, Supreme Court, New York County,
New York, Case No. 406225/96, was filed in October 1996. In January 1999, the
court ruled that the pending motions in this case, including motions to dismiss,
were "moot" as this case has been settled as part of the MSA.

      County of Erie v. The Tobacco Institute, Supreme Court, Erie County, New
York, Case No. I 1997/359, was filed in January 1997. In February 1999, the
court stayed this action until decision of Erie County's appeal of the New York
trial court's approval of the MSA or until further order of the court. On
January 5, 2000, the parties filed a stipulation discontinuing this action.

      County of Cook v. Philip Morris, Inc., Circuit Court, Cook County,
Illinois, Case No. 97-L-4550, was filed in April 1997. On December 10, 1999,
certain defendants filed a motion for summary judgment, which is currently
pending before the court.

      City of Birmingham v. American Tobacco Co., Inc., United States District
Court for the Northern District of Alabama, Case No. CV-97-P-1449-W, was filed
in May 1997. The parties stipulated to a dismissal that was granted by the court
on October 26, 1999.

      City of St. Louis v. American Tobacco Co., Inc., United States District
Court for the Eastern District of Missouri, Case No. 4:98CV02087ERW, was filed
in November 1998. The parties are currently awaiting the court's ruling on
certain defendants' motion to dismiss the first amended petition which was filed
on December 16, 1999.

      St. Louis County v. American Tobacco Co., Inc., United States District
Court for the Eastern District of Missouri, Case No. 4:98CV02104ERW, was filed
in November 1998. Defendants have until February 17, 2000 to file answer or
other response to plaintiffs' complaint.

      County of Allegheny v. American Tobacco Co., Inc., United States District
Court for the Western District of Pennsylvania, Case No. 99-365, was filed in
March 1999. Plaintiffs voluntarily dismissed this case on May 14, 1999.


                                       14
<PAGE>   15

      County of Wayne v. Philip Morris, Inc., United States District Court for
the Eastern District of Michigan, Case No. 99-936252-NZ, was filed in December
1999. Defendants removed the case to federal court on December 22, 1999. RJR
Tobacco filed its answer to the complaint on December 23, 1999.

                                     UNIONS
                            HEALTH CARE COST RECOVERY

      Lawsuits have been brought by union trust funds against cigarette
manufacturers, including RJR Tobacco and others (RJR in some cases), in state
and federal courts across the country in the past three years. The funds seek
recovery on an aggregate basis for their payment of medical expenses of their
"participants" - unionized employees and their dependents -- allegedly injured
by cigarettes. The complaints in these cases are substantially identical, and
more than 30 of the cases purport to be class actions on behalf of all union
funds in a particular state.

      Stationary Engineers Local 393 Health & Welfare Trust Fund v. Philip
Morris, Inc., United States District Court for the Northern District of
California, Case No. C-97-1519-MMC, was filed in April 1997. On April 30, 1998,
defendants' motion to dismiss was granted in part and denied. Plaintiffs
appealed this ruling to the United States Court of Appeals for the Ninth
Circuit. On February 15, 2000, an agreement was reached to dismiss the case for
a waiver of costs. A stipulation of dismissal reflecting this agreement is to be
filed with the court.

      Northwest Laborers-Employers Health & Security Trust Fund v. Philip
Morris, Inc., United States District Court for the Western District of
Washington, Case No. C97-849-WD, was filed in May 1997. In December 1998, the
court denied defendants' motion for judgment on the pleadings. On December 17,
1999, the court granted the parties' joint motion for preliminary approval of
agreement to dismiss upon certain conditions. A hearing on the final approval of
the preliminary approval order and notice to the class of dismissal was held on
February 1, 2000, at which time the court granted plaintiffs' motion to dismiss
their appeal to the United States Court of Appeals for the Ninth Circuit.

      Iron Workers Union Insurance Fund v. Philip Morris, Inc. United States
District Court for the Northern District of Ohio, Case No. 1:97 CV 144, was
filed in May 1997. In October 1998, the trial court granted plaintiffs' motion
for certification of a class consisting of all Ohio labor health and welfare
funds. In February 1999, the United States Court of Appeals for the Sixth
Circuit declined to review the trial court's certification of the class. The
trial of this case began on February 22, 1999. On March 18, 1999, a verdict was
returned in favor of defendants on all counts. On May 11, 1999, plaintiffs moved
the court for a new trial. However, on October 4, 1999, the parties consented
to, and the court granted, a voluntary dismissal.

      Laborers District Council Health and Welfare Trust Fund v. Philip Morris,
Inc., United States District Court for the Western District of Kentucky, Case
No. 3:97CV-394-H, was filed in June 1997. On October 6, 1999, a consent order of
dismissal was entered by the court.

      Massachusetts Laborers Health and Welfare Fund v. Philip Morris, Inc.,
United States District Court for the District Court of Massachusetts, Case No.
97-11552-GAO, was filed in June 1997. On October 5, 1999, plaintiffs filed a
first amended complaint. Defendants have obtained from plaintiff's counsel an
open-ended extension of time within which to file their answers.

      Hawaii Health & Welfare Fund for Operating Engineers v. Philip Morris,
Inc., United States District Court for the District of Hawaii, Case No.
97-00833, was filed in June 1997. In January 1999, the court granted defendants'
motion to dismiss based on the remoteness doctrine. Plaintiffs appealed this
ruling to the United States Court of Appeals for the Ninth Circuit. On February
15, 2000, an agreement was reached to dismiss the case for a waiver of costs. A
stipulation of dismissal reflecting this agreement is to be filed with court.


                                       15
<PAGE>   16

      United Federation of Teachers Welfare Fund v. Philip Morris, Inc., United
States District Court for the Southern District of New York, Case No.97CIV4676,
was filed in June 1997. On March 25, 1999, the federal district court granted in
part, and dismissed in part, plaintiffs' complaint. Plaintiffs appealed this
ruling to the United States Court of Appeals for the Second Circuit, who, on
April 9, 1999, reversed the district court's ruling, and ordered the district
court to dismiss plaintiffs' complaint. On April 23, 1999, plaintiffs petitioned
the Second Circuit for a panel rehearing. On July 30, 1999, plaintiffs requested
a pre-motion conference for leave to file a second amended complaint in the
federal district court, which the Second Circuit denied. On August 18, 1999, the
Second Circuit remanded the case back to the federal district court with
directions to dismiss plaintiffs' complaint. On November 4, 1999, plaintiffs
filed a petition for certiorari to the U.S. Supreme Court, which was denied on
January 10, 2000.

      Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., United
States District Court for the Southern District of New York, Case Number
97CIV4550, was filed in June 1997. On March 25, 1999, the federal district court
granted in part, and dismissed in part, plaintiffs' complaint. Plaintiffs
appealed this ruling to the United States Court of Appeals for the Second
Circuit, which, on April 9, 1999, reversed the district court's ruling, and
ordered the district court to dismiss plaintiffs' complaint. On April 23, 1999,
plaintiffs petitioned the Second Circuit for a panel rehearing. On July 30,
1999, plaintiffs requested a pre-motion conference for leave to file a second
amended complaint in the federal district court, which the Second Circuit
denied. On August 18, 1999, the Second Circuit remanded the case back to the
federal district court with directions to dismiss plaintiffs' complaint. On
November 4, 1999, plaintiffs filed a petition for certiorari to the U.S. Supreme
Court, which was denied on January 10, 2000.

      Oregon Laborers-Employers Health & Welfare Trust Fund v. Philip Morris,
Inc., United States District Court for the District of Oregon, Case No.
9706-04707, was filed in June 1997. Plaintiffs filed a motion for class
certification. On August 3, 1998, the federal district court granted defendants'
motion for judgment on the pleadings. On July 14, 1999, the Ninth Circuit Court
of Appeals affirmed the district court's dismissal. Plaintiffs filed a petition
for certiorari to the United States Supreme Court on October 12, 1999. On
January 10, 2000, the United States Supreme Court denied the petition.

      Laborers and Operating Engineers Utility Agreement Health & Welfare Trust
Fund v. Philip Morris, Inc., United States District Court for the District of
Arizona, Case No. 97-1406-PHXSMM, was filed in June 1997. In February 17 1999,
the court granted defendants' motion to dismiss the first amended complaint.
Plaintiffs appealed this ruling to the United States Court of Appeals for the
Ninth Circuit. On February 15, 2000, an agreement was reached to dismiss the
case for a waiver of costs. A stipulation of dismissal reflecting this agreement
is to be filed with court.

      Central Laborers Welfare Fund v. Philip Morris, Inc., United States
District Court for Southern District of Illinois, Case No. 97-568-WDS, was filed
in June 1997. Currently pending before the court are defendants' motion to
dismiss, and motion to transfer venue.

      Ark-La-Miss Laborers Welfare Fund v. Philip Morris, Inc., United States
District Court for the Eastern District of Louisiana, Case No. 97-1944, was
filed in June 1997. On March 31, 1999, this court ordered this case stayed, and
administratively closed, pending a decision by the United States Court of
Appeals for the Fifth Circuit in the Texas Carpenters case. On January 19, 2000,
the Fifth Circuit affirmed the trial court's dismissal of the Texas Carpenters
case.

      International Operating Engineers Local 132 (formerly West Virginia
Laborers Pension Fund) v. Philip Morris, Inc., United States District Court for
the Southern District of West Virginia, Case No. 3:97-0708, was filed in July
1997. On June 29, 1999, the court entered an order dismissing this action.


                                       16
<PAGE>   17

      Eastern States Health & Welfare Fund v. Philip Morris, Inc., Supreme
Court, New York County, New York, Case No. 97/603869, was filed in July 1997. On
January 6, 1998, the judge issued an order stating that the group of similar
union cases pending before the court (Eastern States, Puerto Rican ILGWU, IBEW
Local 363, IBEW Local 25, Local 840, Local 138, 138A and 138B, Long Island
Regional Council of Carpenters, Day Care Council-Local 205, Local 1199 National
Benefit Fund, and Local 1199 Home Care Industry) were related for the purposes
of pretrial discovery and would be assigned the same judge. On August 28, 1998,
defendants filed a motion to dismiss. The court granted in part, and denied in
part, their motion. On August 18, 1999, defendants filed a supplemental notice
of motion to dismiss on statute of limitation grounds. On August 23, 1999,
defendants filed a request for judicial intervention to dismiss this action
because of delinquent discovery and inactivity. The court has not yet entered an
order officially dismissing the case.

      Rhode Island Laborers Health & Welfare Fund v. American Tobacco Co., Inc.,
United States District Court for the District of Rhode Island, Case No. 97-500L,
was filed in July 1997. Discovery is ongoing.

      Connecticut Pipe Trades Health Fund v. Philip Morris, Inc., United States
District Court for the District of Connecticut, Case No. 397CV01305 (JBA), was
filed in July 1997. On November 22, 1999, the parties' joint stipulation of
dismissal was approved by the court.

      Asbestos Workers Local 53 Health and Welfare Fund v. Philip Morris, Inc.,
United States District Court for the Eastern District of Louisiana, Case No.
97-2570, was filed in August 1997. On March 31, 1999, this court ordered this
case stayed, and administratively closed, pending a decision by the United
States Court of Appeals for the Fifth Circuit in the Texas Carpenters case. On
January 19, 2000, the Fifth Circuit affirmed the trial court's dismissal of the
Texas Carpenters case.

      Teamsters No. 142 Health and Welfare Trust Fund v. Philip Morris, Inc.,
United States District Court for the Northern District of Indiana, Case No.
3:97CV00667RM, was filed in September 1997. The court listed this case "as being
in a state of `suspended animation' and the defendants are not required to take
any action at this time." Plaintiffs' counsel will contact the court if and when
he wishes to activate this case.

      Puerto Rican ILGWU Health & Welfare Fund v. Philip Morris, Inc., Supreme
Court, New York County, New York, Case No. 97/604785, was filed in September
1997. On August 28, 1998, defendants filed their motion to dismiss. The court
granted in part, and denied in part, their motion. On August 18, 1999,
defendants filed a supplemental notice of motion to dismiss on statute of
limitation grounds. On August 23, 1999, defendants filed a request for judicial
intervention to dismiss this action because of delinquent discovery and
inactivity. The court has not yet entered an order officially dismissing the
case.

      Arkansas Carpenters Health & Welfare Fund v. Philip Morris, Inc., United
States District Court for the District of Arkansas, Case No. LR-C-97-0754, was
filed in September 1997. On September 28, 1999, the court granted defendants'
motions to dismiss On October 22, 1999, plaintiffs appealed this ruling to the
United States Court of Appeals for the Eighth Circuit. On November 19, 1999,
plaintiffs-appellants' filed a motion to dismiss their appeal which was granted,
and entered by the appellate court on November 22, 1999, and by the trial court
on December 2, 1999.

      Central States Joint Board Health and Welfare Trust Fund v. Philip Morris,
Inc., United States District Court for the Northern District of Illinois, Case
No. 97C8114, was filed in October 1997. On December 1, 1998, the federal court
granted defendants' motion to dismiss. On November 15, 1999, the U.S. Court of
Appeals for the Seventh Circuit affirmed the trial court's ruling.

