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									Group 8 PMC Presentation

 A LT R I A & P H I L I P M O R R I S I N T E R N AT I O N A L

              B Y: B R A D L E Y K N E E D L E R
                   A N A LY S T T E A M 8

 Altria
   $1.16 base dividend; 9% growth for 5 yrs; 5% perpetual growth
    afterward; 8.19% required rate of return
   $45.56

   $1.84 base dividend; 12% growth for 5 yrs; 5% perpetual
    growth afterward; 8.19% required rate of return
   $82.23

 Altria plans to buy back 7.5 Billion Dollars In Next 2 yrs
  ROUGHLY 18-20% Of Company
 Plans to Cut Cost by 1billion over next Two Yrs
 Plans to payout 4.5+ billion in Dividends
 Total Cash Planned Back to Shareholders over next 2yrs
  12 Billion, Between Share Purchases & Dividends

 Almost two-thirds of Chinese men (63%), and 3.8% of Chinese women, are smokers,
  giving a total of 350 million smokers in China, with more on the way. Young Chinese
  women are likely to be an important target group for growth for Big Tobacco

 Outside of China, PMI owns 25% of Worldwide market share. Currently has no share
  of market in China.

 New Joint Venture with Chinese State owned company will begin selling
  Marlboro Brands in China In June

 PMI last yr sold 311 billion units of Cigarettes
 Chinese market alone has 2.5 Trillion unit per yr volume
 Robert Fletcher, regional public affairs manager for the tobacco company
  Rothman, said that “thinking about Chinese smoking statistics is like trying to
  think about the limits of space”
              Projected Total Return For PMI

 Dividends:        08       09        10        11       12        Total Dividend
                    $1.84 $2.02 $2.22 $2.44 $2.70                     $11.22
   Year 5 EPS: $4.89 (compounded at 12%)
   Year 5 Stock Price: P/E 16= $78.38+$11.22= $89.60
   Annual Return: 13%
   *Year 5 Stock Price: P/E 20= $97.80+11.22= $109.02
   Annual Return: 18%
   *We as group believe these two projections to be conservative since the cigarette
    business is a low capital intense business therefore making it a cash cow that is
    growing. PMI will be unaffected by the U.S. legal system and pending lawsuit within
    the U.S. This we believe will allow PMI to experience an expanded P/E compared to
    its domestic sister company. These figures don’t include future acquisitions made by
    PMI in emerging markets that will have considerable growth going forward as the
    world population will experience an increase in disposable income. An accelerated
    EPS could be realized on far end of growth model if the Chinese J/C venture is
    successful. This will further expand PMI’s P/E ratio going forward.
           PMI Love For Shareholders

 Board approved 13 Billion Share Buy Back earlier this Yr
 to be completed over next 2 years.

 Will payout 65% of earnings going forward as Dividends

                                           Historical EPS/DPS
                                                                 Gain from Sale of
                                                                                                           Spin-off of





        1993   1994   1995   1996   1997    1998   1999   2000   2001   2002   2003   2004   2005   2006     2007
    Legal Issues and Reason For PMI Spin-Off

 Reason why PMI will be spun off:
 “To remove the cloud of legal smoke that hangs about the parent. A cloud created by
  lawsuits and U.S regulation. They will reside in Switzerland where Swiss laws will take
 Claims related to tobacco products fall within the following categories
           i. smoking and health cases alleging personal injury brought by individuals behalf
           ii. cases seeking court supervised programs for ongoing medical monitoring and purporting
           to be brought on behalf of individual plaintiffs, also includes cases where a
           number of individual plaintiffs to be tried in a single proceeding.
           iii. Cases brought by government and non government plaintiffs seeking reimbursement for
           healthcare expenditures allegedly caused by cigarette smoking.
           iv. Class actions suits alleging that the use of “lights” and “ultra lights” constitute deceptive
           and unfair trade practices.
   27 of 43 cases since 1999 have been returned in favor of PM, the defendant. Only 4 of the
    16 that were in favor of Plaintiff have reached a final verdict.
                           LEGAL ISSUES

 One of the most recent of those lawsuits where the Supreme Court overturned a
  $79.5 million punitive-damages award against Altria Group Inc.'s Philip Morris
  USA unit, giving both the tobacco company and the corporate world a legal
 There is an estimated 130 individual smoking and health cases as of February 15,
  2007 in countries such as Argentina, Australia, Brazil, Chile, Costa Rica, France,
  Italy, Poland, and Scotland. In Italy there are 17 cases that are pending in the
  equivalent of small claims court where damages are limited to 2000 Euros per
  case, an amount not to fret about.
 Since January 1999, verdicts have been returned in 45 smoking and health,
  Lights/Ultra lights and health care cost recovery cases in which PM USA was a
  defendant. Verdicts in favor of PM USA and other defendants were returned in 28
  of the 45 cases.
 Of the 17 cases in which verdicts were returned in favor of plaintiffs, eight have
  reached final resolution. There were a couple health care recovery cases were
  verdicts have been reversed and all claims were dismissed with prejudice. After
  exhausting all appeals, PM USA has paid six judgments totaling $71,476,238.
 We Conclude That PMI should be bought.
 MO should be watched to see if it becomes cheaper
 and more attractive.

 Today’s Price PM $50.58

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