Cigarette Tax Management

Least 1999 Badw 20" Foram MA Foram "a CAM C . -'a2 x Inft ion Rate 2% 4% 5% 6% 118 .00 Gaon T .o. 6742.1 9576 14229 19942 295 .78 weKr A Levin 68% / mi n 68% / min 52% / min 52% / min 76 .47 EUR 13 .1 EUR 13.1 EUR 10 EUR 10 Tobacco Fond 5% on 5% on 5% on 5% on 100 .00 DPLC DPLC DPLC DPLC Specific Excise 0.002 / s 0 .002 / s 0.008 / s 0 .008 / s 400 .00 Ad-Valorem 30% on 30% on 30% on 30% on 100 .00 Excise RSP RSP RSP RSP VAT 20% 20% 20% 20% 100.0 0 N .T.O. 3241 .1 4611 6114.5 8667 267 .4 0 Total Incidence 46 .84 47 .34 51 .52 50 .94 108 .75 % RSP NT.O/1000 49.86 52 .10 48.90 53 .20 106 .70

CURD 1999 adPt 2000 Fast" 2001 Foreea012902 CAGR Y9-'02 % Inflation Rate 2% 40/o 5% 6% 118.00 G-T.0 3457 .5 4836.4 7186 .4 10071 .7 208.25 Duties a Levin 68% / min 68% / mi n 52% / min 52% / min 76.47 EUR 13 .1 EUR 13.1 EUR 10 EUR 10 Tobacco Fond 5% on 5% on 5% on 5% on 100.00 DPLC DPLC DPLC DPLC Specific Excite 0 .001 /PCs O.OOI /PCs 0 .004 / s 0.0041 s 400.00 Ad.Vabrem 30% on 30% on 30% on 30% on 100.00 Excise RSP RSP RSP RSP VAT 2096 20% 20% 20% 100.00 N.T.O. 1662 .1 2328 .8 3088 .1 4377.3 263 .36 Totallncid"' x 46.84 47.34 51 .52 50.94 108 .75 % RSP N.T.0n000 25 .57 26.31 24 .70 26.87 105 .08

?,kb . Poeidlwe.l 1900 aware 2000 Foram 2001 Fene.R 2002 CAGR C .ccuey Raeda Dunhill Int . 2 .70 2.80 2 .90 3 .00 111 .1 1 Cartier Vendome 2 .70 2.80 2 .90 3 .00 111 .1 1 Rothmans R / Int. 2 .70 2.80 2 .90 3 .00 111 .1 1 Kent 100' 2 .70 2 .70 2 .75 2 .90 107 .41 Rothmans KS 2.40 2 .40 2 .50 2 .75 114.5 8 Rothmans KS Li 2.40 2 .40 2 .55 2 .80 116.6 7 Kim Lights 2 .40 2 .40 2 .50 2 .60 108.3 3 Kim US 2.70 2 .70 2 .80 2 .90 107.4 1 Luc Strike KS 2.00 2 .10 2 .30 2.60 130.00 Lucky Strike KS Li 2.25 2 .30 2 .50 2 .70 120.00 Pall Mall KS 1 .70 1 .80 2 .10 2.30 135.2 9 Pall Mall Li 1 .75 1 .85 2 .25 2.40 137.1 4

Pricing Paek/CURO 1999 i.dgt 2000 Foram 2001 Fore" 2M2 CAGR armde '99-102 % Dunhill Int. 1 .38 1 .41 1 .46 1 .52 110.1 4 Cartier Vendome 1 .38 1 .41 1 .46 1 .52 110.1 4 Rothmans R / int . 1 .38 1 .41 1 .46 1 .52 110.1 4 Kent 100' 1 .38 1 .36 1 .39 1 .46 105 .80 Rothmans KS 1 .23 1 .21 1 .26 1 .39 113 .0 1 Rothmans KS Li 1 .23 1 .21 1 .29 1 .41 114 .63 Kim Lights 1 .23 1 .21 1 .26 1 .31 106 .5 0 Kim US 1 .38 1 .36 1 .41 1 .46 105 .80 Lucky Strike KS 1 .03 1 .06 1 .16 1 .31 127 .1 8 Lucky Strike KS Li 1.15 1.16 1 .26 1 .36 118 .2 6 Pall Mall KS 0.87 0.91 1 .06 1 .16 133 .3 3 Pall Mall Li 0.90 0.93 1 .14 1 .21 134 .4 4

