UNITED STATES SECURITIES and EXCHANGE COMMISSION Washington, D.C

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2000 Commission file number 1-9076

FORTUNE BRANDS, INC. ------(Exact name of registrant as specified in its charter)

DELAWARE 13-3295276 ------(State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)

300 Tower Parkway, Lincolnshire, IL 60069-3640 ------(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (847) 484-4400

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange Title of each class on which registered ------Common Stock, par value $3.125 per share New York Stock Exchange, Inc. $2.67 Convertible Preferred Stock, without par value New York Stock Exchange, Inc. 8 1/2% Notes Due 2003 New York Stock Exchange, Inc. 8 5/8% Debentures Due 2021 New York Stock Exchange, Inc. 7 7/8% Debentures Due 2023 New York Stock Exchange, Inc. Preferred Share Purchase Rights New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None ------Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of Registrant's voting stock held by non- affiliates of Registrant, at February 9, 2001, was $5,198,097,296. The number of shares outstanding of Registrant's common stock, par value $3.125 per share, at February 28, 2001, were 153,759,959.

DOCUMENTS INCORPORATED BY REFERENCE

(1) Certain information contained in the Annual Report to Stockholders of Registrant for the fiscal year ended December 31, 2000 is incorporated by reference into Part I, Part II and Part IV hereof.

(2) Certain information contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on April 24, 2001 (to be filed not later than 120 days after the end of Registrant's fiscal year) is incorporated by reference into Part III hereof.

PART I

Item 1. Business.

(a) General development of business.

Registrant is a holding company with subsidiaries engaged in the manufacture, production and sale of home products, office products, golf products and spirits and wine.

Registrant was incorporated under the laws of Delaware in 1985 and until 1986 conducted no business. Prior to 1986, the businesses of Registrant's subsidiaries were conducted by American Brands, Inc., a New Jersey corporation organized in 1904 ("American New Jersey"), and its subsidiaries. American New Jersey was merged into The American Tobacco Company on December 31, 1985, and the shares of the principal first-tier subsidiaries formerly held by American New Jersey were transferred to Registrant. In addition, Registrant assumed all liabilities and obligations in respect of the public debt securities of American New Jersey outstanding immediately prior to the merger. On May 30, 1997, Registrant's name was changed from American Brands, Inc. to Fortune Brands, Inc.

As a holding company, Registrant is a legal entity separate and distinct from its subsidiaries. Accordingly, the right of Registrant, and thus the right of Registrant's creditors (including holders of its debt securities and other obligations) and stockholders, to participate in any distribution of the assets or earnings of any subsidiary is subject to the claims of creditors of the subsidiary, except to the extent that claims of Registrant itself as a creditor of such subsidiary may be recognized, in which event Registrant's claims may in certain circumstances be subordinate to certain claims of others. In addition, as a holding company, a principal source of Registrant's unconsolidated revenues and funds is dividends and other payments from its subsidiaries. Registrant's principal subsidiaries currently are not limited by long-term debt or other agreements in their abilities to pay cash dividends or to make other distributions with respect to their capital stock or other payments to Registrant.

In recent years, Registrant has been engaged in a strategy of seeking to enhance the operations of its principal operating companies. Pursuant to this strategy, in 1999 subsidiaries of Registrant completed two acquisitions, one in Registrant's home products business and another in the office products business, for an aggregate cost of $103.6 million in cash, including fees and expenses. Also in 1999, Registrant's spirits and wine business formed an international sales and distribution joint venture, named Maxxium International B.V. (Maxxium), with Remy-Cointreau and Highland Distillers, to distribute and sell spirits in key markets outside the United States. Registrant's subsidiary agreed to contribute assets related to its international distribution network and periodic cash payments with a total estimated value of $110 million in return for a one-third interest in the venture. During 1999, Registrant's subsidiary made a cash investment of approximately $30 million. Additionally, in 2000, Registrant's spirits and wine business made a cash investment of approximately $25 million in Maxxium towards its total investment of $110 million. The investments of Registrant's subsidiary in Maxxium were recorded at the book value of assets contributed

plus cash invested. In 1998, Registrant's subsidiaries completed three acquisitions of home products, office products and spirits and wine businesses for an aggregate cost of $271.8 million in cash, including fees and expenses. In 1997, Registrant's subsidiaries completed five acquisitions of office products, golf clubs and home products businesses for an aggregate cost of $92 million, including fees and expenses. In 1996, Registrant acquired Cobra Golf Incorporated ("Cobra"), a leading manufacturer of golf clubs, for an aggregate cost of $712 million in cash, including fees and expenses.

Registrant has also disposed of subsidiaries having significant revenues but engaged in businesses considered by Registrant to be nonstrategic to its long-term operations. For example, in 1997, Registrant completed the spin-off of Gallaher Group Plc ("Gallaher Group") to Registrant's stockholders. Subsidiaries of Gallaher Group compete in the international tobacco business.

In addition, a number of other nonstrategic businesses and product lines have been sold. In 1997, one of Registrant's office products subsidiaries sold Sax Arts & Crafts, a marketer to schools of arts and crafts supplies. In 1998, one of Registrant's home products subsidiaries sold assets relating to the manufacture of door locks and related hardware.

Registrant continues to pursue its strategy to enhance the operations of its principal operating companies. Registrant actively explores possible acquisitions in fields related to its principal operating companies. Registrant also cannot exclude the possibility of acquisitions in other fields or further dispositions. On October 9, 2000, Registrant announced that it is exploring strategic options for its office products business. The evaluation is continuing and includes the possible sale of the office products business.

Registrant is currently reviewing the portfolio of brands owned by its operating companies and evaluating its options for increasing shareholder value. Although no assurance can be given as to whether or when any acquisitions or dispositions will be consummated, if agreement with respect to any acquisitions were to be reached, Registrant might finance such acquisitions by issuing additional debt or equity securities. The possible additional debt from any acquisitions, if consummated, would increase Registrant's debt-to- equity ratio and such debt or equity securities might, at least in the near term, have a dilutive effect on earnings per share. Registrant also continues to consider other corporate strategies intended to enhance stockholder value, including share repurchases. Registrant cannot predict whether or when any such strategies might be implemented or what the financial effect thereof might be upon Registrant's debt or equity securities.

Another aspect of Registrant's strategy to enhance the operations of its principal operating companies has been to continuously evaluate the productivity of their product lines and existing asset base and actively seek to identify opportunities to improve Registrant's and its subsidiaries cost structure. This strategy led Registrant to record, in 2000, pre-tax restructuring and other nonrecurring charges totaling $73 million across all segments of its business. In 1999, Registrant recorded $196 million in pre-tax restructuring and other nonrecurring charges across all segments of its business. Additionally, in 1997, Registrant recorded $298.2 million in pre-tax restructuring and other nonrecurring charges across all of its principal operating companies.

Cautionary Statement

Except for the historical information contained in this Annual Report on Form 10-K, certain statements in this document, including without limitation, certain matters discussed in Part I, Item 1 -- Business and Item 3 -- Legal Proceedings and in Part II, Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations, are forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. Readers are cautioned that these forward-looking statements speak only as of the date hereof. Actual results may differ materially from those projected as a result of certain risks and uncertainties including, but not limited to, changes in general economic conditions, foreign exchange rate fluctuations, changes in interest rates, competitive product and pricing pressures, trade consolidations, the impact of excise tax increases with respect to distilled spirits, regulatory developments, the uncertainties of litigation, changes in golf equipment regulatory standards, the impact of weather, particularly on the home and golf products groups, expenses and disruptions related to shifts in manufacturing to different locations and sources, challenges in the integration of acquisitions and joint ventures, risks associated with Registrant's implementation of strategic options for ACCO World Corporation, as well as other risks and uncertainties detailed from time to time in Registrant's Securities and Exchange Commission filings.

(b) Financial information about industry segments.

See Note 14 "Information on Business Segments" in the Notes to Consolidated Financial Statements contained in the 2000 Annual Report to Stockholders of Registrant, which Note is incorporated herein by reference.

The following is a description of the business of the subsidiaries of Registrant in the industry segments of Home Products, Office Products, Golf Products and Spirits and Wine. For financial information about the above industry segments, see Note 14 "Information on Business Segments" in the Notes to Consolidated Financial Statements contained in the 2000 Annual Report to Stockholders of Registrant, which Note is incorporated herein by reference.

Home Products

MasterBrand Industries, Inc. ("MasterBrand") is a holding company for subsidiaries in the home products business. Subsidiaries include Moen Incorporated ("Moen"), MasterBrand Cabinets, Inc. ("MasterBrand Cabinets"), Master Lock Company ("Master Lock") and Waterloo Industries, Inc. ("Waterloo"). The home products business is highly competitive. MasterBrand's operating companies compete on the basis of product quality, price, service and responsiveness to distributor and retailer needs and end-user consumer preferences. Factors that affect MasterBrand's results of operations include the levels of home improvement and residential construction activity, principally in the U.S. (including repair and remodeling and new construction).

Moen manufactures and packages faucets, sinks, bath furnishings and plumbing accessories and parts and a wide variety of plumbing supply and repair products in the U.S. and East Asia. Moen branded faucets are sold under a variety of trade names, including Villeta, extensa, Boutique, Traditional, Touch Control, One-Touch, Monticello, PureTouch, Concentrix, Chateau and Legend, and other products are sold under the Moen, Chicago Specialty, Dearborn Brass, Wrightway, Hoov-R-Line and CSI Donner brand names. Composite kitchen sinks are sold under the MoenStone brand name. Sales are made through Moen's own sales force and independent manufacturers' representatives primarily to wholesalers, mass merchandisers and home centers and also to industrial distributors, repackagers and original equipment manufacturers. Some plumbing parts and repair products are purchased from other manufacturers and repackaged for resale. Products are sold principally in the U.S. and Canada and also in East Asia, Mexico and Latin America. Moen's chief competitors include Masco's Delta/Peerless, Black & Decker's Price Pfister, Kohler and American Standard.

MasterBrand Cabinets, Inc. ("MasterBrand Cabinets") is engaged in manufacturing ready-to-assemble stock and semi-custom kitchen cabinets and bathroom vanities. MasterBrand Cabinets sells under the brand names Aristokraft, Decora', Schrock, Diamond, Kemper and NHB. Sales under the Aristokraft brand name are made in the U.S. primarily through stocking distributors for resale to kitchen and bath specialty dealers, lumber and building material dealers, remodelers and builders. Decora' brands are sold primarily in the U.S. to kitchen and bath specialty dealers. The Schrock, Diamond and Kemper brands are primarily sold in the U.S. to home centers and kitchen and bath specialty dealers. NHB markets its products under the brand names Kitchen Classics, The Georgetown Collection, Parkhill and NHB through home centers and kitchen and bath specialty dealers in the U.S. and Canada. MasterBrand Cabinets' competitors include Masco's Merillat, KraftMaid and Mills Pride brands, Armstrong World Industries' Triangle Pacific brand, American Woodmark Corporation and The Omega Group's HomeCrest, KitchenCraft and Omega brands.

Master Lock manufactures key-controlled and combination padlocks, bicycle and cable locks, built-in locker locks, automotive locks and other specialty security devices. Sales of products designed for consumer use are made to wholesale distributors, home centers and hardware and other retail outlets. Sales of lock systems are made to industrial and institutional users, original equipment manufacturers and retail outlets. Master Lock competes with Abus, Belwith, Kryptonite, Hampton, American Lock, Winner and various imports in the padlock segment.

Waterloo manufactures tool storage products, principally high quality steel toolboxes, tool chests, workbenches and related products. Waterloo sells to Sears for resale under the Craftsman brand owned by Sears and under the Waterloo brand name to specialty industrial and automotive dealers, mass merchandisers, home centers and hardware stores. Waterloo competes with Snap- On, Kennedy, Stanley, Stack-On, and others in the metal storage segment, and with Contico, Zag, Rubbermaid and others in the plastic hand box category.

Raw materials used for the manufacture of products offered by MasterBrand's operating companies are primarily red oak and maple lumber, particleboard, rolled steel, brass, zinc, copper, nickel, and various plastic resins. These materials are available from a number of sources.

The continued consolidation of the customer base in the home products industry, including home centers and large homebuilders, as well as increased price competition will continue to present us and our competitors with pricing and service challenges. Customer consolidation will also present opportunities for the most efficient manufacturers and skilled marketers.

Our home products business may be impacted in 2001 by a potential moderation in the housing market and overall economic conditions.

Office Products

ACCO World Corporation ("ACCO") is a holding company for subsidiaries engaged in designing, developing, manufacturing and marketing a wide variety of traditional and computer-related office products, supplies, personal computer accessory products, time management products, presentation aids and label products. Products are manufactured by subsidiaries, joint ventures and licensees of ACCO, or manufactured to such subsidiaries' specifications by third-party suppliers throughout the world, principally in the U.S., Mexico, Canada, Western Europe, Australia, Taiwan and China.