      Texas Carpenters Health Benefit Fund v. Philip Morris, Inc., United States
District Court for the Eastern District of Texas, Case No. 97-CV-0625, was filed
in October 1997. On January 19, 2000, the United States Court of Appeals for the
Fifth Circuit affirmed the trial court's August 31, 1998 order granting
defendants' motion to dismiss the complaint.


                                       17
<PAGE>   18

      International Brotherhood of Teamsters Local 734 Health and Welfare Trust
Fund v. Philip Morris, Inc., United States District Court for the Northern
District of Illinois, Case No. 97C8113, was filed in October 1997. On December
1, 1998, the federal court granted defendants' motion to dismiss. On November
15, 1999, the U.S. Court of Appeals for the Seventh Circuit affirmed the trial
court's ruling.

      New Mexico and West Texas Multi-Craft Health & Welfare Fund v. Philip
Morris, Inc., District Court, Bernalillo County, New Mexico, Case No.
CV-97-0009118, was filed in October 1997. In December 1998, the court dismissed
the case with prejudice noting that the "remoteness doctrine was the principle
catalyst for this decision."

      IBEW Local 25 Health & Welfare Benefit Fund v. Philip Morris, Inc.,
Supreme Court, New York County, New York, Case No. 97/122255, was filed in
November 1997. On August 28, 1998, defendants filed their motion to dismiss,
which the court granted in part, and denied in part. On August 18, 1999,
defendants filed a supplemental notice of motion to dismiss on statute of
limitation grounds. On August 23, 1999, defendants filed a request for judicial
intervention to dismiss this action because of delinquent discovery and
inactivity. The court has not yet entered an order officially dismissing the
case.

      IBEW Local 363 Welfare Fund v. Philip Morris, Inc., Supreme Court, New
York County, New York, Case No. 97/122254, was filed in November 1997. On August
28, 1998, defendants filed their motion to dismiss, which the court granted in
part and denied in part. On August 18, 1999, defendants filed a supplemental
notice of motion to dismiss on statute of limitation grounds. On August 23,
1999, defendants filed a request for judicial intervention to dismiss this
action because of delinquent discovery and inactivity. The court has not yet
entered an order officially dismissing the case.

      Long Island Regional Council of Carpenters Welfare Fund v. Philip Morris,
Inc., Supreme Court, New York County, New York, Case No. 97/122258, was filed in
November 1997. On August 28, 1998, defendants filed their motion to dismiss. The
court granted in part, and denied in part, their motion. On August 18, 1999,
defendants filed a supplemental notice of motion to dismiss on statute of
limitation grounds. On August 23, 1999, defendants filed a request for judicial
intervention to dismiss this action because of delinquent discovery and
inactivity. The court has not yet entered an order officially dismissing the
case.

      Local 840, International Brotherhood of Teamsters Health & Insurance Fund
v. Philip Morris, Inc., Supreme Court, New York County, New York, Case No.
97/122256, was filed in November 1997. On August 28, 1998, defendants filed
their motion to dismiss. The court granted in part, and denied in part, their
motion. On August 18, 1999, defendants filed a supplemental notice of motion to
dismiss on statute of limitation grounds. On August 23, 1999, defendants filed a
request for judicial intervention to dismiss this action because of delinquent
discovery and inactivity. The court has not yet entered an order officially
dismissing the case.

      Local 138, 138A, and 138B International Union of Operating Engineers
Welfare Fund v. Philip Morris, Inc., Supreme Court, New York County, New York,
Case No. 97/122257, was filed in November 1997. On August 28, 1998, defendants
filed their motion to dismiss. The court granted in part, and denied in part,
their motion. On August 18, 1999, defendants filed a supplemental notice of
motion to dismiss on statute of limitation grounds. On August 23, 1999,
defendants filed a request for judicial intervention to dismiss this action
because of delinquent discovery and inactivity. The court has not yet entered an
order officially dismissing the case.

      United Food & Commercial Workers Union v. Philip Morris, Inc., United
States District Court for the Northern District of Alabama, Case No. CV-97-1340,
was filed in November 1997. On December 30, 1997, defendants removed this case
to federal court. On August 11, 1999, the trial court entered an order denying
plaintiffs' motion to amend its complaint, and granting defendants' motion to
dismiss. The court also vacated conditional class certification previously
granted by the state court, and dismissed the case as to the claims of the other
class members. On September 1, 1999, plaintiffs appealed the federal district
court's ruling to the United States Court of Appeals for the Eleventh Circuit,
where briefing has been completed. The Eleventh Circuit has not yet scheduled
oral argument.

                                       18
<PAGE>   19

      Screen Actors Guild-Producers Health & Welfare Fund Plan v. Philip Morris,
Inc., Superior Court, Los Angeles County, California, Case No. BS181603, was
filed in November 1997. On July 26, 1999, the court granted plaintiffs' motion
to intervene into Operating Engineers Local 12.

      Day Care Council Local 205 D.C. 1717 Welfare Fund v. Philip Morris, Inc.,
Supreme Court, New York County, New York, Case No. 97/606240, was filed in
December 1997. On August 28, 1998, defendants filed their motion to dismiss. The
court granted in part, and denied in part, their motion. On August 18, 1999,
defendants filed a supplemental notice of motion to dismiss on statute of
limitation grounds. On August 23, 1999, defendants filed a request for judicial
intervention to dismiss this action because of delinquent discovery and
inactivity. The court has not yet entered an order officially dismissing the
case.

      Local 1199 National Benefit Fund for Health and Human Services Employees
v. Philip Morris, Inc., Supreme Court, New York County, New York, Case No.
97/606241, was filed in December 1997. On August 28, 1998, defendants filed
their motion to dismiss. The court granted in part, and denied in part, their
motion. On August 18, 1999, defendants filed a supplemental notice of motion to
dismiss on statute of limitation grounds. On August 23, 1999, defendants filed a
request for judicial intervention to dismiss this action because of delinquent
discovery and inactivity. The court has not yet entered an order officially
dismissing the case.

      Local 1199 Home Care Industry Benefit Fund v. Philip Morris, Inc., Supreme
Court, New York County, New York, Case No. 97/606249, was filed in December
1997. On August 28, 1998, defendants filed their motion to dismiss. The court
granted in part, and denied in part, their motion. On August 18, 1999,
defendants filed a supplemental notice of motion to dismiss on statute of
limitation grounds. On August 23, 1999, defendants filed a request for judicial
intervention to dismiss this action because of delinquent discovery and
inactivity. The court has not yet entered an order officially dismissing the
case.

