Mondelez International

Of course we’re big...

2001 ANNUAL REPORT

...but that’s a small part of our story.

Think of us as an energetic one year old with 100 years’ experience.

On June 13, 2001, we began trading as a public company. Our $8.4 billion

initial public offering was the second biggest in U.S. history. With nearly

$34 billion in revenues, we are the largest food company in North

America and the second largest worldwide. 35 of our brands have

been delighting consumers for more than 100 years. The care and

quality that J. L. Kraft, Johann Jacobs, Oscar Mayer and C. W. Post

first put into their products live in our brands today.

2

We touch a billion people, one at a time.

Six of our brands have global revenues of more than $1 billion, 61 have

revenues of more than $100 million. We’re a member of the family in

99.6% of all American households. Last year, we listened to more

than 2.5 million people to learn how to better meet consumers’ needs.

Each month, 12 million people visit our websites for product, menu

and nutrition information. A billion people see our advertising

around the world. We’re building a future on innovations in taste,

nutrition, convenience, variety and value.

4

We know how to make good ideas grow.

One good idea leads to another, and another, and another. In 2001,

new products generated more than $1.1 billion in revenues. We hold

thousands of patents worldwide and, since 1981, we’ve received

more U.S. food-related patents than any other food company. We invest

more in advertising than any other U.S. food company. In the last six

years, we’ve received more than 100 advertising awards around the

world. Our focus is on four key growth areas: snacks, beverages,

convenient meals and health & wellness.

6

We’re local, all around the world.

Our brands are sold in millions of neighborhood stores in more 

than 145 countries. We’ve earned the #1 share in 21 of our top 25

categories in the U.S. and 21 of our top 25 country categories

elsewhere in the world. We have operations in 68 countries.

In developing markets, our volume grew 11% in 2001. We have 

a global sales force of more than 19,000 professionals. Last year,

we supported the communities we live in around the world with 

more than $25 million in food and financial contributions.

8

We think of discipline as one more opportunity to innovate.

At every step, from the purchase of raw materials to the final product

on the shelf, we find ways to create a competitive advantage. Our cost

control breakthroughs generated savings of 3.5% of cost of goods

sold in 2001 to reinvest in growth and build the bottom line. With the

integration of Nabisco, so far we’ve captured more than $100 million

in synergy savings. We’ve developed proprietary tools to make the

most of our marketing investments. Our worldwide councils of category

experts share best practices and leverage new product ideas and

technologies for profitable growth.

10

We’re a team of 113,690 passionate entrepreneurs.

Profitable growth is everyone’s goal. Our top 27 executives average

20 years of service with Kraft in many different business units and

countries around the world. The Wall Street Journal reported, “In the

food world, Kraft is considered the Harvard of career management.”

U.S. grocery retailers ranked Kraft #1 in Best Combination of Growth

and Profitability, Most Innovative Marketing Programs and Best Sales

Force/Customer Teams.

12

And what we do is build sustainable growth.

We are a global growth company. With the integration of Nabisco,

our reported revenues increased by 28%. Our volume increased 

3.7%* and once again our earnings growth was among the best in 

the food industry. In 2001, our return on sales was 18.1%, an increase 

of 7.6 percentage points since 1991. For the 28 weeks Kraft stock

traded in 2001, total shareholder return was 10.6%. Growth is the

heart of our culture. We’re committed to driving shareholder value 

with consistent, top-tier performance.

* For a more meaningful comparison, results are presented on a pro forma basis, 
and volume results are compared to a 52-week fiscal year 2000. See 2001 Financial 
Highlights on page18 for a more detailed explanation.

14

3.7%

2001

Volume
52-week
Pro Forma*

2000

19.9%

2001

8.9%

2001

Operating Companies Income
Pro Forma*

2000

10.6%

12/31/01

Net Earnings
Pro Forma*

Total Shareholder Return

2000

6/13/01

A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER C
LUEBERRY  MORNING,  BOCA,  BREAKSTONE'S,  BULL'S-EYE,  CAFÉ  CREMES,  CALUMET,  CAMEO,  CAPRI  SUN,  CARRIAGE  INN,  CARTE  NOIRE,  CASINO,  CASTELET
HEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR
ME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, 
REAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATI
FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HO
ONEYCOMB,  JACK'S,  JACOBS,  JELL-O,  KNUDSEN,  KOOL-AID,  KRAFT,  LIFE  SAVERS,  LIGHT  N'  LIVELY,  LORNA  DOONE,  LOUIS  RICH,  LUNCHABLES,  MALLOMARS
OUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASS
RY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAK
HREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈME, SWISS FUDGE, TA
RAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOI
ARTE  NOIRE,  CEREALITAS,  CHEEZ  WHIZ,  CHIPS  AHOY!,  CLIGHT,  CLUB  SOCIAL,  CÔTE  D’OR,  DADAK,  DAIM,  DAIRYLEA,  EL  CASERÍO,  ESTRELLA,  EXPRESS,  FIGA
RESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA, KABA
ENCO,  KOOL-AID,  KORONA,  KRAFT,  LACTA,  LUCKY,  LUNCHABLES,  MAARUD,  MAGUARY,  MAMA  LUISE,  MARABOU,  MAXIM,  MAXWELL  HOUSE,  MELLOW  BIRD'S, 
EURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, POIANA, POK
RINCE  POLO,  RHODESIA,  RITZ,  ROYAL,  SAIMAZA,  SAMAR,  SHOT,  SIESTA,  SIMMENTHAL,  SOTTILETTE,  SPLENDID,  SUCHARD,  SUGUS,  SUSANNA,  SVOGE,  TANG,  T
ERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, VERAO, A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S
UTRITION  BAR,  BANANA  NUT  CRUNCH,  BARNUM'S  ANIMALS,  BETTER  CHEDDARS,  BLUEBERRY  MORNING,  BOCA,  BREAKSTONE'S,  BULL'S-EYE,  CAFÉ  CREMES
AMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINN
EBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, 
RROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG 
LAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CR
EASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LI
GHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY
UTTER  BUTTER,  OASIS,  OREO  O'S,  OREOS,  OSCAR  MAYER,  OVEN  CLASSICS,  OVEN  FRY,  OYSTERETTES,  PEEK  FREAN’S,  PHILADELPHIA,  PLANTERS,  POLLY-O,  P
OASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STON
HINS,  STOVE  TOP,  SUCHARD,  SURE·JELL,  SWISS  CRÈME,  SWISS  FUDGE,  TANG,  TEDDY  GRAHAMS,  TOBLERONE,  TRISCUITS,  TROLLI,  TWIGS,  TWILIGHT,  UNEED,
AFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLU
ÔTE  D’OR,  DADAK,  DAIM,  DAIRYLEA,  EL  CASERÍO,  ESTRELLA,  EXPRESS,  FIGARO,  FREIA,  FRESH,  GALLITO,  GENERAL  FOODS  INTERNATIONAL  COFFEES,  GEVAL
ÈRE,  HAG,  INVERNIZZI,  JACOBS,  JACQUES  VABRE,  JAPP,  JELL-O,  JOCCA,  KABA,  KARUNA,  KENCO,  KOOL-AID,  KORONA,  KRAFT,  LACTA,  LUCKY,  LUNCHABLES
AGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASI
NKO,  OREO,  PACIFIC  SODA,  PEPITOS,  PHILADELPHIA,  PLANTERS,  POIANA,  POKROV,  POST,  PRINCE  POLO,  RHODESIA,  RITZ,  ROYAL,  SAIMAZA,  SAMAR,  SHO
MMENTHAL, SOTTILETTE, SPLENDID, SUCHARD, SUGUS, SUSANNA, SVOGE, TANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA
ERAO,  A.1.,  AIR  CRISPS,  ALMOST  HOME,  ALPHA-BITS,  ALTOIDS,  ATHENOS,  BAKER'S,  BALANCE  NUTRITION  BAR,  BANANA  NUT  CRUNCH,  BARNUM'S  ANIMAL
HEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, C
ERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, C
OUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DE
GIORNO,  DREAM  WHIP,  DUET,  D-ZERTA,  EASY  CHEESE,  EASY  MAC,  EL  QUESOSISIMO,  FIG  NEWTONS,  FLAVOR  CRISPS,  FLAVOR  SNACKS,  FLEISCHMANN’S,  F
REATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPO
NACKS,  HONEY  MAID,  HONEYCOMB,  JACK'S,  JACOBS,  JELL-O,  KNUDSEN,  KOOL-AID,  KRAFT,  LIFE  SAVERS,  LIGHT  N'  LIVELY,  LORNA  DOONE,  LOUIS  RICH,  LUN
ALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSC
VEN CLASSICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SAN
EAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈ
UDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3
OLD,  ALTOIDS,  BIRD'S,  CARTE  NOIRE,  CEREALITAS,  CHEEZ  WHIZ,  CHIPS  AHOY!,  CLIGHT,  CLUB  SOCIAL,  CÔTE  D’OR,  DADAK,  DAIM,  DAIRYLEA,  EL  CASERÍO, 
XPRESS, FIGARO, FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JA
OCCA, KABA, KARUNA, KENCO, KOOL-AID, KORONA, KRAFT, LACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUS
RD'S,  MERENDA,  MEURISSE,  MILKA,  MIRABELL,  MIRACLE  WHIP,  MIRÁCOLI,  NOVA  BRASILIA,  O'BOY,  ONKO,  OREO,  PACIFIC  SODA,  PEPITOS,  PHILADELPHIA, 
OIANA, POKROV, POST, PRINCE POLO, RHODESIA, RITZ, ROYAL, SAIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL, SOTTILETTE, SPLENDID, SUCHARD, SUGUS, SUSANN
ANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, VERAO, A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS
AKER'S,  BALANCE  NUTRITION  BAR,  BANANA  NUT  CRUNCH,  BARNUM'S  ANIMALS,  BETTER  CHEDDARS,  BLUEBERRY  MORNING,  BOCA,  BREAKSTONE'S,  BULL'S
REMES,  CALUMET,  CAMEO,  CAPRI  SUN,  CARRIAGE  INN,  CARTE  NOIRE,  CASINO,  CASTELETS,  CERTO,  CHEESE  NIPS  CRISPS,  CHEESE  PUFFS,  CHEEZ  WHIZ,  CH
HURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNC
F  WHEAT,  CREMA  DE  ARROZ,  CREME  SAVERS,  CROWN,  CRYSTAL  LIGHT,  DAIM,  DELI  DELUXE,  DIGIORNO,  DREAM  WHIP,  DUET,  D-ZERTA,  EASY  CHEESE,  EAS
UESOSISIMO,  FIG  NEWTONS,  FLAVOR  CRISPS,  FLAVOR  SNACKS,  FLEISCHMANN’S,  FRESHMADE  CREATIONS,  FRUIT  &  FIBRE,  GENERAL  FOODS  INTERNATIONAL
EVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O,
OOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABEL
HIP,  MISTER  SALTY,  NABISCO,  NUTTER  BUTTER,  OASIS,  OREO  O'S,  OREOS,  OSCAR  MAYER,  OVEN  CLASSICS,  OVEN  FRY,  OYSTERETTES,  PEEK  FREAN’S,  PHIL
LANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABL
EA,  STELLA  D’ORO,  STONED  WHEAT  THINS,  STOVE  TOP,  SUCHARD,  SURE·JELL,  SWISS  CRÈME,  SWISS  FUDGE,  TANG,  TEDDY  GRAHAMS,  TOBLERONE,  TRISCUIT
WIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CH
HIPS  AHOY!,  CLIGHT,  CLUB  SOCIAL,  CÔTE  D’OR,  DADAK,  DAIM,  DAIRYLEA,  EL  CASERÍO,  ESTRELLA,  EXPRESS,  FIGARO,  FREIA,  FRESH,  GALLITO,  GENER
TERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA, KABA, KARUNA, KENCO, KOOL-AID, KORO
ACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABEL
HIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, POIANA, POKROV, POST, PRINCE POLO, RHODESIA, R
AIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL, SOTTILETTE, SPLENDID, SUCHARD, SUGUS, SUSANNA, SVOGE, TANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TO
RAKINAS, UKRAINA, VELVEETA, A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, 
NIMALS,  BETTER  CHEDDARS,  BLUEBERRY  MORNING,  BOCA,  BREAKSTONE'S,  BULL'S-EYE,  CAFÉ  CREMES,  CALUMET,  CAMEO,  CAPRI  SUN,  CARRIAGE  INN,  CAR
ASINO,  CASTELETS,  CERTO,  CHEESE  NIPS  CRISPS,  CHEESE  PUFFS,  CHEEZ  WHIZ,  CHIPS  AHOY!,  CHURNY,  CINNA-CRUNCH  PEBBLES,  CLIGHT,  CLUB  SOCIAL,  C
ORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYS
AIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISC
RESHMADE  CREATIONS,  FRUIT  &  FIBRE,  GENERAL  FOODS  INTERNATIONAL  COFFEES,  GEVALIA,  GOLDEN  CRISP,  GOOD  SEASONS,  GRAPE-NUTS,  GREAT  GRA

We are

NIMALS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CART
HT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ
SIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES
ACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA
SICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN
JELL, SWISS CRÈME, SWISS FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS
ÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASERÍO, ESTRELLA, EXPRESS, FIGARO, FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA
UCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABELL, MIRACL
LO, RHODESIA, RITZ, ROYAL, SAIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL, SOTTILETTE, SPLENDID, SUCHARD, SUGUS, SUSANNA, SVOGE, TANG, TERRABUS
THENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S
CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME
ELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S
REAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY
TY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS
LES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈME, SWISS FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE
IRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASERÍO, ESTRELLA, EXPRESS
E, JAPP, JELL-O, JOCCA, KABA, KARUNA, KENCO, KOOL-AID, KORONA, KRAFT, LACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM
CIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, POIANA, POKROV, POST, PRINCE POLO, RHODESIA, RITZ, ROYAL, SAIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL
NA, VELVEETA, VERAO, A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S
IAGE INN, CARTE NOIRE, CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES
HEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, E
TERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB
MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER
CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP
TA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT
NATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA, KABA, KARUNA, KENCO, KOOL-AID, KORONA
ISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, POIANA, POKROV
NNA, SVOGE, TANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, VERAO, A.1., AIR CRISPS, ALMOST HOME, ALPHA
RNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, CASTELETS, CERTO, CHEES
ÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT
OR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS
FT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACL
REAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES
E, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT
LEA, EL CASERÍO, ESTRELLA, EXPRESS, FIGARO, FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZ
GUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASILIA
MAZA,  SAMAR,  SHOT,  SIESTA,  SIMMENTHAL,  SOTTILETTE,  SPLENDID,  SUCHARD,  SUGUS,  SUSANNA,  SVOGE,  TANG,  TERRABUSI,  TERRY'S  CHOCOLATE  ORANGE
 BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET
OY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND
ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE
CKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES
O O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM
ED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈME, SWISS FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT
Z WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASERÍO, ESTRELLA, EXPRESS, FIGARO, FREIA, FRESH, GALLITO, GENERA
KENCO, KOOL-AID, KORONA, KRAFT, LACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S
A, PLANTERS, POIANA, POKROV, POST, PRINCE POLO, RHODESIA, RITZ, ROYAL, SAIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL, SOTTILETTE, SPLENDID, SUCHARD
RISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER CHEDDARS
, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP
RS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR
N CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL
TE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FRY, OYSTERETTES
'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈME, SWISS
ORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DADAK, DAIM
MÈRE,  HAG,  INVERNIZZI,  JACOBS,  JACQUES  VABRE,  JAPP,  JELL-O,  JOCCA,  KABA,  KARUNA,  KENCO,  KOOL-AID,  KORONA,  KRAFT,  LACTA,  LUCKY,  LUNCHABLES
P, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, POIANA, POKROV, POST, PRINCE POLO, RHODESIA, RITZ
Y'S  CHOCOLATE  ORANGE,  TOBLERONE,  TRAKINAS,  UKRAINA,  VELVEETA,  VERAO,  A.1.,  AIR  CRISPS,  ALMOST  HOME,  ALPHA-BITS,  ALTOIDS,  ATHENOS,  BAKER'S
'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ
ARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM
ADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY
NA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER
Y-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA
ISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE
FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA
ELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS
LETTE, SPLENDID, SUCHARD, SUGUS, SUSANNA, SVOGE, TANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, VERAO
LS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE
B SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREM
 NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA
LL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE
N FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS
L, SWISS CRÈME, SWISS FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS
ÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASERÍO, ESTRELLA, EXPRESS, FIGARO, FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA

the world’s favorite foods...

IT A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETT
NOIRE, CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOC
CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEW
GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-
MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FR
SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS C
WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DA
GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA, KABA, KARUNA, KENCO, KOOL-AID, KORONA, KRAFT, LACTA, LUCKY, LUNCHA
WHIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, POIANA, POKROV, POST, PRINCE POLO, RHODESI
TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, VERAO, A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAK
BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFF
CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIO
FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS
LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, 
POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL T
TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE
FIGARO, FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-
MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, P
SOTTILETTE, SPLENDID, SUCHARD, SUGUS, SUSANNA, SVOGE, TANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA
ANIMALS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CA
CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA 
QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL
JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HO
OVEN CLASSICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ
SUCHARD, SURE·JELL, SWISS CRÈME, SWISS FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE C
CLUB SOCIAL, CÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASERÍO, ESTRELLA, EXPRESS, FIGARO, FREIA, FRESH, GALLITO, GENERAL FOODS INTERNATIONAL CO
KRAFT, LACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, 
POST, PRINCE POLO, RHODESIA, RITZ, ROYAL, SAIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL, SOTTILETTE, SPLENDID, SUCHARD, SUGUS, SUSANNA, SVOGE, T
BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA
NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, CO
DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, 
GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVER
WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILA
SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈME, SWISS FUDGE, TANG, TEDD
ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASER
JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA, KABA, KARUNA, KENCO, KOOL-AID, KORONA, KRAFT, LACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA
O'BOY,  ONKO,  OREO,  PACIFIC  SODA,  PEPITOS,  PHILADELPHIA,  PLANTERS,  POIANA,  POKROV,  POST,  PRINCE  POLO,  RHODESIA,  RITZ,  ROYAL,  SAIMAZA,  SAMAR
TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANAN
CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, 
CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY 
GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY M
MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS
PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT TH
UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS
FOODS INTERNATIONAL COFFEES, GEVALIA, GRAND’ MÈRE, HAG, INVERNIZZI, JACOBS, JACQUES VABRE, JAPP, JELL-O, JOCCA, KABA, KARUNA, KENCO, KOO
MERENDA, MEURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, NOVA BRASILIA, O'BOY, ONKO, OREO, PACIFIC SODA, PEPITOS, PHILADELPHIA, PLANTERS, 
SUGUS, SUSANNA, SVOGE, TANG, TERRABUSI, TERRY'S CHOCOLATE ORANGE, TOBLERONE, TRAKINAS, UKRAINA, VELVEETA, VERAO, A.1., AIR CRISPS, ALMOS
BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ CREMES, CALUMET, CAMEO, CAPRI SUN, CARRIAGE INN, CARTE NOIRE, CASINO, CASTELETS,
CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRANBERRY ALMOND CRUNCH, CREAM OF WHEAT, CREMA DE ARROZ, CREME SAVERS, CROWN, C
CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIONS, FRUIT & FIBRE, GENERAL FOODS INTERNATIONAL COFFEES, GEVALIA, GOLDEN CRISP, GOO
AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LOUIS RICH, LUNCHABLES, MALLOMARS, MAXWELL HOUSE, MILKA, MILK-BONE, MINUTE, MIRABELL
PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, POST TOASTIES, POSTUM, PREMIUM, QUE CHATEL, RITZ, SANKA, SEVEN SEAS, SHAKE 'N BAKE, SHR
FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TROLLI, TWIGS, TWILIGHT, UNEED, VELVEETA, WAFFLE CRISP, WHEAT THINS, WHEATSWORTH, YUBAN
DAIRYLEA,  EL  CASERÍO,  ESTRELLA,  EXPRESS,  FIGARO,  FREIA,  FRESH,  GALLITO,  GENERAL  FOODS  INTERNATIONAL  COFFEES,  GEVALIA,  GRAND’  MÈRE,  HAG,  I
MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, MELLOW BIRD'S, MERENDA, MEURISSE, MILKA, MIRABELL, MIRACLE WHIP, MIRÁCOLI, 
ROYAL,  SAIMAZA,  SAMAR,  SHOT,  SIESTA,  SIMMENTHAL,  SOTTILETTE,  SPLENDID,  SUCHARD,  SUGUS,  SUSANNA,  SVOGE,  TANG,  TERRABUSI,  TERRY'S  CHOCOLA
BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER CHEDDARS, BLUEBERRY MORNING, BOCA, BREAKSTONE'S, BULL'S-EYE, CAFÉ 
WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COOL WHIP, CORNNUTS, CÔTE D’OR, COUNTRY TIME, CRACKER BARREL, CRAN
WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, FLAVOR CRISPS, FLAVOR SNACKS, FLEISCHMANN’S, FRESHMADE CREATIO
POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSEN, KOOL-AID, KRAFT, LIFE SAVERS, LIGHT N' LIVELY, LORNA DOONE, LO
BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FRY, OYSTERETTES, PEEK FREAN’S, PHILADELPHIA, PLANTERS, POLLY-O, POST, PO
STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈME, SWISS FUDGE, TANG, TEDDY GRAHAMS, TOBLERONE, TRISCUITS, TRO
CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DADAK, DAIM, DAIRYLEA, EL CASERÍO, ESTRELLA, EXPRESS, FIGARO, FREIA, FRESH
KABA, KARUNA, KENCO, KOOL-AID, KORONA, KRAFT, LACTA, LUCKY, LUNCHABLES, MAARUD, MAGUARY, MAMA LUISE, MARABOU, MAXIM, MAXWELL HOUSE, M
PHILADELPHIA, PLANTERS, POIANA, POKROV, POST, PRINCE POLO, RHODESIA, RITZ, ROYAL, SAIMAZA, SAMAR, SHOT, SIESTA, SIMMENTHAL, SOTTILETTE, SPLEND
A.1., AIR CRISPS, ALMOST HOME, ALPHA-BITS, ALTOIDS, ATHENOS, BAKER'S, BALANCE NUTRITION BAR, BANANA NUT CRUNCH, BARNUM'S ANIMALS, BETTER CH
CASINO, CASTELETS, CERTO, CHEESE NIPS CRISPS, CHEESE PUFFS, CHEEZ WHIZ, CHIPS AHOY!, CHURNY, CINNA-CRUNCH PEBBLES, CLIGHT, CLUB SOCIAL, COO
SAVERS, CROWN, CRYSTAL LIGHT, DAIM, DELI DELUXE, DIGIORNO, DREAM WHIP, DUET, D-ZERTA, EASY CHEESE, EASY MAC, EL QUESOSISIMO, FIG NEWTONS, F
GOLDEN CRISP, GOOD SEASONS, GRAPE-NUTS, GREAT GRAINS, GREY-POUPON, HANDI-SNACKS, HONEY MAID, HONEYCOMB, JACK'S, JACOBS, JELL-O, KNUDSE
MINUTE, MIRABELL, MIRACLE WHIP, MISTER SALTY, NABISCO, NUTTER BUTTER, OASIS, OREO O'S, OREOS, OSCAR MAYER, OVEN CLASSICS, OVEN FRY, OYSTE
SHAKE 'N BAKE, SHREDDIES, SNACKWELL’S, SOCIABLES, SOCIAL TEA, STELLA D’ORO, STONED WHEAT THINS, STOVE TOP, SUCHARD, SURE·JELL, SWISS CRÈ
WHEATSWORTH, YUBAN, 3-BIT, ALPEN GOLD, ALTOIDS, BIRD'S, CARTE NOIRE, CEREALITAS, CHEEZ WHIZ, CHIPS AHOY!, CLIGHT, CLUB SOCIAL, CÔTE D’OR, DA

CHEDDARS,
ETS,  CERTO,
R, COUNTRY
 DIGIORNO,
IONS, FRUIT
ONEY MAID,
S,  MAXWELL
SSICS, OVEN
KE 'N BAKE,
ANG, TEDDY
OIDS, BIRD'S,
ARO,  FREIA,
A, KARUNA,
,  MERENDA,
KROV, POST,
TERRABUSI,
S, BALANCE
S,  CALUMET,
NA-CRUNCH
 CREMA DE
G NEWTONS,
RISP, GOOD
IFE SAVERS,
Y, NABISCO,
POST,  POST
NED WHEAT
,  VELVEETA,
LUB SOCIAL,
LIA,  GRAND’
S,  MAARUD,
SILIA, O'BOY,
HOT,  SIESTA,
A, VELVEETA,
ALS,  BETTER
CASTELETS,
CÔTE D’OR,
ELI DELUXE,
FRESHMADE
PON, HANDI-
UNCHABLES,
CAR MAYER,
NKA, SEVEN
ÈME, SWISS
3-BIT, ALPEN
  ESTRELLA,
APP, JELL-O,
SE, MELLOW
PLANTERS,
NA, SVOGE,
S, ATHENOS,
S-EYE,  CAFÉ
HIPS  AHOY!,
NCH, CREAM
SY  MAC,  EL
L  COFFEES,
, KNUDSEN,
LL, MIRACLE
LADELPHIA,
LES, SOCIAL
ITS,  TROLLI,
HEEZ WHIZ,
RAL  FOODS
ONA, KRAFT,
LL, MIRACLE
RITZ, ROYAL,
OBLERONE,
, BARNUM'S
ARTE  NOIRE,
COOL  WHIP,
YSTAL LIGHT,
SCHMANN’S,
AINS,  GREY-

From the first cup of coffee in the

morning to a last late-night snack, 

Kraft Foods makes the world’s favorite

foods. Our market basket of products,

which includes six brands with more

than $1 billion in revenues and a total 

of 61 brands with revenues of at least 

$100 million, is balanced across five

growing global sectors: Snacks,

Beverages, Cheese, Convenient 

Meals and Grocery. 