ACCO Brands, Inc. ("ACCO Brands"), ACCO's primary U.S. operating company, manufactures or sources and sells binders, fasteners, paper clips, punches, staples, stapling equipment and storage products, computer supplies and accessories, labels and presentation products. ACCO Canada Inc. ("ACCO Canada"), a subsidiary of ACCO, manufactures a limited product range and distributes in Canada a range of office products similar to that distributed by ACCO Brands in the U.S. Principal office products brands include ACCO fastener products, Swingline staples and stapling equipment, Wilson Jones binders and columnar pads, Perma Products corrugated storage products, Kensington and Gravis computer accessories and supplies, MACO and Wilson Jones labels and Apollo presentation products. Products are sold throughout the U.S. and Canada by in- house sales forces and independent representatives to office and computer products wholesalers, retailers, dealers, mail order companies and mass merchandisers. Sales are concentrated in the U.S., Canada and Australia.

Subsidiaries of ACCO Europe PLC ("ACCO Europe"), another subsidiary of ACCO, manufacture or source and distribute a wide range of office supplies and machines, storage and retrieval filing systems and presentation products. ACCO Europe's products are sold primarily in the U.K., Ireland, Western Europe and Australia through its subsidiaries' sales forces and through distributors. Principal brands used by ACCO Europe's subsidiaries include ACCO fastening products, Kensington and Gravis computer accessories, Rexel stapling products, Nyrex and Twinlock filing products, Nobo and Sasco presentation products and, in Australia, Marbig products.

Day-Timers, Inc.("Day-Timers"), a subsidiary of ACCO, manufactures personal organizers, planners and time management computer software in the U.S. Management believes Day-Timers is the second leading seller of paper-based organizers in North America. Products are sold in the U.S. by Day-Timers, and in Canada, Australia and Europe by subsidiaries of Day-Timers, through direct mail advertising, catalogs to consumers and businesses, and electronic commerce. In addition, products are sold through ACCO Brands and ACCO Canada to retailers and mass merchandisers.

The office products business is increasingly concentrated in a small number of major customers, principally office products superstores, large retailers, wholesalers and contract stationers. The continuing consolidation of both competitors and customers is causing increased pricing pressures and rebates that have negatively affected results. Pricing pressures were compounded by the decision of several customers to continue to reduce inventory levels. These conditions persisted throughout 2000 and continue to present challenges for our office products group and its competitors.

During the fourth quarter of 2000, Registrant recorded a non-cash write-down of goodwill of $502.6 million ($487.3 million after tax, or $3.09 per share) in its office products business. This action resulted from the significant shortfall in office products earnings, the softening conditions in the office products industry and the ongoing strategic review process, which led to the implementation of additional restructuring actions.

On October 9, 2000, Registrant announced that it is exploring strategic options for its office products unit. The evaluation is continuing and includes the possible sale of the office products business.

Management believes that manufacturing within the office products industry remains highly fragmented, however, significant manufacturing consolidations occurred during 1998, particularly the acquisition of Leitz by Esselte and of IBICO by GBC, and 1999, specifically the joint venture between Avery Dennison and Steinbeis Holding GmbH. Due to local market preferences for product design and paper sizes, many office product manufacturers supply on a regional basis only. Many manufacturers supply a relatively narrow range of products. ACCO's key competitors on a worldwide basis include Avery Dennison, Esselte, Newell, Fellowes, Eagle OPG Inc. and GBC. Primary competitors for personal organizers in the North American market are Franklin Quest and Day- Runner, and key competitors in the international market for personal organizers, although less developed than in the North American market, include Day-Runner in the U.K. and Quo Vadis in France. In computer accessories, ACCO competes against Logitech, Fellowes, Microsoft, Targus and others.

ACCO's subsidiaries purchase raw materials, components and products from a variety of sources, including non-U.S. vendors, on competitively available terms that fluctuate based on market conditions. ACCO has established substantial and growing production operations in Mexico, helping to reduce its cost base.

Golf Products

Acushnet Company ("Acushnet"), together with its subsidiaries, is a leading manufacturer and distributor of golf balls, golf clubs, golf shoes and golf gloves. Other products include bags, dress and athletic shoes as well as socks, accessories and apparel outerwear. Acushnet's leading brands are Titleist and Pinnacle golf balls; Titleist and Cobra golf clubs; Scotty Cameron by Titleist and Bulls Eye putters; FootJoy golf shoes; and FootJoy and Titleist golf gloves. Acushnet products are sold primarily to on-course golf pro shops and selected off-course specialty stores, sporting goods stores and mass merchants throughout the United States. Sales are made in the U.K., Canada, Germany, Austria, Denmark, Ireland, France, Sweden, The Netherlands, South Africa, Thailand and Japan through subsidiaries and outside these areas through distributors or agents.

Acushnet and its subsidiaries compete on the basis of product quality, price, service and responsiveness to consumer preferences. In golf balls, Acushnet's main competitors are Spalding, Wilson, Dunlop/Slazenger and Bridgestone and new entrants such as Callaway and Nike. In golf clubs, Callaway, Taylor Made, Ping, Adams, Orlimar, Tommy Armour, Spalding and Mizuno are the main competitors. In golf shoes, Etonic, Nike, Dexter, Reebok, Mizuno, Stylo and Adidas are the main competitors. In golf gloves, Wilson, Daiwa, Dunlop/Maxfli, Kasco, Slazenger, Nike, Etonic, Tommy Armour, Mizuno and Bridgestone are the main competitors.

In 2000 and 1999, the golf club market was adversely affected by lower customer demand, leading to volume declines and price discounting. The Cobra brand was adversely affected by the competition's aggressive introduction of new products. Titleist clubs posted sales and profit growth. Conditions in the club market remain very competitive, with major competitors introducing new products and consumers becoming more price conscious. In 2000, aggressive actions were undertaken, including field sales force consolidation and programs to bring Cobra expenses in line with lower demand and to identify further synergies between Titleist and Cobra.

In 2000, the golf shoe product lines posted record sales and increased market share through the introduction of new products.

The golf ball business experienced a product mix shift as Titleist branded golf balls declined 2% while lower-priced Pinnacle golf balls increased 12%.

Competitors with significant brand awareness have introduced golf balls into their product offerings in the past two years. The combined share of Titleist and Pinnacle in the domestic golf ball market fell approximately 2% in 2000. It is not possible to predict what long-term effect these new entrants or their impact on trade inventories will have on our business, but significant research and development and marketing expenditures to defend market share will continue.

The United States Golf Association (USGA) establishes standards for golf equipment used in competitive play in the United States. On November 2, 1998, the USGA announced the immediate implementation of a new golf club performance rule that established a rebound velocity standard for driving clubs. The Royal and Ancient Golf Club (R&A) establishes standards for golf equipment used in competitive play outside the United States and Mexico. On September 21, 2000, the R&A issued a Notice to Manufacturers announcing its decision not to adopt the USGA's rebound velocity standard or any new rule or test protocol for driving clubs. The R&A's decision not to adopt the rule implemented by the USGA will result in conflicting conformance standards for driving clubs in the United States and the rest of the world. The divergence between the USGA and the R&A on this issue may cause confusion to consumers and could be disruptive to the United States and world markets for driving clubs. In addition, the USGA rule could hamper innovation and make it more difficult to use technological advances to produce USGA conforming products. However, it is not possible to determine whether in the long term the USGA rule or the divergence in rules will have a material effect on the golf club industry and our golf products business.

The USGA has announced its intention to propose new rules addressing the initial velocity and overall distance standards for golf balls. Until more details regarding such potential rule changes become available, we cannot determine whether they would have a material effect on our group's golf ball business and/or the golf ball industry. However, the new rules being considered could incorporate rules that would shorten the overall distance that golf balls are allowed to travel and that could hamper innovation in the design and manufacture of golf balls. The adoption of any such rules could materially impact our golf products business and/or the golf ball industry.

Acushnet's advertising and promotional campaigns rely in part on a large number of touring professionals and club professionals using and endorsing its products. Acushnet has been competing for the endorsement and promotional services of touring professionals. As a result, these costs have risen and may continue to rise.

There is currently a substantial market in "knock-off" and counterfeit golf clubs which imitate or copy the protected features of original equipment manufacturers golf club products. Acushnet has an active program of enforcing its intellectual property rights against those who make or sell such products.

Spirits and Wine

Jim Beam Brands Worldwide, Inc. ("JBB Worldwide") is a holding company for subsidiaries in the distilled spirits and wine business. Principal subsidiaries include Jim Beam Brands Co. ("Beam"), Alberta Distillers Limited ("Alberta"), Jim Beam Brands Australia Pty. Limited (Australia) and JBB (Greater Europe) PLC ("JBB (Greater Europe)").

In August 1999, JBB Worldwide formed an international sales and distribution joint venture, named Maxxium International B.V., to distribute and sell premium wines and spirits in key markets outside the United States. In August 1998, JBB Worldwide purchased the Geyser Peak wine business and adjacent vineyard property. The winery is located in Alexander Valley, Sonoma County, California. Geyser Peak wine brands include Geyser Peak Reserve, Geyser Peak and Canyon Road. In February 1998, JBB Worldwide formed a joint venture to distribute the Barwang brand of Australian wines on a global basis, except in Australia and New Zealand.

Principal markets for the products of JBB Worldwide's subsidiaries are the U.S., the U.K. and Australia. Approximately 87% of JBB Worldwide subsidiary sales are to these three markets, with the U.S. and the U.K. representing 68% and 12% of sales, respectively.

JBB Worldwide's leading brands are owned by its subsidiaries, except that DeKuyper cordials are produced and sold in the U.S. under a perpetual license, Gilbey's gin and Gilbey's vodka are produced and sold in the U.S. under a license expiring September 30, 2007 and the rights to the Kamchatka vodka brand in California are claimed by another entity.

Beam, whose operations are located in the U.S., currently produces, or imports, and markets a broad line of distilled spirits, including bourbon and other whiskeys, cordials, gin, vodka, rum, tequila and cognac. Beam and its predecessors have been distillers of bourbon whiskey since 1795. Beam's nine leading brand names are Jim Beam Bourbon Whiskey, DeKuyper cordials, Windsor Canadian Supreme Whisky, Lord Calvert Canadian Whisky, Gilbey's gin, Gilbey's vodka, Kamchatka vodka, Wolfschmidt vodka and Kessler American Blended Whiskey. As discussed below, in 1998 Beam also added wines to its product offerings. Products of JBB Worldwide's subsidiaries are sold through various distributors and in the 18 "control" states (and one county) in the U.S. that have established government control over certain aspects of the purchase and distribution of alcoholic beverages.

JBB (Greater Europe) is located in the U.K. and produces, bottles, and sells blended and single malt Scotch whiskies, markets and sells vodka, and sells Scotch whisky in bulk. JBB (Greater Europe) has its origins as a distiller of Scotch whisky in 1844. JBB (Greater Europe)'s principal brand names are Whyte & Mackay, The Claymore, The Dalmore, Cluny, Mackinlay and Isle of Jura Scotch whiskies, Glayva Scotch whisky liqueur and Vladivar vodka.

The distilled spirits business is highly competitive, with many brands sold in the consumer market. Management believes there are approximately nine major competitors worldwide and many smaller distillers and bottlers. Management also believes that, based on units and sales value, the JBB Worldwide group, with four brands that each sell over one million cases worldwide, is the second or third largest producer and marketer of distilled spirits in the U.S. and is among the nine major competitors worldwide. JBB Worldwide's subsidiaries compete on the basis of product quality, price, service and responsiveness to consumer preferences.

For many years through 1995, consumption of distilled spirits declined in many countries, including our major market, the U.S. However, since 1996, consumption in the U.S. has been steady or increased slightly, indicating that the historic decline may be reversing. From 1996 through 2000, cases of our spirits products sold by distributors to retailers declined, although the rate of decline has slowed since 1998. The number of cases sold may be affected by our spirits and wine business's historic strength in mid-to-low priced products that may not be fully benefiting from the factors influencing the recent industry trends. Our spirits and wine business has introduced and developed several premium brands in recent years and is focusing on the introduction of additional premium products to its portfolio to capitalize on the fastest growing segment of the spirits and wine industry. The number of cases sold may also be affected by price increases our spirits and wine business has implemented in recent years.

The Maxxium joint venture, the merger of Grand Metropolitan and Guinness to create Diageo in late 1997 and the pending sale of Seagram to Diageo and Pernod-Ricard may reflect a trend towards consolidation in the highly competitive global spirits and wine business. The creation of Diageo, and the breadth of its portfolio, as well as the continued consolidation of the supplier, distributor and retailer tiers, may present pricing and service challenges for our subsidiaries and their competitors. It may also present opportunities, particularly for the most efficient competitors.