      Operating Engineers Local 12 Health & Welfare Fund v. American Tobacco
Co., Inc., Superior Court, Los Angeles County, California, Case No. BC 177968,
was filed in December 1997. On July 26, 1999, the court granted plaintiffs'
motion to consolidate several similar cases, pending before the same judge, with
this case designated as the lead and controlling case for the consolidation.

      Carpenters & Joiners Welfare Fund v. Philip Morris, Inc., United States
District Court for the District of Minnesota, Case No. 98-515JMR/FLN, was filed
in December 1997. Defendants' motion to dismiss plaintiffs' amended complaint
was granted by the trial court on April 29, 1999. This ruling is currently on
appeal in the United States Court of Appeals for the Eighth Circuit.

      Operating Engineers Local 324 Health Care Fund v. Philip Morris, Inc.,
Circuit Court, Wayne County, Michigan, Case No. 5:98-CV-60020, was filed in
December 1997. On February 26, 1999, the court granted defendants' motion to
dismiss plaintiffs' first amended complaint. This case is currently on appeal in
the Michigan Court of Appeals.

      Steamfitters Local Union No. 614 Health and Welfare Fund v. Philip Morris,
Inc., Circuit Court, Shelby County, Tennessee, Case No. 92260-2, was filed in
January 1998. The parties have completed briefing on defendants' interlocutory
appeal of the January 29, 1999 order denying in part defendants' motion to
dismiss. Oral argument before Tennessee Court of Appeals took place on November
22, 1999; however, no ruling has yet been made.

      The National Asbestos Workers Medical Fund v. Philip Morris, Inc., United
States District Court for the Eastern District of New York, Case No. CV 98 1492,
was filed in February 1998. On October 19, 1998, the court denied defendants'
motion to dismiss. Trial in this case is scheduled for June 5, 2000.

      U.A. Local No. 467 Health and Welfare Trust Fund v. Philip Morris, Inc.,
Superior Court, San Mateo County, California, Case No. 404308, was filed in
March 1998. On July 26, 1999, the court granted plaintiffs' motion to
consolidate this case with Operating Engineers Local 12, which is the lead and
controlling case for the consolidation.

                                       19
<PAGE>   20

      Milwaukee Carpenters District Council Health Fund, Welfare Benefit Plan
and Its Trustees v. Philip Morris, Inc., United States District Court for the
Eastern District of Wisconsin, Case No. 98 CV 0394, was filed in March 1998. On
January 13, 2000, this case was dismissed with prejudice by court order.

      Service Employees International Union Health & Welfare Fund v. Philip
Morris, Inc., United States District Court for the District of Columbia, Case
No. 1:98CV00704-GK, was filed in March 1998. On December 21, 1999, in the three
union cases of: (1) Michael H. Holland; (2) Service Employees International
Union; and (3) S.E.I.U. Local 74, a federal district court judge in the District
of Columbia held that plaintiffs' complaints would not be dismissed on
remoteness grounds and that plaintiffs' RICO claims could continue at this
stage, despite the multiple courts of appeals' rulings holding otherwise in
similar cases. The judge, however, did dismiss certain other claims in these
suits.

      Bay Area Automotive Group Welfare Fund v. Philip Morris, Inc., Superior
Court, San Francisco County, California, Case No. 994380, was filed in April
1998. This case was voluntarily dismissed on August 6, 1999.

      Bay Area Delivery Drivers Security Fund v. Philip Morris, Inc., Superior
Court, Alameda County, California, Case No. 797589-9, was filed in April 1998.
This case was voluntarily dismissed on August 6, 1999.

      Teamsters Benefit Trust v. Philip Morris, Inc., Superior Court, Alameda
County, California, Case No. 796981-5, was filed in April 1998. This case was
voluntarily dismissed on August 6, 1999.

      Newspaper Periodical Drivers Local 921 v. Philip Morris, Inc., Superior
Court, San Mateo County, California, Case No. 404469, was filed in April 1998.
This case was voluntarily dismissed on August 6, 1999.

      U.A. Local No. 343 Health and Welfare Trust Fund v. Philip Morris, Inc.,
Superior Court, Alameda County, California, Case No. 796956-4, was filed in
April 1998. This case was voluntarily dismissed on August 6, 1999.

      U.A. Local No. 159 Health and Welfare Trust Fund v. Philip Morris, Inc.,
Superior Court, Alameda County, California, Case No. 796938 8, was filed in
April 1998. This case was voluntarily dismissed on August 6, 1999.

      Sign Pictorial and Display Industry Welfare Fund v. Philip Morris, Inc.,
Superior Court, San Francisco County, California, Case No. 994403, was filed in
April 1998. This case was voluntarily dismissed on August 6, 1999.

      San Francisco Newspaper Publishers and Northern California Newspaper Guild
Health & Welfare Trust v. Philip Morris, Inc., Superior Court, San Francisco
County, California, Case No. 994409, was filed in April 1998. This case was
voluntarily dismissed on August 6, 1999.

      Pipe Trades District Council No. 36 Health & Welfare Trust Fund v. Philip
Morris, Inc., Superior Court, Alameda County, California, Case No. 797130-1, was
filed in April 1998. This case was voluntarily dismissed on August 6, 1999.

      Milwaukee Carpenters District Council Health Fund, Welfare Benefit Plan
and its Trustees v. Philip Morris, Inc., Circuit Court, Milwaukee County,
Wisconsin, Case No. 98CV001704, was filed in April 1998. On September 13, 1999,
plaintiffs' motion to dismiss was granted by the court.


                                       20
<PAGE>   21

      North Coast Trust Fund v. Philip Morris, Inc., Superior Court, San
Francisco County, California, Case No. 994575, was filed in April 1998. On July
26, 1999, the court granted plaintiffs' motion to consolidate this case with
Operating Engineers Local 12, which is the lead and controlling case for the
consolidation.

      Northern California Bakery Drivers Security Fund v. Philip Morris, Inc.,
Superior Court, Alameda County, California, Case No. 797362-6, was filed in
April 1998. This case was voluntarily dismissed on August 6, 1999.

      U.A. Local No. 393 Health and Welfare Trust Fund v. Philip Morris, Inc.,
Superior Court, Alameda County, California, Case No. 798474-3, was filed in May
1998. On July 26, 1999, the court granted plaintiffs' motion to consolidate this
case with Operating Engineers Local 12, which is the lead and controlling case
for the consolidation.