Whether it’s with global brands like

Nabisco, Philadelphia and Tang, or

regional favorites like Oscar Mayer,

Jacobs and Post, we’re on trend with

local tastes in more than 145 countries

around the world. And along with our

products come great food and nutrition

ideas. Our websites, which are among

the most popular of any consumer goods

company, offer recipes, menu planning,

kitchen basics and in-depth health &

wellness information. With the best

brands and a range of helpful services,

we’re making food a simpler, easier,

more enjoyable part of life. 

Snacks

As more consumers eat on the run and snack whenever they get 

a chance, Kraft is right beside them with some of the best-known

brands of cookies, crackers, confectionery and salty snacks. Now,

with the addition of Nabisco, Kraft is the world’s leading producer

of cookies and crackers, including global leaders like the Oreo

and Ritz brands. We’re also one of the largest chocolate producers

worldwide, with brands such as Milka, Toblerone and Côte d’Or.

Brands like Life Savers, Creme Savers, Altoids and Sugus round

out our confectionery business. Estrella in Europe and Planters in

North America are just two of our leading brands of salty snacks.

• Oreo, the world’s number one cookie, got a lot bigger with the launch

of Chocolate Creme Oreo.

• We’re positioned for growth in Russia and Poland with the acquisition 

of Stollwerck, a leading producer of chocolate confectionery.

• Creme Savers, our newest $100 million brand, grew revenues more 

than 25%, with new flavors and expanded distribution.

• Club Social and Trakinas, two of our core biscuit brands in Latin 

America, grew volume better than 30% in the large Brazilian market.

• Bringing together two icon brands, we launched Jell-O Oreo

ready-to-eat pudding.

• Our growth in developing markets continued with the expansion of 
Milka into Ukraine and Siesta into Romania, Lithuania and Bulgaria.

• Broader distribution in the grocery and convenience store channels 
drove strong growth of Planters Trail Mix, which has six of the top ten
items in the trail mix category.

Total Revenues $33.9 Billion

Revenues $10.1 Billion

Beverages

Cheese

There’s nothing more satisfying than hot coffee on a cold morning 

Throughout history, cheese has been an essential element of the

or a cold drink on a hot day. Kraft has them both, with a wide range

eating experience, and for more than a century, Kraft’s innovations

of exciting global and local brands and innovative new products.

have brought quality, convenience and variety to consumers

We built our leading global position in coffee with Maxwell House,

worldwide. Philadelphia cream cheese, our most global brand,

Jacobs, Carte Noire and other brands that meet consumers’ unique

is the perfect example. While people all over the world use cream

local coffee preferences. In the fast-growing area of refreshment

cheese differently, the cream cheese they like best is Philadelphia.

beverages, Kraft is leading the way with powerhouse global brands

From Cracker Barrel natural cheese, and Kraft Singles, Shreds 

such as Tang and strong national and regional brands, including

and Cubes, to Dairylea and El Caserío process cheese, Kraft 

Capri Sun, Crystal Light, Kool-Aid and Clight.

makes the cheese that pleases the world.

• Our ready-to-drink beverages continued their double-digit growth in 

• Annual per capita cheese consumption is more than 30 pounds 

the U.S., with strong performances from Capri Sun, Tang, Crystal Light
and Kool-Aid Jammers.

in the U.S., where Kraft is the number one brand. 

• Kraft Singles with added calcium was introduced across the 

• We expanded our leading global position in coffee with acquisitions 

Asia Pacific region.

in Romania, Bulgaria and Morocco.

• Our global “Taste of Heaven” ad campaign for Philadelphia

• We introduced Tang into Indonesia, India and Vietnam – three countries 

cream cheese is now building volume in 29 markets.

with a combined population of 1.3 billion people.

• We expanded our fast-growing Kraft 2% Milk line of cheese 

• We were the first to introduce an easy-open coffee can lid nationally 

with two new flavors.

in the U.S., on Maxwell House and Yuban coffees.

• Coffee became more convenient across Europe with new single-serve coffee 
sticks under the Jacobs, Carte Noire, Gevalia and Maxwell House brands.

• Clight expanded its Latin American presence with new products in 

Brazil and Venezuela.

• We continued to renew growth in our cottage cheese business, 
adding new flavors to our innovative Breakstone’s and Knudsen
Cottage Doubles.

Revenues $6.6 Billion

Revenues $6.3 Billion

Convenient Meals

Grocery

Who ever has enough time? Kraft helps make life a little easier

A good breakfast is important for the body, but a good dessert

with products that are as convenient as they are delicious. From

feeds the soul. Our grocery sector covers both, and just about

the perennial favorite Oscar Mayer sliced meats and hot dogs, to

everything in between, including sauces, pourable and spoonable

Lunchables lunch combinations, Mirácoli dinners, Boca meat

dressings and mustard. Kraft starts the morning right with a wide

alternatives, to Stove Top Oven Classics and Tombstone, DiGiorno

variety of Post cereals, from Grape Nuts and Shredded Wheat

and Jack’s pizza, consumers rely on Kraft for creative ideas for

to Honey Bunches of Oats and Honeycomb. Midday, a sandwich

their mealtime needs. Wherever there’s a busy family seeking

just isn’t a sandwich without Miracle Whip – or Vegemite in Australia

relief from mealtime mayhem, Kraft is there with satisfying and

and New Zealand. And as everyone knows, there’s always room

convenient solutions.

for Jell-O – topped, of course, with Cool Whip dessert topping.

Once again, Kraft has the perfect brand for any eating occasion.

• Our high-growth pizza business picked up momentum from new 

DiGiorno Stuffed Crust and Tombstone Mexican pizzas in the U.S. 
and Delissio Personal Size pizza in Canada.

• We joined together the Kraft and Oscar Mayer brands to launch 
three new bacon-flavored pourable salad dressings, increasing 
our number one share in the U.S. 

• By taking North America’s favorite Kraft Macaroni & Cheese dinner 

• In Germany we offered health-conscious consumers new low-fat 

and fast-adapting it to the Czech Republic with a variety of sauces 
to fit local tastes, we’ve created a whole new growth business.

• Lunchables lunch combinations, an American phenomenon, 
continued to gain ground in Europe with solid volume growth 
in the United Kingdom, Ireland and Spain.

• Boca meat alternatives grew from the number three to the number 

two brand in the U.S. 

• We acquired It’s Pasta Anytime, giving us a new shelf-stable 

technology for future new products.

• Oscar Mayer sliced meats accelerated their volume growth with 

revitalized ham and turkey products.

Miracle Whip with yogurt. 

• In Latin America, we built on the strength of our popular Clight
powdered soft drink brand with the successful introduction of 
Clight powdered gelatin dessert.

• With new Easy Squeeze packaging for Kraft mayonnaise and 
Miracle Whip dressing, we increased our share leadership in 
U.S. spoonable dressings.  

• Royal, the leader in dry desserts in Latin America, grew even 
stronger with the introduction of new Space gelatin fantasy flavors.

Revenues $5.5 Billion

Revenues $5.4 Billion

2001 Financial Highlights

Consolidated Results

(in millions, except per share data)

2001

2000  % Change 

2001

2000  % Change

Reported 

Pro Forma

Volume (in pounds)
Operating revenues
Operating companies income
Net earnings
Diluted earnings per share

Results by Business Segment
North America
Cheese, Meals and Enhancers

Operating revenues
Operating companies income
Biscuits, Snacks and Confectionery

Operating revenues
Operating companies income
Beverages, Desserts and Cereals

Operating revenues
Operating companies income

Oscar Mayer and Pizza
Operating revenues
Operating companies income

Total North America
Operating revenues
Operating companies income

International
Europe, Middle East and Africa

Operating revenues
Operating companies income
Latin America and Asia Pacific

Operating revenues
Operating companies income

Total International

17,392
$33,875
6,035
1,882
1.17

13,130
$26,532
4,755
2,001
1.38

32.5%
27.7
26.9
(5.9)
(15.2)

17,374
$33,871
6,116
2,092
1.21

*

16,747
$34,033
5,616
1,745
1.01

3.7%
*
(0.5)
8.9
19.9
19.8

$10,256
2,099

$  9,405
1,845

9.0%

13.8

$10,256
2,162

$10,272
2,057

(0.2%)
5.1

5,917
966

5,370
1,192

3,563
539

329
100

5,266
1,090

3,461
512

100+
100+

2.0
9.4

2.9
5.3

5,917
968

5,370
1,204

3,563
544

5,761
777

5,395
1,125

3,473
516

2.7
24.6

(0.5)
7.0

2.6
5.4

$ 25,106
4,796

$ 18,461
3,547

36.0%
35.2

$25,106
4,878

$24,901
4,475

0.8%
9.0

$  6,339
861

$  6,824
1,019

(7.1%)

(15.5)

$  6,339
861

$  6,754
857

(6.1%)
0.5

2,430
378

1,247
189

94.9
100.0

2,426
377

2,378
284

2.0
32.7

Operating revenues
Operating companies income

$ 8,769
1,239

$ 8,071
1,208

8.6%
2.6

$  8,765
1,238

$ 9,132
1,141

(4.0%)
8.5

Total Kraft Foods

Operating revenues
Operating companies income

$33,875
6,035

$26,532
4,755

27.7%
26.9

$33,871
6,116

$34,033
5,616

(0.5%)
8.9

Reported results include the operating results of Nabisco in 2001, but not in 2000. Reported results also reflect average shares of common stock
outstanding during 2001 and assume an average of 1.455 billion shares outstanding during 2000.

Pro forma results assume Kraft owned Nabisco for all of 2000. In addition, pro forma results reflect common shares outstanding of 1.735 billion
based on the assumption that shares issued immediately following the Kraft initial public offering (IPO) were outstanding during all periods
presented and that, effective January 1, 2000, the net proceeds of the IPO were used to retire indebtedness incurred to finance the Nabisco
acquisition. These results also exclude significant one-time items for loss on sale of a factory and integration costs, estimated sales made in
advance of the century date change, gain on sale of a business, and results from operations divested since the beginning of 2000.

Results for fiscal year 2001 are based on a traditional 52-week year while fiscal year 2000 results reflect a 53-week year. 

*

Pro forma volume results shown above and volume comparisons elsewhere in this report exclude the impact of the 53rd week in 2000 
for a more meaningful comparison.

18

•

•

•

•

•

•

•

•

•

•

Fellow Shareholders:

Yes, we’re big. But we’ve never lost touch with the source of our success: the ability
to listen with a creative ear...the imagination to meet people’s needs with innovative
food ideas…a commitment to trust we will not compromise.

And as we’ve grown, we’ve kept the best of local while capturing all the advantages
of global scale – and done it with teamwork, discipline and speed. For those who
invest in us, our goal is simple: consistent, top-tier performance. 

Perhaps no other year in our history has embodied all this quite like 2001.

It was a transformational year for Kraft Foods.

We integrated Nabisco and Kraft with great success, building new growth opportunities
and gaining more than $100 million in synergy savings. 

We completed an initial public offering of 16.1% of Kraft’s outstanding shares, raising
$8.4 billion in net proceeds used to retire debt associated with the Nabisco acquisition.

We began paying dividends at an annual rate of 52 cents per share and produced 
a total return for shareholders of 10.6% for the 28 weeks Kraft shares traded in 2001. 

Our Mission

New products generated more than $1.1 billion in revenues.

•

Our volume grew 11% in developing markets around the world.

We made five acquisitions to drive future growth.

More than 12 million consumers visited our websites each month for ideas and information.

To Be the Undisputed Global 
Food Leader

Consumers... First Choice

Customers... Indispensable Partner

Alliances... Most Desired Partner

Employees... Employer of Choice

Productivity savings for the year met our target of 3.5% of cost of goods sold. 

Communities... Responsible Citizen

We grew worldwide volume 3.7%, in line with our stated goal of 3% - 4% growth. 

Investors... Top-Tier Performer

We generated a strong $3.3 billion in operating cash flow.

And once again we delivered on our promise of top-tier financial results, with operating
companies income up 8.9% to $6.1 billion, net earnings up 19.9% to $2.1 billion and
diluted earnings per share up 19.8% to $1.21.

Our results were strong across the company. 

All six of our business segments increased volume and operating companies income
for the year.

Kraft Foods North America:
Beverages, Desserts and Cereals – Volume was up 9.3%, powered by double-digit
gains in our ready-to-drink beverage business, which more than offset softness in
Desserts and Cereals. Operating companies income for the segment increased 7.0%. 

Biscuits, Snacks and Confectionery – Volume increased 1.6%, led by strong growth 
in our core cookies and crackers businesses. Operating companies income was up
24.6%, benefiting from volume growth and synergy gains.

Note: All amounts discussed in this letter are on a pro forma basis. In addition, the volume comparisons
are also adjusted to reflect a 52-week fiscal year 2000.

19

Our Strategies

Accelerate growth of core brands

Drive global category leadership

Optimize our portfolio

Drive world-class productivity,
quality and service

Build employee and organizational 
excellence

Cheese, Meals and Enhancers – Volume grew 0.9%, as growth in Meals and
Enhancers and in Canada more than offset declines in Cheese and Food Service,
due in part to exiting non -branded businesses. Operating companies income
increased 5.1%.

Oscar Mayer and Pizza – Volume was up 2.3% on gains from our processed meats,
meat alternatives and pizza businesses. Operating companies income was up 5.4%. 

Kraft Foods International:
Europe, Middle East and Africa – Volume increased 1.3%, as strong growth in Central
and Eastern Europe and gains in numerous Western European markets were partially
offset by declines in Germany and Italy. Operating companies income increased 0.5%.

Latin America and Asia Pacific – Volume increased a strong 9.9%, led by broad-based
growth in snacks, beverages, cheese and grocery products. Operating companies
income increased 32.7%.

Overall, the earnings growth we delivered was once again among the industry’s best.
But as good a year as it was, we’re not satisfied. Looking ahead, we will continue to
build both the bottom and top lines with five enduring strategies:

Accelerate growth of core brands – To drive growth, we’re leveraging one of the industry’s
most powerful portfolios of brands to address the marketplace’s most compelling trends.
We’re focusing new-product innovation on four high-growth consumer needs: snacking,
beverages, convenient meals and health & wellness. We’re capturing a greater share
of the fastest-growing distribution channels, including supercenters, convenience stores,
mass merchandisers, drug stores, club stores and food away from home. And we’re
developing customized products and marketing programs to reach rapidly expanding
demographic segments such as the African-American and Hispanic populations 
in the U.S. 

Drive global category leadership – Managed effectively, category leadership is 
a compelling advantage. With our large number of leading brands, we’re able 
to capture a strong share of each category’s growth, giving us the resources to
reinvest in marketing and innovation and keep us well positioned for future growth. 
We build category strength with our worldwide councils of category experts, who
share best practices, fast-adapt product ideas, and optimize productivity and
sourcing in our global biscuits, cheese, coffee, confectionery and refreshment
beverages businesses.

We are intent on driving growth in developing markets. More than 80% of the world’s
population lives in developing markets, yet only 9% of Kraft’s revenues are sourced
there. Our rapid expansion in these markets will continue by broadening our brand
portfolio in current categories, bringing new categories to current geographies,
expanding to new geographies and building distribution in all geographies where 
we operate. 

Optimize our portfolio – With the integration of Nabisco, our reported revenues increased
28%, giving us a leading global position in snack foods. We will continue to acquire
high-potential businesses to jump-start us in new fast-growing categories or countries
and give us greater scale in existing ones. We also will divest slower-growth or lower-
margin businesses that no longer constitute a strategic fit. 

Drive world-class productivity, quality and service – Strong cost management funds
our future, helping us deliver top-tier growth and profitability. Using a continuously
replenished, three-year pipeline of ideas, our productivity programs now yield annual

20

savings of 3.5% of cost of goods sold, while helping us improve product quality and
customer-service levels. We’re also on track to achieve $600 million in ongoing annual
synergy savings from the integration of Nabisco.

Build employee and organizational excellence – Even with our great brand strength 
and global scale, the biggest advantage we have is our people. Using highly
successful recruitment, retention and development initiatives, we’ve built the best
team in the business. We have the experience, the bench strength, the diversity and 
the leadership skills that set us apart. And every one of us is committed to the
same goal – consistent, top-tier performance. 

We expect to deliver on that goal again in 2002. For the year, we expect to grow volume
in the 3%-4% range. And we project diluted earnings per share growth in the range of
14%-16%, to $2.00 -$2.05, reflecting new accounting standards on goodwill amortization.
Of course, in every year there are challenges, some anticipated and some we cannot
foresee. But whether it’s currency translation, commodity costs or economic weakness in
certain countries, you have our committment that we will do our best to overcome them.

Geoffrey C. Bible

Betsy D. Holden

Roger K. Deromedi

In so many ways, 2001 was an extraordinary year for Kraft Foods.

As eventful as it was, and as pleased as we are to celebrate all its successes, our
focus is on what’s next: an emerging trend that creates new opportunity…another
developing market where our brands can prosper...a thriving high-potential business 
we can acquire...the next innovative idea to reduce supply-chain costs...a new
leadership program to help the best team get even better. 

We look ahead with confidence – to another strong year in 2002 and a future of
long-term, sustainable growth.

Geoffrey C. Bible 
Chairman of the Board 
Kraft Foods Inc. 

February 28, 2002

Betsy D. Holden 
Co-CEO, Kraft Foods Inc.
President & CEO 
Kraft Foods North America 

Roger K. Deromedi
Co-CEO, Kraft Foods Inc.
President & CEO 
Kraft Foods International

21

Kraft Foods Inc.

Management’s Discussion and Analysis 
of Financial Condition and Results of Operations

Overview

Kraft Foods Inc. (“Kraft”), together with its subsidiaries (collectively
referred to as the “Company”) is the largest branded food and
beverage company headquartered in the United States. Prior to
June 13, 2001, the Company was a wholly-owned subsidiary of
Philip Morris Companies Inc. (“Philip Morris”). On June 13, 2001, the
Company completed an initial public offering (“IPO”) of 280,000,000
shares of its Class A common stock at a price of $31.00 per share.
The IPO proceeds, net of the underwriting discount and expenses,
of $8.4 billion were used to retire a portion of an $11.0 billion long-
term note payable to Philip Morris incurred in connection with the
acquisition of Nabisco Holdings Corp. (“Nabisco”). After the IPO,
Philip Morris owns approximately 83.9% of the outstanding shares
of the Company’s capital stock through its ownership of 49.5%
of the Company’s Class A common stock, and 100% of the
Company’s Class B common stock. The Company’s Class A
common stock has one vote per share while the Company’s Class
B common stock has ten votes per share. Therefore, Philip Morris
holds 97.7% of the combined voting power of the Company’s
outstanding common stock.

The Company conducts its global business through two units: Kraft
Foods North America, Inc. (“KFNA”) and Kraft Foods International,
Inc. (“KFI”). KFNA manages its operations by product category,
while KFI manages its operations by geographic region. KFNA’s
segments are Cheese, Meals and Enhancers; Biscuits, Snacks and
Confectionery; Beverages, Desserts and Cereals; and Oscar Mayer
and Pizza. KFNA’s food service business within the United States
and its businesses in Canada and Mexico are reported through
the Cheese, Meals and Enhancers segment. KFI’s segments are
Europe, Middle East and Africa; and Latin America and Asia Pacific.

Financial Reporting Release No. 60, which was recently issued
by the Securities and Exchange Commission (“SEC”), requires
all registrants to discuss critical accounting policies or methods
used in the preparation of financial statements. Note 2 to the
consolidated financial statements includes a summary of the
significant accounting policies and methods used in the preparation
of the Company’s consolidated financial statements. In the opinion
of management, the Company does not have any individual
accounting policy which is critical to the preparation of its
consolidated financial statements. This is due principally to the
definitive nature of accounting requirements for consumer products
companies. Also, in most instances, the Company must use
an accounting policy or method because it is the only policy or
method permitted under accounting principles generally accepted
in the United States of America (“U.S. GAAP”). The following is a
review of the more significant accounting policies and methods
used by the Company:

Revenue Recognition: As required by U.S. GAAP, the Company
recognizes operating revenues upon shipment of products to
customers when title and risk of loss pass to its customers.
Provisions and allowances for sales returns and bad debts are also
recorded in the Company’s consolidated financial statements. The
amounts recorded for these provisions and related allowances are
not significant to the Company’s consolidated financial position or

results of operations. As discussed in Note 2 to the consolidated
financial statements, effective January 1, 2002, the Company will
adopt new required accounting standards mandating that certain
costs currently reported as marketing, administration and research
costs be shown as a reduction of operating revenues or an
increase in cost of sales. As a result, previously reported revenues
will be reduced by approximately $4.6 billion, $3.6 billion and $3.4
billion for 2001, 2000 and 1999, respectively. The adoption of the
new accounting standards will have no impact on net earnings or
basic or diluted earnings per share.

Depreciation and Amortization: The Company depreciates
property, plant and equipment and amortizes goodwill and other
intangible assets using straight-line methods. Through December
31, 2001, the Company used forty years to amortize goodwill and
other intangible assets, in recognition of the strength of its brands,
which resulted in amortization expense of $962 million for the year
ended December 31, 2001. Beginning on January 1, 2002, with the
adoption of a new required accounting standard, the Company
will no longer be required to amortize a substantial portion of its
goodwill and other intangible assets. As a result, the Company
estimates that amortization expense will approximate $10 million
for the year ending December 31, 2002. The Company will also be
required to continue to review annually its goodwill and other
intangible assets for possible impairment or loss of value. However,
the Company does not currently anticipate having to record an
impairment loss when it adopts the new standard.