The principal raw materials for the production, storage and aging of distilled products are primarily corn, other grains, and new oak barrels, and are readily available from a number of sources except that new oak barrels are available from only two major sources, one of which is owned by a competitor. Beam has entered into a long-term supply agreement for new oak barrels. Blended Scotch whiskies are composed of a variety of grain and malt whiskies blended to provide a consistent product. The Scotch industry is therefore dependent on the trading of whiskies between whisky companies.

The principal raw materials used in the production of wines are grapes, barrels and packaging materials. Grapes are primarily purchased from independent growers under long-term supply contracts and, from time to time, are adversely affected by weather and other forces which may limit production. In fiscal 2000, approximately 5-10% of Geyser Peak's total grape supply came from company-owned land.

Because whiskeys are aged for various periods, generally from three to eight years, subsidiaries of JBB Worldwide maintain, in accordance with industry practice, substantial inventories of bulk whiskey in warehouse facilities. Whiskey production is generally scheduled to meet demand years into the future, and production schedules are adjusted from time to time to bring inventories into balance with estimated future demand.

The production, storage, transportation, distribution and sale of the products of JBB Worldwide's subsidiaries are subject to regulation by federal, state, local and foreign authorities. Various local jurisdictions prohibit or restrict the sale of distilled spirits and wine in whole or in part. As a result of the publicity surrounding litigation against manufacturers of tobacco products and other class action litigation, some commentators have suggested that other industries, including beverage alcohol,

may be the targets of litigation. Registrant believes, and counsel has advised generally, that in the event such actions are commenced, Registrant and its subsidiaries would have meritorious defenses to such suits and they would be vigorously contested.

In the U.S., U.K. and many other countries, distilled spirits and wine are subject to federal excise taxes and/or customs duties as well as state, local and other taxes. The U.K. excise duties on distilled spirits have fluctuated over the past six years, increasing by 26 pence in January 1995 and by 19 pence in January 1998, and decreasing by 27 pence in November 1995 and by 26 pence in November 1996. There have been no increases in the U.S. federal excise tax since January 1, 1991, although proposals to increase such taxes have been made from time to time. It is believed that the U.S. Federal excise tax increase in 1991 contributed to a decline in distilled spirits unit sales for the industry, including Beam. The effect of any future excise tax increases in any jurisdiction cannot be determined, but it is possible that any future excise tax increases would have an adverse effect on unit sales and increase existing competitive pressures.

The Alcoholic Beverage Labeling Act of 1988 (the "Labeling Act") and regulations of the Bureau of Alcohol, Tobacco and Firearms of the Department of the Treasury (the "BATF") require that containers of alcoholic beverages for sale or distribution in the U.S. and to members of the United States Armed Forces abroad bear a specific written warning statement. It is not possible to state whether any additional or different requirements imposing further labeling or other warning statement requirements will be enacted in the U.S. Requirements that distilled spirits containers bear warning statements have been established in certain other markets in which JBB Worldwide's products are sold, notably South Korea, Thailand and Japan. It is not possible to predict the effect, if any, that existing or future labeling or other warning statement requirements may have on the industry generally or on JBB Worldwide specifically.

Previously, there has been discussion and legislation introduced to ban U.S. television advertising of spirits. Although no legislation is currently pending or has been enacted, most TV networks and local affiliated stations in the U.S. currently decline to accept distilled spirits advertising. JBB Worldwide's operating subsidiaries outside the U.S. have conducted broadcast advertising in markets where legal. In 1998, the BATF approved two statements for wine labels referencing the health effects of wine consumption. Producers may voluntarily place these statements on wine labels, but Beam has no present intention of placing either statement on its wine labels. The BATF has not yet authorized such statements for beer or spirits labels. It is not possible to predict the effect, if any, the use of these statements may have on Beam's or its competitors' businesses. The approval of these statements also has generated criticism and calls for additional legislative restrictions on beverage alcohol advertising, although to date, no such legislation is pending. It is also not possible to predict when or whether additional restrictions on advertising may be implemented in the U.S. or elsewhere. If new restrictions are implemented, they may have an adverse effect on unit sales and industry trends.

Other Matters

Employees

Registrant and its subsidiaries had approximately, as of December 31, 2000, the following number of employees:

Home Products 12,750 Office Products 8,370 Golf Products 4,500 Spirits and Wine 2,050 Corporate Office 130 ------Total 27,800 ======

Environmental matters

Registrant and its subsidiaries are subject to federal, state and local laws and regulations concerning the discharge of materials into the environment and the handling, disposal and clean-up of waste materials and otherwise relating to the protection of the environment. While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that Registrant's subsidiaries may undertake in the future, in the opinion of management of Registrant, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon the capital expenditures, financial condition, results of operations or competitive position of Registrant and its subsidiaries.

(d) Financial information about foreign and domestic operations and export sales.

Registrant's subsidiaries operate in the United States, Europe (principally the U.K.) and other areas (principally Canada and Australia). See the table captioned "Information on Business Segments" contained in the 2000 Annual Report to Stockholders of Registrant, which table is incorporated herein. Registrant has investments in various foreign countries, principally the United Kingdom, as well as Australia and Canada, and, therefore, changes in the value of the currencies of these countries can have an effect on Registrant's financial statements when translated into U.S. dollars.

Item 2. Properties.

Registrant leases its principal executive offices in Lincolnshire, Illinois. Additionally, Registrant continues to lease and has sublet a portion of premises in Old Greenwich, Connecticut. that formerly served as its executive offices. The following table indicates the principal properties of Registrant's subsidiaries:

------Segment Manufacturing Plants Distribution Centers Warehouses Other ------Owned Leased Owned Leased Owned Leased Owned Leased ------

Home ------U.S. 27 3 1 12 4 3 ------Asia 1(JV) ------Canada 4 ------Mexico 1 ------Brazil 1 ------

------Office ------U.S. 6 5 2 1 ------Europe 11 3 1 4 ------Canada 1 2 ------Mexico 2 2 ------Australia 1 ------New Zealand 1 ------

------Golf ------U.S. 6 2 4 ------Europe 2 3 1 4 ------Canada 1 1 ------Asia 2(1 JV) 1 1 1 3 ------Africa 1 ------

------Spirits and Wine ------U.S. 8 1 9 1 ------Europe 8 9 1 1 ------Canada 1 1 1 ------Australia 1 ------

------Total U.S. 47 8 2 14 15 3 4 2 ------Total Non-U.S. 28 10 1 16 11 2 - 11 ------TOTAL 75 18 3 30 26 5 4 13 ------

JV = Joint Venture

Registrant and its subsidiaries are of the opinion that their properties are suitable to their respective businesses and have productive capacities adequate to the needs of such businesses.

Item 3. Legal Proceedings.

Overview

On December 22, l994, Registrant sold The American Tobacco Company ("ATCO") to Brown & Williamson Tobacco Corporation ("B&W"), at the time a wholly owned subsidiary of B.A.T Industries p.l.c. In connection with the sale, B&W and ATCO ("the Indemnitors") agreed to indemnify Registrant against claims including legal expenses arising from smoking and health and fire safe cigarette matters relating to the tobacco business of ATCO.

Numerous legal actions, proceedings and claims are pending in various jurisdictions against leading tobacco manufacturers, including B&W both individually and as successor by merger to ATCO, based upon allegations that cancer and other ailments have resulted from tobacco use. Registrant has been named as a defendant in some of these cases. These claims generally fall within three categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs, (ii) smoking and health cases alleging personal injury and other damages and purporting to be brought on behalf of classes of individual plaintiffs, and (iii) health care cost recovery cases, including class actions, brought by foreign governments, unions, health trusts, federal and state taxpayers and others seeking reimbursement for health care expenditures allegedly caused by cigarette smoking. As noted below, in 1998, certain United States tobacco companies, including B&W, entered into a Master Settlement Agreement that resolved all remaining health care cost recovery cases brought by the various States, U.S. territories, and the District of Columbia. Damages claimed in some of the smoking and health class actions and remaining health care cost recovery cases range into the billions of dollars.

Certain former asbestos manufacturers and asbestos manufacturers' personal injury settlement trusts have also sought unspecified amounts in indemnity or contribution in third party actions against all or most of the major domestic tobacco manufacturers. It has also been reported that civil and criminal investigations of tobacco manufacturers are pending before certain prosecutorial and other authorities.

In recent years there has been a substantial increase in the number of smoking and health cases filed in the United States, a trend which continued to accelerate in 2000.

Individual Cases

As of March 1, 2001, there were approximately 93 smoking and health cases pending on behalf of individual plaintiffs in which Registrant has been named as one of the defendants, compared with approximately 94 such cases as of March 23, 2000. See "List of Pending Cases" below.

Class Actions

As of March 1, 2001, there were approximately 18 purported smoking and health class actions pending in which Registrant has been named as one of the defendants compared with approximately 22 such cases as of March 23, 2000. See "List of Pending Cases" below.

Health Care Cost Recovery Actions

As of March 1, 2001, there were approximately 4 health care recovery actions pending in which Registrant has been named as one of the defendants, compared with approximately 3 such cases as of March 23, 2000. See "List of Pending Cases" below.

Certain Developments Affecting The Indemnitors

In July of 1998, trial began in a Florida action against B&W (individually and as successor by merger to ATCO) and other U.S. tobacco manufacturer defendants brought on behalf of a class of Florida residents allegedly injured as a result of their alleged addiction to cigarettes containing nicotine (Engle v. R. J. Reynolds tobacco Company, et al.). The jury in Phase I of the trial found for the plaintiffs and against certain tobacco manufacturers (including B&W individually and as successor by merger to ATCO). In Phase II of the trial, the same jury addressed the individual claims of the named class representatives. The trial court judge ruled that the jury in Phase II could award an aggregate classwide lump-sum amount of punitive damages. This ruling is being challenged by the defendants in Florida's appellate courts. On April 17, 2000, the jury awarded an approximate aggregate amount of $12.7 million to three of the named class representatives, although it also found that the claims of one of the three class representatives may have been barred by the statute of limitations. On July 14, 2000, the jury awarded a total of $144.87 billion in punitive damages against the defendants, including $17.59 billion against Brown and Williamson. On November 6, 2000, Florida Circuit Judge Robert Kaye upheld this jury award, and held that the class of plaintiffs eligible to recover damages should be extended to smokers with illnesses diagnosed more than four years before the lawsuit was filed in 1994. Defendants have expressed their intention to appeal these awards. Florida law sets a cap of $100 million on the bond that companies must pay while the appeals process is under way. Plaintiffs have argued that this cap is unconstitutional. Registrant is not a party to the Engle litigation.

In September of 1999, the United States government filed a recoupment lawsuit in Federal Court in Washington, D.C. against the leading tobacco manufacturers (including B&W individually and as a successor to ATCO) seeking recovery of costs paid by the Federal government for claimed smoking-related illness. In September 2000, the U.S. District Court for the District of Columbia ruled that the government could not use the Medical Care Recovery Act ("MCRA") or Medicare Secondary Payor ("MSP") insurance provisions as a basis to try to recover government expenses relating to tobacco smokers, and dismissed the counts of the lawsuit relating to these laws. The court ruled that the government could proceed with two counts under the federal RICO statute under which the government seeks disgorgement of all of defendants' profits from the sale of tobacco. In October 2000, the United States government filed a motion for reconsideration seeking a partial reinstatement

of the MCRA claim, and in February 2001, filed an amended complaint repleading the MSP claim. The court has not ruled that either claim can go forward. A tentative trial date of July 15, 2003 has been set with respect to all claims. Registrant is not a party to this action.

Resolution of Health Care Cost Recovery Actions By States, U.S. Territories and the District of Columbia

On November 23, 1998, certain U.S. tobacco companies, including B&W, entered into a Master Settlement Agreement (the "MSA") with certain state attorneys general that would result in the dismissal of all remaining health care reimbursement lawsuits brought by the various States, U.S. territories, and the District of Columbia. Registrant is not a party to the MSA and is not bound by any of the payment obligations or other restrictions of the MSA.

Under the MSA, the settling States agreed to dismiss their current health care reimbursement lawsuits and not to refile such suits in the future. The MSA provides for the release by the settling States of claims for past conduct, acts or omissions (including future damages resulting from past conduct, acts or omissions) in any way related, in whole or in part, to the use, sale, distribution, manufacture, development, advertising, marketing or health effects of, the exposure to, or research, statements or warnings about, tobacco products. The release includes any claim that was brought or comparable claims that could have been brought by the States in their health care cost recovery actions. It also includes claims for future conduct, acts or omissions, or claims in any way related, in whole or in part, to the use of or exposure to tobacco products manufactured in the ordinary course of business, including future claims for reimbursement of health care costs allegedly associated with the use of or exposure to tobacco products. All 52 government entities permitted to participate in the MSA, including 46 States, American Samoa, Guam, Puerto Rico, the U.S. Virgin Islands, the Northern Mariana Islands and the District of Columbia, have dismissed their health care reimbursement suits pursuant to the MSA.