      Northern California Plasterers Health & Welfare Trust Fund v. Philip
Morris, Inc., Superior Court, San Francisco County, California, Case No. 995226,
was filed in May 1998. This case was voluntarily dismissed on August 6, 1999.

      Northern California General Teamsters Security Fund v. Philip Morris,
Inc., Superior Court, Alameda County, California, Case No. 798492 9, was filed
in May 1998. This case was voluntarily dismissed on August 6, 1999.

      Utah Laborers Health & Welfare Trust Fund v. Philip Morris, Inc., United
States District Court for the District of Utah, Case No. 2:98CV403C, was filed
in June 1998. On March 31, 1999, the court denied defendants' motion to dismiss.
On November 22, 1999, the United States Court of Appeals for the Tenth Circuit
granted defendants' petition to appeal this ruling.

      Joint Benefit Trust v. Philip Morris, Inc., Superior Court, Alameda
County, California, Case No. 799495-5, was filed in June 1998. This case was
voluntarily dismissed on August 6, 1999.

      Northern California Pipe Trades Health and Welfare Trust v. Philip Morris,
Inc., Superior Court, Alameda County, California, Case No. 799692-4, was filed
in June 1998. This case was voluntarily dismissed on August 6, 1999.

      S.E.I.U. Local 74 Welfare Fund v. Philip Morris, Inc., United States
District Court for the District of Columbia, Case No. 1:98CV01569, was filed in
June 1998. On December 21, 1999, in the three union cases of: (1) Michael H.
Holland; (2) Service Employees International Union; and (3) S.E.I.U. Local 74, a
federal district court judge in the District of Columbia held that plaintiffs'
complaints would not be dismissed on remoteness grounds and that plaintiffs'
RICO claims could continue at this stage, despite the multiple courts of
appeals' rulings holding otherwise in similar cases. The judge, however, did
dismiss certain other claims in these suits

      Shop Ironworkers Local 790 Welfare Plan v. Philip Morris, Inc., Superior
Court, Alameda County, California, Case No. 801309-3, was filed in July 1998.
This case was voluntarily dismissed on August 6, 1999.

      IBEW Local 595 Health and Welfare Trust Fund v. Philip Morris, Inc.,
Superior Court, Alameda County, California, Case No. 801292-0, was filed in July
1998. This case was voluntarily dismissed on August 6, 1999.

      Plastering Industry Welfare Trust Fund v. Philip Morris, Inc., Superior
Court, San Francisco County, California, Case No. 996189, was filed in July
1998. This case was voluntarily dismissed on August 6, 1999.


                                       21
<PAGE>   22

      Northern California Tile Industry Health & Welfare Trust Fund v. Philip
Morris, Inc., Superior Court, San Francisco County, California, Case No. 996822,
was filed in July 1998. This case was voluntarily dismissed on August 6, 1999.

      Central Valley Painting & Decorating Health & Welfare Trust Fund v. Philip
Morris, Inc., Superior Court, San Francisco County, California, Case No. 996262,
was filed in July 1998. This case was voluntarily dismissed on August 6, 1999.

      Contractors, Laborers, Teamsters & Engineers Health & Welfare Plan v.
Philip Morris, Inc., United States District Court for the District of Nebraska,
Case No. 8:98CV364, was filed in August 1998. In February 1999, the court
granted defendants' motion to dismiss for failure to state a claim.

      Holland v. Philip Morris, Inc., United States District Court for the
District of Columbia, Case No. 1:98CV01716, was filed in August 1998. On
December 21, 1999, in the three union cases of: (1) Michael H. Holland; (2)
Service Employees International Union; and (3) S.E.I.U. Local 74, a federal
district court judge in the District of Columbia held that plaintiffs'
complaints would not be dismissed on remoteness grounds and that plaintiffs'
RICO claims could continue at this stage, despite the multiple courts of
appeals' rulings holding otherwise in similar cases. The judge, however, did
dismiss certain other claims in these suits.

      San Francisco Culinary, Bartenders and Service Employees Welfare Fund v.
Philip Morris, Inc., Superior Court, San Francisco County, California, Case No.
996855, was filed in September 1998. This case was voluntarily dismissed on
August 6, 1999.

      Central Coast Trust Fund v. Philip Morris, Inc., Superior Court, San
Francisco County, California, Case No. 998208, was filed in September 1998. This
case was voluntarily dismissed on August 6, 1999.

      Sheet Metal Workers Trust Fund v. Philip Morris, Inc., United States
District Court for the District of Columbia, Case No. 1:99CV02326, was filed in
August 1999. On December 21, 1999, the court denied certain defendants' motions
to dismiss in part, but granted the motion in part with respect to plaintiffs'
failure to state a claim.

      Bergeron v. Philip Morris, Inc., United States District Court for the
Eastern District of New York, Case No. CV 99 6142, was filed in September 1999.
As of December 31, 1999, defendants were in the process of filing a motion to
dismiss.

                             INSURERS/SELF-INSURERS
                            HEALTH CARE COST RECOVERY

      Claims for recovery of health costs have also been filed by four groups of
health care insurers, as well as a private entity that operates its employee
health care programs on a self-insured basis. The claims advanced in these cases
are comparable to those advanced in the union health care cost recovery actions.

      Great Lakes Sales & Marketing (formerly Williams & Drake Co., Inc.) v.
American Tobacco Co., Inc., United States District Court for the Western
District of Pennsylvania, Case No. 98553, was filed in March 1998. On December
21, 1998, the trial court dismissed this case with prejudice. Plaintiffs
appealed this ruling to the United States Court of Appeals for the Third
Circuit, which affirmed the trial court's decision on April 20, 1999.

      Group Health Plan v. Philip Morris, Inc., United States District Court for
the District of Minnesota, Case No. 98-CV-1036, was filed in March 1998. On
January 25, 2000, the court granted in part, and denied in part, defendants'
motion to dismiss. Trial is scheduled for December 1, 2000.


                                       22
<PAGE>   23

      Regence Blueshield v. Philip Morris, Inc., United States District Court
for the Western District of Washington, at Seattle, Case No. C98-0559R, was
filed in April 1998. In January 6, 1999, the court granted certain defendants'
motion to dismiss. On February 4, 1999, plaintiffs appealed this ruling to the
United States Court of Appeals for the Ninth Circuit. On September 15, 1999,
plaintiffs-appellant filed a motion for stay or in the alternative for extension
of time to file opening briefs, which is still pending before the Ninth Circuit.

      Blue Cross and Blue Shield of New Jersey, Inc. v. Philip Morris, Inc.,
United States District Court for the Eastern District of New York, Case No. CV
98 3287, was filed in April 1998. On February 25, 1999, the trial court denied
certain defendants' motions to dismiss for failure to state a claim and failure
to join necessary parties. Trial in this case is scheduled for May 22, 2000.