Marketing Costs: As required by U.S. GAAP, the Company
records marketing costs as an expense in the year to which such
costs relate. The Company does not defer the recognition of
any amounts on its consolidated balance sheet with respect to
marketing costs. The Company expenses advertising costs as
incurred in the period in which the related advertisement initially
appears. The Company records consumer incentive and trade
promotion costs as an expense in the period in which these
programs are offered, based on estimates of utilization and
redemption rates that are developed from historical information. As
discussed above under “Revenue Recognition,” beginning January
1, 2002, the Company will adopt the previously mentioned revenue
recognition accounting standards mandating that certain costs
currently reported as marketing expense be shown as a reduction
of operating revenues or an increase in cost of sales. As a result,
previously reported amounts for marketing, administration and
research costs will be reduced by approximately $4.7 billion, $3.7
billion and $3.4 billion for 2001, 2000 and 1999, respectively. The
adoption of the new accounting standards will have no impact on
net earnings or basic or diluted earnings per share.

Hedging Instruments: As of January 1, 2001, the Company
adopted the provisions of a new required accounting standard,
which did not have a material effect on net earnings (less than
$1 million) or accumulated other comprehensive losses (less than
$1 million). The new accounting standard requires that the fair value
of all derivative financial instruments be recorded on the Company’s
consolidated balance sheet as assets or liabilities. Substantially all
of the Company’s derivative financial instruments are effective as
hedges under the new standard; accordingly, the changes in their

22

Kraft Foods Inc.

fair value are recognized in earnings when the related hedged items
are recorded in earnings. During 2001, the Company recognized
deferred losses of $15 million in earnings, which offset the impact
of gains on the related hedged items. In Note 16 of the notes to
consolidated financial statements, the Company has included a
detailed discussion of the types of exposures that it periodically
hedges, as well as a summary of the various instruments which it
utilizes. The Company does not use derivative financial instruments
for speculative purposes.

Employee Benefit Plans: The Company and its subsidiaries
provide a range of benefits to their employees and retired
employees, including pensions, postretirement health care
benefits and postemployment benefits (primarily severance). The
Company records annual amounts relating to these plans based
on calculations specified by U.S. GAAP, which include various
actuarial assumptions, such as discount rates, assumed rates of
return, compensation increases, turnover rates and health care
cost trend rates. The Company reviews its actuarial assumptions
on an annual basis and makes modifications to the assumptions
based on current rates and trends when it is deemed appropriate
to do so. As required by U.S. GAAP, the effect of the modifications
is generally recorded or amortized over future periods. The
Company believes that the assumptions utilized in recording its
obligations under its plans, which are presented in Note 14 to the
consolidated financial statements, are reasonable based on its
experience and advice from its actuaries.

Related Party Transactions: As discussed in Note 3 to the
Company’s consolidated financial statements, Philip Morris and
certain of its affiliates provide the Company with various services,
including planning, legal, treasury, accounting and financial
services, auditing, insurance, human resources, office of the
secretary, corporate affairs, information technology and tax
services. Billings for these services were $339 million in 2001,
$248 million in 2000 and $165 million in 1999. The increases reflect
information services and financial services that were previously
performed by the Company, but are now provided by Philip Morris
at approximately the same cost. Although the value of services
provided by Philip Morris cannot be quantified on a stand-alone
basis, management believes that the billings are reasonable based
on the level of support provided by Philip Morris, and that the
charges reflect all services provided.

The Company also has long-term notes payable to Philip Morris of
$5.0 billion at December 31, 2001 and $21.4 billion at December 31,
2000. A significant portion of the amount outstanding at December
31, 2000 related to borrowings for the acquisition of Nabisco. The
decrease from 2000 to 2001 reflects the repayment of borrowings
with proceeds from the IPO, a public global bond offering and
short-term borrowings. The interest rates on the debt with Philip
Morris were established at market rates available to Philip Morris
at the time of issuance for similar debt with matching maturities.
However, the $5.0 billion remaining long-term note payable to Philip
Morris has no prepayment penalty, and the Company may repay
some or all of the note with the proceeds from external debt
offerings in the current low interest rate environment.

23

In addition, the accounts of the Company are included in the
consolidated federal income tax return of Philip Morris. To the
extent that foreign tax credits, capital losses and other credits
generated by the Company, which cannot be utilized on a stand-
alone basis, are utilized in Philip Morris’ consolidated federal income
tax return, the benefit is recognized in the Company’s calculation
of its provision for income taxes. The Company’s provisions for
income taxes for the years ended December 31, 2001, 2000 and
1999 were lower than provisions calculated on a stand-alone basis
by $185 million, $139 million and $107 million, respectively.

The preparation of all financial statements includes the use of
estimates and assumptions that affect a number of amounts
included in the Company’s financial statements, including, among
other things, employee benefit costs and related disclosures,
inventories under the last-in-first-out (“LIFO”) method, marketing
costs (advertising, consumer incentives and trade promotions),
environmental costs and income taxes. The Company bases its
estimates on historical experience and other assumptions which it
believes are reasonable. If actual amounts are ultimately different
from previous estimates, the revisions are included in the
Company’s results for the period in which the actual amounts
become known. Historically, the aggregate differences, if any,
between the Company’s estimates and actual amounts in any year
have not had a significant impact on the Company’s consolidated
financial statements.

Business Environment

The Company is subject to fluctuating commodity costs, currency
movements and competitive challenges in various product
categories and markets, including a trend toward increasing
consolidation in the retail trade and consequent inventory reductions
and changing consumer preferences. Certain competitors may have
different profit objectives and some international competitors may
be less susceptible to currency exchange rates. To confront these
challenges, the Company continues to take steps to build the value
of its brands and improve its food business portfolio with new
products and marketing initiatives.

Fluctuations in commodity costs can cause retail price volatility,
intensify price competition and influence consumer and trade
buying patterns. KFNA’s and KFI’s businesses are subject to
fluctuating commodity costs, including dairy, coffee bean and
cocoa costs. Dairy commodity costs on average have been higher
in 2001 than those seen in 2000. Cocoa bean prices have also
been higher, while coffee bean prices have been lower than in
2000. During the latter part of 2000 and into 2001, energy costs
rose in response to higher prices charged for oil and natural gas.
However, this increase in energy costs did not have a material
adverse effect on the operating results of the Company.

Kraft Foods Inc.

On December 11, 2000, the Company acquired all of the
outstanding shares of Nabisco for $55 per share in cash. The
purchase of the outstanding shares, retirement of employee stock
options and other payments totaled approximately $15.2 billion. In
addition, the acquisition included the assumption of approximately
$4.0 billion of existing Nabisco debt. The Company financed the
acquisition through the issuance of two long-term notes payable
to Philip Morris totaling $15.0 billion and short-term intercompany
borrowings of $255 million. The acquisition has been accounted
for as a purchase. Nabisco’s balance sheet was consolidated with
the Company as of December 31, 2000, and beginning January 1,
2001, Nabisco’s earnings have been included in the consolidated
operating results of the Company; however, Nabisco’s earnings
from December 11, 2000 to December 31, 2000 were not included
in the consolidated operating results of the Company since such
amounts were insignificant. The Company’s interest cost associated
with acquiring Nabisco has been included in interest and other
debt expense, net, on the Company’s consolidated statements
of earnings for the years ended December 31, 2001 and 2000.

The integration of Nabisco into Kraft has continued throughout
2001. The closure of a number of Nabisco domestic and
international facilities resulted in severance and other exit costs
of $379 million, which are included in the adjustments for the
allocation of purchase price. The closures will result in the
termination of approximately 7,500 employees and will require total
cash payments of $373 million, of which approximately $74 million
has been spent through December 31, 2001. Substantially all of the
closures will be completed by the end of 2002.

The integration of Nabisco into the operations of the Company
will also result in the closure or reconfiguration of several of the
Company’s existing facilities. The aggregate charges to the
Company’s consolidated statement of earnings to close or
reconfigure its facilities and integrate Nabisco are estimated to
be in the range of $200 million to $300 million. During 2001, the
Company incurred pre-tax integration costs of $53 million for
site reconfigurations and other consolidation programs in the
United States.

During 2001, the Company purchased coffee businesses in
Romania, Morocco and Bulgaria and also acquired confectionery
businesses in Russia and Poland. The total cost of these and
other smaller acquisitions was $194 million. The operating results
of these businesses were not material to the Company’s
consolidated financial position or results of operations in any
of the periods presented.

During 2000, the Company purchased the outstanding common
stock of Balance Bar Co., a maker of energy and nutrition snack
products. In a separate transaction, the Company also acquired
Boca Burger, Inc., a privately held manufacturer and marketer of
soy-based meat alternatives. The total cost of these and other
smaller acquisitions was $365 million. The operating results of
these businesses were not material to the Company’s consolidated
financial position or results of operations in any of the periods
presented.

During 2001, 2000 and 1999, the Company sold several small
businesses, including a French confectionery business in 2000.
The aggregate proceeds received in these transactions during 2001,
2000 and 1999 were $21 million, $300 million and $175 million,
respectively, on which pre-tax gains of $8 million, $172 million and
$62 million, respectively, were recorded. The operating results of
businesses divested were not material to the consolidated
operating results of the Company in any of the periods presented.

Euro: Twelve of the fifteen member countries of the European
Union have established fixed conversion rates between their
existing currencies and one common currency—the euro. In
January 2002, the new euro-denominated currency (bills and coins)
was issued. The Company’s operating subsidiaries affected by the
euro conversion have addressed the systems and business issues
raised by the euro currency conversion. These issues included,
among others: (1) the need to adapt computer and other business
systems and equipment to accommodate euro-denominated
transactions; and (2) the competitive impact of cross-border price
transparency, which makes it more difficult for businesses to
charge different prices for the same products on a country-by-
country basis. The euro conversion has not had, and the Company
currently anticipates that it will not have, a material adverse impact
on its financial condition or results of operations.

Century Date Change: The Company did not experience any
material disruptions to its business as a result of the Century Date
Change (“CDC”). The Company’s increases in 1999 year-end
inventories and trade receivables caused by preemptive CDC
contingency plans resulted in incremental cash outflows during
1999 of approximately $155 million. The cash outflows reversed in
the first quarter of 2000. In addition, the Company had increased
shipments in the fourth quarter of 1999 because customers
purchased additional product in anticipation of potential CDC-
related disruptions. The increased shipments in 1999 resulted
in estimated incremental operating revenues and operating
companies income in 1999 of approximately $97 million and $40
million, respectively, and corresponding decreases in operating
revenues and operating companies income in 2000.

53rd Week and Trade Inventory Reductions: The Company’s
subsidiaries end their fiscal years on the last Saturday in December.
Accordingly, most years contain 52 weeks of operating results
while every fifth or sixth year includes 53 weeks. The Company’s
consolidated statement of earnings for the year ended December
31, 2000 included a 53rd week. The benefit to 2000 operating
results from an extra week of shipments was partially offset by
inventory reductions undertaken by trade customers for certain
of the Company’s products. A reduction in trade inventories also
occurred in 2001. The net result is that Kraft’s 2001 volume
and revenue comparisons to 2000 were affected by the extra
week of shipments in 2000. Volume comparisons contained in
Management’s Discussion and Analysis for 2001 versus 2000 have
been provided on a comparable 52-week basis to provide a more
meaningful comparison of operating results.

24

Kraft Foods Inc.

Consolidated Operating Results

Year Ended December 31,

2001

2000

Reported volume (in pounds):
Kraft Foods North America

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

Kraft Foods International

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International

Total reported volume

Reported operating revenues:
Kraft Foods North America

5,219
2,350
3,421
1,519
12,509

2,826
2,057
4,883
17,392

4,820
54
3,117
1,507
9,498

2,829
803
3,632
13,130

(in millions)
1999

4,874
47
2,883
1,433
9,237

2,816
764
3,580
12,817

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

$10,256
5,917
5,370
3,563
25,106

$ 9,405
329
5,266
3,461
18,461

$ 9,360
265
5,074
3,198
17,897

Kraft Foods International

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International
Total reported operating 

6,339
2,430
8,769

6,824
1,247
8,071

7,676
1,224
8,900

revenues

$33,875

$26,532

$26,797

Reported operating 

companies income:
Kraft Foods North America

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

$ 2,099
966
1,192
539
4,796

$ 1,845
100
1,090
512
3,547

$ 1,658
73
1,009
450
3,190

Kraft Foods International

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International
Total reported operating 
companies income

861
378
1,239

1,019
189
1,208

895
168
1,063

$ 6,035

$ 4,755

$ 4,253

Separation Programs: In October 2001, the Company announced
that it was offering a voluntary retirement program to certain
salaried employees in the United States. The program is expected
to terminate approximately 750 employees and will result in an
estimated pre-tax charge of approximately $140 million upon final
employee acceptance in the first quarter of 2002. This pre-tax
charge is part of the previously discussed $200 million to $300
million in pre-tax charges related to the integration of Nabisco.

During 1999, KFNA offered voluntary retirement incentive or
separation programs to certain eligible hourly and salaried
employees in the United States. Employees electing to terminate
employment under the terms of these programs were entitled to
enhanced retirement or severance benefits. Approximately 1,100
hourly and salaried employees accepted the benefits offered by
these programs and elected to retire or terminate. As a result, the
Company recorded a pre-tax charge of $157 million in 1999. This
charge was included in marketing, administration and research
costs in the consolidated statements of earnings for the following
segments: Cheese, Meals and Enhancers, $71 million; Oscar
Mayer and Pizza, $38 million; Biscuits, Snacks and Confectionery,
$2 million; and Beverages, Desserts and Cereals, $46 million.
Payments of pension and postretirement benefits are made in
accordance with the terms of the applicable benefit plans.
Severance benefits, which were paid over a period of time,
commenced upon dates of termination, which ranged from April
1999 to March 2000. The program and related payments were
completed during 2000. Salary and related benefit costs of
employees prior to their retirement or termination date were
expensed as incurred.

Consolidated Operating Results

The acquisition of Nabisco and subsequent IPO were significant
events that affect the comparability of earnings. In order to isolate
the financial effects of these events, and to provide a more
meaningful comparison of the Company’s results of operations, the
following tables and the subsequent discussion of the Company’s
consolidated operating results refer to results on a reported,
underlying and pro forma basis. Reported results include the
operating results of Nabisco in 2001, but not in 2000 and 1999.
Reported results also reflect average shares of common stock
outstanding during 2001, and reflect an average of 1.455 billion
shares outstanding during 2000 and 1999. Underlying results
include the operating results of Nabisco in 2001, but not in 2000
and 1999, and adjust for certain unusual items as detailed on
the tables, such as results from operations divested since the
beginning of 1999. Pro forma results assume the Company owned
Nabisco for all of 2000. In addition, pro forma results reflect
common shares outstanding of 1.735 billion based on the
assumption that shares issued immediately following the IPO were
outstanding during 2001 and 2000, and that, effective January 1,
2000, the net proceeds of the IPO were used to retire a portion of
a long-term note payable used to finance the Nabisco acquisition.
Pro forma results also adjust for certain unusual items as detailed
on the tables, such as the results from operations divested since
the beginning of 2000.

25

Kraft Foods Inc.

The following is a reconciliation of reported operating results to
underlying and pro forma operating results:

(in millions)
1999

12,817
(176)

(55)
12,586

2001

2000

17,392
(18)

13,130
(82)

55
13,103
3,852
16,955

(4)

(162)

(373)

Year Ended December 31,

Reported volume (in pounds)
Volume of businesses sold
Estimated impact of century 

date change

Underlying volume (in pounds)

17,374

Nabisco volume

Pro forma volume (in pounds)

17,374

Operating revenues of 
businesses sold

Estimated impact of century 

date change

Underlying operating revenues

33,871

Nabisco operating revenues
Pro forma operating revenues

$33,871

Reported operating revenues

$33,875

$26,532

$26,797

Reported operating 
companies income
Operating companies income of 

businesses sold

Estimated impact of century 

date change

Loss on the sale of a North American 
food factory and integration costs

Separation programs
Gain on sale of a French 
confectionery business

Underlying operating 
companies income

Nabisco operating 

companies income
Pro forma operating 
companies income

2001 compared with 2000

$ 6,035

$ 4,755

$ 4,253

(1)

82

(39)

40

(139)

(64)

(40)

157

6,116

4,617

$ 4,306

999

$ 6,116

$ 5,616

Reported volume for 2001 increased 4,262 million pounds (32.5%)
over 2000, due primarily to the acquisition of Nabisco. Pro forma
volume increased 2.5% over 2000. Excluding the 53rd week of
shipments in 2000, volume increased 3.7%, reflecting new product
introductions and volume gains in developing markets.

Reported operating revenues for 2001 increased $7,343 million
(27.7%) over 2000, due primarily to the acquisition of Nabisco.
Pro forma operating revenues decreased slightly from 2000, due
primarily to the 53rd week of sales in 2000, the adverse effect of
currency exchange rates and lower sales prices on coffee products
(driven by commodity-related price declines), partially offset by the
favorable impact of volume growth.

26

Reported operating companies income, which is defined as
operating income before general corporate expenses and
amortization of goodwill and other intangible assets, was affected
by the following unusual items during 2001 and 2000:

• Sale of Food Factory and Integration Costs: During 2001,

the Company recorded pre-tax charges of $53 million for site
reconfigurations and other consolidation programs in the United
States. In addition, the Company recorded a pre-tax charge of
$29 million related to the sale of a North American food factory.
These pre-tax charges, which aggregate $82 million, were
included in marketing, administration and research costs in the
consolidated statement of earnings for the following segments:
Cheese, Meals and Enhancers, $63 million; Biscuits, Snacks and
Confectionery, $2 million; Beverages, Desserts and Cereals, $12
million; and Oscar Mayer and Pizza, $5 million.

(97)
$26,327

97
26,467

7,566
$34,033

• Sale of French Confectionery Business: During 2000, the
Company sold a French confectionery business (“French
Confectionery Sale”) for proceeds of $251 million on which a
pre-tax gain of $139 million was recorded. The pre-tax gain is
included in the Europe, Middle East and Africa segment’s
marketing, administration and research costs in the consolidated
statement of earnings.

The operating companies income comparison was also affected by
approximately $40 million of operating income from the previously
mentioned CDC sales.

Reported operating companies income increased $1,280 million
(26.9%) over 2000, due primarily to the acquisition of Nabisco.
On a pro forma basis, operating companies income increased
$500 million (8.9%), driven by volume growth, productivity
savings and Nabisco synergies, partially offset by unfavorable
currency movements.

Currency movements have decreased operating revenues by
$522 million and operating companies income by $60 million from
2000. Decreases in operating revenues and operating companies
income are due to the strength of the U.S. dollar against the euro,
Canadian dollar and certain Asian and Latin American currencies.
Although the Company cannot predict future movements in
currency exchange rates, the strength of the U.S. dollar, primarily
against the euro and Asian currencies, if sustained during 2002,
could continue to have an unfavorable impact on operating
revenues and operating companies income comparisons.

Reported interest and other debt expense, net, increased $840
million in 2001. This increase was due primarily to notes issued to
Philip Morris in the fourth quarter of 2000 to finance the acquisition
of Nabisco. On a pro forma basis, interest and other debt expense,
net, decreased $213 million in 2001 from $1,348 million in 2000.
This decrease in pro forma interest expense is due to the use of
free cash flow to repay debt and ongoing efforts to externally
refinance debt payable to Philip Morris in the current low interest
rate environment.

Kraft Foods Inc.

During 2001, the Company’s reported effective tax rate increased
by 4.0 percentage points to 45.4% as compared with 2000, due
primarily to higher Nabisco-related goodwill amortization, which is
not tax deductible.

Reported diluted and basic earnings per share (“EPS”), which were
both $1.17 for 2001, decreased by 15.2% from 2000, due primarily
to higher levels of goodwill amortization and interest expense
associated with the acquisition of Nabisco. Reported net earnings
of $1,882 million for 2001 decreased $119 million (5.9%) from 2000.
On a pro forma basis, diluted and basic EPS, which were both
$1.21 for 2001, increased by 19.8% over 2000, due primarily to
higher operating results in all segments. Pro forma net earnings of
$2,092 million for 2001 increased $347 million (19.9%) from 2000.

2000 compared with 1999

Reported volume for 2000 increased 313 million pounds (2.4%)
over 1999. Reported volume in 2000 benefited from the inclusion of
53 weeks in 2000 operating results, partially offset by a decrease
related to trade inventory reductions in the United States. Volume
increased in every segment except Cheese, Meals and Enhancers,
where a decrease in lower-margin food service products more
than offset volume increases in higher margin products. On an
underlying basis, volume increased 4.1%.

Reported operating revenues for 2000 decreased $265 million
(1.0%) from 1999, due primarily to unfavorable currency movements
($857 million), the estimated shift in CDC revenues ($194 million)
and revenues from divested businesses, partially offset by higher
volume/mix ($756 million), the impact of acquisitions ($148 million)
and higher pricing ($49 million). On an underlying basis, operating
revenues increased 0.5%.

Reported operating companies income for 2000 increased $502
million (11.8%) over 1999, due primarily to higher volume/mix
($387 million), higher margins ($402 million, due primarily to price
increases and lower commodity and manufacturing costs), 1999
separation charges ($157 million) and the gain on the French
Confectionery Sale in 2000 ($139 million), partially offset by higher
marketing expenses ($366 million), unfavorable currency
movements ($91 million), the shift in CDC income ($80 million)
and the impact of divested businesses. On an underlying basis,
operating companies income increased 7.2%.

Interest and other debt expense, net, increased $58 million (10.8%),
due primarily to the notes issued to Philip Morris in connection with
the acquisition of Nabisco.

During 2000, the Company’s reported effective tax rate decreased
0.9 percentage points to 41.4%. This decrease was due primarily to
a reduction in state and local income taxes resulting from the mix
of pre-tax earnings in various states.

Reported net earnings in 2000 increased $248 million (14.1%) and
2000 basic and diluted earnings per share each increased by
15.0%. On an underlying basis, net earnings of $1.9 billion increased

27

6.6% over $1.8 billion in 1999, and basic and diluted earnings per
share each grew 7.2% from $1.25 in 1999 to $1.34 in 2000.

Operating Results by Reportable Segment

Kraft Foods North America

Year Ended December 31,

2001

2000

Reported volume (in pounds):
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total reported volume (in pounds)

Volume of businesses sold:

Cheese, Meals and Enhancers

Estimated impact of century 

date change:
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza
Underlying volume (in pounds)

Nabisco volume:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals

Reported operating revenues:
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total reported operating revenues

Operating revenues of 
businesses sold:
Cheese, Meals and Enhancers

Estimated impact of century 

date change:
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza
Underlying operating revenues

Nabisco operating revenues:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals

(in millions)
1999

4,874
47
2,883
1,433
9,237

5,219
2,350
3,421
1,519
12,509

4,820
54
3,117
1,507
9,498

(5)

(13)

(16)
(1)
(19)
(5)
9,183

16
1
19
5
9,534

418
2,260
41
12,253

12,509

$10,256
5,917
5,370
3,563
25,106

$ 9,405
329
5,266
3,461
18,461

$ 9,360
265
5,074
3,198
17,897

(10)

(25)

34
3
22
12
18,522

(34)
(3)
(22)
(12)
$17,801

25,106

843
5,429
107
$24,901

Pro forma operating revenues

$25,106

Pro forma volume (in pounds)

12,509

Kraft Foods Inc.