The MSA provides for the release of claims against participating manufacturers, as well as their predecessors, successors, and past, present, and future affiliates. "Affiliate" is defined to include past or present persons or entities who own or control, are owned by or controlled by, or are under common ownership of a 10% or more equity interest. Registrant understands that it is a released party under the terms of the MSA.

Under the MSA, participating manufacturers are required to make initial "upfront" payments totaling nearly $13 billion between 1998 and 2003 to the settling States. Additional annual payments must be made beginning in 2000 in perpetuity (starting at $4.5 billion in 2000 and increasing to $9 billion in 2018 and thereafter), and payments to several funds (a "strategic contribution" fund to reward individual States for their contributions to the settlement, a public health foundation, and a public advertising and awareness fund) are also required. Further payments of $300 million per year will also be required, if the market share of the participating manufacturers in the preceding year was at least 99.05%. These payments are subject to various credits and adjustments, depending on industry volume, inflation, and other factors. The initial up front payment will be allocated among the participating manufacturers according to market capitalizations; all other payments are to be

allocated according to market share. Moreover, participating manufacturers have agreed to a variety of additional restrictions and limitations, including, for example, restrictions on advertising, marketing and lobbying. The MSA also calls for the participating manufacturers to pay attorneys' fees for the States' attorneys in the settled litigation.

Prior to the MSA, health care cost recovery actions filed by the states of Minnesota, Texas, Florida and Mississippi were settled separately on terms which included monetary payments of several billion dollars. Registrant was not a party to the Minnesota or Texas action and was voluntarily dismissed from the Florida and Mississippi actions. Registrant is not a party to any of the settlements nor is it required to pay any money under these settlements.

List of Pending Cases

For a list of pending cases, see Exhibit 99 to this Form 10-K and, for a discussion of other pending litigation, see Note 18 "Pending Litigation" in the Notes to Consolidated Financial Statements contained in the 2000 Annual Report to Stockholders of Registrant, which Note is incorporated herein by reference.

List of Terminated Cases

For a list of terminated cases, see Exhibit 99 to this Form 10-K.

Conclusion

Management believes that there are meritorious defenses to the pending actions referred to in Exhibit 99 of this Form 10-K, including the fact that the Registrant never made or sold tobacco, and these actions are being vigorously contested. However, it is not possible to predict the outcome of the pending litigation, and it is possible that some of these actions could be decided unfavorably. Management is unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome of the pending litigation. Management believes that the pending actions will not have a material adverse effect upon the results of operations, cash flows or financial condition of Registrant as long as the Indemnitors continue to fulfill their obligations to indemnify Registrant under the aforementioned indemnification agreement (see "Overview" on page 16).

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 4a. Executive Officers of the Registrant.

The name, present positions and offices with Registrant, principal occupations during the past five years and age of each of Registrant's present executive officers are as follows:

Present positions and offices with Registrant and principal occupations Name during the past five years Age ------Norman H. Wesley Chairman of the Board and Chief 51 Executive Officer of Registrant since December 1999; President and Chief Operating Officer of Registrant during 1999; Chairman of the Board and Chief Executive Officer of Fortune Brands Home & Office, Inc. from December 1997 to December 1999; President and Chief Executive Officer of ACCO World Corporation prior thereto.

Thomas J. Flocco Senior Vice President - Strategy & 38 Corporate Development of Registrant since January 2000; Partner, McKinsey & Company, a management consulting firm, from 1998 to 1999; Engagement Manager, McKinsey & Company, specializing in the consumer products area, prior thereto.

Mark Hausberg Senior Vice President - Finance and 51 Treasurer of Registrant since January 2000; Vice President and Treasurer from January 1996 to December 1999; Treasurer of Registrant prior thereto.

Craig P. Omtvedt Senior Vice President and Chief Financial 51 Officer of Registrant since January 2000; Senior Vice President and Chief Accounting Officer of Registrant during 1998 and 1999; Vice President and Chief Accounting Officer of Registrant during 1997; Vice President -- Deputy Controller and Chief Internal Auditor of Registrant during 1996; Deputy Controller and Chief Internal Auditor of Registrant prior thereto.

Present positions and offices with Registrant and principal occupations Name during the past five years Age ------

Mark A. Roche Senior Vice President, General Counsel 46 and Secretary of Registrant since January 2000; Senior Vice President and General Counsel of Registrant during 1999; Vice President and General Counsel during 1998; Vice President and Associate General Counsel of Registrant from January 1996 to December 1997; Associate General Counsel of Registrant prior thereto.

Anne C. Linsdau Vice President - Human Resources of 47 Registrant since November 1997; Vice President - Human Resources, Magazine Publishing Services, with R.R. Donnelley & Sons Company prior thereto.

Michael R. Mathieson Vice President, Controller and Chief 48 Accounting Officer of Registrant since January 2000; Controller of Registrant since July 1998; Vice President and Corporate Controller of Avon Products, Inc. prior thereto.

In the case of each of the above-listed executive officers, the occupation or occupations given were the principal occupation and employment during the period or periods indicated. None of such executive officers is related to any other such executive officer. None was selected pursuant to any arrangement or understanding between the executive officer and any other person. All executive officers are elected annually.

PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

See the information in the tables captioned "Quarterly Common Stock Dividend Payments" and "Quarterly Composite Common Stock Prices" and the discussion relating thereto contained in the 2000 Annual Report to Stockholders of Registrant, which information and discussion are incorporated herein by reference. On February 28, 2001, there were 33,491 record holders of Registrant's common stock, par value $3.125 per share.

Item 6. Selected Financial Data.

See the information for 1995 through 2000 in the table captioned "Six- Year Consolidated Selected Financial Data" contained in the 2000 Annual Report to Stockholders of Registrant, which information is incorporated herein by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

See the discussion and analysis under the captions "Results of Operations" and "Financial Condition" contained in the 2000 Annual Report to Stockholders of Registrant, which discussion and analysis are incorporated herein by reference.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

See the discussion and analysis under "Market Risk," "Foreign Exchange Contracts" and "Interest Rates" under the caption "Financial Condition" in the 2000 Annual Report to Stockholders of Registrant, which discussion is incorporated herein by reference.

Item 8. Financial Statements and Supplementary Data.

See the information in the Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows, Consolidated Statement of Stockholders' Equity, Notes to Consolidated Financial Statements and Report of Independent Accountants contained in the 2000 Annual Report to Stockholders of Registrant, which information is incorporated herein by reference. For unaudited selected quarterly financial data, see the table captioned "Quarterly Financial Data" contained in the 2000 Annual Report to Stockholders of Registrant, which table is incorporated herein by reference.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of Registrant.

See the information under the caption "Election of Directors" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on April 24, 2001 (to be filed not later than 120 days after the end of Registrant's fiscal year), which information is incorporated herein by reference. See also the information with respect to executive officers of Registrant under Item 4a of Part I hereof, which information is incorporated herein by reference.

Item 11. Executive Compensation.

See the information up to but not including the subcaption "Report of the Compensation and Stock Option Committee on Executive Compensation" under the caption "Executive Compensation" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on April 24, 2001 (to be filed not later than 120 days after the end of Registrant's fiscal year), which information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

See the information under the caption "Certain Information Regarding Security Holdings" contained in the Proxy Statement for the Annual Meeting of Stockholders of Registrant to be held on April 24, 2001 (to be filed not later than 120 days after the end of Registrant's fiscal year), which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions.

None.

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a) Financial Statements, Financial Statement Schedules and Exhibits.

(1) Financial Statements (all financial statements listed below are of Registrant and its consolidated subsidiaries)

Consolidated Statement of Income for the years ended December 31, 2000, 1999 and 1998 contained in the 2000 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Consolidated Balance Sheet as of December 31, 2000 and 1999 contained in the 2000 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Consolidated Statement of Cash Flows for the years ended December 31, 2000, 1999 and 1998 contained in the 2000 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Consolidated Statement of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998 contained in the 2000 Annual Report to Stockholders of Registrant is incorporated herein by reference.

Notes to Consolidated Financial Statements contained in the 2000 Annual Report to Stockholders of Registrant are incorporated herein by reference.

Report of Independent Accountants contained in the 2000 Annual Report to Stockholders of Registrant is incorporated herein by reference.

(2) Financial Statement Schedules

See Index to Financial Statement Schedule of Registrant and subsidiaries at page F-1, which Index is incorporated herein by reference.

(3) Exhibits

3(i). Restated Certificate of Incorporation of Registrant as in effect on the date hereof is incorporated herein by reference to Exhibit 3(i) to the Annual Report on Form 10-K of Registrant for the fiscal year ended December 31, 1998.

3(ii). By-laws of Registrant as in effect on the date hereof are incorporated by reference to Exhibit 3(ii)b to the Annual Report on Form 10-K of Registrant for the fiscal year ended December 31, 1999.

10a1. Fortune Brands, Inc. Annual Executive Incentive Compensation Plan is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated August 12, 1997.*

10b1. 1990 Long-Term Incentive Plan of Fortune Brands, Inc. (As Amended and Restated as of January 1, 1994) is incorporated herein by reference to Exhibit 10a to the Quarterly Report on Form 10-Q of Registrant dated August 11, 1994 maintained in Commission File No. 1-9076.*

10b2. Amendment to 1990 Long-Term Incentive Plan of Fortune Brands, Inc. constituting Exhibit 10b1 hereto is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated November 11, 1997.*

10b3. Fortune Brands, Inc. 1999 Long-Term Incentive Plan is incorporated herein by reference to Exhibit 4el to the Registration Statement for the Fortune Brands, Inc. 1999 Long-Term Incentive Plan filed by Registrant on Form S-8, dated February 1, 2000.*

10b4. Fortune Brands, Inc. Non-Employee Director Stock Option Plan is incorporated herein by reference to Exhibit 10b1 to the Quarterly Report on Form 10-Q of Registrant dated August 12, 1997.*

10b5. Amendment to Registrant's Non-Employee Director Stock Option Plan constituting Exhibit 10b7 hereto is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated August 12, 1998.*

10b6. Amendment to Registrant's Non-Employee Director Stock Option Plan and Amendment thereto constituting Exhibits 10b4 and 10b5 hereto is incorporated herein by reference to Exhibit 10b9 to the Annual Report on Form 10-K of Registrant for the fiscal year ended December 31, 1999.*

10b7. Fortune Brands, Inc. Stock Plan for Non-employee Directors is incorporated by reference to Exhibit 10b5 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1999.*

10c1. Amended Supplemental Plan of Fortune Brands, Inc. is incorporated herein by reference to Exhibit 10c1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1995 maintained in Commission File No. 1-9076.*

10c2. Trust Agreement, made as of the 2nd day of January, 1991, among Registrant, The Chase Manhattan Bank ("Chase"), et al. establishing a trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Amended Supplemental Plan constituting Exhibit 10c1 hereto is incorporated herein by reference to Exhibit 10c2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1995 maintained in Commission File No. 1-9076.*

10c3. Amendment made as of the 1st day of November, 1993 to Trust Agreement constituting Exhibit 10c2 hereto is incorporated herein by reference to Exhibit 10c3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1995 maintained in Commission File No. 1-9076.*

10c4. Amendment made as of the 1st day of January, 1995, to the Trust Agreement and Amendment thereto constituting Exhibits 10c2 and 10c3 hereto is incorporated herein by reference to Exhibit 10c4 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1995 maintained in Commission File No. 1-9076.*

10c5. Amendment made as of the 1st day January, 1997, to Trust Agreement and Amendments thereto constituting Exhibits 10c2, 10c3 and 10c4 hereto is incorporated herein by reference to Exhibit 10c5 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1997.*

10c6. Schedule identifying substantially identical agreements to Trust Agreement and Amendments thereto constituting Exhibits 10c2, 10c3, 10c4 and 10c5 hereto in favor of Norman H. Wesley, Mark Hausberg, Anne C. Linsdau, Craig P. Omtvedt and Mark A. Roche.*

10c7. Amendment made as of January 1, 2000, to Trust Agreement and Amendments thereto, constituting Exhibits 10c2, 10c3, 10c4 and 10c5 hereto relating to the trust established in favor of Norman H. Wesley, is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated May 12, 2000.*

10c8. Trust Agreement, made as of the 1st day of November, 1993, among Gilbert L. Klemann, II, Registrant and Chase establishing a grantor trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Amended Supplemental Plan constituting Exhibit 10c1 hereto is incorporated herein by reference to Exhibit 10c6 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1995 maintained in Commission File No. 1-9076.*

10c9. Amendment made as of 1st day of January, 1996 to Trust Agreement constituting Exhibit 10c8 hereto is incorporated herein by reference to the Quarterly Report on Form 10-Q of Registrant dated August 8, 1996.*

10c10. Amendment made as of the 1st day of January, 1997 to Trust Agreement and Amendment thereto constituting Exhibits 10c8 and 10c9 hereto is incorporated herein by reference to Exhibit 10c1 to the Quarterly Report on Form 10-Q of Registrant dated August 12, 1997.*