      Arkansas Blue Cross and Blue Shield v. Philip Morris, Inc., United States
District Court for the Northern District of Illinois, Case No. 98 C 2612, was
filed in April 1998. On March 31, 1999, the trial court denied defendants' joint
motion to dismiss. Defendants appealed this ruling to the United States Court of
Appeals for the Seventh Circuit, which reversed and remanded the case to the
trial court with instructions to dismiss the complaint. On December 21, 1999,
the trial court entered an order dismissing plaintiffs' complaint. Plaintiffs
filed a motion to amend their complaint and a motion to vacate the December 21,
1999 dismissal, which the trial court denied on January 20, 2000, pursuant to
the order of the Seventh Circuit.

                                  INDIAN TRIBES
                            HEALTH CARE COST RECOVERY

      Muscogee Creek Nation v. American Tobacco Co., Inc., Muscogee Creek Tribal
Court, Oklahoma, Case No. CV 97-27, was filed in June 1997. On December 28,
1999, the court entered an order granting plaintiffs' motion for voluntary
dismissal.

      Lower Brule Sioux Nation v. American Tobacco Co., Inc., Lower Brule Sioux
Tribal Court, South Dakota, Case No. 97-5-0057, was filed in June 1997. Pending
approval of a tolling agreement between all parties regarding the voluntary
dismissal of the complaint, any applicable statute of limitations shall be
tolled with respect to any claims the Tribe may assert against defendants. The
tolling period shall run from September 14, 1997 to 365 days after the date the
Tribe's voluntary dismissal is filed in Tribal Court. A stipulation and proposed
order to stay the proceedings for 540 days was sent to plaintiff's counsel in
January 2000, with instructions to sign and return for filing with the court.
The signed stipulation has not yet been filed.

      Crow Creek Sioux Tribe v. American Tobacco Co., Inc., Tribal Court of the
Crow Creek Sioux, South Dakota, Case No. CV 97-09-082, was filed in September
1997. Pending approval of a tolling agreement between all parties regarding the
voluntary dismissal of the complaint, any applicable statute of limitations
shall be tolled with respect to any claims the Tribe may hereafter assert
against defendants. The tolling period shall run from September 14, 1997 to 365
days after the date the Tribe's voluntary dismissal is filed in Tribal Court. An
order staying the case for 540 days was entered on February 8, 2000.

      The Standing Rock Sioux Tribe v. American Tobacco Co., Inc., Standing Rock
Sioux Tribal Court, North Dakota, was filed in May 1998. On March 1, 1999,
defendants' motion to dismiss was denied. On April 27, 1999, the Court, upon
motion of defendants, entered an order staying proceedings. On August 6, 1999,
the Tribe's petition for review was granted. The parties are currently briefing
the pending appeal.

      The Sisseton-Wahpeton Sioux Tribe v. American Tobacco Co., Inc.,
Sisseton-Wahpeton Sioux Tribal Court, North Dakota, was filed in May 1998. On
November 2, 1999, the court granted in part, and denied in part, defendants'
motion to dismiss plaintiffs' first amended complaint. On November 12, 1999,
defendants filed a petition to for intermediate appeal, which the appeal court
granted on December 1, 1999. On January 20, 2000, the appeal court entered an
order staying all proceedings until July 1, 2000.

                                       23
<PAGE>   24

      Pechanga Band of Luiseno Mission Indians v. Philip Morris, Inc., Superior
Court, San Diego County, California, Case No. 725419, was filed in October 1998.
On January 7, 2000, plaintiffs filed a second amended complaint. On February 7,
2000, RJR Tobacco filed its answer.

      Yukon-Kuskokwim Health Corporation v. Philip Morris, Inc., Superior Court,
Bethel, Alaska, Case No. 4BE-99-84 CL, was filed in April 1999. Plaintiffs
voluntarily dismissed this action on August 20, 1999.

      Acoma Pueblo v. American Tobacco Co., Inc., District Court, Sante Fe
County, New Mexico, Case No. CIV 91049 WWD, was filed in June 1999. On November
18, 1999, the court entered an order staying this case until July 1, 2000.

      The Navajo Nation v. Philip Morris, Inc., District Court, Navajo Nation,
Arizona, Case No. WR-CV:449-99, was filed in August 1999. This case was filed on
August 11, 1999. On October 20, 1999, defendants filed a motion to dismiss
plaintiffs' complaint, to which plaintiffs have filed their opposition.
Defendants reply brief was filed on January 21, 2000. No date has been set for
oral argument on defendants' motion.

                                  INTERNATIONAL
                            HEALTH CARE COST RECOVERY

      Certain foreign countries have filed lawsuits in United States' courts
asserting claims comparable to those asserted in the domestic health care cost
recovery actions. These cases are as follows.

      Panama v. American Tobacco Co., Inc., United States District Court for the
Eastern District of Louisiana, Case No. 98-17752 F, was filed in October 1998.
This case was removed by defendants to federal court on November 15, 1998. On
December 4, 1998, plaintiffs filed a motion to remand the case back to state
court, which was granted on May 28, 1999. Defendants appealed this ruling to the
United States Court of Appeals for the Fifth Circuit on June 25, 1999, and
further moved to federal district court, on August 30, 1999, for a stay pending
the appeal. Briefing is underway in the appellate court.

      Her Majesty The Queen in Right of British Columbia v. Imperial Tobacco,
Ltd., Supreme Court, British Columbia, Vancouver Registry, Case No. C985776, was
filed in November 1998. On February 21, 2000, the British Columbia Supreme Court
declared the cost recovery act unconstitutional and dismissed the action.

      Bolivia v. Philip Morris, Inc., United States District Court for the
Southern District of Texas, Case No. G-99-110, was filed in January 1999. In
March 1999, the United States District Court for the Southern District of Texas
transferred this case to the United States District Court for the District of
Columbia. On February 19, 1999, defendants removed this case United States
District Court for the Southern District of Texas, Galveston Division. On March
18, 1999, plaintiff filed a motion to remand the case back to state court. On
April 12, 1999, defendants filed their motion to dismiss. On June 10, 1999, the
Multidistrict Litigation Panel ("MDL") transferred this case to the District of
Columbia for consolidated proceedings. A conditional transfer order (to the MDL)
was filed on November 26, 1999. On December 10, 1999, federal district court
Judge Hoveler granted defendants' motion for stay and stayed plaintiff's motion
to remand.