Kraft Foods North America (continued)

Year Ended December 31,

2001

2000

(in millions)
1999

Reported operating 

companies income:
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza
Total reported operating 
companies income
Operating companies income of 

businesses sold:
Cheese, Meals and Enhancers

Estimated impact of century 

date change:
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Loss on sale of a North American 

food factory and integration costs:
Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Separation programs:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Underlying operating 
companies income

Nabisco operating companies income:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals

Pro forma operating 
companies income

2001 compared with 2000

and the Oscar Mayer and Pizza segment, partially offset by the
impact of the 53rd week in 2000.

Reported operating companies income for 2001 increased $1,249
million (35.2%) over 2000, due primarily to the acquisition of
Nabisco ($1.2 billion), lower marketing, administration and research
costs ($177 million) and the shift in CDC income ($27 million),
partially offset by lower margins ($39 million, driven by higher dairy
commodity-related costs) and the loss on the sale of a North
American food factory and integration costs ($82 million). On a
pro forma basis, operating companies income increased 9.0%.

The following discusses operating results within each of KFNA’s
reportable segments.

$2,099
966
1,192
539

$1,845
100
1,090
512

$1,658
73
1,009
450

4,796

3,547

3,190

(4)

(8)

15
1
7
4

63
2
12
5

(15)
(1)
(7)
(4)

71
2
46
38

Cheese, Meals and Enhancers: Reported volume in 2001
increased 8.3% over 2000, due primarily to the acquisition of
Nabisco. On a pro forma basis, volume in 2001 decreased 0.6%
due primarily to the 53rd week of shipments in 2000. Excluding the
53rd week of shipments in 2000, volume increased 0.9%, as
volume gains in meals, enhancers and Canada were partially offset
by declines in cheese and food services. Meals recorded volume
gains, reflecting higher shipments of macaroni & cheese dinners.
Enhancers also recorded volume gains, reflecting higher shipments
of spoonable and pourable dressings. In Canada, volume grew
on higher shipments of branded products. In cheese, shipments
decreased due primarily to the Company’s decision to exit the
lower-margin, non-branded cheese business. Volume also declined
in process cheese loaves and cream cheese, as retailers continued
to reduce trade inventory levels, partially offset by higher volume
in grated and natural cheese. In U.S. food service, shipments
declined due to weakness in the economy and the Company’s
exit from lower-margin businesses.

4,878

3,570

$3,312

201
676
28

$4,878

$4,475

During 2001, reported operating revenues increased $851 million
(9.0%) over 2000, due primarily to the acquisition of Nabisco ($861
million), higher pricing ($89 million, primarily related to higher dairy
commodity costs) and the shift in CDC revenues ($34 million),
partially offset by lower volume/mix ($65 million) and unfavorable
currency movements ($62 million). On a pro forma basis, operating
revenues decreased slightly from the comparable period of 2000,
as unfavorable currency and lower volume/mix were partially offset
by higher pricing in cheese and food service.

Reported operating companies income for 2001 increased $254
million (13.8%) over 2000, due primarily to the acquisition of
Nabisco ($234 million), lower marketing, administration and
research costs ($173 million, primarily lower marketing expense) and
the shift in CDC income ($15 million), partially offset by unfavorable
margins due to higher dairy commodity costs ($81 million) and the
loss on the sale of a North American food factory and integration
costs ($63 million). Marketing expense decreased due to lower
price promotions on cheese products as cheese commodity costs
increased. This followed a period of heavy price promotion in 2000,
when low cheese commodity costs drove a period of intense price
competition. On a pro forma basis, operating companies income
increased 5.1%.

28

KFNA’s reported volume for 2001 increased 31.7% over 2000, due
primarily to the acquisition of Nabisco. On a pro forma basis,
volume for 2001 increased 2.1%, or 3.4% excluding the 53rd week
of shipments in 2000. The increase was due primarily to higher
shipments across all segments and reflects contributions from
new products.

Reported operating revenues increased $6.6 billion (36.0%) over
2000, due primarily to the acquisition of Nabisco ($6.6 billion)
and the shift in CDC revenues ($71 million), partially offset by
unfavorable currency movements ($62 million). On a pro forma
basis, operating revenues increased 0.8%, due primarily to higher
revenues from the Biscuits, Snacks and Confectionery segment

Kraft Foods Inc.

Biscuits, Snacks and Confectionery: Reported volume in 2001
increased more than 100% over 2000, due to the acquisition of
Nabisco. On a pro forma basis, volume in 2001 increased 1.5%
over 2000. Excluding the 53rd week of shipments in 2000, volume
increased 1.6%, due primarily to new product introductions in
biscuits, partially offset by lower shipments of snack nuts.

During 2001, reported operating revenues increased $5.6 billion
or more than 100% over 2000, due to the acquisition of Nabisco.
On a pro forma basis, operating revenues increased 2.7%, due
primarily to higher volume driven by new biscuit products and
higher pricing of biscuit and confectionery products.

Reported operating companies income for 2001 increased $866
million, or more than 100% over 2000, due primarily to the
acquisition of Nabisco ($925 million), partially offset by higher
marketing, administration and research costs ($39 million). On a
pro forma basis, operating companies income increased 24.6%,
due primarily to higher volume from new biscuit products, lower
commodity costs for snack nuts, and productivity and Nabisco
synergy savings.

Beverages, Desserts and Cereals: Reported volume in 2001
increased 9.8% over 2000, due primarily to growth in beverages.
On a pro forma basis, volume in 2001 increased 7.7% over 2000.
Excluding the 53rd week of shipments in 2000, volume increased
9.3%, due primarily to increased shipments of ready-to-drink
beverages, benefiting from the introduction of new products.
Desserts volume was below the prior year due to lower shipments
of dry packaged desserts and frozen toppings. Cereal volume
declined due primarily to weak category performance and
increased competition in the ready-to-eat cereal category.

During 2001, reported operating revenues increased $104 million
(2.0%) over 2000, due primarily to the acquisition of Nabisco ($93
million), the acquisition of Balance Bar Co. ($20 million), the shift in
CDC revenues ($22 million) and higher volume/mix ($17 million),
partially offset by lower pricing ($49 million, due primarily to coffee
commodity-related price reductions). On a pro forma basis,
operating revenues decreased 0.5%, reflecting commodity-related
price reductions on coffee products and lower shipments in
desserts and cereals.

Reported operating companies income for 2001 increased $102
million (9.4%) over 2000, primarily reflecting higher margins ($87
million), the acquisition of Nabisco ($32 million), lower marketing,
administration and research costs ($21 million) and the shift in CDC
income ($7 million), partially offset by integration costs ($12 million).
On a pro forma basis, operating companies income increased 7.0%.

Oscar Mayer and Pizza: Reported volume in 2001 increased
0.8% over 2000. Excluding the 53rd week of shipments in 2000,
volume increased 2.3%, due to volume gains in processed meats
and pizza. The processed meats business recorded volume gains
in luncheon meats, hot dogs, bacon and soy-based meat
alternatives. Volume in the pizza business increased, driven by
new products.

During 2001, reported operating revenues increased $102 million
(2.9%) over 2000 due primarily to higher volume/mix ($75 million),
the shift in CDC revenues ($12 million) and the acquisition of Boca
Burger, Inc.

Reported operating companies income for 2001 increased $27
million (5.3%) over 2000 primarily reflecting higher volume/mix ($45
million), lower marketing, administration and research costs ($22
million) and the shift in CDC income, partially offset by unfavorable
margins ($36 million, due primarily to higher meat and cheese
commodity costs).

2000 compared with 1999

KFNA’s reported volume for 2000 increased 2.8% over 1999. On
an underlying basis, volume increased 3.8%, including the benefit
related to the 53rd week of shipments, partially offset by a
decrease related to trade inventory reductions in 2000.

Reported operating revenues increased $564 million (3.2%) over
1999, due primarily to higher volume/mix ($465 million), the impact
of acquisitions ($148 million) and higher pricing ($79 million), partially
offset by the shift in CDC revenues ($142 million).

Reported operating companies income increased $357 million
(11.2%) over 1999, due primarily to higher margins ($318 million,
driven by higher pricing and lower commodity-related costs), the
1999 pre-tax charge for separation programs ($157 million) and
higher volume/mix ($240 million), partially offset by higher
marketing, administration and research costs ($310 million, the
majority of which related to higher marketing expenses) and the
shift in CDC income ($54 million). On an underlying basis, operating
companies income increased 7.8%.

The following discusses operating results within each of KFNA’s
reportable segments.

Cheese, Meals and Enhancers: Reported volume in 2000
decreased 1.1% from 1999, due primarily to a decrease in the United
States food service business, which more than offset an increase
in retail businesses. The decrease in food service volume was due
to the expiration of an exclusive distribution agreement, the loss
of a contract to supply cold cuts and the pruning of low margin
products. Cheese volume increased over 1999 with gains in
process, natural and cream cheese products. Meals volume was
lower in 2000, reflecting lower shipments of Mexican dinners and
rice. Enhancers volume decreased slightly. Volume in Canada grew
due to new product introductions. On an underlying basis, volume
decreased 0.3%.

Reported operating revenues increased $45 million (0.5%) over
1999, due primarily to higher volume/mix ($99 million, primarily
favorable product mix from the pruning of low margin products)
and favorable currency movements ($30 million), partially offset
by the shift in CDC revenues ($68 million) and the impact of
divestitures ($15 million).

29

Kraft Foods Inc.

Reported operating companies income increased $187 million
(11.3%) over 1999 due to higher margins ($254 million, driven by
lower commodity-related and manufacturing costs), higher
volume/mix ($67 million) and the 1999 separation charge ($71
million), partially offset by higher marketing, administration and
research costs ($171 million, the majority of which related to higher
marketing expenses) and the shift in CDC income ($30 million).
Marketing expense increased as the Company increased price
promotions on cheese products during 2000 in the United States
during a period of intense competition that resulted from low
cheese commodity costs. On an underlying basis, operating
companies income increased 8.8%.

Biscuits, Snacks and Confectionery: Reported volume in 2000
increased 14.9% over 1999, reflecting the continued success of
two-compartment snacks and the introduction of new intense mint
and chocolate products.

Reported operating revenues increased $64 million (24.2%) over
1999, due primarily to higher volume/mix. Reported operating
companies income increased $27 million (37.0%) over 1999, due
primarily to higher volume/mix ($45 million) and the 1999 separation
charge, partially offset by higher marketing, administration and
research costs ($24 million). On an underlying basis, operating
companies income increased 36.5%.

Beverages, Desserts and Cereals: Reported volume in 2000
increased 8.1% from 1999. Beverages volume grew on the strength
of ready-to-drink beverages, reflecting new product introductions,
and higher coffee shipments due to growth in Starbucks grocery
coffee. Volume also grew in frozen whipped toppings, due in part
to the introduction of new products. These increases were partially
offset by lower volume in ready-to-eat cereals, due to aggressive
competitive activity, and lower volume in dry packaged desserts,
reflecting lower promotions. On an underlying basis, volume
increased 9.5%, of which 0.6 percentage points related to the
acquisition of Balance Bar Co.

Reported operating revenues increased $192 million (3.8%) over
1999, due primarily to higher volume/mix ($126 million) and the
acquisition of Balance Bar Co. ($113 million), partially offset by the
shift in CDC revenues ($44 million).

Reported operating companies income increased $81 million (8.0%)
over 1999, due primarily to higher volume/mix ($50 million), the
1999 separation charges ($46 million), higher margins ($20 million,
due primarily to lower commodity costs) and the acquisition of
Balance Bar Co., partially offset by higher marketing, administration
and research costs ($29 million, the majority of which related to
higher marketing expenses), and the shift in CDC income ($14
million). On an underlying basis, operating companies income
increased 4.7%.

Oscar Mayer and Pizza: Reported volume in 2000 increased
5.2% from 1999. Volume grew in pizza, reflecting the continued
success of rising crust pizza and new product introductions.
Volume growth also reflected the introduction of new lunch

combination varieties, the acquisition of Boca Burger, Inc. and
gains in hot dogs and cold cuts. On an underlying basis, volume
increased 5.9%, of which approximately 0.8 percentage points
related to the acquisition of Boca Burger, Inc.

Reported operating revenues increased $263 million (8.2%) over
1999, due primarily to higher volume/mix ($168 million), higher
pricing ($82 million) and the acquisition of Boca Burger, Inc. ($35
million), partially offset by the shift in CDC revenues ($24 million).

Reported operating companies income increased $62 million
(13.8%) over 1999, due primarily to higher volume/mix ($78 million),
higher margins ($43 million) and the 1999 separation charge ($38
million), partially offset by higher marketing, administration and
research costs ($86 million, the majority of which related to higher
marketing expenses) and the shift in CDC income ($8 million). On
an underlying basis, operating companies income increased 6.6%.

Kraft Foods International

Year Ended December 31,

2001

2000

Reported volume (in pounds):
Europe, Middle East and Africa
Latin America and Asia Pacific
Total reported volume (in pounds)

Volume of businesses sold:

Europe, Middle East and Africa
Latin America and Asia Pacific

Estimated impact of century 

date change:
Europe, Middle East and Africa
Latin America and Asia Pacific

2,826
2,057
4,883

(1)
(17)

Underlying volume (in pounds)

4,865

Nabisco volume:

Europe, Middle East and Africa
Latin America and Asia Pacific

Pro forma volume (in pounds)

4,865

2,829
803
3,632

(40)
(37)

7
7
3,569

44
1,089
4,702

(in millions)
1999

2,816
764
3,580

(93)
(70)

(7)
(7)
3,403

Reported operating revenues:
Europe, Middle East and Africa
Latin America and Asia Pacific

Total reported operating revenues

Operating revenues of 
businesses sold:
Europe, Middle East and Africa
Latin America and Asia Pacific

Estimated impact of century 

date change:
Europe, Middle East and Africa
Latin America and Asia Pacific
Underlying operating revenues

Nabisco operating revenues:

Europe, Middle East and Africa
Latin America and Asia Pacific

$6,339
2,430
8,769

$6,824
1,247
8,071

$7,676
1,224
8,900

(4)

(131)
(21)

(294)
(54)

8,765

(14)
(12)
$8,526

14
12
7,945

47
1,140
$9,132

Pro forma operating revenues

$8,765

30

Kraft Foods Inc.

Kraft Foods International (continued)

Year Ended December 31,

2001

2000

(in millions)
1999

Reported operating 

companies income:
Europe, Middle East and Africa
Latin America and Asia Pacific

Total reported operating 
companies income
Gain on sale of a French 
confectionery business:
Europe, Middle East and Africa
Operating companies income of 

businesses sold:
Europe, Middle East and Africa
Latin America and Asia Pacific

Estimated impact of century 

date change:
Europe, Middle East and Africa
Latin America and Asia Pacific

Underlying operating 
companies income

$ 861
378

$1,019
189

$ 895
168

1,239

1,208

1,063

(1)

(139)

(32)
(3)

8
5

(52)
(4)

(8)
(5)

1,238

1,047

$ 994

Nabisco operating companies income:
Europe, Middle East and Africa
Latin America and Asia Pacific

Pro forma operating 
companies income

1
93

$1,238

$1,141

2001 compared with 2000

KFI’s reported volume for 2001 increased 34.4% over 2000, due
primarily to the acquisition of Nabisco. On a pro forma basis,
volume for 2001 increased 3.5% over 2000. Excluding the 53rd
week of shipments in 2000, volume increased 4.7%, benefiting from
gains across most consumer sectors and driven by continued
growth in the developing markets of Central and Eastern Europe,
Latin America and Asia Pacific.

During 2001, reported operating revenues increased $698 million
(8.6%) over 2000, due primarily to the acquisition of Nabisco ($1.2
billion) and the shift in CDC revenues ($26 million), partially offset by
unfavorable currency movements ($460 million) and the revenues
of divested businesses ($148 million). On a pro forma basis,
operating revenues decreased 4.0%, primarily reflecting unfavorable
currency movements.

Reported operating companies income for 2001 increased $31
million (2.6%) over 2000, due primarily to the acquisition of Nabisco
($128 million), lower marketing, administration and research costs
($119 million) and the shift in CDC income ($13 million), partially
offset by the gain on the French Confectionery Sale in 2000 ($139
million), unfavorable currency movements ($51 million) and income
of divested businesses ($34 million). On a pro forma basis, which
does not include the French Confectionery Sale in 2000, operating
companies income increased 8.5%.

The following discusses operating results within each of KFI’s
reportable segments.

Europe, Middle East and Africa: Reported and pro forma
volume for 2001 decreased slightly from 2000, due primarily to
the 53rd week of shipments in 2000. Excluding the 53rd week of
shipments in 2000, volume increased 1.3%, due primarily to volume
gains in the developing markets of Central and Eastern Europe and
growth in many Western European markets, partially offset by lower
volume in Germany, reflecting increased price competition and
trade inventory reductions, and lower canned meats volume in Italy.
In beverages, volume increased in both coffee and refreshment
beverages. Coffee volume grew in many markets, driven by new
product introductions and recent acquisitions in Romania, Morocco
and Bulgaria. In Germany, coffee volume increased despite trade
inventory reductions. Refreshment beverages volume increased,
driven by higher sales to the Middle East. Snacks volume
increased, driven by confectionery and salty snacks, particularly in
Central and Eastern Europe. Snacks volume in Germany was lower
due to increased price competition and trade inventory reductions.
Cheese volume increased due primarily to Philadelphia cream
cheese growth across the region, partially offset by lower volume
in Germany. In convenient meals and grocery, volume declined as
lower canned meats volume in Italy and a decline in grocery
volume in Germany were partially offset by higher shipments of
lunch combinations and pourable dressings in the United Kingdom.

Reported operating revenues for 2001 decreased $485 million
(7.1%) from 2000, due primarily to unfavorable currency movements
($251 million), revenues from divested businesses ($131 million),
lower pricing ($123 million, primarily commodity-driven coffee price
decreases) and lower volume/mix ($69 million), partially offset by
the acquisition of Nabisco ($46 million), the 2001 acquisitions of
coffee businesses in Romania, Morocco and Bulgaria ($29 million)
and the shift in CDC revenues ($14 million). On a pro forma basis,
operating revenues decreased 6.1%, reflecting unfavorable currency
movements and commodity-related coffee price decreases.

Reported operating companies income for 2001 decreased $158
million (15.5%) from 2000, due primarily to the gain on the French
Confectionery Sale in 2000 ($139 million), unfavorable currency
movements ($19 million), income from divested businesses ($32
million), lower volume/mix ($12 million) and unfavorable margins
($16 million), partially offset by lower marketing, administration and
research costs ($50 million) and the shift in CDC income. On a pro
forma basis, operating companies income increased 0.5%.

Latin America and Asia Pacific: Reported volume for 2001
increased more than 100% from 2000, due primarily to the
acquisition of Nabisco. On a pro forma basis, volume for 2001
increased 9.6% over 2000. Excluding the 53rd week of shipments
in 2000, volume increased 9.9%, due to gains across most
consumer sectors. Beverages volume increased, due primarily to
growth in refreshment beverages in Latin America and Asia Pacific,
and coffee in Asia Pacific. Cheese volume increased due primarily
to cream cheese and process cheese. Grocery volume was higher,
due primarily to new product introductions. Snacks volume
increased, driven primarily by new biscuit product introductions

31

Kraft Foods Inc.

and geographic expansion, partially offset by lower volume in
Argentina, due to economic weakness. Continued erosion of the
economic climate in Argentina may negatively affect volume and
income growth in the Latin America and Asia Pacific segment
during 2002.

During 2001, reported operating revenues increased $1,183 million
(94.9%) over 2000, due primarily to the acquisition of Nabisco,
partially offset by unfavorable currency movements. On a pro forma
basis, operating revenues increased 2.0%.

Reported operating companies income for 2001 increased $189
million (100.0%) over 2000, due primarily to the acquisition of
Nabisco ($128 million), lower marketing, administration and
research costs ($69 million), higher margins ($14 million) and the
shift in CDC income, partially offset by unfavorable currency
movements ($32 million). On a pro forma basis, operating
companies income increased 32.7%, due primarily to productivity
savings and Nabisco synergies.

into Central and Eastern Europe, as well as new confectionery
product launches and line extensions. Cheese volume grew on
the strength of Philadelphia cream cheese, reflecting successful
marketing programs across Europe and a re-launch in the Middle
East. Volume also grew for process cheese in Italy and Spain. In
convenient meals, volume grew on the successful launch of new
lunch combination varieties in the United Kingdom and line
extensions of packaged dinners in Germany and Belgium. Volume
grew in grocery, reflecting gains in spoonable dressings, benefiting
from effective marketing programs in Italy and new product
launches in Spain.

Reported operating revenues decreased $852 million (11.1%) from
1999, due primarily to unfavorable currency movements ($830
million), lower pricing ($60 million, due primarily to commodity-
driven coffee price decreases), the shift in CDC revenues ($28
million) and the impact of divestitures ($163 million), partially offset
by higher volume/mix ($186 million). On an underlying basis,
operating revenues decreased 9.0%.

2000 compared with 1999

KFI’s reported volume for 2000 increased 1.5% over 1999, due
primarily to volume increases in both the Europe, Middle East &
Africa and Latin America & Asia Pacific segments. On an underlying
basis, volume increased 4.9%, including the impact of the 53rd
week of shipments in 2000.

Reported operating revenues for 2000 decreased $829 million
(9.3%) from 1999, due primarily to unfavorable currency movements
($887 million), the shift in CDC revenues ($52 million), lower pricing
($30 million, due primarily to commodity-driven coffee price
decreases) and the impact of divestitures ($196 million), partially
offset by higher volume/mix ($291 million). On an underlying basis,
operating revenues decreased 6.8%.

Reported operating companies income for 2000 increased by $145
million (13.6%) to $1.2 billion, due primarily to higher volume/mix
($147 million), the gain on the French Confectionery Sale ($139
million) and higher margins ($84 million, primarily relating to lower
commodity costs), partially offset by unfavorable currency
movements ($96 million), higher marketing, administration and
research costs ($78 million), the shift in CDC income ($26 million)
and the impact of divested businesses. On an underlying basis,
operating companies income increased 5.3%.

The following discusses operating results within each of KFI’s
reportable segments.

Europe, Middle East and Africa: Reported volume for 2000
increased 0.5% over 1999, while underlying volume increased 2.9%
over 1999, with growth in all product categories. In beverages,
coffee volume benefited from growth in the developing markets
of Central and Eastern Europe and in the established markets
of Sweden, Austria, Italy and the United Kingdom. Volume in
refreshment beverages grew in Central and Eastern Europe, driven
by the expansion of powdered soft drinks. Volume growth in
snacks reflected double-digit gains in salty snacks on expansion

32

Reported operating companies income increased $124 million
(13.9%) over 1999, due primarily to the gain on the French
Confectionery Sale ($139 million), higher volume/mix ($104 million)
and higher margins ($70 million, due primarily to lower coffee
commodity costs), partially offset by unfavorable currency
movements ($97 million), higher marketing, administration and
research costs ($58 million), the shift in CDC income ($16 million)
and the impact of divestitures ($20 million). On an underlying basis,
operating companies income increased 2.5%.

Latin America and Asia Pacific: Reported volume for 2000
increased 5.1% over 1999. On an underlying basis, volume in 2000
increased 12.5% over 1999, led by strong growth in Brazil, Australia,
China, the Philippines, Indonesia, Japan and Korea and higher
exports to the Caribbean. Beverages volume grew due to
increased coffee volume in the Caribbean and China. Refreshment
beverages volume increased, benefiting from new flavors in Brazil,
marketing programs in China and the Philippines, and expansion
into Thailand. Snacks volume gains were driven by confectionery
volume growth in Asia Pacific, reflecting new product launches in
Indonesia, China and the Philippines. In Latin America, volume
benefited from the launch of new chocolate products in Brazil.
Cheese volume grew, driven by marketing and promotion of
Philadelphia cream cheese in Australia and Japan, as well as gains
in process cheese in the Philippines and Indonesia. Convenient
meals volume grew, led by exports of macaroni & cheese dinners
to Asian markets. Grocery volume grew on higher shipments of
yeast spread in Australia and increased shipments of gelatins and
cereals to Asia.