Rate 1999: EURO I = BGN 1 .95 Plan rate 2000: EURO I = BGN 1 .98

321578892 Prking Paei/USD 1999 Dadpt 2000 Fonnu 2001 Parreeaa 2002 CAGR Dros& '99-'02 X Dunhill hit . 1 .46 1 .51 1 .57 1 .62 110.1 4 Cartier Vendome 1 .46 1 .51 1 .57 1 .62 110 .1 4 Rothmans R I int. 1 .46 1 .51 1 .57 1 .62 110 .1 4 Kent 100' 1 .46 1 .46 1 .49 1 .57 105 .80 Rothmans KS 1 .30 1 .30 1 .35 1 .49 113 .0 1 Rothmans KS Li 1 .30 1 .30 1 .38 1 .51 114 .63 Kim lights 1 .30 1 .30 1 .35 1 .41 106 .50 Kim US 1 .46 1 .46 1 .51 1 .57 105 .80 Luc Strike KS 1 .08 1 .14 1 .24 1 .41 127 .1 8 Lucky Strike KS Li 1 .22 1 .24 1 .35 1 .46 118 .26 Pall Mall KS 0 .92 0.97 1 .14 1 .24 133 .3 3 Pall Mall Li 0.95 1 .00 1 .22 1 .30 134 .44

Total Tax taddesee % 1999 Budget 2000 PoneM 2001 Porenp 2002 CAGA K Braude '99-'02 % Dunhill lot . 46.70 46.43 50.69 50 .33 107 .77 Cartier Vendome 46.70 46.43 50.69 50 .33 107 .77 Rothmans R / Int. 46.70 46.43 50.69 50 .33 107 .77 Kent 100' 46.70 46.48 50.91 50 .69 108 .54 Rothmans KS 46.70 46.67 51 .60 50 .91 109 .0 1 Rothmans KS Li 46.70 46.67 51 .37 50 .71 108 .5 9 Kim Lights 46.70 46.67 51 .60 51 .15 109 .5 3 Kim US 46.70 46.48 50.71 50.69 108 .5 4 Lucky Strike KS 46.70 46.90 52 .17 51 .15 109 .5 3 Luc Strike KS Li 47.10 46.74 51 .60 51 .11 108 .5 1 Pall Mall KS 47.60 47.22 52 .86 52.17 109 .60 Pall Mall Li 47.40 47.16 52 .44 51 .67 109 .0 1

Excise structure

1/ Mixed Excise System was introduced in Jan. '99 - ad-valorem 301/6 on RSP / specific - BGL 0.002 per pcs.

2/ Based on the EU requirement for a gradual increase in cigarette tax incidence up to 57%, a system will be worked out in order to adjust the existing excise system accordingly . The ad-valorem element will be maintained at 30% of RSP while the specific element will go up to BGL 0 .008 per pcs. This will lead to an increase in the total tax incidence in RSP from 46 .8% in 1999 up to 50 .9% in 2002.

Import duties

1/ Reduction in import duties on cigarettes down to 52% / min EURO 10 based on the memorandum signed between Bulgarian Government and EU in April 1999 . As of 2001 .

RSP

I/ Gradual increase in RSP for DP IB imports due to : • Forecasted general inflation • 5% to 7% p.a. increase forecasted for local cigarette prices as a result of the continual rise in local tobacco purchasing prices and increase in the overhead expenses as part of the production cost.

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