10c11. Amendment made as of the 1st day of August, 1998 to Trust Agreement and Amendments thereto constituting Exhibits 10c8, 10c9 and 10c10 hereto is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated November 11, 1998.*

10c12. Schedule identifying substantially identical agreements to the Trust Agreement and Amendments thereto constituting Exhibits 10c8, 10c9, 10c10 and 10c11 hereto in favor of Norman H. Wesley, Mark Hausberg, Anne C. Linsdau, Craig P. Omtvedt and Mark A. Roche.*

10d1. Resolutions of the Board of Directors of Registrant adopted on October 28, 1986 and July 26, 1988 adopting and amending a retirement plan for directors of Registrant who are not officers or employees of Registrant or a subsidiary thereof are incorporated herein by reference to Exhibit 10e1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991 maintained in Commission File No. 1-9076.*

10d2. Resolutions of the Board of Directors of Registrant adopted on July 26, 1994 amending the resolutions constituting Exhibit 10d1 hereto is incorporated herein by reference to Exhibit 10e2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994 maintained in Commission File No. 1-9076.*

10e1. Fortune Brands, Inc. Severance Plan for Vice Presidents, adopted as of January 1, 2000, is incorporated by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated August 11, 2000.*

10f1. Resolution of the Board of Directors of Registrant adopted on July 26, 1988 with respect to retirement and health benefits provided to Mark A. Roche is incorporated herein by reference to Exhibit 10f2 to the Annual Report on Form 10-K of Registrant for the fiscal year ended December 31, 1998.*

10g1. Letter dated August 11, 1995 from Registrant with respect to deferred payment of fees to Gordon R. Lohman is incorporated herein by reference to Exhibit 10b to the Quarterly Report on Form 10-Q of Registrant dated November 9, 1995 maintained in Commission File No. 1- 9076.*

10h1. Agreement dated January 2, 1991 between Registrant and Gilbert L. Klemann, II is incorporated herein by reference to Exhibit 10s1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992 maintained in Commission File No. 1-9076.*

10h2. Amendment dated November 28, 1994 to the Agreement constituting Exhibit 10h1 hereto is incorporated herein by reference to Exhibit 10r2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994 maintained in Commission File No. 1- 9076.*

10h3. Schedule identifying substantially identical agreements to the Agreement and Amendment thereto constituting Exhibits 10h1 and 10h2 hereto entered into by Registrant with Norman H. Wesley, Mark Hausberg, Anne C. Linsdau, Craig P. Omtvedt and Mark A. Roche.*

10h4. Amendment made as of March 16, 2000, amending the Agreement, constituting Exhibits 10h1 and 10h2 hereto, between Registrant and Norman H. Wesley, is incorporated by reference to Exhibit 10b2 to the Quarterly Report on Form 10-Q of Registrant dated May 12, 2000.*

10h5. Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10h4 hereto, entered into by Registrant with Mark Hausberg and Mark A. Roche.*

10h6. Agreement dated as of September 1, 2000 between Registrant and Thomas J. Flocco is incorporated by reference to Exhibit 10b1 to the Quarterly Report on Form 10-Q of Registrant dated November 13, 2000.*

10i1. Trust Agreement, made as of the 2nd day of January, 1991, among Registrant, Chase, et al. establishing a trust in favor of Gilbert L. Klemann, II for purposes of paying amounts under the Agreement and Amendment thereto constituting Exhibits 10h1 and 10h2 hereto is incorporated herein by reference to Exhibit 10s1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994 maintained in Commission File No. 1-9076.*

10i2. Amendment made as of the 1st day of November, 1993 to Trust Agreement constituting Exhibit 10i1 hereto is incorporated herein by reference to Exhibit 10s2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994 maintained in Commission File No. 1-9076.*

10i3. Amendment made as of the 1st day of January, 1997 to Trust Agreement and Amendment thereto constituting Exhibits 10i1 and 10i2 hereto is incorporated herein by reference to Exhibit 10i3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1997.*

10i4. Schedule identifying substantially identical agreements to the Trust Agreement and Amendments thereto constituting Exhibits 10i1, 10i2 and 10i3 hereto in favor of Norman H. Wesley, Mark Hausberg, Anne C. Linsdau, Craig P. Omtvedt and Mark A. Roche.*

10j1. Agreement dated as of January 2, 1991 between Registrant and Gilbert L. Klemann, II and amendment thereto is incorporated herein by reference to Exhibit 10y1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1991 maintained in Commission File No. 1-9076.*

10j2. Agreement dated as of October 28, 1991 amending the Agreement constituting Exhibit 10j1 hereto is incorporated herein by reference to Exhibit 10w2 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1992 maintained in Commission File No. 1-9076.*

10j3. Amendment effective as of January 1, 1995 to the Agreement and Amendment thereto constituting Exhibits 10j1 and 10j2 hereto is incorporated herein by reference to Exhibit 10u3 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1994 maintained in Commission File No. 1-9076.*

10j4. Schedule identifying substantially identical agreements to the Agreement and Amendments thereto constituting Exhibits 10j1, 10j2 and 10j3 hereto entered into by Registrant with Norman H. Wesley, Craig P. Omtvedt and Mark A. Roche.*

10j5. Amendment dated as of August 1, 1998 to the Agreement and Amendments thereto constituting Exhibits 10j1, 10j2 and 10j3 hereto is incorporated herein by reference to Exhibit 10b1 to the Quarterly Report on Form 10-Q of Registrant dated November 11, 1998.*

10j6. Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10j5 hereto entered into by Registrant with Norman H. Wesley and Mark A. Roche.*

10j7. Amendment dated as of August 1, 1998 between Registrant and Craig P. Omtvedt to the Agreement and Amendments between Registrant and Mr. Omtvedt substantially identical to Exhibits 10j1, 10j2 and 10j3 hereto is incorporated herein by reference to Exhibit 10j8 to the Annual Report on Form 10-K for the Fiscal Year ended December 31, 1998.*

10j8. Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10j7 hereto entered into by Registrant with Norman H. Wesley and Mark A. Roche is incorporated herein by reference to Exhibit 10j9 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1998.*

10j9. Amendment dated as of July 26, 1999 to the Agreement dated as of January 2, 1991 between Registrant and Gilbert L. Klemann, II and Amendments thereto constituting Exhibits 10j1, 10j2, 10j3 and 10j5 hereto, is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated November 12, 1999.*

10j10. Schedule identifying substantially identical agreement to the Amendment constituting Exhibit 10j9 hereto, in favor of Mark Hausberg.*

10j11. Agreement dated as of November 18, 1997 between Registrant and Anne C. Linsdau is incorporated herein by reference to Exhibit 10j12 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1999.*

10j12. Schedule identifying substantially identical agreement to the Agreement constituting Exhibit 10j11 hereto, in favor of Mark Hausberg, is incorporated herein by reference to Exhibit 10j13 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1999.*

10j13. Severance and Retirement Agreement made as of January 1, 2000, between Registrant and Norman H. Wesley amending and restating the Agreement referred to in Exhibits 10j1, 10j2, 10j3, 10j5 and 10j7 hereto for Norman H. Wesley, is incorporated herein by reference to Exhibit 10c1 to the Quarterly Report on Form 10-Q of Registrant dated May 12, 2000.*

10j14. Severance Agreement dated as of January 1, 2000 between Registrant and Thomas J. Flocco is incorporated by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated November 13, 2000.*

10j15. Amendment dated as of December 18, 2000 between Registrant and Mark A. Roche to the Agreement and Amendments between Registrant and Mr. Roche substantially identical to Exhibits 10j1, 10j2, 10j3, 10j5 and 10j7 hereto.*

10j16. Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10j10 hereto entered into by Registrant with Mark Hausberg.*

10k1. Rights Agreement, dated as of November 19, 1997, between Registrant and First Chicago Trust Company of New York, as Rights Agent, is incorporated herein by reference to Exhibit 4a to the Current Report on Form 8-K of Registrant dated December 2, 1997.

10l1. Indemnification Agreement, dated as of December 22, 1994, among Registrant, The American Tobacco Company and Brown & Williamson Tobacco Corporation, is incorporated herein by reference to Exhibit 10m1 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1997.

12. Statement re computation of ratio of earnings to fixed charges.

13. 2000 Annual Report to Stockholders of Registrant.

21. Subsidiaries of Registrant.

23(i). Consent of Independent Accountants, PricewaterhouseCoopers LLP.

24. Powers of Attorney relating to execution of this Annual Report on Form 10-K.

99. List of Pending/Terminated Cases.

* Indicates that exhibit is a management contract or compensatory plan or arrangement.

In lieu of filing certain instruments with respect to long-term debt of the kind described in Item 601(b)(4) of Regulation S-K, Registrant agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.

(b) Reports on Form 8-K.

Registrant filed a Current Report on Form 8-K, dated October 10, 2000, in respect of Registrant's press release dated October 9, 2000 announcing that Registrant is exploring strategic options for its ACCO World Corporation office products unit (Items 5 and 7(c)).

Registrant filed a Current Report on Form 8-K, dated October 20, 2000, in respect of Registrant's press release dated October 20, 2000 announcing Registrant's financial results for the three-month and nine-month periods ended September 30, 2000 (Items 5 and 7(c)).

Registrant furnished a Current Report on Form 8-K, dated November 13, 2000, for the purpose of furnishing an investment brochure pursuant to Regulation FD (Items 7(c) and 9).

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FORTUNE BRANDS, INC. (Registrant)

By /s/ Norman H. Wesley Norman H. Wesley Chairman of the Board and Date: March 9, 2001 Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of Registrant and in the capacities and on the dates indicated.

/s/ Norman H. Wesley Norman H. Wesley, Chairman of the Board and Chief Executive Officer (principal executive officer) Date: March 9, 2001

/s/ Craig P. Omtvedt Craig P. Omtvedt, Senior Vice President and Chief Financial Officer (principal financial officer) Date: March 9, 2001

/s/ Michael R. Mathieson Michael R. Mathieson, Vice President, Controller and Chief Accounting Officer (principal accounting officer) Date: March 9, 2001

/s/ Patricia O. Ewers* Patricia O. Ewers, Director Date: March 9, 2001

/s/ Thomas C. Hays* Thomas C. Hays, Director Date: March 9, 2001

/s/ John W. Johnstone, Jr.* John W. Johnstone, Jr., Director Date: March 9, 2001

/s/ Sidney Kirschner* Sidney Kirschner, Director Date: March 9, 2001

/s/ Gordon R. Lohman* Gordon R. Lohman, Director Date: March 9, 2001

/s/ Charles H. Pistor, Jr.* Charles H. Pistor, Jr., Director Date: March 9, 2001

/s/ Eugene A. Renna* Eugene A. Renna, Director Date: March 9, 2001

/s/ Anne M. Tatlock* Anne M. Tatlock, Director Date: March 9, 2001

/s/ David M. Thomas* David M. Thomas, Director Date: March 9, 2001

/s/ Peter M. Wilson* Peter M. Wilson, Director Date: March 9, 2001

*By A. Robert Colby A. Robert Colby, Attorney-in-Fact

INDEX TO FINANCIAL STATEMENT SCHEDULE

Pages ----- FORTUNE BRANDS, INC. AND SUBSIDIARIES

Report of Independent Accountants F-2

Schedule ------

II Valuation and qualifying accounts For the years ended December 31, 2000, 1999 and 1998 F-3

F-1

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of Fortune Brands, Inc.:

Our report on the consolidated financial statements of Fortune Brands, Inc. and Subsidiaries has been incorporated by reference in this Form 10-K from page 55 of the 2000 Annual Report to Stockholders of Fortune Brands, Inc. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page F-1 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.

PricewaterhouseCoopers LLP

Chicago, Illinois 60601 January 24, 2001

F-2

FORTUNE BRANDS, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS For the Years Ended December 31, 2000, 1999 and 1998 (In millions)

------Col. A Col. B Col. C Col. D Col. E ------Additions ------Balance at Charged Balance Beginning to Costs at End Description of Period and Expenses Deductions of Period ------

2000: Allowance for cash discounts $ 8.8 $ 72.4 $ 72.1 (1) $ 9.0 0.1 (4) Allowance for returns 19.2 173.0 171.5 (1) 20.4 0.3 (4) Allowance for doubtful accounts 35.4 8.6 12.4 (2) 30.5 1.1 (4) ------$63.4 $254.0 $257.5 $59.9 ======1999: Allowance for cash discounts $ 8.9 $ 76.3 $ 76.4 (1) $ 8.8

Allowance for returns 19.1 156.4 157.1 (1) 19.2 (0.8)(3) Allowance for doubtful accounts 33.4 15.0 14.6 (2) 35.4 (1.6)(3) ------$61.4 $247.7 $245.7 $63.4 ======1998: Allowance for cash discounts $ 8.2 $ 93.1 $ 92.4 (1) $ 8.9

Allowance for returns 20.4 150.3 151.6 (1) 19.1

Allowance for doubtful accounts 25.7 14.3 9.9 (2) 33.4 (3.3)(3) ------$54.3 $257.7 $250.6 $61.4 ======

(1) Cash discounts and returns allowed customers. (2) Doubtful accounts written off, net of recoveries. (3) Balance at acquisition date of subsidiaries. (4) Foreign exchange rate changes.