Reported operating revenues increased $23 million (1.9%) over
1999, due primarily to higher volume/mix ($105 million) and higher
pricing ($30 million), partially offset by unfavorable currency
movements ($57 million), the shift in CDC revenues ($24 million)
and the impact of divestitures ($33 million). On an underlying basis,
operating revenues increased 6.9%.

Kraft Foods Inc.

Reported operating companies income increased $21 million
(12.5%) over 1999, due primarily to higher volume/mix ($43 million)
and higher pricing ($14 million), partially offset by higher marketing,
administration and research costs ($20 million) and the shift in CDC
income ($10 million). On an underlying basis, operating companies
income increased 20.1%.

Financial Review

Net Cash Provided by Operating Activities

Net cash provided by operating activities was $3.3 billion in 2001
and 2000, while $2.7 billion was provided by operating activities
in 1999. The increase in 2000 operating cash flows over 1999
primarily reflected increased net earnings of $248 million and
reduced levels of receivables and inventories of $318 million, which
included the shift in working capital attributable to the CDC.

Net Cash Used in Investing Activities

During 2001, 2000 and 1999, net cash used in investing activities
was $1.2 billion, $16.1 billion and $669 million, respectively. The
increase in 2000 primarily reflects the cash used for the acquisition
of Nabisco.

Capital expenditures, which were funded by operating activities,
were $1.1 billion, $906 million and $860 million in 2001, 2000 and
1999, respectively. The capital expenditures were primarily to
modernize the manufacturing facilities, lower cost of production
and expand production capacity for growing product lines. The
additional expenditures in 2001 were due primarily to the
acquisition of Nabisco. Capital expenditures are expected to be
approximately $1.2 billion in 2002 and are expected to be funded
from operations.

During 2001, the Company purchased coffee businesses in
Romania, Morocco and Bulgaria and also acquired confectionery
businesses in Russia and Poland. The total cost of these and other
smaller acquisitions was $194 million.

During 2000, the Company purchased Boca Burger, Inc. and
Balance Bar Co. The total cost of these and other smaller
acquisitions was $365 million.

Net Cash Used in Financing Activities

During 2001, net cash of $2.1 billion was used in financing activities,
compared with $13.0 billion provided by financing activities
during 2000. During 2001, financing activities included net debt
repayments of $2.0 billion, excluding debt repayments made with
IPO proceeds. The net proceeds from the IPO were used to repay
debt to Philip Morris and, as a result, had no impact on financing
cash flows. In 2000, the Company’s financing activities provided
cash, as additional borrowings to finance the acquisition of
Nabisco exceeded the cash used to pay dividends. During 1999,
net cash of $2.0 billion was used in financing activities.

Debt and Liquidity

The SEC recently issued Financial Reporting Release No. 61, which
sets forth the views of the SEC regarding enhanced disclosures
relating to liquidity and capital resources. The information provided
below about the Company’s debt, credit facilities, guarantees and
future commitments is included here to facilitate a review of the
Company’s liquidity.

Debt: The Company’s total debt, including intercompany accounts
payable to Philip Morris, was $16.0 billion at December 31, 2001,
and $25.8 billion at December 31, 2000. The decrease was due
primarily to the repayment of $8.4 billion of long-term notes payable
to Philip Morris with the net proceeds from the IPO.

During 2001, the Company refinanced $2.6 billion, representing the
remaining portion of an $11.0 billion long-term note payable to Philip
Morris, with the proceeds from short-term borrowings. In addition,
the Company refinanced long-term, fixed-rate Swiss franc notes
payable to Philip Morris with short-term Swiss franc borrowings
from Philip Morris at variable interest rates.

During 2001, in anticipation of a public bond offering, the Company
converted its $4.0 billion, 7.40% note payable to Philip Morris,
originally maturing in December 2002, into a 3.56125% note
payable to Philip Morris maturing in November 2001. On November
2, 2001, the Company completed a $4.0 billion public global bond
offering at a weighted average interest rate of 5.48%, the net
proceeds of which were used to repay the 3.56125% short-term
note payable to Philip Morris.

As discussed in Notes 3, 7 and 8 to the consolidated financial
statements, the Company’s total debt of $16.0 billion at December
31, 2001 is due to be repaid as follows: in 2002, $4.9 billion; in
2003-2004, $0.5 billion; in 2005-2006, $2.0 billion; and thereafter,
$8.6 billion. Debt obligations due to be repaid in 2002 will be
satisfied with a combination of short-term borrowings, refinancing
transactions in the debt markets and operating cash flows. The
Company’s debt-to-equity ratio was 0.68 at December 31, 2001
and 1.84 at December 31, 2000.

Credit Ratings: The Company’s credit ratings by Moody’s at
December 31, 2001 were “P-1” in the commercial paper market and
“A2” for long-term debt obligations. The Company’s credit ratings
by Standard & Poor’s at December 31, 2001 were “A-1” in the
commercial paper market, and “A-” for long-term debt obligations.
The Company’s credit ratings by Fitch Rating Services at
December 31, 2001 were “F-1” in the commercial paper market and
“A” for long-term debt obligations. Changes in the Company’s credit
ratings, although none are currently anticipated, could result in
corresponding changes in the Company’s borrowing costs.
However, none of the Company’s debt agreements require
accelerated repayment in the event of a decrease in credit ratings.

Credit Facilities: In July 2001, reflecting the Company’s reduced
requirements for credit facilities following the IPO, Philip Morris
terminated an existing $9.0 billion 364-day revolving credit
agreement that could have been transferred to the Company. Upon

33

Kraft Foods Inc.

Market Risk

The Company operates internationally, with manufacturing and
sales facilities in various locations around the world, and utilizes
certain financial instruments to manage its foreign currency and
commodity exposures, which primarily relate to forecasted
transactions and interest rate exposures. Derivative financial
instruments are used by the Company, principally to reduce
exposures to market risks resulting from fluctuations in foreign
exchange rates, commodity prices and interest rates by creating
offsetting exposures. The Company is not a party to leveraged
derivatives. For a derivative to qualify as a hedge at inception and
throughout the hedged period, the Company formally documents
the nature and relationships between the hedging instruments and
hedged items, as well as its risk-management objectives, strategies
for undertaking the various hedge transactions and method of
assessing hedge effectiveness. Additionally, for hedges of
forecasted transactions, the significant characteristics and
expected terms of a forecasted transaction must be specifically
identified, and it must be probable that each forecasted transaction
will occur. Financial instruments qualifying for hedge accounting
must maintain a specified level of effectiveness between the
hedging instrument and the item being hedged, both at inception
and throughout the hedged period. The Company does not use
derivative financial instruments for speculative purposes.

Substantially all of the Company’s derivative financial instruments
are effective as hedges under the new accounting standard.
Accordingly, the Company recorded deferred losses of $18 million
in accumulated other comprehensive losses. This reflects the initial
adoption of the accounting pronouncement and a decrease in the
fair value of derivatives during the year of $33 million, partially offset
by deferred losses transferred to earnings of $15 million. The fair
value of all derivative financial instruments has been calculated
based on active market quotes.

Foreign Exchange Rates: The Company uses forward foreign
exchange contracts and foreign currency options to mitigate its
exposure to changes in foreign currency exchange rates from third-
party and intercompany forecasted transactions. The primary
currencies to which the Company is exposed include the euro and
Canadian dollar. At December 31, 2001 and 2000, the Company
had option and forward foreign exchange contracts with aggregate
notional amounts of $431 million and $237 million, respectively, for
the purchase or sale of foreign currencies.

termination of this facility, the Company entered into agreements
for a $2.0 billion 5-year revolving credit facility expiring in July 2006
and a $4.0 billion 364-day revolving credit facility expiring in July
2002. Including these revolving credit facilities, the Company’s total
credit facilities were $6.8 billion at December 31, 2001, of which
approximately $6.5 billion were undrawn at December 31, 2001.
Certain of these credit facilities are used to support commercial
paper borrowings, the proceeds of which will be used for general
corporate purposes. A portion of the facilities is used to meet the
short-term working capital needs of the Company’s international
businesses. Certain of the credit facilities require the maintenance
of a minimum net worth, as defined, of $18.2 billion, which the
Company exceeded at December 31, 2001. The Company does
not currently anticipate any difficulty in continuing to exceed this
covenant requirement. The foregoing revolving credit facilities do
not include any other covenants that could require an acceleration
of maturity or the posting of collateral. The five-year revolving credit
facility enables the Company to reclassify short-term debt on a
long-term basis. At December 31, 2001, $2.0 billion of commercial
paper borrowings that the Company intends to refinance were
reclassified as long-term debt. The Company expects to continue
to refinance long-term and short-term debt from time to time. The
nature and amount of the Company’s long-term and short-term
debt and the proportionate amount of each can be expected to
vary as a result of future business requirements, market conditions
and other factors.

Guarantees and Commitments: At December 31, 2001, the
Company was contingently liable for guarantees and commitments
of $41 million. These include surety bonds related to dairy
commodity purchases and guarantees related to letters of credit.
Guarantees do not have, and are not expected to have, a
significant impact on the Company’s liquidity. The Company’s
consolidated rent expense for 2001 was $372 million. Accordingly,
the Company does not consider its lease commitments to be a
significant determinant of the Company’s liquidity.

The Company believes that its cash from operations, existing credit
facilities and access to global capital markets will provide sufficient
liquidity to meet its working capital needs, planned capital
expenditures and payment of its anticipated quarterly dividends.

Dividends

Dividends paid in 2001 and 2000 were $225 million and $1.0 billion,
respectively. The dividends paid in 2000 reflect dividends to Philip
Morris. During 2001, the Company declared two regular quarterly
dividends of $0.13 per share on its Class A and Class B common
stock. The present annualized dividend rate is $0.52 per common
share. The declaration of dividends is subject to the discretion of
the Company’s board of directors and will depend on various
factors, including the Company’s net earnings, financial condition,
cash requirements, future prospects and other factors deemed
relevant by the Company’s board of directors.

34

Kraft Foods Inc.

Commodities: The Company is exposed to price risk related to
forecasted purchases of certain commodities used as raw
materials by the Company’s businesses. Accordingly, the Company
uses commodity forward contracts, as cash flow hedges, primarily
for coffee, cocoa, milk, cheese and wheat. Commodity futures and
options are also used to hedge the price of certain commodities,
including milk, coffee, cocoa, wheat, corn, sugar and soybean.
At December 31, 2001 and 2000, the Company had net long
commodity positions of $589 million and $617 million, respectively.

Interest Rates: The Company uses interest rate swaps to hedge
the fair value of an insignificant portion of its long-term debt. The
differential to be paid or received is accrued and recognized as
interest expense. If an interest rate swap agreement is terminated
prior to maturity, the realized gain or loss is recognized over the
remaining life of the agreement if the hedged amount remains
outstanding, or immediately if the underlying hedged exposure does
not remain outstanding. If the underlying exposure is terminated
prior to the maturity of the interest rate swap, the unrealized gain or
loss on the related interest rate swap is recognized in earnings
currently. At December 31, 2001, the aggregate notional principal
amount of those agreements, which converted fixed-rate debt to
variable-rate debt, was $102 million. Aggregate maturities at
December 31, 2001 were $29 million in 2003 and $73 million in
2004. During the year ended December 31, 2001, there was no
ineffectiveness relating to these fair value hedges.

Value at Risk: The Company uses a value at risk (“VAR”)
computation to estimate the potential one-day loss in the fair value
of its interest rate-sensitive financial instruments and to estimate
the potential one-day loss in pre-tax earnings of its foreign currency
and commodity price-sensitive derivative financial instruments.
The VAR computation includes the Company’s debt; short-term
investments; foreign currency forwards, swaps and options; and
commodity futures, forwards and options. Anticipated transactions,
foreign currency trade payables and receivables, and net
investments in foreign subsidiaries, which the foregoing instruments
are intended to hedge, were excluded from the computation.

The VAR estimates were made assuming normal market
conditions, using a 95% confidence interval. The Company used
a “variance/co-variance” model to determine the observed
interrelationships between movements in interest rates and various
currencies. These interrelationships were determined by observing
interest rate and forward currency rate movements over the
preceding quarter for the calculation of VAR amounts at December
31, 2001 and 2000, and over each of the four preceding quarters
for the calculation of average VAR amounts during each year. The
values of foreign currency and commodity options do not change
on a one-to-one basis with the underlying currency or commodity,
and were valued accordingly in the VAR computation.

The estimated potential one-day loss in fair value of the Company’s
interest rate-sensitive instruments, primarily debt, under normal
market conditions and the estimated potential one-day loss in pre-
tax earnings from foreign currency and commodity instruments
under normal market conditions, as calculated in the VAR model,
were as follows:

(in millions)

At 12/31/01 Average

High

Low

Pre-Tax Earnings Impact

Instruments sensitive to:
Foreign currency rates
Commodity prices

$ 2
5

$ 6
7

$ 13
11

$ 2
5

(in millions)

At 12/31/01 Average

High

Low

Instruments sensitive to:

Interest rates

$122

$79

$122

$56

Fair Value Impact

(in millions)

At 12/31/00 Average

High

Low

Pre-Tax Earnings Impact

Instruments sensitive to:
Foreign currency rates
Commodity prices

$ 20
9

$20
8

$ 24
9

$15
7

(in millions)

At 12/31/00 Average

High

Low

Instruments sensitive to:

Interest rates

$166

$83

$166

$39

Fair Value Impact

35

Kraft Foods Inc.

This VAR computation is a risk analysis tool designed to statistically
estimate the maximum probable daily loss from adverse movements
in interest rates, foreign currency rates and commodity prices
under normal market conditions. The computation does not purport
to represent actual losses in fair value or earnings to be incurred
by the Company, nor does it consider the effect of favorable
changes in market rates. The Company cannot predict actual future
movements in such market rates and does not present these VAR
results to be indicative of future movements in such market rates
or to be representative of any actual impact that future changes
in market rates may have on its future results of operations or
financial position.

New Accounting Standards

Effective January 1, 2001, the Company adopted Statement of
Financial Accounting Standards (“SFAS”) No. 133, “Accounting for
Derivative Instruments and Hedging Activities,” and its related
amendment, SFAS No. 138, “Accounting for Certain Derivative
Instruments and Certain Hedging Activities” (collectively referred
to as “SFAS No. 133”). These standards require that all derivative
financial instruments be recorded on the consolidated balance
sheets at their fair value as either assets or liabilities. Changes in
the fair value of derivatives are recorded each period in earnings or
accumulated other comprehensive losses, depending on whether
a derivative is designated and effective as part of a hedge
transaction and, if it is, the type of hedge transaction. Gains and
losses on derivative instruments reported in accumulated other
comprehensive losses are included in earnings in the periods in
which earnings are affected by the hedged item. As of January 1,
2001, the adoption of these new standards did not have a material
effect on net earnings (less than $1 million) or accumulated other
comprehensive losses (less than $1 million).

The Emerging Issues Task Force (“EITF”) issued EITF Issue
No. 00-14, “Accounting for Certain Sales Incentives” and EITF
Issue No. 00-25, “Vendor Income Statement Characterization of
Consideration Paid to a Reseller of the Vendor’s Products.” As a
result, certain items previously included in marketing, administration
and research costs on the consolidated statement of earnings will
either be recorded as a reduction of operating revenues or as an
increase in cost of sales. These EITF Issues will be effective in the
first quarter of 2002. The Company estimates that adoption of 

EITF Issues No. 00-14 and No. 00-25 will result in a reduction of
operating revenues in 2001, 2000 and 1999 of approximately
$4.6 billion, $3.6 billion and $3.4 billion, respectively. Marketing,
administration and research costs will decline in 2001, 2000 and
1999 by approximately $4.7 billion, $3.7 billion and $3.4 billion,
respectively, while cost of sales will increase by an insignificant
amount. The adoption of these EITF Issues will have no impact
on net earnings or basic and diluted EPS.

During 2001, the Financial Accounting Standards Board (“FASB”)
issued SFAS No. 141, “Business Combinations” and SFAS No. 142,
“Goodwill and Other Intangible Assets.” Effective January 1, 2002,
the Company will no longer be required to amortize indefinite life
goodwill and intangible assets as a charge to earnings. In addition,
the Company will be required to conduct an annual review of
goodwill and other intangible assets for potential impairment. The
Company estimates that net earnings and diluted earnings per
share would have been approximately $2,839 million and $1.76,
respectively, for the year ended December 31, 2001; $2,531 million
and $1.74, respectively, for the year ended December 31, 2000; and
$2,287 million and $1.57, respectively, for the year ended December
31, 1999, had the provisions of the new standards been applied in
those years. The Company does not currently anticipate having
to record a charge to earnings for the potential impairment of
goodwill or other intangible assets as a result of adoption of these
new standards.

In October 2001, the FASB issued SFAS No. 144, “Accounting for
the Impairment or Disposal of Long-Lived Assets,” which replaces
SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of.” SFAS No. 144 provides
updated guidance concerning the recognition and measurement of
an impairment loss for certain types of long-lived assets, expands
the scope of a discontinued operation to include a component of
an entity and eliminates the current exemption to consolidation
when control over a subsidiary is likely to be temporary. SFAS
No. 144 is effective for the Company on January 1, 2002. The
Company does not expect the adoption of SFAS No. 144 to have
a material impact on the Company’s 2002 financial statements.

Contingencies

See Note 17 to the consolidated financial statements for a
discussion of contingencies.

36

Kraft Foods Inc.

Forward-Looking and Cautionary Statements

The Company and its representatives may from time to time make
written or oral forward-looking statements, including statements
contained in the Company’s filings with the Securities and
Exchange Commission and in its reports to shareholders. One can
identify these forward-looking statements by use of words such as
“strategy,” “expects,” “plans,” “believes,” “will,” “estimates,” “intends,”
“projects,” “goals,” “targets” and other words of similar meaning.
One can also identify them by the fact that they do not relate
strictly to historical or current facts. In connection with the “safe
harbor” provisions of the Private Securities Litigation Reform Act of
1995, the Company is hereby identifying important factors that
could cause actual results and outcomes to differ materially from
those contained in any forward-looking statement made by or on
behalf of the Company; any such statement is qualified by
reference to the following cautionary statements.

Each of the Company’s segments is subject to intense competition,
changes in consumer preferences, the effects of changing prices
for its raw materials and local economic conditions. Their results 

are dependent upon their continued ability to promote brand equity
successfully, to anticipate and respond to new consumer trends,
to develop new products and markets and to broaden brand
portfolios, in order to compete effectively with lower priced
products in a consolidating environment at the retail and
manufacturing levels, and to improve productivity. The Company’s
results are also dependent on its ability to successfully integrate
and derive cost savings from the integration of Nabisco’s
operations with the Company. In addition, the Company is subject
to the effects of foreign economies, currency movements and
fluctuations in levels of customer inventories. The food industry
continues to be subject to the possibility that consumers could
lose confidence in the safety and quality of certain food products.
Developments in any of these areas, which are more fully
described above and which descriptions are incorporated into this
section by reference, could cause the Company’s results to differ
materially from results that have been or may be projected by or on
behalf of the Company. The Company cautions that the foregoing
list of important factors is not exclusive. The Company does not
undertake to update any forward-looking statement that may be
made from time to time by or on behalf of the Company.

37

Kraft Foods Inc.

Selected Financial Data — Five-Year Review

(in millions of dollars, except per share data)

2001

2000

1999

1998

1997

Summary of Operations:
Operating revenues
Cost of sales
Operating income
Interest and other debt expense, net
Earnings before income taxes
Pre-tax profit margin
Provision for income taxes
Net earnings
Basic EPS
Diluted EPS
Dividends declared per share
Weighted average shares (millions) — Basic
Weighted average shares (millions) — Diluted
Capital expenditures
Depreciation
Property, plant and equipment, net
Inventories
Total assets
Total long-term debt
Notes payable to parent and affiliates
Total debt
Total deferred income taxes
Shareholders’ equity
Common dividends declared as a % of Basic EPS
Common dividends declared as a % of Diluted EPS
Book value per common share outstanding
Market price per Class A common share — high/low
Closing price of Class A common share at year end
Price/earnings ratio at year end — Basic
Price/earnings ratio at year end — Diluted
Number of common shares outstanding at 

year end (millions)
Number of employees

$33,875
17,531
4,884
1,437
3,447
10.2%
1,565
1,882
1.17
1.17
0.26
1,610
1,610
1,101
680
9,109
3,026
55,798
8,134
5,000
16,007
4,565
23,478
22.2%
22.2%
13.53
35.57-29.50
34.03
29
29

1,735
114,000

$26,532
13,917
4,012
597
3,415
12.9%
1,414
2,001
1.38
1.38
—
1,455
1,455
906
499
9,405
3,041
52,071
2,695
21,407
25,826
942
14,048
—
—
9.65
—
—
—
—

1,455
117,000

$26,797
14,573
3,579
539
3,040
11.3%
1,287
1,753
1.20
1.20
—
1,455
1,455
860
491
6,526
2,563
30,336
433
6,602
7,828
789
13,461
—
—
9.25
—
—
—
—

1,455
71,000

$27,311
15,544
3,535
536
2,999
11.0%
1,367
1,632
1.12
1.12
—
1,455
1,455
841
494
6,494
2,570
31,391
483
6,234
7,168
707
15,134
—
—
10.40
—
—
—
—

1,455
78,000

$27,690
15,978
3,559
476
3,083
11.1%
1,291
1,792
1.23
1.23
—
1,455
1,455
737
512
6,198
2,643
31,257
531
5,000
6,393
340
15,761
—
—
10.83
—
—
—
—

1,455
82,000

38

Kraft Foods Inc.

Consolidated Balance Sheets

(in millions of dollars)

At December 31,

Assets

Cash and cash equivalents
Receivables (less allowances of $151 and $152)
Inventories:

Raw materials
Finished product

Deferred income taxes
Other current assets

Total current assets

Property, plant and equipment, at cost:

Land and land improvements
Buildings and building equipment
Machinery and equipment
Construction in progress

Less accumulated depreciation

Goodwill and other intangible assets (less accumulated amortization of $7,099 and $6,100)
Prepaid pension assets
Other assets
Total Assets

Liabilities

Short-term borrowings
Current portion of long-term debt
Due to parent and affiliates
Accounts payable
Accrued liabilities:
Marketing
Employment costs
Other
Income taxes

Total current liabilities

Long-term debt
Deferred income taxes
Accrued postretirement health care costs
Notes payable to parent and affiliates
Other liabilities

Total liabilities

Contingencies (Note 17)

Shareholders’ Equity

Class A common stock, no par value (555,000,000 and 275,000,000 shares issued and 

outstanding in 2001 and 2000)

Class B common stock, no par value (1,180,000,000 shares issued and outstanding)
Additional paid-in capital
Earnings reinvested in the business
Accumulated other comprehensive losses (primarily currency translation adjustments)

Total shareholders’ equity

Total Liabilities and Shareholders’ Equity

See notes to consolidated financial statements.