      Venezuela v. Philip Morris Cos., Inc., United States District Court for
the Southern District of Florida, Miami Division, Case No. 99-01943 CA, was
filed in January 1999. On June 10, 1999, the MDL transferred this case to the
District of Columbia for consolidated proceedings. Even though RJR Tobacco has
never been officially served with process, it filed its answer to the complaint
on January 3, 2000.

      Thailand v. The Tobacco Institute, United States District Court for the
Southern District of Texas, Case No. H-99-0320, was filed in January 1999. This
case was voluntarily dismissed on June 16, 1999.


                                       24
<PAGE>   25

      Rio de Janeiro v. Philip Morris Cos., Inc., District Court, Angelina
County, Texas, Case No. 32198-99-7, was filed in July 1999. Defendants removed
this case to federal district court on August 11, 1999. Plaintiffs filed a
motion to remand on August 16, 1999. A conditional transfer order to the MDL
Panel was filed on August 30, 1999. Defendants also filed a motion to stay the
proceedings pending transfer of this case to the MDL Panel on August 30. On
September 14, 1999, this case was remanded back to Angelina County District
Court. On September 15, 1999, the conditional transfer order was vacated. On
September 24, 1999, defendants appealed this ruling to the United States Court
of Appeals for the Fifth Circuit.

      Goias v. Philip Morris Cos., Inc., United States District Court for the
District of Columbia, Case No. 99-3061-CIV, was filed in October 1999. On
December 22, 1999, this case was transferred to the United States District Court
for the District of Columbia for inclusion in the consolidated pretrial
proceedings (MDL Panel).

      Ukraine v. American Brands, Inc., United States District Court for the
District of Columbia, Case No. 1:99CV03080 PLF, was filed in November 1999. On
December 23, 1999, this case was transferred to the United States District Court
for the District of Columbia for inclusion in the consolidated pretrial
proceedings (MDL Panel).

                                    TAXPAYER
                            HEALTH CARE COST RECOVERY

      Coyne v. American Tobacco Co., Inc., United States District Court for the
Northern District of Ohio, Case No. 96-2247, was filed in September 1996. On
October 16, 1996, defendants removed this case to federal district court which
granted defendants motion to dismiss on February 12, 1998. On March 12, 1998,
plaintiffs appealed the trial court's dismissal to the United States Court of
Appeals for the Sixth Circuit. On July 29, 1999, the Sixth Circuit remanded this
case back to state court where it had been originally filed -- Common Pleas
Court of Cuyahoga County, Ohio. On December 10, 1999, plaintiffs filed a motion
for leave to amend the complaint, to which defendants filed their brief in
opposition on January 10, 2000.

      Beckom v. American Tobacco Co., Inc., United States District Court for the
Eastern District of Tennessee, Case No. 3:97-CV-0436, was filed in May 1997. On
November 3, 1998, the trial court granted defendants' motion to dismiss. On
November 20, 1998, plaintiffs appealed this ruling to the United States Court of
Appeals for the Sixth Circuit. Briefing has been completed and the Sixth Circuit
heard oral argument on February 3, 2000.

      Woods v. American Tobacco Co., Inc., United States District Court for the
Middle District of North Carolina, Case No. 1:98 CV 138, was filed in February
1998. The parties are currently awaiting the court's decision on defendants'
motion to dismiss.

                                   UNIVERSITY
                            HEALTH CARE COST RECOVERY

      University of South Alabama v. American Tobacco Co., Inc., United States
District Court for the District of Alabama, Case No. 97-0552-BH-S, was filed in
May 1997. In March 1999, the Court of Appeals reversed the trial court's
dismissal of this case. On January 13, 2000, a stipulation of dismissal was
filed.


                                       25
<PAGE>   26

                                    HOSPITAL
                            HEALTH CARE COST RECOVERY

      Association of Washington Public Hospital Districts v. Philip Morris,
Inc., United States District Court for the Western District of Washington, Case
No. C98-1675, was filed in November 1998. On December 14, 1999, the trial court
granted defendants' motion to dismiss plaintiffs' complaint. On January 15,
2000, plaintiffs appealed this ruling to the United States Court of Appeal for
the Ninth Circuit.

      Allegheny General Hospital v. Philip Morris, Inc., United States District
Court for the Western District of Pennsylvania, Case No. 98-18956, was filed in
December 1998. On November 4, 1999, the trial court granted defendants' motion
to dismiss plaintiffs' first amended complaint. On December 3, 1999, plaintiffs
appealed this ruling to the United States Court of Appeals for the Third
Circuit.

                                     FEDERAL
                            HEALTH CARE COST RECOVERY

      United States v. Philip Morris, Inc., United States District Court for the
District of Columbia, Case No. 99-CV-02496 (GK), was filed in September 1999.
The U.S. Department of Justice brought this action against various industry
members, including RJR Tobacco. The government seeks to recover federal funds
expended in providing health care to smokers who have developed diseases and
injuries alleged to be smoking-related, and, in addition, seeks, pursuant to the
federal RICO statute, disgorgement of profits the government contends were
earned as a consequence of a RICO racketeering "enterprise." On December 27,
1999, defendants filed a motion to dismiss challenging all counts included in
the complaint. Briefing on that motion is still underway, with oral argument
currently scheduled for May 15, 2000.

                              ASBESTOS CONTRIBUTION

      Twelve lawsuits, of which 9 remain pending, have been filed against RJR
Tobacco by asbestos companies and/or related asbestos-related trust funds
asserting claims for unjust enrichment, restitution, contribution, indemnity and
unfair contribution. These theories are based on the assertion that the asbestos
entities have "overpaid" claims brought against them to the extent that tobacco
use, not asbestos exposure, was the cause of the alleged personal injuries with
respect to which they have paid compensation. As with the other health care cost
recovery actions, the complaints typically seek to aggregate the alleged damages
associated with tens of thousands of underlying claims, without specifically
identifying a single individual who claims injury by virtue of tobacco use.

      Thomas v. R. J. Reynolds Tobacco Co., Circuit Court, Jefferson County,
Mississippi, Case No. 96-0065, was filed in August 1996. The claims of plaintiff
Owens Corning have been severed from those of the individual plaintiffs in this
case. Trial in the Owens Corning portion of the case is scheduled February 1,
2001. The individual plaintiffs' trial has not yet been scheduled, although the
Special Master has recommended the trial to begin in June 2001.

      Raymark Industries, Inc. v. R. J. Reynolds Tobacco Co., Circuit Court,
Duval County, Florida, Case No. 97-5254 CA-F, was filed in September 1997. The
case remains effectively stayed following Raymark's March 1998 bankruptcy
filing.