F-3

EXHIBIT INDEX ------

Sequentially Exhibit Numbered Page ------

10a1. Fortune Brands, Inc. Annual Executive Incentive Compensation Plan is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated August 12, 1997.*

10b3. Fortune Brands, Inc. 1999 Long-Term Incentive Plan is incorporated herein by reference to Exhibit 4e1 to the Registration Statement for the Fortune Brands, Inc. 1999 Long-Term Incentive Plan filed by Registrant on Form S-8, dated February 1, 2000.*

10b4. Fortune Brands, Inc. Non-Employee Director Stock Option Plan is incorporated herein by reference to Exhibit 10b1 to the Quarterly Report on Form 10-Q of Registrant dated August 12, 1997.*

10h5. Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10h4 hereto, entered into by Registrant with Mark Hausberg and Mark A. Roche.*

10h6 Agreement dated as of September 1, 2000 between Registrant and Thomas J. Flocco is incorporated by reference to Exhibit 10b1 to the Quarterly Report on Form 10-Q of Registrant dated November 13, 2000.*

10j5 Amendment dated as of August 1, 1998 to the Agreement and Amendments thereto constituting Exhibits 10j1, 10j2 and 10j3 hereto is incorporated herein by reference to Exhibit 10b1 to the Quarterly Report on Form 10-Q of Registrant dated November 11, 1998.*

10j6. Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10j5 hereto entered into by Registrant with Norman H. Wesley and Mark A. Roche.*

10j7. Amendment dated as of August 1, 1998 between Registrant and Craig C. Omtvedt to the Agreement and Amendments between Registrant and Mr. Omtvedt substantially identical to Exhibits 10j1, 10j2 and 10j3 hereto is incorporated herein by reference to Exhibit 10j8 to the Annual Report on Form 10-K for the Fiscal Year ended December 31, 1998.*

10j8 Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10j7 hereto entered into by Registrant with Norman H. Wesley and Mark A. Roche is incorporated herein by reference to Exhibit 10j9 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1998.*

10j9 Amendment dated as of July 26, 1999 to the Agreement dated as of January 2, 1991 between Registrant and Gilbert L. Klemann, II and Amendments thereto constituting Exhibits 10j1, 10j2, 10j3 and 10j5 hereto, is incorporated herein by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated November 12, 1999.*

10j10 Schedule identifying substantially identical agreement to the Amendment constituting Exhibit 10j9 hereto, in favor of Mark Hausberg.*

10j11 Agreement dated as of November 18, 1997 between Registrant and Anne C. Linsdau is incorporated herein by reference to Exhibit 10j12 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1999.*

10j12 Schedule identifying substantially identical agreement to the Agreement constituting Exhibit 10j11 hereto, in favor of Mark Hausberg, is incorporated herein by reference to Exhibit 10j13 to the Annual Report on Form 10-K of Registrant for the Fiscal Year ended December 31, 1999.*

10j13 Severance and Retirement Agreement made as of January 1, 2000, between Registrant and Norman H. Wesley amending and restating the Agreement referred to in Exhibits 10j1, 10j2, 10j3, 10j5 and 10j7 hereto for Norman H. Wesley, is incorporated herein by reference to Exhibit 10c1 to the Quarterly Report on Form 10-Q of Registrant dated May 12, 2000.*

10j14 Severance Agreement dated as of January 1, 2000 between Registrant and Thomas J. Flocco is incorporated by reference to Exhibit 10a1 to the Quarterly Report on Form 10-Q of Registrant dated November 13, 2000.*

10j15 Amendment dated as of December 18, 2000 between Registrant and Mark A. Roche to the Agreement and Amendments between Registrant and Mr. Roche substantially identical to Exhibits 10j1, 10j2, 10j3, 10j5 and 10j7 hereto.*

10j16 Schedule identifying substantially identical agreements to the Amendment constituting Exhibit 10j10 hereto entered into by Registrant with Mark Hausberg.*

12. Statement re computation of ratio of earnings to fixed charges.

13. 2000 Annual Report to Stockholders of Registrant.

21. Subsidiaries of Registrant.

23(i). Consent of Independent Accountants, PricewaterhouseCoopers LLP.

24. Powers of Attorney relating to execution of this Annual Report on Form 10-K.

99. List of Pending/Terminated Cases.

EXHIBIT 10c6

Schedule identifying substantially identical agreements, among Fortune Brands, Inc. ("Fortune") and The Chase Manhattan Bank, et al., establishing a trust in favor of each of the following persons, to the Agreement and the Amendments thereto constituting Exhibits 10c2, 10c3, 10c4 and 10c5 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ----

Norman H. Wesley Mark Hausberg Anne C. Linsdau Craig P. Omtvedt Mark A. Roche

EXHIBIT 10c12

Schedule identifying substantially identical agreements, among Fortune Brands, Inc. ("Fortune"), The Chase Manhattan Bank and each of the following persons, to the Trust Agreement and Amendments constituting Exhibits 10c8, 10c9, 10c10 and 10c11 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ----

Norman H. Wesley Mark Hausberg Anne C. Linsdau Craig P. Omtvedt Mark A. Roche

EXHIBIT 10h3

Schedule identifying substantially identical agreements, among Fortune Brands, Inc. ("Fortune") and each of the following persons, to the Agreement and Amendment constituting Exhibits 10h1 and 10h2 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------Name ----

Norman H. Wesley Mark Hausberg Anne C. Linsdau Craig P. Omtvedt Mark A. Roche

EXHIBIT 10h5

Schedule identifying substantially identical agreements, among Fortune Brands, Inc. ("Fortune") and each of the following persons, to the Amendment constituting Exhibit 10h4 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ----

Mark Hausberg Mark A. Roche

EXHIBIT 10i4

Schedule identifying substantially identical agreements, among Fortune Brands, Inc. ("Fortune") and The Chase Manhattan Bank, et al. in favor of each of the following persons, to the Trust Agreement and Amendments thereto constituting Exhibits 10i1, 10i2 and 10i3 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------Name ----

Norman H. Wesley Mark Hausberg Anne C. Linsdau Craig P. Omtvedt Mark A. Roche

EXHIBIT 10j4

Schedule identifying substantially identical agreements, between Fortune Brands, Inc. ("Fortune") and each of the following persons, to the Agreement and Amendments thereto constituting Exhibits 10j1, 10j2 and 10j3 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ----

Norman H. Wesley Craig P. Omtvedt Mark A. Roche

EXHIBIT 10j6

Schedule identifying substantially identical agreements, between Fortune Brands, Inc. ("Fortune") and each of the following persons, to the Amendment constituting Exhibits 10j5 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ---- Norman H. Wesley Mark A. Roche

EXHIBIT 10j10

Schedule identifying substantially identical agreement, between Fortune Brands, Inc. ("Fortune") and the following persons, to the Agreement constituting Exhibit 10j9 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ---- Mark Hausberg

EXHIBIT 10j15

AMENDMENT TO SEVERANCE AGREEMENT ------

This AMENDMENT to the Severance Agreement (the "Agreement") dated as of January 29, 1996, as amended, between FORTUNE BRANDS, INC., a Delaware corporation (the "Company") and MARK A. ROCHE ( the "Executive");

W I T N E S S E T H ------

WHEREAS, the Company and the Executive entered into the Agreement in order to provide severance benefits in the event of termination of the Executive's employment; and

WHEREAS, the Company and the Executive desire to amend the Agreement in order to define more precisely the amounts payable in lieu of an incentive bonus in the event of termination of employment, to provide that a relocation of the Company's principal executive office constitutes a "good reason" for termination of employment, to reflect changes in the addresses to which notices may be sent under the Agreement and to add provisions on Confidential Information, Loyalty and Non-Competition to the Agreement;

NOW, THEREFORE, in consideration of the premises and to further assure the retention of the Executive in the employ of the Company after the date of this Amendment to Severance Agreement, the parties do hereby agree as follows:

1. Section 1(f) of the Agreement is hereby amended by redesignating paragraphs (iv) through (vi) thereof as paragraphs (v) through (vii), respectively, and by adding a new paragraph (iv) as follows:

"(iv) the relocation of the Company's principal executive offices to a location more than 35 miles from their location on March 1, 2000 or the Company requiring the Executive to relocate to any office other than the Company's principal executive offices, except for required travel on the Company's business to an extent substantially consistent with his business travel obligations on March 1, 2000."

2. Section 2(b)(ii) of the Agreement is hereby amended in its entirety as follows:

"in lieu of any further salary payments, annual incentive compensation awards or profit-sharing allocations to the Executive for periods subsequent to the Termination Date, an amount equal to the product of (A) the sum of (1) his annual base salary at the rate in effect on the date hereof plus any increases therein subsequent thereto, plus (2) the greater of the amount that was awarded to the Executive under the Annual Executive Incentive Compensation Plan of the Company and any other plans or arrangements of the Company and its affiliates providing for an annual (but not long-term) bonus arrangement (the 'Incentive Compensation Plans') for the calendar year immediately preceding the year in which the Termination Date occurs (whether or not fully paid), but not less than the amount paid to the Executive for 1996, plus (3) the greater of the amount that was allocated to the Executive's account under the Fortune Brands Retirement Savings Plan (the 'Profit-Sharing Plan'), including the Company 401(k) matching contribution thereto, the profit-sharing provisions of the Supplemental Plan of Fortune Brands, Inc. (the 'Supplemental Plan'), including the Company matching award related to the supplemental tax deferred amounts therein, and any other defined contribution plan of the Company or an affiliate for 1996 and the amount that would have been required to be so allocated to him for the year immediately preceding the year in which the Termination Date occurs, multiplied by (B) the lesser of the number two and the number of years (and fraction thereof) from the Termination Date to the Executive's Normal Retirement Date (as defined in the Retirement Plan for Employees and Former Employees of Fortune Brands, Inc. (the 'Retirement Plan')); and"

3. Section 2(f)(ii) of the Agreement is hereby amended in its entirety as follows:

"(ii) incentive compensation under the Incentive Compensation Plans for the calendar year in which the Termination Date occurs, payable at the time awards thereunder are normally paid, equal to the amount paid to the Executive under the Incentive Compensation Plans for 1996 or, if higher, the amount for the calendar year immediately preceding the year in which the Termination Date occurs, with such incentive compensation amount prorated for the portion of the year through the Termination Date. The payments under this Section 2(f)(ii) shall be reduced by the amount actually paid to the Executive under the Incentive Compensation Plans for the calendar year in which the Termination Date occurs."

4. Sections 3, 4, 5, 6, 7, 8, and 9 of the Agreement are hereby amended by redesignating them as Sections 7, 8, 9, 10, 11, 12 and 13, respectively, (and any references to such Sections are hereby redesignated accordingly) and new Sections 3, 4, 5 and 6 are added to the Agreement as follows:

"Section 3. Confidential Information. ------

(a) The Executive acknowledges that given his high level position with the Company, he has had and will have access to highly confidential information of the Company and its affiliates, including, but not limited to, financial information, supply and service information, marketing information, personnel data, customer lists, business and financial plans and strategies, and product costs, sources and pricing. The Company and the Executive consider their relation to be one of high confidence with respect to all such information ('Confidential Trade Secrets'). Accordingly, the Executive agrees that during and for a period of eighteen (18) months after the termination of his employment with the Company, regardless of the reasons that such employment might end, the Executive will:

(i) hold all Confidential Trade Secrets in confidence and not discuss, communicate, disclose or transmit to others, or make any unauthorized copy of or use the Confidential Trade Secrets in any capacity, position or business unrelated to the Company;

(ii) use the Confidential Trade Secrets only in furtherance of proper Company employment related business reasons; and

(iii) take all reasonable action that the Company deems necessary and appropriate to prevent unauthorized use or disclosure of or to protect the Company's interests in the Confidential Trade Secrets.

(b) It is understood and agreed that the Executive's obligations under Section 3(a) do not extend to any knowledge or information which is or hereafter may become available to the public or to competitors otherwise than by disclosure by the Executive in breach of this Agreement nor to disclosure compelled by judicial or administrative proceedings after the Executive diligently tries to avoid each disclosure and affords the Company the opportunity to obtain assurance that compelled disclosures will receive confidential treatment.