39

2001

2000

$

162
3,131

$

191
3,231

1,281
1,745
3,026
466
221
7,006

387
2,915
9,264
706
13,272
4,163
9,109
35,957
2,675
1,051
$55,798

$

681
540
1,652
1,897

1,398
658
1,821
228
8,875

8,134
5,031
1,850
5,000
3,430
32,320

1,175
1,866
3,041
504
185
7,152

419
2,949
8,858
816
13,042
3,637
9,405
31,584
2,623
1,307
$52,071

$

146
713
865
1,971

1,601
625
1,411
258
7,590

2,695
1,446
1,867
21,407
3,018
38,023

23,655
2,391
(2,568)
23,478
$55,798

15,230
992
(2,174)
14,048
$52,071

Kraft Foods Inc.

Consolidated Statements of Earnings

(in millions of dollars, except per share data)

For the years ended December 31,

Operating revenues
Cost of sales

Gross profit

Marketing, administration and research costs
Amortization of goodwill and other intangible assets

Operating income

Interest and other debt expense, net

Earnings before income taxes

Provision for income taxes

Net earnings

Per share data:

Basic earnings per share

Diluted earnings per share

See notes to consolidated financial statements.

2001

$33,875
17,531

16,344
10,498
962

4,884
1,437

3,447
1,565
$ 1,882

2000

$26,532
13,917

12,615
8,068
535

4,012
597

3,415
1,414
$ 2,001

1999

$26,797
14,573

12,224
8,106
539

3,579
539

3,040
1,287
$ 1,753

$ 1.17

$ 1.17

$ 1.38

$ 1.38

$ 1.20

$ 1.20

40

Kraft Foods Inc.

Consolidated Statements of Cash Flows

(in millions of dollars)

For the years ended December 31,

Cash Provided By (Used In) Operating Activities

Net earnings
Adjustments to reconcile net earnings to operating cash flows:

Depreciation and amortization
Deferred income tax provision
Gains on sales of businesses
Loss on sale of a North American food factory and integration costs
Cash effects of changes, net of the effects from acquired and divested companies:

Receivables, net
Inventories
Accounts payable
Income taxes
Other working capital items

Increase in pension assets and postretirement liabilities, net
Increase (decrease) in amount due to parent and affiliates
Other

Net cash provided by operating activities

Cash Provided By (Used In) Investing Activities

Capital expenditures
Purchase of Nabisco, net of acquired cash
Purchases of other businesses, net of acquired cash
Proceeds from sales of businesses
Other

Net cash used in investing activities

Cash Provided By (Used In) Financing Activities

Net issuance (repayment) of short-term borrowings
Long-term debt proceeds
Long-term debt repaid
Net proceeds from sale of Class A common stock
Proceeds from issuance of notes payable to parent and affiliates
Repayment of notes payable to parent and affiliates
Increase in amounts due to parent and affiliates
Dividends paid
Other

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents:

(Decrease) increase
Balance at beginning of year
Balance at end of year

Cash paid:

Interest

Income taxes

See notes to consolidated financial statements.

41

2001

2000

1999

$ 1,882

$ 2,001

$ 1,753

1,642
414
(8)
82

23
(107)
(73)
74
(407)
(245)
138
(87)
3,328

(1,101)

(194)
21
52
(1,222)

2,505
4,077
(705)
8,425

(16,350)
142
(225)

(2,131)
(4)

(29)
191
162

$

$ 1,433

$ 1,058

1,034
245
(172)

204
175
13
35
(195)
(215)
104
25
3,254

(906)
(15,159)
(365)
300
(8)
(16,138)

(816)
87
(112)

15,000
(124)
143
(1,009)
(187)
12,982
(2)

96
95
191

605

$

$

1,030
151
(62)

156
(95)
(18)
127
(137)
(205)
(21)
14
2,693

(860)

(14)
175
30
(669)

(22)
78
(111)

768
(178)
450
(3,016)

(2,031)
(10)

(17)
112
95

533

$

$

$ 1,051

$ 1,022

Kraft Foods Inc.

Consolidated Statements of Shareholders’ Equity

(in millions of dollars, except per share data)

Balances, January 1, 1999

$ —

$16,493

$

—

$(1,349)

Class A and B
Common
Stock

Additional
Paid-in
Capital

Earnings
Reinvested in
the Business

Currency
Translation
Adjustments

Total
Shareholders’
Equity

Total

$(1,359)

$15,134

Other

$ (10)

Accumulated Other Comprehensive Losses

Comprehensive earnings:

Net earnings
Other comprehensive losses, net of

income taxes:
Currency translation adjustments
Additional minimum pension liability

Total other comprehensive losses

Total comprehensive earnings
Dividends declared

Balances, December 31, 1999

Comprehensive earnings:

Net earnings
Other comprehensive losses, net of 

income taxes:
Currency translation adjustments
Additional minimum pension liability

Total other comprehensive losses

Total comprehensive earnings
Dividends declared

Comprehensive earnings:

Net earnings
Other comprehensive losses, net of 

income taxes:
Currency translation adjustments
Additional minimum pension liability
Change in fair value of derivatives 

accounted for as hedges

Total other comprehensive losses

Total comprehensive earnings
Sale of Class A common stock to public
Dividends declared ($0.26 per share)
Balances, December 31, 2001
See notes to consolidated financial statements.

Balances, December 31, 2000

—

15,230

1,753

(392)
(18)
(410)
1,343
(3,016)
13,461

2,001

(397)
(8)
(405)
1,596
(1,009)
14,048

1,882

(298)
(78)

(18)
(394)
1,488
8,425
(483)
$23,478

1,753

(392)

(18)

(392)
(18)

(1,263)
15,230

(1,753)
—

—

(1,741)

(28)

(1,769)

2,001

(1,009)
992

1,882

(397)

(8)

(397)
(8)

(2,138)

(36)

(2,174)

(298)

(78)

(18)

(298)
(78)

(18)

8,425

$ —

$23,655

(483)
$2,391

$(2,436)

$(132)

$(2,568)

42

Kraft Foods Inc.

Notes to Consolidated Financial Statements

Note 1. Background and Basis of Presentation:

Note 2. Summary of Significant Accounting Policies:

Cash and cash equivalents: Cash equivalents include demand
deposits with banks and all highly liquid investments with original
maturities of three months or less.

Inventories: Inventories are stated at the lower of cost or market.
The last-in, first-out (“LIFO”) method is used to cost substantially
all domestic inventories. The cost of other inventories is principally
determined by the average cost method.

Impairment of long-lived assets: The Company reviews long-
lived assets, including intangible assets, for impairment whenever
events or changes in business circumstances indicate that the
carrying amount of the assets may not be fully recoverable. The
Company performs undiscounted operating cash flow analyses to
determine if an impairment exists. If an impairment is determined to
exist, any related impairment loss is calculated based on fair value.
Impairment losses on assets to be disposed of, if any, are based
on the estimated proceeds to be received, less costs of disposal.

In October 2001, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting Standards
(“SFAS”) No. 144, “Accounting for the Impairment or Disposal of
Long-Lived Assets,” which replaces SFAS No. 121, “Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of.” SFAS No. 144 provides updated guidance
concerning the recognition and measurement of an impairment
loss for certain types of long-lived assets, expands the scope of a
discontinued operation to include a component of an entity and
eliminates the current exemption to consolidation when control
over a subsidiary is likely to be temporary. SFAS No. 144 is effective
for the Company on January 1, 2002. The Company does not
expect the adoption of SFAS No. 144 to have a material impact
on the Company’s 2002 financial statements.

Depreciation, amortization and goodwill valuation: Property,
plant and equipment are stated at historical cost and depreciated
by the straight-line method over the lives of the assets. Machinery
and equipment are depreciated over periods ranging from 3 to
20 years and buildings and building improvements over periods
up to 40 years. Goodwill and other intangible assets substantially
comprise brand names purchased through acquisitions.
In consideration of the long histories of these brands, goodwill
and other intangible assets associated with them are amortized
on the straight-line method over 40 years.

Background: Kraft Foods Inc. (“Kraft”) was incorporated in 2000
in the Commonwealth of Virginia. Following Kraft’s formation, Philip
Morris Companies Inc. (“Philip Morris”) transferred to Kraft its
ownership interest in Kraft Foods North America, Inc., a Delaware
corporation, through a capital contribution. In addition, during
2000, Philip Morris transferred management responsibility for its
food businesses in Latin America to Kraft Foods North America,
Inc. and its wholly-owned subsidiary, Kraft Foods International, Inc.
Kraft, together with its subsidiaries (collectively referred to as the
“Company”), is engaged in the manufacture and sale of retail
packaged foods in the United States, Canada, Europe, Latin
America and Asia Pacific.

On December 11, 2000, the Company acquired all of the
outstanding shares of Nabisco Holdings Corp. (“Nabisco”) for
$55 per share in cash. See Note 5, Acquisitions, for a complete
discussion of this transaction.

Prior to June 13, 2001, the Company was a wholly-owned
subsidiary of Philip Morris. On June 13, 2001, the Company
completed an initial public offering (“IPO”) of 280,000,000 shares of
its Class A common stock at a price of $31.00 per share. The IPO
proceeds, net of the underwriting discount and expenses, of $8.4
billion were used to retire a portion of an $11.0 billion long-term note
payable to Philip Morris incurred in connection with the acquisition
of Nabisco. After the IPO, Philip Morris owns approximately 83.9%
of the outstanding shares of the Company’s capital stock through
its ownership of 49.5% of the Company’s Class A common
stock and 100% of the Company’s Class B common stock. The
Company’s Class A common stock has one vote per share while
the Company’s Class B common stock has ten votes per share.
Therefore, Philip Morris holds 97.7% of the combined voting power
of the Company’s outstanding common stock.

Basis of presentation: The consolidated financial statements
include the Company and its subsidiaries. The preparation of
financial statements in conformity with accounting principles
generally accepted in the United States of America requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the dates of the financial
statements and the reported amounts of operating revenues and
expenses during the reporting periods. Actual results could differ
from those estimates. The Company’s operating subsidiaries report
year-end results as of the Saturday closest to December 31 each
year. This resulted in fifty-three weeks of operating results in the
Company’s consolidated statement of earnings for the year ended
December 31, 2000.

Certain prior years’ amounts have been reclassified to conform with
the current year’s presentation.

43

Kraft Foods Inc.

During 2001, the FASB issued SFAS No. 141, “Business
Combinations” and SFAS No. 142, “Goodwill and Other Intangible
Assets.” Effective January 1, 2002, the Company will no longer be
required to amortize indefinite life goodwill and intangible assets as
a charge to earnings. In addition, the Company will be required to
conduct an annual review of goodwill and other intangible assets
for potential impairment. The Company estimates that net
earnings and diluted earnings per share (“EPS”) would have been
approximately $2,839 million and $1.76, respectively, for the year
ended December 31, 2001; $2,531 million and $1.74, respectively, for
the year ended December 31, 2000; and $2,287 million and $1.57,
respectively, for the year ended December 31, 1999, had the
provisions of the new standards been applied in those years. The
Company does not currently anticipate having to record a charge
to earnings for the potential impairment of goodwill or other
intangible assets as a result of adoption of these new standards.

Marketing costs: The Company promotes its products with
significant marketing activities, including advertising, consumer
incentives and trade promotions. Advertising costs are expensed
as incurred. Consumer incentive and trade promotion activities are
recorded as expense based on amounts estimated as being due to
customers and consumers at the end of a period, based principally
on the Company’s historical utilization and redemption rates.

Revenue recognition: The Company recognizes operating
revenue upon shipment of goods when title and risk of loss pass to
customers. The Company classifies shipping and handling costs
as part of cost of sales.

The Emerging Issues Task Force (“EITF”) issued EITF Issue
No. 00-14, “Accounting for Certain Sales Incentives” and EITF
Issue No. 00-25, “Vendor Income Statement Characterization of
Consideration Paid to a Reseller of the Vendor’s Products.” As a
result, certain items previously included in marketing, administration
and research costs on the consolidated statement of earnings will
either be recorded as a reduction of operating revenues or as an
increase in cost of sales. These EITF Issues will be effective in the
first quarter of 2002. The Company estimates that adoption of
EITF Issues No. 00-14 and No. 00-25 will result in a reduction of
operating revenues in 2001, 2000 and 1999 of approximately
$4.6 billion, $3.6 billion and $3.4 billion, respectively. Marketing,
administration and research costs will decline in 2001, 2000 and
1999 by approximately $4.7 billion, $3.7 billion and $3.4 billion,
respectively, while cost of sales will increase by an insignificant
amount. The adoption of these EITF Issues will have no impact
on net earnings or basic and diluted EPS.

Hedging instruments: Effective January 1, 2001, the Company
adopted SFAS No. 133, “Accounting for Derivative Instruments and
Hedging Activities,” and its related amendment, SFAS No. 138,
“Accounting for Certain Derivative Instruments and Certain Hedging
Activities” (collectively referred to as “SFAS No. 133”). These
standards require that all derivative financial instruments be
recorded on the consolidated balance sheets at their fair value as
either assets or liabilities. Changes in the fair value of derivatives

are recorded each period in earnings or accumulated other
comprehensive losses, depending on whether a derivative is
designated and effective as part of a hedge transaction and, if it
is, the type of hedge transaction. Gains and losses on derivative
instruments reported in accumulated other comprehensive losses
are included in earnings in the periods in which earnings are
affected by the hedged item. As of January 1, 2001, the adoption
of these new standards did not have a material effect on net
earnings (less than $1 million) or accumulated other comprehensive
losses (less than $1 million).

Stock-based compensation: The Company accounts for
employee stock compensation plans in accordance with the
intrinsic value-based method permitted by SFAS No. 123,
“Accounting for Stock-Based Compensation,” which does not
result in compensation cost.

Income taxes: The Company accounts for income taxes in
accordance with SFAS No. 109, “Accounting for Income Taxes.” The
accounts of the Company are included in the consolidated federal
income tax return of Philip Morris. Income taxes are generally
computed on a separate company basis. To the extent that foreign
tax credits, capital losses and other credits generated by the
Company, which cannot be utilized on a separate company basis,
are utilized in Philip Morris’ consolidated federal income tax return,
the benefit is recognized in the calculation of the Company’s
provision for income taxes. The Company’s provisions for income
taxes included in the consolidated statements of earnings for the
years ended December 31, 2001, 2000 and 1999 were lower than
provisions calculated on a separate return basis by $185 million,
$139 million and $107 million, respectively. The Company makes
payments to, or is reimbursed by, Philip Morris for the tax effects
resulting from its inclusion in Philip Morris’ consolidated federal
income tax return.

Software costs: The Company capitalizes certain computer
software and software development costs incurred in connection
with developing or obtaining computer software for internal use.
Capitalized software costs, which are not significant, are amortized
on a straight-line basis over the estimated useful lives of the
software, which do not exceed five years.

Foreign currency translation: The Company translates the
results of operations of its foreign subsidiaries using average
exchange rates during each period, whereas balance sheet
accounts are translated using exchange rates at the end of each
period. Currency translation adjustments are recorded as a
component of shareholders’ equity. Transaction gains and losses
for all periods presented were not significant.

Environmental costs: The Company is subject to laws and
regulations relating to the protection of the environment. The
Company provides for expenses associated with environmental
remediation obligations when such amounts are probable and can
be reasonably estimated. Such accruals are adjusted as new
information develops or circumstances change.

44

Kraft Foods Inc.

While it is not possible to quantify with certainty the potential
impact of actions regarding environmental remediation and
compliance efforts that the Company may undertake in the future,
in the opinion of management, environmental remediation and
compliance costs, before taking into account any recoveries
from third parties, will not have a material adverse effect on the
Company’s consolidated financial position, results of operations
or cash flows.

Note 3. Related Party Transactions:

Philip Morris and certain of its affiliates provide the Company with
various services, including planning, legal, treasury, accounting,
auditing, insurance, human resources, office of the secretary,
corporate affairs, information technology and tax services. In 2001,
the Company entered into a formal agreement with Philip Morris
providing for a continuation of these services, the cost of which
increased $91 million as Philip Morris provided information
technology and financial services, all of which were previously
performed by the Company at approximately the same cost.
Billings for these services, which were based on the cost to Philip
Morris to provide such services, were $339 million, $248 million
and $165 million for the years ended December 31, 2001, 2000 and
1999, respectively. These costs were paid to Philip Morris monthly.
Although the cost of these services cannot be quantified on a
stand-alone basis, management believes that the billings are
reasonable based on the level of support provided by Philip Morris
and its affiliates, and that they reflect all services provided. The
effects of these transactions are included in operating cash flows
in the Company’s consolidated statements of cash flows.

The two notes maturing in 2002 were related to the financing for
the acquisition of Nabisco and were at market interest rates
available to Philip Morris for debt with matching maturities.

During 2001, the Company used the IPO proceeds, net of the
underwriting discount and expenses, of $8.4 billion to retire a
portion of the $11.0 billion long-term note payable to Philip Morris.
The remainder of this note was repaid with the proceeds from
commercial paper borrowings. The Company repaid the $4.0 billion
note primarily with the net proceeds from a $4.0 billion public global
bond offering. The Company also refinanced the two long-term
Swiss franc notes payable to Philip Morris with short-term Swiss
franc borrowings from Philip Morris at variable interest rates. The
short-term Swiss franc borrowings are included in due to parent
and affiliates on the Company’s consolidated balance sheet as of
December 31, 2001.

Based on interest rates available to the Company for issuances of
debt with similar terms and remaining maturities, the aggregate fair
values of the Company’s long-term notes payable to Philip Morris
and its affiliates at December 31, 2001 and 2000 were $5,325
million and $21,357 million, respectively. The fair values of the
Company’s current amounts due to parent and affiliates
approximate carrying amounts.

Note 4. Divestitures:

During 2001, the Company sold several small food businesses. The
aggregate proceeds received in these transactions were $21 million,
on which the Company recorded a pre-tax gain of $8 million.

In addition, the Company’s daily net cash or overdraft position is
transferred to Philip Morris or a European subsidiary of Philip
Morris. The Company pays or receives interest based upon the
applicable commercial paper rate, or the London Interbank Offered
Rate, on the net amount payable to, or receivable from, Philip
Morris or its European subsidiary.

During 2000, the Company sold a French confectionery business
for proceeds of $251 million, on which a pre-tax gain of $139 million
was recorded. Several small international and domestic food
businesses were also sold in 2000. The aggregate proceeds
received in these transactions were $300 million, on which the
Company recorded pre-tax gains of $172 million.

The Company also has long-term notes payable to its parent, Philip
Morris, and its affiliates as follows:

At December 31,

Notes payable in 2009, interest at 7.00%
Notes payable in 2002, interest at 7.75%
Notes payable in 2002, interest at 7.40%
Swiss franc notes payable in 2008, interest 

at 4.58%

Swiss franc notes payable in 2006, interest 

at 3.58%

2001

$5,000

$5,000

(in millions)
2000

$ 5,000
11,000
4,000

715

692
$21,407

During 1999, the Company sold several small international and
domestic food businesses. The aggregate proceeds received in
these transactions were $175 million, on which the Company
recorded pre-tax gains of $62 million.

The operating results of the businesses sold were not material to
the Company’s consolidated operating results in any of the periods
presented. Pre-tax gains on these divestitures were included in
marketing, administration and research costs on the Company’s
consolidated statements of earnings.

45

Kraft Foods Inc.

Note 5. Acquisitions:

Nabisco: On December 11, 2000, the Company acquired all of the
outstanding shares of Nabisco for $55 per share in cash. The
purchase of the outstanding shares, retirement of employee stock
options and other payments totaled approximately $15.2 billion. In
addition, the acquisition included the assumption of approximately
$4.0 billion of existing Nabisco debt. The Company financed the
acquisition through the issuance of two long-term notes payable to
Philip Morris totaling $15.0 billion and short-term intercompany
borrowings of $255 million. The acquisition has been accounted for
as a purchase. Nabisco’s balance sheet was consolidated with the
Company as of December 31, 2000, and beginning January 1,
2001, Nabisco’s earnings have been included in the consolidated
operating results of the Company; however, Nabisco’s earnings from
December 11, 2000 to December 31, 2000 were not included in the
consolidated operating results of the Company since such amounts
were insignificant. The Company’s interest cost associated with
acquiring Nabisco has been included in interest and other debt
expense, net, on the Company’s consolidated statements of
earnings for the years ended December 31, 2001 and 2000.

During 2001, the Company completed the allocation of excess
purchase price relating to Nabisco. As a result, the Company
recorded, among other things, the final valuations of property, plant
and equipment and intangible assets, primarily trade names,
amounts relating to the closure of Nabisco facilities and related
deferred income taxes. The final allocation of excess purchase
price at December 31, 2001 was as follows:

Purchase price
Historical value of tangible assets acquired and 

liabilities assumed

Excess of purchase price over assets acquired and 

liabilities assumed at the date of acquisition

Increases for allocation of purchase price:

Property, plant and equipment
Other assets
Accrued postretirement health care costs
Pension liabilities
Debt
Legal, professional, lease and contract termination costs
Other liabilities, principally severance
Deferred income taxes

Goodwill and other intangible assets at December 31, 2001

(in millions)

$15,254

(1,271)

16,525

367
347
230
190
50
129
602
3,583
$22,023

Goodwill and other intangible assets at December 31, 2001 include
approximately $11.7 billion related to trade names. The Company
also recorded deferred federal income taxes of $3.9 billion related
to trade names.

The closure of a number of Nabisco domestic and international
facilities resulted in severance and other exit costs of $379 million,
which are included in the above adjustments for the allocation of
purchase price. The closures will result in the elimination of
approximately 7,500 employees and will require total cash

46

payments of $373 million, of which approximately $74 million has
been spent through December 31, 2001.

The integration of Nabisco into the operations of the Company will
also result in the closure of several of the Company’s existing
facilities. The aggregate charges to the Company’s consolidated
statement of earnings to close or reconfigure its facilities and
integrate Nabisco are estimated to be in the range of $200 million
to $300 million. During 2001, the Company incurred pre-tax
integration costs of $53 million for site reconfigurations and other
consolidation programs in the United States. In October 2001, the
Company announced that it was offering a voluntary retirement
program to certain salaried employees in the United States. The
program is expected to eliminate approximately 750 employees
and will result in an estimated pre-tax charge of approximately $140
million upon final employee acceptance in the first quarter of 2002.

Assuming the acquisition of Nabisco occurred at the beginning of
2000 and 1999, pro forma operating revenues would have been
approximately $34 billion in each year; pro forma net earnings
would have been $1.4 billion in 2000 and $1.1 billion in 1999; while
basic and diluted EPS would have been $0.96 in 2000 and $0.77
in 1999. These pro forma results, which are unaudited, do not give
effect to any synergies expected to result from the merger of
Nabisco’s operations with those of the Company, nor do they give
effect to the reduction of interest expense from the repayment of
borrowings with the proceeds from the IPO. The pro forma results
also do not reflect the effects of SFAS No. 141 and 142 on the
amortization of goodwill or other intangible assets, or the EITF
Issues concerning the classification of certain expenses on the
consolidated statements of earnings. The pro forma results are not
necessarily indicative of what actually would have occurred if the
acquisition had been consummated and the IPO completed, at the
beginning of each year, nor are they necessarily indicative of future
consolidated operating results.

Other acquisitions: During 2001, the Company purchased coffee
businesses in Romania, Morocco and Bulgaria and also acquired
confectionery businesses in Russia and Poland. The total cost of
these and other smaller acquisitions was $194 million.

During 2000, the Company purchased the outstanding common
stock of Balance Bar Co., a maker of energy and nutrition snack
products. In a separate transaction, the Company also acquired
Boca Burger, Inc., a manufacturer and marketer of soy-based meat
alternatives. The total cost of these and other smaller acquisitions
was $365 million.

During 1999, the Company purchased several small North American
and international food businesses for $14 million.

The effects of these acquisitions were not material to the
Company’s consolidated financial position or results of operations
in any of the periods presented.