      Raymark Industries, Inc. v. American Tobacco Co., Inc., United States
District Court for the Northern District of Georgia, Case No. 1 97-CV-2711, was
filed in September 1997. On August 7, 1998, federal district court Judge Story
entered an order staying this case pending further order of the court. The clerk
was directed to administratively close the case pending completion of the
bankruptcy proceedings. There has been no other activity since the August 7,
1998 order.


                                       26
<PAGE>   27

      Falise v. American Tobacco Co., Inc., United States District Court for the
Eastern District of New York, Case No. 97 CV 7640, was originally filed in
November 1997. However, on November 2, 1999, the court entered an order
dismissing this case due to jurisdictional grounds. On November 11, 1999,
plaintiffs filed a new complaint in the same court -- Falise v. American Tobacco
Co., Inc., United States District Court for the Eastern District of New York,
Case No. CV 99-7392 -- and amended it on December 17, 1999. Trial in this case
is scheduled for April 17, 2000.

      Fibreboard Corp. v. R. J. Reynolds Tobacco Co., Superior Court, Alameda
County, California, Case No. 791919-8, was filed in November 1997. Discovery is
ongoing.

      Keene Creditors Trust v. Brown & Williamson Tobacco Corp., Supreme Court,
New York County, New York, Case No. 606479/97, was filed in December 1997.
Defendants' answer or other response to plaintiffs' complaint is due on May 24,
2000.

      Conwed Corp. v. R. J. Reynolds Tobacco Co., United States District Court
for the District of Minnesota, Case No. 98-CV-1412, was filed in April 1998. On
April 29, 1999, the trial court granted defendants' motion to dismiss and
dismissed plaintiffs' amended complaint without prejudice.

      Raymark Industries, Inc. v. American Tobacco Co., Inc., United States
District Court for the Eastern District of New York, Case No. 98-CV-675, was
filed in May 1998. Trial is scheduled for October 2, 2000.

      H.K. Porter Co., Inc. v. American Tobacco Co., Inc., United States
District Court for the Eastern District of New York, Case No. CV 97-7658 (JBW),
was filed in June 1998. Trial is scheduled for September 11, 2000.

      The Seibels Bruce Group, Inc. v. R. J. Reynolds Tobacco Co., United States
District Court for the Northern District of California, Case No. C99-0593 MHP,
was filed in December 1998. On September 21, 1999, the court granted defendants'
motion to dismiss.

      UNR Asbestos-Disease Claims Trust v. Brown & Williamson Tobacco Corp.,
Supreme Court, New York County, New York, Case No. 105152/99, was filed in March
1999. Defendants' answer or response to plaintiffs' complaint is due on May 25,
2000.

                       CERTAIN OTHER NON-INDIVIDUAL CASES
                                 PROPOSITION 65

      California v. Brown & Williamson Tobacco Corp., Superior Court, San
Francisco County, California, Case No. 996781, was filed in July 1998. Discovery
in this case is ongoing. Trial is scheduled for June 6, 2000.

      California v. Philip Morris, Inc., Superior Court, Los Angeles County,
California, Case No. BC 19427, was filed in July 1998. Discovery in this case is
ongoing. Trial is scheduled for June 6, 2000.

                       CERTAIN OTHER NON-INDIVIDUAL CASES
                                   MSA-RELATED

      Wynn v. Philip Morris, Inc., Circuit Court, Jefferson County, Alabama,
Case No. CV-9803295, was filed in May 1998. On September 13, 1999, the court
granted defendants' motion to dismiss.

      Hise v. Philip Morris, Inc., United States District Court for the Northern
District of Oklahoma, Case No. 98CV947 C (E), was filed in December 1998. On
April 29, 1999, the trial court granted defendants' motion for summary judgment.
On May 27, 1999, plaintiffs appealed the trial court's dismissal to the United
States Court of Appeals for the Tenth Circuit. Briefing on the appeal is
underway.


                                       27
<PAGE>   28

      Vaughan v. Gilmore, Circuit Court, Henrico County, Virginia, Case No.
998147, was filed in December 1998. On February 23, 1999, the court dismissed
this case.

      Perry v. Walkup, Chancery Court, Davidson County, Tennessee, Case No.
98-3771-II, was filed in December 1998. Plaintiffs' complaint for declaratory
judgment was filed on December 18, 1998. The plaintiffs have appealed denial of
their motion to intervene in the Tennessee attorney general action. On December
14, 1999, the State of Tennessee requested that the Tennessee Supreme Court
assume jurisdiction over the consolidated appeals. On January 10, 2000, the
Tennessee Supreme Court granted the State's motion, and assumed jurisdiction.

      Vaughan v. Earley, Circuit Court, Henrico County, Virginia, Case No.
HK-10-1, was filed in January 1999. On February 23, 1999, the court dismissed
this case.

      Forces Action Project v. California, United States District Court for the
Northern District of California, Case No. C 99-0607 EDL, was filed in February
1999. On January 5, 2000, the trial court granted defendants' motion to dismiss.

      Oliva v. Florida, Circuit Court, Leon County, Florida, Case No. 99-2234,
was filed in April 1999. On November 24, 1999, plaintiffs voluntarily dismissed
certain defendants, including RJR Tobacco.

      Harris v. Owens, United States District Court for the District of
Colorado, Case No. 99-S-953, was filed in May 1999. On September 10, 1999, the
parties filed a stipulation and motion for the dismissal of the tobacco
defendants, including RJR Tobacco, from this case.

      Table Bluff Reservation v. Philip Morris, Inc., United States District
Court for the Northern District of California, Case No. C 99-02621, was filed in
June 1999. On November 12, 1999, the trial court granted defendants' motion to
dismiss the complaint. On November 18, 1999, plaintiffs appealed the trial
court's dismissal to the United States Court of Appeals for the Ninth Circuit.

      Turner W. Branch, P.A. v. Brown & Williamson Tobacco Corp., United States
District Court for the District of New Mexico, Case No. CV-99 08036, was filed
in August 1999. On September 7, 1999, defendants removed this case to federal
court. On October 29, 1999, the court granted defendants' motion to complete
arbitration and for a stay pending the completion of the arbitration.

      PTI, Inc., v. Philip Morris, Inc., United States District Court for the
Central District of California, Case No. 99-08235 NM (Ex), was filed in August
1999. On November 1, 1999, certain defendants filed a motion to dismiss which is
scheduled for hearing on March 13, 2000.

      Skillings v. Illinois, United States District Court for the Central
District of Illinois, Case No. 99-2087, was filed in August 1999. On November 8,
1999, the court entered an order dismissing certain defendants, including RJR
Tobacco, from this lawsuit.



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