Section 4. Loyalty. The Executive further acknowledges ------that the loyalty and dedicated service of the Company's and its affiliates' employees is critical to the Company's business. Accordingly, the Executive agrees that during and after his employment by the Company, regardless of the reasons the employment might end, he will not, without the prior written consent of the Company, induce or attempt to induce any employee or agency representative of the Company or any of its affiliates to leave the employment or representation of the Company or of any affiliate. The Executive also agrees that during and after his employment, he will not take any action, or make any statements, that could discredit or disparage the Company or its affiliates, or its or their officers, directors, employees or products.

Section 5. Non-Competition. ------

(a) The Executive acknowledges that the Company and its affiliates have invested time and money in establishing or planning to establish one or more aspects of its business throughout the United States, Canada, Mexico and Europe. Therefore, the Executive agrees that during his employment by the Company and for a period of eighteen (18) months after the termination of his employment, the Executive will not, directly or indirectly, individually engage in nor be competitively employed or retained by, or render any competing services for, or be financially interested in, any firm or corporation engaged in any business in the United States, Canada, Mexico or Europe which is directly competitive with any significant business in which the Company or any of its affiliates was engaged during the two-year period preceding the date the Executive's employment terminates, including, but not limited to, any significant business in which, during such two-year period, the Executive was involved in the Company's or any affiliate's planning to enter such business.

(b) The restriction in Section 5(a) shall not apply to

(i) the purchase by the Executive of stock not to exceed 5% of the outstanding shares of capital stock of any corporation whose securities are listed on any national securities exchange; or

(ii) the employment of the Executive by a non-competitive subsidiary or non-competitive affiliated entity of a competitor of the Company or any affiliate upon written consent of the Company, which consent shall not unreasonably be withheld.

(c) The Executive also agrees that for a period of eighteen (18) months after the termination of his employment with the Company he will not solicit business from nor directly or indirectly cause others to solicit business that competes with the Company's or any affiliate's line of products from any entities which have been customers of the Company during the Executive's employment or which were targeted as potential customers during Executive's employment.

Section 6. Remedies. The Executive recognizes and agrees: ------

(a) that the covenants and restrictions in Sections 3, 4 and 5 of this Agreement are reasonable and valid and all defenses to the strict enforcement thereof by the Company are waived by the Executive to the full extent permitted by law. In the event, however, that a court of competent jurisdiction should determine in any case that the enforcement of any provision contained in such paragraphs would not be reasonable, it is intended that enforcement of a provision which is determined by such court to be reasonable shall be given effect; and

(b) that a breach of the covenants and restrictions in Sections 3, 4 and 5 of this Agreement would result in irreparable harm to the Company which could not be compensated by money damages alone. Accordingly, the Executive agrees that should there be a breach of any or all of these provisions or a threatened breach, the Company shall be entitled to cease paying amounts under Section 2 and to offset any amounts it owes to Executive against any damage that it has suffered as a result of the breach of any of the covenants and restrictions in Sections 3, 4 and 5 and, in addition to its other remedies, to an order enjoining any such breach or threatened breach without bond. In addition, the Executive agrees that, in the event he breaches any of the covenants or restrictions in Sections 3, 4 or 5 of this Agreement, he will promptly repay to the Company upon demand of the Company any amounts paid to him pursuant to Section 2. The Executive further agrees that he will reimburse the Company for its attorney fees and costs incurred in pursuing any action to enforce these provisions."

5. Section 5 of the Agreement (Section 9 as redesignated above) is hereby amended in its entirety as follows:

"Any notice, demand, or other communication required or permitted under this Agreement shall be effective only if it is in writing and delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Fortune Brands, Inc. 300 Tower Parkway Lincolnshire, Illinois 60069

Attention: Secretary

If to the Executive:

Mark A. Roche 22 S. Wynstone Drive North Barrington, IL 60010

or to such other address as either party may designate by notice to the other and shall be deemed to have been given as of the date so personally delivered or mailed."

IN WITNESS WHEREOF, the Company has caused this Amendment to Severance Agreement to be signed by its duly authorized officer and the Executive has hereunto set his hand as of the ______day of December, 2000.

FORTUNE BRANDS, INC.

By:______Anne C. Linsdau Vice President - Human Resource

Attest:

______

______Mark A. Roche

EXHIBIT 10j16

Schedule identifying substantially identical agreement, between Fortune Brands, Inc. ("Fortune") and each of the following persons, to the Amendment constituting Exhibits 10j15 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2000.

------

Name ----

Mark Hausberg

(b) Reports on Form 8-K.

Registrant filed a Current Report on Form 8-K, dated November 13, 2000, for the purpose of furnishing an investment brochure pursuant to Regulation FD (Items 7(c) and 9).

EXHIBIT 12

FORTUNE BRANDS, INC.

Statement Re Computation of Ratio of Earnings to Fixed Charges (Dollar amounts in millions)

Years Ended December 31, ------1996 1997 1998 1999 2000 ------

Continuing Operations ------Earnings Available:

Income before provision for taxes on income and minority interest $ 340.1 $ 145.2 $ 516.4 ($725.2) $ 44.0

Less: Excess of earnings over dividends of less than fifty percent owned companies 0.2 0.2 0.2 0.2 0.2

Capitalized interest 0.3 - - 4.1 0.6 ------339.6 145.0 516.2 (720.9) 43.2 ------Fixed Charges:

Interest expense (including capitalized interest) and amortization of debt discount and expenses 172.6 122.4 105.4 113.9 135.6

Portion of rentals representative of an interest factor 15.1 14.7 17.0 19.0 18.0 ------Total Fixed Charges 187.7 137.1 122.4 132.9 153.6 ------

Total Earnings Available $ 527.3 $ 282.1 $ 638.6 $ (588.0) $ 196.8 ======

Ratio of Earnings to Fixed Charges 2.81 2.06 5.22 (A) (A) ======

(A) As a result of the loss reported for the years ended December 31, 2000 and 1999, the Company was unable to cover the fixed charges as indicated.

Included in earnings for 2000 was a fourth quarter goodwill write-down of $502.6 million and included in earnings for 1999 was a second quarter goodwill write-down of $1,126 million as disclosed in Note 1 to the Company's consolidated financial statements. If the write-down were excluded from earnings, the ratio of earnings to fixed charges for the years ended December 31, 2000 and 1999 would have been 4.52 and 4.05, respectively.

Exhibit 13

Financial Highlights

------Fortune Brands, Inc. and Subsidiaries

------

(In millions, except per share amounts) 2000 1999 Change 1998 ------

NET SALES/(1)/ Home products $2,215.0 $1,950.7 $ 1,636.8 Office products 1,435.4 1,381.0 1,403.3 Golf products 965.2 977.7 974.1 Spirits and wine 1,228.9 1,269.6 1,265.9 ------$5,844.5 $5,579.0 4.8% $ 5,280.1 ======OPERATING COMPANY CONTRIBUTION/(2)/ Home products $ 340.4 $ 300.2 $ 252.5 Office products 79.5 88.5 134.0 Golf products 145.2 147.0 142.9 Spirits and wine 309.1 293.6 268.9 ------$ 874.2 $ 829.3 5.4% $ 798.3 ======

Income (loss) from continuing operations $ (137.7) $ (890.6) -- $ 293.6 ======Earnings per common share from continuing operations Basic $ (0.88) $ (5.35) $ 1.70 Diluted $ (0.88) $ (5.35) $ 1.67 ======

Income from operations before net charges/(3)/ $ 366.2 $ 339.8 7.8% $ 293.6 ======

Earnings per common share before net charges Basic $ 2.32 $ 2.03 14.3% $ 1.70 Diluted $ 2.29 $ 1.99 15.1% $ 1.67 ======

EBITDA/(4)/ $ 985.0 $ 907.0 9% $ 865.7 ======

Dividends paid per common share $ .93 $ .89 4% $ .85 ======Actual number of common shares outstanding 153.5 163.2 170.9 Average number of common shares outstanding 157.6 166.6 172.2 ======

/(1)/ Net sales have been restated for 1999 and 1998 to conform to the 2000 presentation due to the reclassification of shipping and handling in accordance with Emerging Issues Task Force Issue No. 00-10.

/(2)/ Operating company contribution is net sales less all costs and expenses other than restructuring and other nonrecurring charges, write-down of goodwill, amortization of intangibles, corporate administrative expenses, interest and related expenses, other (income) expenses, net and income taxes.

/(3)/ Income from operations before net charges was $366.2 million, or $2.32 basic and $2.29 diluted per share for 2000, compared with $339.8 million, or $2.03 basic and $1.99 diluted per share for 1999. The net charges for 2000 represent: a goodwill write-down of $502.6 million ($487.3 million after tax, or $3.09 per share); restructuring and other nonrecurring charges of $73.0 million ($46.6 million after-tax, or 30 cents per share); and a $30.0 million tax reserve reversal no longer required, taken in the fourth quarter. The net charges for 1999 represent: a goodwill write-down of $1,126 million, or $6.76 per share; restructuring and other nonrecurring charges of $196 million ($125.6 million after tax, or 75 cents per share); and the sale of a financing subsidiary for $31.6 million ($21.2 million after-tax gain, or 13 cents per share).

We reported a net loss in 2000 and 1999. Because of this, the calculation of reported earnings per share on a diluted basis excludes the impact of the convertible preferred stock and stock options. For comparative purposes, however, the impact of the convertible preferred stock and stock options are considered.

Income (loss) from continuing operations excludes extraordinary items charges in 1998 for the early extinguishment of debt.

/(4)/ EBITDA is defined as income from continuing operations before extraordinary items and net charges, interest expense, income taxes and depreciation and amortization. EBITDA, which is earnings before interest, taxes, depreciation and amortization, is a measure commonly used by analysts and investors. Accordingly, this information has been presented to permit a more complete analysis of the Company's operating performance. EBITDA should not be considered a substitute for net income or cash flow prepared in accordance with generally accepted accounting principles as a measure of the profitability or liquidity of the Company.

Results of Operations ------Fortune Brands, Inc. and Subsidiaries

------

Net Sales Operating Company Contribution(a) ------(In millions) 2000 1999 1998 2000 1999 1998 ------

Home products $2,215.0 $1,950.7 $1,636.8 $340.4 $300.2 $252.5 Office products 1,435.4 1,381.0 1,403.3 79.5 88.5 134.0 Golf products 965.2 977.7 974.1 145.2 147.0 142.9 Spirits and wine 1,228.9 1,269.6 1,265.9 309.1 293.6 268.9 ------Continuing operations $5,844.5 $5,579.0 $5,280.1 $874.2 $829.3 $798.3 ======

(a) Operating company contribution (OCC) is net sales less all costs and expenses other than restructuring and other nonrecurring charges, write- down of goodwill, amortization of intangibles, corporate administrative expenses, interest and related expenses, other (income) expenses, net and income taxes. (See Note 14.)

CONSOLIDATED

2000 COMPARED TO 1999 Net sales grew $265.5 million, an increase of 5%. The increase was primarily due to the introduction of new products, line extensions, and the full year benefit of acquisitions made in 1999 in the home and office products segments. These increases were partly offset by lower average foreign exchange rates, volume declines in some existing products and increased rebates and allowances in the United States in our office products segment. In addition, reported sales of spirits and wine were lower because sales through the Maxxium joint venture are net of excise taxes and distribution costs, which are now incurred by the venture. Absent this change, total sales would have increased 6%. Operating company contribution, our key measure by which we gauge performance, increased $44.9 million, or 5%, on the benefit of the higher sales, improved product mix and savings resulting from our restructuring initiatives.

During the fourth quarter of 2000, we recorded a non-cash write-down of goodwill of $502.6 million, ($487.3 million after tax, or $3.09 per share). This action resulted from the significant shortfall in office products earnings, the softening conditions in the office products industry and the ongoing strategic review process, which led to the implementation of additional restructuring actions.

During 2000, we recorded aggregate pre-tax restructuring and other nonrecurring charges of $73.0 million, ($46.6 million after-tax, or 30 cents per share). (See Note 13.) These charges principally relate to relocation costs for manufacturing facilities in the office segment, rationalization of operations in the home segment, product line discontinuances and manufacturing consolidation in the golf segment, other workforce reduction initiatives across these segments and downsizing and relocation of the Corporate office.

Interest and related expenses increased 25%. This increase reflects higher average borrowings resulting primarily from share repurchases and an investment in a joint venture and higher average interest rates. Corporate administrative expense decreased $22.5 million, or 36%, due to the restructuring program initiated in 1999.

The effective income tax rate comparison was distorted primarily by the absence of tax benefits on the write-down of goodwill, lower pre-tax income due to the impact of the restructuring and other nonrecurring charges taken in 2000 and the benefit of the reversal of prior year tax reserves no longer required. Excluding these charges and reversals, the effective income tax rate was 40.4% for 2000 and 1999.

Net loss was $137.7 million, or 88 cents per share, in 2000 compared with a net loss of $890.6 million, or $5.35 per share, for 1999.