Kraft Foods Inc.

Note 6. Inventories:

Aggregate maturities of long-term debt, excluding short-term
borrowings reclassified as long-term debt, are as follows:

The cost of approximately 54% and 56% of inventories in 2001 and
2000, respectively, was determined using the LIFO method. The
stated LIFO amounts of inventories were approximately $150 million
and $171 million higher than the current cost of inventories at
December 31, 2001 and 2000, respectively.

Note 7. Short-Term Borrowings and
Borrowing Arrangements:

At December 31, 2001, the Company had short-term borrowings
of $2,681 million, consisting principally of commercial paper
borrowings with an average year-end interest rate of 1.9%. Of this
amount, the Company reclassified $2.0 billion of the commercial
paper borrowings to long-term debt based upon its intent and
ability to refinance these borrowings. At December 31, 2000, the
Company had short-term borrowings of $146 million with an
average year-end interest rate of 9.2%.

The fair values of the Company’s short-term borrowings at
December 31, 2001 and 2000, based upon current market interest
rates, approximate the amounts disclosed above.

During 2001, the Company entered into agreements for a $2.0
billion 5-year revolving credit facility maturing in July 2006 and a
$4.0 billion 364-day revolving credit facility maturing in July 2002.
The Company intends to use these credit facilities to support
commercial paper borrowings, the proceeds of which will be used
for general corporate purposes. These facilities require the
maintenance of a minimum net worth. None of these facilities were
drawn at December 31, 2001. In addition, the Company maintains
credit lines with a number of lending institutions amounting to
approximately $768 million. The Company maintains these credit
lines primarily to meet the short-term working capital needs of its
international businesses.

Note 8. Long-Term Debt:

At December 31, 2001 and 2000, the Company’s long-term debt
consisted of the following:

Short-term borrowings, reclassified as 

long-term debt

Notes, 4.63% to 7.55% (average effective 

rate 5.95%), due through 2035

Debentures, 7.00% to 8.50% (average effective 

rate 10.14%), $315 million face amount, 
due through 2017

Foreign currency obligations
Other

Less current portion of long-term debt

2001

(in millions)
2000

$2,000

$

—

6,229

2,751

258
136
51
8,674
(540)
$8,134

401
173
83
3,408
(713)
$2,695

47

2002
2003
2004
2005
2006
2007-2011
Thereafter

(in millions)

$ 540
378
85
730
1,252
2,593
1,153

Based on market quotes, where available, or interest rates currently
available to the Company for issuance of debt with similar terms
and remaining maturities, the aggregate fair value of the Company’s
long-term debt, including the current portion of long-term debt,
at December 31, 2001 and 2000 was $8,679 million and $3,459
million, respectively.

Note 9. Capital Stock:

The Company’s articles of incorporation authorize 3.0 billion shares
of Class A common stock, 2.0 billion shares of Class B common
stock and 500 million shares of preferred stock. At December 31,
2001, there were 555 million Class A common shares and 1.18
billion Class B common shares issued and outstanding, of which
Philip Morris holds 275 million Class A common shares and all of
the Class B common shares. There are no preferred shares issued
and outstanding. Class A common shares are entitled to one vote
each while Class B common shares are entitled to ten votes each.
Therefore, Philip Morris holds 97.7% of the combined voting power
of the Company’s outstanding common stock. At December 31,
2001, 75,949,530 shares of common stock were reserved for stock
options and other stock awards.

Note 10. Stock Plans:

The Company’s Board of Directors has adopted the 2001 Kraft
Performance Incentive Plan (the “Plan”), which was established
concurrently with the IPO. Under the Plan, the Company may grant
stock options, stock appreciation rights, restricted stock, reload
options and other awards based on the Company’s Class A
common stock, as well as performance-based annual and long-
term incentive awards. Up to 75 million shares of the Company’s
Class A common stock may be issued under the Plan. The
Company’s Board of Directors granted options for 21,029,777
shares of Class A common stock concurrent with the closing
date of the IPO (June 13, 2001) at an exercise price equal to the
IPO price of $31.00 per share. A portion of the shares granted
(18,904,637) becomes exercisable on January 31, 2003, and will
expire ten years from the date of the grant. The remainder of the
shares granted (2,125,140) may become exercisable on a schedule
based on total shareholder return for the Company’s Class A
common stock during the three years following the date of the
grant, or will become exercisable five years from the date of
the grant. These options will also expire ten years from the date

Kraft Foods Inc.

of the grant. Shares available to be granted under the Plan at
December 31, 2001 were 54,688,173.

The Company’s Board of Directors has also adopted the Kraft
Director Plan. Under the Kraft Director Plan, awards are granted
only to members of the Board of Directors who are not full-time
employees of the Company or Philip Morris or their subsidiaries.
Up to 500,000 shares of Class A common stock may be awarded
under the Kraft Director Plan. During 2001, 8,945 stock options were
granted under the Kraft Director Plan. Shares available to be granted
under the Kraft Director Plan at December 31, 2001 were 491,055.

The Company accounts for the plans in accordance with the
intrinsic value-based method permitted by SFAS No. 123,
“Accounting for Stock-Based Compensation,” which does not
result in compensation cost.

Option activity was as follows for the year ended December 31, 2001:

Balance at January 1, 2001

Options granted
Options canceled

Balance at December 31, 2001

Shares Subject
to Option

—
21,038,722
(268,420)
20,770,302

Weighted
Average
Exercise Price

$

—
31.00
31.00
31.00

Prior to the IPO, certain employees of the Company participated
in Philip Morris’ stock compensation plans. Philip Morris does
not currently intend to issue additional Philip Morris stock
compensation to the Company’s employees. Philip Morris accounts
for its plans in accordance with the intrinsic value-based method
permitted by SFAS No. 123, “Accounting for Stock-Based
Compensation,” which does not result in compensation cost.

The Company’s employees held options to purchase the following
number of shares of Philip Morris’ stock: 57,349,595 shares at an
average exercise price of $34.66 per share at December 31, 2001;
56,977,329 shares at an average exercise price of $30.46 per share
at December 31, 2000; and 39,911,082 shares at an average
exercise price of $34.34 per share at December 31, 1999. Of these
amounts, the following were exercisable at each date: 44,930,609
at an average exercise price of $31.95 per share at December 31,
2001; 38,444,963 at an average exercise price of $34.82 per share
at December 31, 2000; and 31,071,681 at an average exercise price
of $32.75 per share at December 31, 1999.

Had compensation cost for stock option awards under the Kraft
plans and Philip Morris’ plans been determined by using the fair
value at the grant date, the Company’s net earnings and EPS
(basic and diluted) would have been $1,785 million and $1.11 for
the year ended December 31, 2001; $1,947 million and $1.34 for
the year ended December 31, 2000; and $1,713 million and $1.18
for the year ended December 31, 1999. The foregoing impact of
compensation cost was determined using a modified Black-
Scholes methodology and the following assumptions:

Risk-Free
Interest
Rate

Weighted
Average
Expected 
Life

2001 Kraft
2001 Philip Morris
2000 Philip Morris
1999 Philip Morris

4.81% 5 years
4.86
6.58
5.81

5
5
5

Expected
Volatility

29.70%
33.88
31.71
26.06

Expected
Dividend 
Yield

Fair Value
at Grant 
Date

1.68% $ 9.13
10.36
4.78
3.19
9.00
8.21
4.41

In addition, certain of the Company’s employees held shares of
Philip Morris restricted stock and rights to receive shares of stock,
giving these employees in most instances all of the rights of
shareholders, except that they may not sell, assign, pledge or
otherwise encumber such shares and rights. Such shares are
subject to forfeiture if certain employment conditions are not met.
During 2001 and 2000, Philip Morris granted to certain of the
Company’s U.S. employees restricted stock of 279,120 shares and
2,113,570 shares, respectively. Philip Morris also issued to certain of
the Company’s non-U.S. employees rights to receive 31,310 and
683,790 equivalent shares during 2001 and 2000, respectively.
During 1999, there were no restricted stock grants issued to the
Company’s employees. At December 31, 2001, restrictions on the
stock, net of forfeitures, lapse as follows: 2002—2,638,410 shares;
and 2003—92,000 shares. The fair value of the restricted shares
and rights at the date of grant is amortized to expense ratably over
the restriction period through a charge from Philip Morris. In 2001,
2000 and 1999, the Company recorded compensation expense
related to restricted stock awards of $39 million, $23 million and
$3 million, respectively.

Note 11. Earnings Per Share:

Basic and diluted EPS were calculated using the following for the
years ended December 31, 2001, 2000 and 1999:

Net earnings

Weighted average shares for 

basic and diluted EPS

2001

2000

(in millions)
1999

$1,882

$2,001

$1,753

1,610

1,455

1,455

During June 2001, the Company completed an IPO of 280,000,000
shares of its Class A common stock. Immediately following the
IPO, the Company had 1,735,000,000 Class A and B common
shares outstanding.

48

Kraft Foods Inc.

Note 12. Pre-tax Earnings and Provision for Income Taxes:

Pre-tax earnings and provision for income taxes consisted of the
following for the years ended December 31, 2001, 2000 and 1999:

The tax effects of temporary differences that gave rise to deferred
income tax assets and liabilities consisted of the following at
December 31, 2001 and 2000:

Pre-tax earnings:
United States
Outside United States

Total pre-tax earnings

Provision for income taxes:
United States federal:

Current
Deferred

State and local
Total United States
Outside United States:

Current
Deferred

Total outside United States
Total provision for income taxes

2001

2000

(in millions)
1999

$2,282
1,165
$3,447

$2,188
1,227
$3,415

$1,990
1,050
$3,040

$ 594
299
893
112
1,005

445
115
560
$1,565

$ 572
218
790
120
910

477
27
504
$1,414

$ 543
164
707
144
851

449
(13)
436
$1,287

At December 31, 2001, applicable United States federal income
taxes and foreign withholding taxes have not been provided on
approximately $1.5 billion of accumulated earnings of foreign
subsidiaries that are expected to be permanently reinvested. The
Company is unable to provide a meaningful estimate of additional
deferred taxes that would have been provided were these earnings
not considered permanently reinvested.

The effective income tax rate on pre-tax earnings differed from the
U.S. federal statutory rate for the following reasons for the years
ended December 31, 2001, 2000 and 1999:

U.S. federal statutory rate
Increase (decrease) resulting from:
State and local income taxes, 
net of federal tax benefit

Goodwill amortization
Other

Effective tax rate

2001

2000

1999

35.0%

35.0%

35.0%

2.0
9.4
(1.0)
45.4%

2.2
5.2
(1.0)
41.4%

3.0
5.9
(1.6)
42.3%

Deferred income tax assets:

Accrued postretirement and 
postemployment benefits

Other
Total deferred income tax assets

Deferred income tax liabilities:

Trade names
Property, plant and equipment
Prepaid pension costs
Total deferred income tax liabilities

Net deferred income tax liabilities

Note 13. Segment Reporting:

2001

(in millions)
2000

$

774
737
1,511

$ 789
539
1,328

(3,847)
(1,379)
(850)
(6,076)
$(4,565)

(1,527)
(743)
(2,270)
$ (942)

The Company manufactures and markets packaged retail food
products, consisting principally of beverages, cheese, snacks,
convenient meals and various packaged grocery products through
its North American and international food businesses. Reportable
segments for the North American businesses are organized and
managed principally by product category. The North American food
segments are Cheese, Meals and Enhancers; Biscuits, Snacks and
Confectionery; Beverages, Desserts and Cereals; and Oscar Mayer
and Pizza. Kraft Foods North America’s food service business
within the United States and its businesses in Canada and Mexico
are managed through the Cheese, Meals and Enhancers segment.
International operations are organized and managed by geographic
location. The international food segments are Europe, Middle East
and Africa; and Latin America and Asia Pacific.

The Company’s management reviews operating companies
income to evaluate segment performance and allocate resources.
Operating companies income excludes general corporate expenses
and amortization of goodwill. Interest and other debt expense,
net, and provision for income taxes are centrally managed and,
accordingly, such items are not presented by segment since they
are excluded from the measure of segment profitability reviewed by
management. The Company’s assets, which are principally in the
United States and Europe, are managed geographically. The
accounting policies of the segments are the same as those
described in the Summary of Significant Accounting Policies.

49

Kraft Foods Inc.

Reportable segment data were as follows:

For the Years Ended December 31,

2001

2000

Operating revenues:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International
Total operating revenues

Operating companies income:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International
Total operating companies income

Amortization of goodwill and 

other intangibles

General corporate expenses
Total operating income

Interest and other debt expense, net
Earnings before income taxes

(in millions)
1999

$ 9,360
265
5,074
3,198
17,897
7,676
1,224
8,900
$26,797

$ 1,658
73
1,009
450
3,190
895
168
1,063
4,253

$10,256
5,917
5,370
3,563
25,106
6,339
2,430
8,769
$33,875

$ 2,099
966
1,192
539
4,796
861
378
1,239
6,035

$ 9,405
329
5,266
3,461
18,461
6,824
1,247
8,071
$26,532

$ 1,845
100
1,090
512
3,547
1,019
189
1,208
4,755

(962)
(189)
4,884
(1,437)
$ 3,447

(535)
(208)
4,012
(597)
$ 3,415

(539)
(135)
3,579
(539)
$ 3,040

As previously noted, the Company’s international operations are
managed by geographic location. Operating revenues by consumer
sector for Kraft Foods International were as follows:

Consumer Sector

For the Years Ended December 31,

2001

2000

Snacks
Beverages
Cheese
Grocery
Convenient Meals

Total

$3,263
3,097
1,267
866
276
$8,769

$2,723
3,201
1,259
584
304
$8,071

(in millions)
1999

$2,999
3,551
1,316
664
370
$8,900

During 2001, the Company recorded pre-tax charges of $53 million
for site reconfigurations and other consolidation programs in the
United States. In addition, the Company recorded a pre-tax charge
of $29 million to close a North American food factory. These
pre-tax charges, which aggregate $82 million, were included in
marketing, administration and research costs in the consolidated
statement of earnings for the following segments: Cheese, Meals
and Enhancers, $63 million; Biscuits, Snacks and Confectionery,
$2 million; Beverages, Desserts and Cereals, $12 million; and Oscar
Mayer and Pizza, $5 million.

50

During 1999, the Company’s North American food business
announced that it was offering voluntary retirement incentive or
separation programs to certain eligible hourly and salaried
employees in the United States. Employees electing to terminate
employment under the terms of these programs were entitled to
enhanced retirement or severance benefits. Approximately 1,100
hourly and salaried employees accepted the benefits offered by
these programs and elected to retire or terminate. As a result, the
Company recorded a pre-tax charge of $157 million during 1999.
This charge was included in marketing, administration and research
costs in the consolidated statement of earnings for the following
segments: Cheese, Meals and Enhancers, $71 million; Oscar
Mayer and Pizza, $38 million; Biscuits, Snacks and Confectionery,
$2 million; and Beverages, Desserts and Cereals, $46 million.
Payments of pension and postretirement benefits are made in
accordance with the terms of the applicable benefit plans.
Severance benefits, which were paid over a period of time,
commenced upon dates of termination which ranged from April
1999 to March 2000. The program and related payments were
completed during 2000. Salary and related benefit costs of
employees prior to their retirement or termination date were
expensed as incurred.

See Notes 4 and 5 regarding divestitures and acquisitions. The
acquisition of Nabisco primarily affected the reported results of the
Biscuits, Snacks and Confectionery and the Latin America and Asia
Pacific segments.

For the Years Ended December 31,

2001

2000

(in millions)
1999

Depreciation expense:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International
Total depreciation expense

Capital expenditures:

Cheese, Meals and Enhancers
Biscuits, Snacks and Confectionery
Beverages, Desserts and Cereals
Oscar Mayer and Pizza

Total Kraft Foods North America

Europe, Middle East and Africa
Latin America and Asia Pacific

Total Kraft Foods International
Total capital expenditures

$ 163
152
113
55
483
158
39
197
$ 680

$ 257
171
202
131
761
231
109
340
$1,101

$150

$135

109
51
310
163
26
189
$499

102
49
286
175
30
205
$491

$247

$246

193
148
588
239
79
318
$906

204
125
575
255
30
285
$860

Kraft Foods Inc.

Geographic data for operating revenues, total assets and long-lived
assets (which consist of all non-current assets, other than goodwill
and other intangible assets and prepaid pension assets) were
as follows:

For the Years Ended December 31,

2001

2000

Operating revenues:
United States
Europe
Other

Total operating revenues

At December 31,

Total assets:

United States
Europe
Other

Total assets

Long-lived assets:
United States
Europe
Other

Total long-lived assets

Note 14. Benefit Plans:

$23,078
6,062
4,735
$33,875

$16,910
6,642
2,980
$26,532

2001

2000

$43,889
7,366
4,543
$55,798

$ 6,750
2,136
1,274
$10,160

$40,454
7,630
3,987
$52,071

$ 6,684
2,116
1,912
$10,712

(in millions)
1999

$16,540
7,500
2,757
$26,797

(in millions)
1999

$19,429
8,292
2,615
$30,336

$ 3,904
2,021
971
$ 6,896

The Company and its subsidiaries sponsor noncontributory defined
benefit pension plans covering substantially all U.S. employees.
Pension coverage for employees of the Company’s non-U.S.
subsidiaries is provided, to the extent deemed appropriate, through
separate plans, many of which are governed by local statutory
requirements. In addition, the Company’s U.S. and Canadian
subsidiaries provide health care and other benefits to substantially
all retired employees. Health care benefits for retirees outside the
United States and Canada are generally covered through local
government plans.

Pension Plans: Net pension (income) cost consisted of the
following for the years ended December 31, 2001, 2000 and 1999:

(in millions)

Service cost
Interest cost
Expected return on 

plan assets
Amortization:

Net gain on adoption 
of SFAS No. 87
Unrecognized net 
(gain) loss from 
experience 
differences
Prior service cost

Settlements

Net pension 

U.S. Plans
2000

1999

2001

Non-U.S. Plans
2000

$ 69
213

$ 76
212

$ 45
112

$ 37
98

1999

$ 40
100

2001

$ 107
339

(648)

(523)

(511)

(126)

(103)

(97)

(11)

(11)

(1)

(1)

(21)
8
(12)

(36)
7
(34)

(15)
6
(41)

(1)
5

(1)
4

2
4

(income) cost

$(227) $(315) $(284) $ 35

$ 34

$ 48

In 2001 and 2000, retiring employees elected lump-sum payments,
resulting in settlement gains of $12 million and $34 million,
respectively. During 2001, the Company announced that it was
offering a voluntary early retirement program to certain eligible
salaried employees in the United States. The program is expected
to eliminate approximately 750 employees and will result in a pre-
tax charge of approximately $140 million upon final employee
acceptance in the first quarter of 2002. During 1999, the Company
instituted an early retirement and workforce reduction program that
resulted in settlement gains, net of additional termination benefits of
$41 million.

51

Kraft Foods Inc.

The changes in benefit obligations and plan assets, as well as the
funded status of the Company’s pension plans at December 31,
2001 and 2000, were as follows:

(in millions)

Benefit obligation at 

January 1
Service cost
Interest cost
Benefits paid
Acquisitions
Settlements
Actuarial losses
Currency
Other

Benefit obligation at 

December 31

Fair value of plan assets at 

January 1
Actual return on plan assets
Contributions
Benefits paid
Acquisitions
Currency
Actuarial gains (losses)
Fair value of plan assets at 

U.S. Plans

Non-U.S. Plans

2001

2000

2001

2000

$4,327
107
339
(403)
71
14
500

$2,766
69
213
(258)
1,463
11
51

9

12

$1,915
45
112
(108)
(22)

$1,740
37
98
(94)
236

22
18
39

91
(205)
12

4,964

4,327

2,021

1,915

7,039
(386)
37
(394)
(45)

6,282
(215)
33
(278)
1,226

108

(9)

1,589
(227)
63
(76)
(41)
18
3

1,314
103
32
(64)
265
(121)
60

December 31

6,359

7,039

1,329

1,589

At December 31, 2001 and 2000, certain of the Company’s U.S.
plans were unfunded, with projected benefit and accumulated
benefit obligations of $213 million and $164 million, respectively, in
2001 and $156 million and $97 million, respectively, in 2000. For
certain non-U.S. plans, which have accumulated benefit obligations
in excess of plan assets, the projected benefit obligation,
accumulated benefit obligation and fair value of plan assets were
$1,165 million, $1,073 million and $416 million, respectively, as of
December 31, 2001 and $639 million, $596 million and $49 million,
respectively, as of December 31, 2000.

The following weighted-average assumptions were used to
determine the Company’s obligations under the plans:

Discount rate
Expected rate of return on 

plan assets

Rate of compensation increase

U.S. Plans

Non-U.S. Plans

2001

2000

2001

2000

7.00%

7.75%

5.80%

5.88%

9.00
4.50

9.00
4.50

8.49
3.36

8.51
3.55

The Company and certain of its subsidiaries sponsor employee
savings plans, to which the Company contributes. These plans
cover certain salaried, non-union and union employees. The
Company’s contributions and costs are determined by the
matching of employee contributions, as defined by the plans.
Amounts charged to expense for defined contribution plans totaled
$63 million, $43 million and $41 million in 2001, 2000 and 1999,
respectively.

1,395

2,712

(692)

(326)

756

(691)

226

(42)

Postretirement Benefit Plans: Net postretirement health care
costs consisted of the following for the years ended December 31,
2001, 2000 and 1999:

Excess (deficit) of plan assets 
versus benefit obligations at 

December 31

Unrecognized actuarial 

losses (gains)
Unrecognized prior 

service cost

Unrecognized net transition 

obligation
Net prepaid pension 

asset (liability)

54

56

(1)

49

7

27

7

$2,206

$2,075

$ (410)

$ (334)

Service cost
Interest cost
Amortization:

Unrecognized net loss from 
experience differences

Unrecognized prior service cost

Other expense
Net postretirement health 

care costs

2001

$ 34
168

2000

$ 23
109

(in millions)
1999

$ 27
101

5
(8)

2
(8)

3
(7)
21

$199

$126

$145

During 1999, the Company instituted early retirement and workforce
reduction programs that resulted in curtailment losses of $21 million.

The combined U.S. and non-U.S. pension plans resulted in a net
prepaid asset of $1,796 million and $1,741 million at December 31,
2001 and 2000, respectively. These amounts were recognized in
the Company’s consolidated balance sheets at December 31, 2001
and 2000 as prepaid pension assets of $2,675 million and $2,623
million, respectively, for those plans in which plan assets exceeded
their accumulated benefit obligations and as other liabilities of
$879 million and $882 million at December 31, 2001 and 2000,
respectively, for plans in which the accumulated benefit obligations
exceeded their plan assets.

52

Kraft Foods Inc.

The Company’s postretirement health care plans are not funded.
The changes in the benefit obligations of the plans at December 31,
2001 and 2000 were as follows:

covered employees. Net postemployment costs consisted of the
following for the years ended December 31, 2001, 2000 and 1999:

Accumulated postretirement benefit 

obligation at January 1
Service cost
Interest cost
Benefits paid
Acquisitions
Plan amendments
Actuarial losses

Accumulated postretirement benefit 

obligation at December 31
Unrecognized actuarial losses
Unrecognized prior service cost

Accrued postretirement health care costs

2001

(in millions)
2000

$2,102
34
168
(172)
8
1
295

2,436
(464)
53
$2,025

$1,380
23
109
(111)
633
(7)
75

2,102
(159)
62
$2,005

Service cost
Amortization of unrecognized 

net gains
Other expense
Net postemployment costs

2001

$20

2000

$13

(8)

(4)

$12

$ 9

(in millions)
1999

$12

(8)
19
$23

The Company instituted a workforce reduction program in its North
American food business in 1999. This action resulted in incremental
postemployment costs, which are shown as other expense above.

The Company’s postemployment plans are not funded. The
changes in the benefit obligations of the plans at December 31,
2001 and 2000 were as follows:

The current portion of the Company’s accrued postretirement
health care costs of $172 million and $138 million at December 31,
2001 and 2000, respectively, are included in other accrued liabilities
on the consolidated balance sheets.

The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation for U.S. plans was
7.5% in 2000, 6.8% in 2001 and 6.2% in 2002, gradually declining to
5.0% by the year 2005 and remaining at that level thereafter. For
Canadian plans, the assumed health care cost trend rate was 8.0%
in 2000, 9.0% in 2001 and 8.0% in 2002, gradually declining to 4.0%
by the year 2006 and remaining at that level thereafter. A one-
percentage-point increase in the assumed health care cost trend
rates for each year would increase the accumulated postretirement
benefit obligation as of December 31, 2001 and postretirement
health care cost (service cost and interest cost) for the year then
ended by approximately 9.2% and 12.9%, respectively. A one-
percentage-point decrease in the assumed health care cost trend
rates for each year would decrease the accumulated postretirement
benefit obligation as of December 31, 2001 and postretirement
health care cost (service cost and interest cost) for the year then
ended by approximately 7.6% and 10.4%, respectively.

The accumulated postretirement benefit obligations for U.S. plans
at December 31, 2001 and 2000 were determined using an
assumed discount rate of 7.0% and 7.75%, respectively. The
accumulated postretirement benefit obligations for Canadian plans
at December 31, 2001 and 2000 were determined using assumed
discount rates of 6.75% and 7.0%, respectively.

Postemployment Benefit Plans: The Company and certain
of its affiliates sponsor postemployment benefit plans covering
substantially all salaried and certain hourly employees. The cost of
these plans is charged to expense over the working lives of the

Accumulated benefit obligation at January 1

Service cost
Benefits paid
Acquisitions
Actuarial losses

Accumulated benefit obligation 

at December 31
Unrecognized experience gains

Accrued postemployment costs

2001

$ 373
20
(156)
269
14

520
52
$ 572

(in millions)
2000

$333
13
(76)
74
29

373
22
$395

The accumulated benefit obligation was determined using an
assumed ultimate annual turnover rate of 0.3% in 2001 and 2000,
assumed compensation cost increases of 4.5% in 2001 and
2000, and assumed benefits as defined in the respective plans.
Postemployment costs arising from actions that offer employees
benefits in excess of those specified in the respective plans are
charged to expense when incurred.

Note 15. Additional Information:

For the Years Ended December 31,

2001

2000

(in millions)
1999

Research and development 

expense

Advertising expense

Interest and other debt 

expense, net:
Interest expense, parent 

and affiliates

Interest expense, external debt
Interest income

Rent expense

53

$ 358

$1,190

$ 270

$1,198

$ 262

$1,272

$1,103
349
(15)
$1,437

$ 531
84
(18)
$ 597

$ 458
89
(8)
$ 539

$ 372

$ 277

$ 285

Kraft Foods Inc.

Minimum rental commitments under non-cancelable operating
leases in effect at December 31, 2001 were as follows:

2002
2003
2004
2005
2006
Thereafter

(in millions)

$212
171
135
109
86
136
$849

Note 16. Financial Instruments:

Derivative financial instruments: The Company operates
internationally, with manufacturing and sales facilities in various
locations around the world and utilizes certain financial instruments
to manage its foreign currency and commodity exposures, primarily
related to forecasted transactions and interest rate exposures.
Derivative financial instruments are used by the Company,
principally to reduce exposures to market risks resulting from
fluctuations in interest rates and foreign exchange rates by creating
offsetting exposures. The Company is not a party to leveraged
derivatives. For a derivative to qualify as a hedge at inception and
throughout the hedged period, the Company formally documents
the nature and relationships between the hedging instruments and
hedged items, as well as its risk-management objectives, strategies
for undertaking the various hedge transactions and method
of assessing hedge effectiveness. Additionally, for hedges of
forecasted transactions, the significant characteristics and
expected terms of a forecasted transaction must be specifically
identified, and it must be probable that each forecasted transaction
will occur. If it were deemed probable that the forecasted
transaction will not occur, the gain or loss would be recognized in
earnings currently. Financial instruments qualifying for hedge
accounting must maintain a specified level of effectiveness
between the hedging instrument and the item being hedged, both
at inception and throughout the hedged period.

The Company uses forward foreign exchange contracts and
foreign currency options to mitigate its exposure to changes in
foreign currency exchange rates from third-party and intercompany
forecasted transactions. The primary currencies to which the
Company is exposed include the Euro, Japanese yen and
Canadian dollar. At December 31, 2001 and 2000, the Company
had option and forward foreign exchange contracts with aggregate
notional amounts of $431 million and $237 million, respectively, for
the purchase or sale of foreign currencies. The effective portion of
unrealized gains and losses associated with forward contracts is
deferred as a component of accumulated other comprehensive
losses until the underlying hedged transactions are reported on the
Company’s consolidated statement of earnings.

The Company uses interest rate swaps to hedge the fair value of
an insignificant portion of its long-term debt. The differential to be
paid or received is accrued and recognized as interest expense.
If an interest rate swap agreement is terminated prior to maturity,

54

the realized gain or loss is recognized over the remaining life of
the agreement if the hedged amount remains outstanding, or
immediately if the underlying hedged exposure does not remain
outstanding. If the underlying exposure is terminated prior to the
maturity of the interest rate swap, the unrealized gain or loss on
the related interest rate swap is recognized in earnings currently.
At December 31, 2001, the aggregate notional principal amount
of those agreements was $102 million. Aggregate maturities at
December 31, 2001 were $29 million in 2003 and $73 million in
2004. During the year ended December 31, 2001, there was no
ineffectiveness relating to these fair value hedges.

During the year ended December 31, 2001, ineffectiveness related
to cash flow hedges was not material. The Company is hedging
forecasted transactions for periods not exceeding the next eighteen
months and expects substantially all amounts reported in
accumulated other comprehensive losses to be reclassified to the
consolidated statement of earnings within the next twelve months.

The Company is exposed to price risk related to forecasted
purchases of certain commodities used as raw materials by the
Company’s businesses. Accordingly, the Company uses commodity
forward contracts, as cash flow hedges, primarily for coffee, cocoa,
milk, cheese and wheat. Commodity futures and options are also
used to hedge the price of certain commodities, including milk,
coffee, cocoa, wheat, corn, sugar, soybean and energy. In general,
commodity forward contracts qualify for the normal purchase
exception under SFAS No. 133 and are, therefore, not subject to the
provisions of SFAS No. 133. At December 31, 2001 and 2000, the
Company had net long commodity positions of $589 million and
$617 million, respectively. Unrealized gains or losses on net
commodity positions were immaterial at December 31, 2001 and
2000. The effective portion of unrealized gains and losses on
commodity futures and option contracts is deferred as a component
of accumulated other comprehensive losses and is recognized as a
component of cost of sales in the Company’s consolidated
statement of earnings when the related inventory is sold.

Hedging activity affected accumulated other comprehensive losses,
net of income taxes, during the year ended December 31, 2001,
as follows:

Balance as of January 1, 2001
Derivative losses transferred to earnings
Change in fair value
Balance as of December 31, 2001

(in millions)

$ —
15
(33)
$(18)

The Company does not engage in trading or other speculative use
of financial instruments. Derivative losses reported in accumulated
other comprehensive losses are a result of qualifying hedging
activity. Transfers of these losses from accumulated other
comprehensive losses to earnings are offset by gains on the
underlying hedged items.

Kraft Foods Inc.

Credit exposure and credit risk: The Company is exposed to
credit loss in the event of nonperformance by counterparties.
However, the Company does not anticipate nonperformance and
such exposure was not material at December 31, 2001.

Fair value: The aggregate fair value, based on market quotes, of
the Company’s third-party debt at December 31, 2001 was $9,360
million as compared with its carrying value of $9,355 million.
The aggregate fair value of the Company’s third-party debt at
December 31, 2000 was $3,605 million as compared with its
carrying value of $3,554 million. Based on interest rates available
to the Company for issuances of debt with similar terms and
remaining maturities, the aggregate fair value and carrying value of
the Company’s long-term notes payable to Philip Morris and its
affiliates were $5,325 million and $5,000 million, respectively, at
December 31, 2001 and $21,357 million and $21,407 million,
respectively, at December 31, 2000.

the consideration paid in connection with their purchase of the
Company’s Class A common stock or, if they had already sold the
stock, attempt to recover losses resulting from their purchase of
the Class A common stock. The Company cannot determine
the amount of Class A common stock that was purchased by
recipients of the “pre-marketing feedback” form. However, the
Company does not believe that any attempts to rescind these
purchases or to recover these losses will have a material adverse
effect on its consolidated financial position or results of operations.

Note 18. Quarterly Financial Data (Unaudited):

(in millions, except per share data)

2001 Quarters

First

Second

Third

Fourth

Operating revenues

Gross profit

Net earnings

$8,367

$4,100

$ 326

$8,692

$4,300

$ 505

$8,056

$3,832

$ 503

$8,760

$4,112

$ 548

See Notes 3, 7 and 8 for additional disclosures of fair value for
short-term borrowings and long-term debt.

Weighted average shares 

for diluted EPS

1,455

1,510

1,735

1,736

Note 17. Contingencies:

The Company and its subsidiaries are parties to a variety of legal
proceedings arising out of the normal course of business, including
a few cases in which substantial amounts of damages are sought.
The Company believes that it has valid defenses and is vigorously
defending the litigation pending against it. While the results of
litigation cannot be predicted with certainty, management believes
that the final outcome of these proceedings will not have a material
adverse effect on the Company’s consolidated financial position or
results of operations.

Prior to the effectiveness of the registration statement covering the
shares of the Company’s Class A common stock being sold in the
IPO, some of the underwriters of the IPO provided written copies of
a “pre-marketing feedback” form to certain potential purchasers
of the Company’s Class A common stock. The feedback form
was for internal use only and was designed to elicit orally certain
information from designated accounts as part of designing strategy
in connection with the IPO. This form may have constituted a
prospectus that did not meet the requirements of the Securities Act
of 1933.

If the distribution of this form by the underwriters did constitute a
violation of the Securities Act of 1933, persons who received this
form, directly or indirectly, and who purchased the Company’s
Class A common stock in the IPO may have the right, for a period
of one year from the date of the violation, to obtain recovery of

Per share data:

Basic EPS

Diluted EPS

Dividends declared

Market price—high
—low

$ 0.22

$ 0.22

$ 0.33

$ 0.33

$32.00
$29.50

$ 0.29

$ 0.29

$ 0.13

$34.81
$30.00

$ 0.32

$ 0.32

$ 0.13

$35.57
$31.50

(in millions, except per share data)

2000 Quarters

First

Second

Third

Fourth

Operating revenues

Gross profit

Net earnings

$6,460

$3,079

$ 470

$6,974

$3,417

$ 568

$6,215

$2,958

$ 548

$6,883

$3,161

$ 415

Weighted average shares 

for diluted EPS

1,455

1,455

1,455

1,455

Per share data:

Basic EPS

Diluted EPS

$ 0.32

$ 0.32

$ 0.39

$ 0.39

$ 0.38

$ 0.38

$ 0.29

$ 0.29

Basic and diluted EPS are computed independently for each of the periods presented.
Accordingly, the sum of the quarterly EPS amounts may not agree to the total year.

On June 13, 2001, the Company completed an IPO by issuing 280
million shares of its Class A common stock.

During the third quarter of 2000, the Company recorded a pre-tax
gain of $139 million on the sale of a French confectionery business.

The principal stock exchange, on which the Company’s Class A common stock is listed, is the New York Stock Exchange. At January 31,
2002, there were approximately 1,500 holders of record of the Company’s Class A common stock.

55

Kraft Foods Inc.

Report of Independent Accountants

Company Report on Financial Statements

To the Board of Directors and Shareholders of Kraft Foods Inc.:

In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of earnings, shareholders’
equity and cash flows present fairly, in all material respects,
the consolidated financial position of Kraft Foods Inc. and its
subsidiaries (the “Company”) at December 31, 2001 and 2000, and
the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Company’s management; our responsibility
is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.

PricewaterhouseCoopers LLP

Chicago, Illinois
January 28, 2002

The consolidated financial statements and all related financial
information herein are the responsibility of the Company. The
financial statements, which include amounts based on judgments,
have been prepared in accordance with generally accepted
accounting principles. Other financial information in the annual
report is consistent with that in the financial statements.

The Company maintains a system of internal controls that
it believes provides reasonable assurance that transactions are
executed in accordance with management’s authorization and
properly recorded, that assets are safeguarded, and that
accountability for assets is maintained. The system of internal
controls is characterized by a control-oriented environment within
the Company, which includes written policies and procedures,
careful selection and training of personnel, and audits by a
professional staff of internal auditors.

PricewaterhouseCoopers LLP, independent accountants, have
audited and reported on the Company’s consolidated financial
statements. Their audits were performed in accordance with
generally accepted auditing standards.

The Audit Committee of the Board of Directors, composed
of four non-employee directors, meets periodically with
PricewaterhouseCoopers LLP, the Company’s internal auditors
and management representatives to review internal accounting
control, auditing and financial reporting matters. Both
PricewaterhouseCoopers LLP and the internal auditors have
unrestricted access to the Audit Committee and may meet
with it without management representatives being present.

56

Richard G. Searer
Group Vice President, 
Kraft Foods North America, Inc., and
President, 
Oscar Mayer, Pizza and Food Service Group

Kraft Foods International, Inc.

Ronald J. S. Bell
Group Vice President, 
Kraft Foods International, Inc., and
President, European Union

Maurizio Calenti
Group Vice President, 
Kraft Foods International, Inc., and
President, CEEMA

Joachim Krawczyk
Group Vice President, 
Kraft Foods International, Inc., and
President, Latin America

Hugh H. Roberts
Group Vice President, 
Kraft Foods International, Inc., and
President, Asia Pacific

Kraft Foods Inc.

Board of Directors and Officers 
(at year end 2001)

Board of Directors

Officers

Geoffrey C. Bible 1
Chairman of the Board, Kraft Foods Inc., 
and Chairman and Chief Executive Officer, 
Philip Morris Companies Inc.

Louis C. Camilleri *
Senior Vice President and 
Chief Financial Officer, 
Philip Morris Companies Inc.

Roger K. Deromedi
Co-Chief Executive Officer, 
Kraft Foods Inc., and 
President and Chief Executive Officer, 
Kraft Foods International, Inc.

W. James Farrell 1, 2
Chairman and Chief Executive Officer, 
Illinois Tool Works Inc.
Glenview, IL

Betsy D. Holden
Co-Chief Executive Officer, 
Kraft Foods Inc., and
President and Chief Executive Officer, 
Kraft Foods North America, Inc.

John C. Pope 1, 2
Chairman, 
PFI Group, LLC
Chicago, IL

Mary L. Schapiro 1, 2
President, 
NASD Regulation, Inc.
Washington, D.C.

William H. Webb
Vice Chairman and Chief Operating Officer,
Philip Morris Companies Inc.

Deborah C. Wright 1, 2
President and Chief Executive Officer, 
Carver Bancorp, Inc.
New York, NY

Committees
1 Member of Compensation and Governance

Committee
Geoffrey C. Bible, Chair

2 Member of Audit Committee

John C. Pope, Chair

* The Philip Morris Companies Inc. Board of Directors 

has announced its intention to elect Louis C. Camilleri 
as President and Chief Executive Officer of 
Philip Morris Companies Inc., effective April 25, 2002,
following the Philip Morris Companies Inc. Annual
Meeting of Shareholders.

Kraft Foods Inc.

Betsy D. Holden
Co-Chief Executive Officer, 
Kraft Foods Inc., and
President and Chief Executive Officer, 
Kraft Foods North America, Inc.

Roger K. Deromedi
Co-Chief Executive Officer, 
Kraft Foods Inc., and
President and Chief Executive Officer, 
Kraft Foods International, Inc.

Calvin J. Collier
Senior Vice President, General Counsel and
Corporate Secretary, 
Kraft Foods Inc.

James P. Dollive
Senior Vice President and 
Chief Financial Officer, 
Kraft Foods Inc.

Kraft Foods North America, Inc.

Mary Kay Haben
Group Vice President, 
Kraft Foods North America, Inc., and 
President, 
Cheese, Meals and Enhancers Group

David S. Johnson
Group Vice President, 
Kraft Foods North America, Inc., and 
President, 
Beverages, Desserts and Cereals Group

Michael B. Polk
Group Vice President, 
Kraft Foods North America, Inc., and 
President, 
Biscuit, Snacks and Confectionery Group

Irene B. Rosenfeld
Group Vice President, 
Kraft Foods North America, Inc., and 
President, 
Operations, Technology, Information Systems, 
Kraft Foods Canada, Mexico and Puerto Rico

57

Kraft Foods Inc.

Kraft Cares: A Catalytic Approach to Community Partnerships

Our business is built on innovation—a passion to find creative
solutions to people’s needs. We try to bring that same spirit to
our relationship with society.

While we contribute more than $25 million annually in food and
financial support to nonprofit organizations around the world, we
do more than simply provide a meal or write a check. Through
Kraft Cares, our community outreach program, we join with the
organizations we support to help solve the structural problems
that stand in the way of greater effectiveness.

In our global efforts to help fight hunger, a good example of this
catalytic approach is the Kraft Community Nutrition Program.
Our goal is not only to help increase the quantity of food available
to food banks and other feeding organizations, but also to
significantly improve the nutritional quality of the food they provide.

Through the Fresh Produce Initiative, one of several initiatives
in the program, we’re helping the food bank network in the U.S.
dramatically increase the quantity of nutritious fresh fruits and
vegetables it provides to the people who need them most.
By helping the network build an infrastructure of refrigeration,
transportation, and food handling equipment, we’ve increased by
more than 400 million servings the annual volume of fresh fruits
and vegetables reaching the hungry. Similar programs in France
and Korea provide refrigerated trucks to the national food bank
networks and significantly increase the distribution of fresh foods.

Our Food Rescue Initiative equips feeding organizations with the
infrastructure to expand the distribution of prepared and perishable
foods collected from supermarkets, restaurants and cafeterias.
And our Seafood Initiative is helping to increase the amount of
nutritious seafood products reaching people in need.

We bring the same passion for innovation to our funding for arts
in education.

For children, exposure to the arts—both to the art of others and
to hands-on creative experience—builds more than a sense
of aesthetics. The arts can help develop critical thinking,
communication skills, team building and discipline, all of which
better enable students to meet the challenges of their core
curriculum. Kraft funds programs that increase the access of
children, especially at-risk children, to the visual and performing arts.

Our Art Discovery program, for example, helps enrich the
educational programming offered by arts organizations to
under-resourced schools in Chicago. And to reach an even
larger number of schools, we created the Art Discovery website
(www.artdiscovery.org). The site provides information to help schools
access a spectrum of educational resources offered by Chicago’s
extraordinary performing, visual and literary arts organizations.

In our funding to address the important issue of domestic violence,
we supported professional training for staff members of 120
domestic violence shelters in the Czech Republic. We’ve also
targeted longer-term solutions. Violence in the home often
interferes with job performance and can become a barrier to
employment. Yet survivors need to provide for themselves and their
children in order to reshape their lives. Kraft’s funding helped create
unique community partnerships that enable survivors to gain the
tools necessary to find and keep work. Women received supportive
services while training for new job opportunities. Through these
community-centered services, hundreds of women have found
hope for a better future.

Our involvement in addressing societal needs goes beyond
corporate action. Our commitment also comes alive in the hands
of our employees. With their contribution of time and financial
support, Kraft employees around the world make a difference in
the communities where they live and work.

Through the Kraft Employee Fund, the United Way and other
charitable programs, employees in 2001 donated more than
$4 million of their own funds in support of community-based 
nonprofit organizations.

On Kraft Cares Day, more than a thousand employee volunteers
donate their time and expertise to do work—from painting schools
to delivering meals—in the places where people need it most. And
employees from around the company help tens of thousands of
students build a future through Junior Achievement. In fact, Kraft’s
2,000 volunteers make up Junior Achievement’s largest corporate
team in the U.S.

Finally, we continue our long-standing commitment to helping those
who are confronted with the hardship of natural disasters or other
crisis situations. In partnership with disaster-relief organizations,
we regularly provide ready-to-eat food products and much-needed
supplies to disaster victims and emergency workers alike. For
example, Kraft worked quickly to get emergency survival kits to
earthquake victims in Peru. Within hours of the tragic events
of September 11, Kraft was making arrangements to rush
14 truckloads of food to New York and Washington.

Whether it’s through corporate support, employee involvement
or disaster relief, all of us at Kraft want to help find innovative
solutions to society’s most pressing needs.

58

Kraft Foods Inc.

Independent Accountants
PricewaterhouseCoopers LLP
1 North Wacker Drive
Chicago, IL 60606-2807

Form 10-K
The company’s annual report to the SEC (Form 10-K) will 
be available to shareholders in March. For a copy, please visit
www.kraft.com or call our Shareholder Publications Center 
toll-free: 1-800-295-1255.

Trademarks
Trademarks and service marks in this report are the registered
property of or licensed by the subsidiaries of Kraft Foods Inc. 
and are italicized or shown in their logo form.

Internet Access Helps Reduce Costs
As a convenience to shareholders and an important cost-reduction
measure, you can register to receive future shareholder materials
(i.e., Annual Report and proxy statement) via the Internet. Shareholders
also can vote their proxy via the Internet. For complete instructions,
visit www.kraft.com.

Printed in the U.S.A. on Recycled Paper

© Copyright 2002 Kraft Foods Inc.

Concept and design: Genesis, Inc.
Photography: Brian Mark, Michael Malyszko, Tim Turner
Financial typography: Grid Typographic Services Inc.
Printer: IGI Earth Color, U.S.A.

Corporate and Shareholder Information

Kraft Foods Inc.
Kraft Foods North America, Inc.
Three Lakes Drive
Northfield, IL 60093-2753
www.kraft.com

Kraft Foods International, Inc.
800 Westchester Avenue
Rye Brook, NY 10573-1301

Shareholder Services

Transfer Agent and Registrar
EquiServe Trust Company, N.A., our shareholder services and
transfer agent, will be happy to answer questions about your
accounts, certificates or dividends.

U.S. and Canadian shareholders may call: 1-866-655-7238 

From outside the U.S. or Canada, shareholders may call:
1-201-222-4994

Postal address:
EquiServe Trust Company, N.A.
P.O. Box 2584
Jersey City, NJ 07303-2584

E-mail address:
kraft@equiserve.com

To eliminate duplicate mailings, please contact EquiServe 
(if you are a registered shareholder) or your broker (if you 
hold your stock through a brokerage firm).

Shareholder Publications
Kraft Foods Inc. makes a variety of publications, reports and
Securities and Exchange Commission (SEC) filings available 
to its shareholders. For copies, please visit our website at:
www.kraft.com. If you do not have Internet access, you can call 
our Shareholder Publications Center toll-free: 1-800-295-1255.

Stock Exchange Listing
Kraft Foods Inc. is listed on the New York Stock Exchange
(ticker symbol KFT).

2002 Annual Meeting
The Annual Meeting of Shareholders will be held at 9:00 a.m. on
Monday, April 22, 2002, at Kraft Foods Inc., Robert M. Schaeberle
Technology Center, 200 DeForest Avenue, East Hanover, NJ 07936. 
For further information, call 1-800-295-1255.

59

...but being better drives our future.

WWW.KRAFT.COM