Income from operations before net charges was $366.2 million, or $2.32 basic and $2.29 diluted per share for 2000, compared with $339.8 million, or $2.03 basic and $1.99 diluted per share for 1999. Income from operations before net charges for the year ended December 31, 2000 represents income before the $502.6 million ($487.3 million after tax, or $3.09 per share) goodwill write-down, the $73.0 million ($46.6 million after tax, or 30 cents per share) restructuring and other nonrecurring charges and a $30.0 million tax reserve reversal that was no longer required. Income from operations before net charges for the year ended December 31, 1999 represents income before the $1,126 million, or $6.76 per share, goodwill write-down, the $196.0 million ($125.6 million after tax, or 75 cents per share) of restructuring and other nonrecurring charges and the $31.6 million ($21.2 million after tax, or 13 cents per share) gain on the sale of a financing subsidiary.

Results of Operations ------Fortune Brands, Inc. and Subsidiaries ------

We derived approximately 23% of our 2000 and 24% of our 1999 operating company contribution from international markets, principally the United Kingdom, Australia and Canada. Fluctuations in the exchange rates of foreign currencies may affect results in future periods. Fluctuations in average foreign exchange reduced 2000 operating company contribution by approximately 2%. We cannot accurately predict fluctuations in foreign exchange rates. A 10% change in average exchange rates for the foreign currencies from 2000 average rates would have resulted in a change in operating company contribution of approximately $20 million, or about 2 1/2 %.

PENDING LITIGATION On December 22, 1994, the Company sold The American Tobacco Company subsidiary to Brown & Williamson Tobacco Corporation, a wholly - owned subsidiary of B.A.T Industries p.l.c. In connection with the sale, Brown & Williamson Tobacco Corporation and The American Tobacco Company ("the Indemnitors") agreed to indemnify the Company against claims including legal expenses arising from smoking and health and fire safe cigarette matters relating to the tobacco business of The American Tobacco Company.

The Company is a defendant in numerous actions based upon allegations that human ailments have resulted from tobacco use. Management believes that there are meritorious defenses to the pending actions, including the fact that the Company never made or sold tobacco, and these actions are being vigorously contested. However, it is not possible to predict the outcome of the pending litigation, and it is possible that some of these actions could be decided unfavorably. Management is unable to make a meaningful estimate of the amount or range of loss that could result from an unfavorable outcome of the pending litigation. Management believes that the pending actions will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company as long as the Indemnitors continue to fulfill their obligations to indemnify the Company under the aforementioned indemnification agreement.

In addition to the lawsuits described above, the Company and its subsidiaries are defendants in lawsuits associated with their businesses and operations. It is not possible to predict the outcome of the pending actions, but management believes that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company. These actions are being vigorously contested.

ENVIRONMENTAL MATTERS Along with other responsible parties, our subsidiaries face claims relating to the protection of the environment. As of February 1, 2001, various of our subsidiaries had been designated as potentially responsible parties under "Superfund" or similar state laws with respect to 47 sites. We have reached settlements with respect to 40 of these sites. We believe that the cost of complying with the present environmental protection laws, before considering estimated recoveries either from other responsible parties or insurance, will not have a material adverse effect upon our results of operations, cash flows or financial condition.

RECENTLY ISSUED ACCOUNTING STANDARDS In June 1999, FAS Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," was issued, deferring the effective date of FAS Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," from January 1, 2000 to January 1, 2001. These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires recognition of all derivatives as either assets or liabilities on the balance sheet and measurement of those instruments at fair value. We adopted FAS 133, as amended by FAS Statement No. 138, "Accounting for Certain Derivative Instruments and Hedging Activities, an amendment of FAS Statement No. 133," beginning January 1, 2001. We currently enter into foreign currency hedges to mitigate any unforeseen risks in the fluctuation of the underlying foreign currency rates. These new Statements will have an insignificant impact on our balance sheet, income statement or footnote disclosures.

CONVERSION TO THE EURO Certain of our subsidiaries are engaged in business in some of the countries that participate in the European monetary union. The previous national currencies of these countries will still be accepted as legal tender until at least January 1, 2002. We do not expect the conversion to the Euro to have a material effect on our results of operations, cash flows or financial condition.

COST INITIATIVES We continuously evaluate the productivity of our product lines and existing asset base and actively seek to identify opportunities to improve our cost structure. Future opportunities may involve, among other things, the reorganization of operations or the relocation of manufacturing or assembly to locations generally having lower costs. Implementing any significant cost reduction and efficiency opportunities could result in charges.

1999 COMPARED TO 1998 Net sales grew $298.9 million, an increase of 6%. The increase was primarily due to new products and line extensions, as well as acquisitions made in

1999 and 1998. The benefits from acquisitions occurred principally in the home products segment, and to a lesser extent in the spirits and wine and office products segments. These increases were partly offset by volume declines in some existing products, lower prices and lower average foreign exchange rates. In addition, reported sales of spirits and wine were lower because sales through the Maxxium joint venture are net of excise taxes and distribution costs, which are now incurred by the venture. Absent this change, sales would have increased 7%. Operating company contribution grew 4% on gains in every segment but office products.

As of April 1, 1999, we elected to change our method of measuring the recoverability of goodwill from an undiscounted cash flow method to a discounted cash flow method. We believe the discounted cash flow method, as described in Note 1 of the Notes to Consolidated Financial Statements, is preferable because it is consistent with the basis used for investment decisions and takes into consideration the specific and detailed operating plans and strategies of each operation. The adoption of the discounted cash flow method may result in greater earnings volatility since any subsequent decreases in discounted cash flows of certain segments may result in the write-down of goodwill. As a result of this change for measuring recoverability, we recorded a non-cash write-down of goodwill of $1,126 million ($6.76 per share). The write-down was recorded in the following business segments: golf products-$517.7 million, spirits and wine- $502.7 million; and office products-$105.6 million. Amortization of intangibles declined to $85.5 million in 1999 from $108.2 million in 1998 due to this write- down.

During 1999, we recorded aggregate pre-tax restructuring and other nonrecurring charges of $196 million, ($125.6 million after-tax, or 75 cents per share). (See Note 13.) These charges are for restructuring activities associated with all segments of the Company. The corporate charge of $82.3 million includes employee severance resulting from a reduction of the corporate workforce by about 40 percent (60 positions), relocation of the corporate headquarters to a lower-cost facility in Lincolnshire, Illinois, and lease termination costs related to the move. Savings achieved in 1999, as a result of the corporate restructuring initiatives, amounted to $7.6 million. Home products charges of $29.2 million include reductions in force (856 positions) as a result of the move of substantially all of the lock assembly operations and certain specialty plumbing operations to Mexico. Office products charges of $23.6 million include reductions in force resulting from the move of labeling and printing production to Mexico and other reductions in force in the U.S. and Europe (406 positions in total), as well as employee termination costs and asset write-downs. Golf products charges of $42.1 million include costs related to termination of licensing agreements, product line discontinuances, asset write-offs (including a note receivable related to a previously sold operation) and reductions in force (180 positions) principally resulting from consolidation of golf club facilities from six to three. Spirits and wine charges of $18.8 million include termination of distribution contracts, lease cancellation costs and employee severance costs related to the formation of the Maxxium joint venture. In total, pre-tax annualized savings from these actions exceeded $60 million in 2000.

Other (income) expense, net in 1999 included a gain of $31.6 million ($21.2 million after-tax, or 13 cents per share), on the sale of a financing subsidiary.

Interest and related expenses increased 4%. This increase reflected higher average borrowings due to share repurchases and acquisitions partly offset by lower interest rates.

The effective income tax rate comparison was distorted primarily by the absence of tax benefits on the write-down of goodwill and lower pre-tax income due to the impact of the restructuring and other nonrecurring charges taken in 1999. Excluding these charges, the effective income tax rates were 40.4% for 1999 and 42.6% for 1998. The lower effective tax rate in 1999 principally reflected lower nondeductible goodwill amortization, tax savings initiatives and a refund associated with the settlement of a tax audit.

The income (loss) from continuing operations before extraordinary items was a loss for 1999 of $890.6 million, or $5.35 per share, compared with income for 1998 of $ 293.6 million, or $1.70 basic and $1.67 diluted per share. In 1998, we incurred extraordinary items charges of $30.5 million ($46.9 million pre-tax), or 18 cents per share. The charges related to repurchasing debt. (See Note 15.)

Net loss in 1999 of $890.6 million, or $5.35 per share, compared with net income of $263.1 million, or $1.52 basic and $1.49 diluted per share, for 1998.

Income from continuing operations before extraordinary items and net charges was $339.8 million, or $2.03 basic and $ 1.99 diluted per share for 1999, compared with $293.6 million, or $1.70 basic and $1.67 diluted per share for 1998. The net charges for 1999 consisted of: the goodwill write-down of $1,126 million, or $6.76 per share; restructuring and other nonrecurring charges of $196 million ($125.6 million after-tax, or 75 cents per share); and the sale of a financing subsidiary for a gain of $31.6 million ($21.2 million after-tax, or 13 cents per share).

Results of Operations ------Fortune Brands, Inc. and Subsidiaries ------

HOME PRODUCTS

2000 COMPARED TO 1999 Net sales increased $264.3 million, or 14%. The increase was primarily attributable to overall volume increases, the acquisition of NHB Group Ltd. in October 1999 and price increases. The overall volume increases reflect line extensions, higher volume in some existing products and the introduction of new products.

Operating company contribution increased $40.2 million, or 13%. The operating company contribution increase resulted from the higher sales, improved product mix and a reduction in administrative expenses, partly offset by increased operating expenses. The increased operating expenses were primarily due to higher selling expenses and increased distribution and research and development expenses.

The continued consolidation of the customer base in the home products industry, including home centers and large homebuilders, as well as increased price competition, will continue to present us and our competitors with pricing and service challenges. Customer consolidation will also present opportunities for the most efficient manufacturers and skilled marketers.

Our home products business may be impacted in 2001 by a potential moderation in the housing market and overall economic conditions.

1999 COMPARED TO 1998 Net sales increased $313.9 million, or 19%. The increase was primarily attributable to the acquisition of Schrock cabinets in June 1998 and to overall volume and price increases. The overall volume increases reflect higher volume in existing products, line extensions and new products.

Operating company contribution increased $47.7 million, or 19% due to the higher sales and improved gross margin, partly offset by increased operating expenses. The gross margin improvement reflects the benefits of higher volume, productivity improvements and price increases. The increased operating expenses were attributable to higher volume-related selling expenses and higher advertising expenses (principally at Moen) as well as increased general and administrative expenses.

OFFICE PRODUCTS

2000 COMPARED TO 1999 Net sales increased $54.4 million, or 4%. The increase resulted primarily from the acquisition of Boone International, Inc. in October 1999 partly offset by lower average foreign exchange rates, volume declines in some existing products and weak volumes in the direct mail channel for time- management products and in certain computer accessory product lines.

Operating company contribution decreased $9 million, or 10%. The decrease reflects lower gross margin, higher operating expenses and lower average foreign exchange rates, partly offset by savings achieved as a result of our restructuring program initiated in 1999. The gross margin decreased due to higher rebates and allowances in the United States and increased material costs. The higher operating expenses reflected increased selling expenses, higher freight costs due primarily to increased fuel prices, and increased distribution and general and administrative expenses, partly offset by reduced information technology related expenses.

Certain major customers of our office products business announced reductions in comparable store sales in the fourth quarter of 2000 and have anticipated soft sales in the first quarter of 2001. In addition, certain major retailers have announced plans to close some stores in 2001. These factors may affect our business in 2001.

On October 9, 2000, we announced that we are exploring strategic options for our office products unit. The evaluation is continuing and includes the possible sale of the office products business.

1999 COMPARED TO 1998 Net sales decreased $22.3 million, or 2%. The decline resulted from softness in the U.S. and U.K. markets for traditional office supplies, inventory reduction programs by major customers, as well as weak volumes, primarily in the direct mail channel for time management products. In addition, sales decreased due to lower

------prices (including higher rebates and allowances) and lower average foreign exchange rates. The decrease in net sales was partly offset by the introduction of new products, particularly technology products at Kensington and the benefits of an acquisition.

Operating company contribution decreased $45.5 million, or 34%. The decrease reflects the lower sales, lower gross margin, higher customer program costs and higher information technology related expenses, partly offset by lower freight costs (favorable comparison to 1998 costs incurred to maintain customer service levels during restructuring activities) and decreased general and administrative costs. The gross margin decreased due to lower prices and additional costs related to the integration and relocation of operations in North America and Europe.

GOLF PRODUCTS

2000 COMPARED TO 1999 Net sales decreased $ 12.5 million, on sales declines in some existing products, principally Cobra golf clubs, partly offset by line extensions and the introduction of new Titleist and FootJoy products.

Operating company contribution declined $1.8 million, or 1%, on the lower sales and higher operating expenses partially offset by improved gross margins across all product categories. The increase in operating expenses was primarily due to higher advertising and volume-related selling expenses, partially offset by lower freight and distribution expenses.

The golf ball business experienced a product mix shift as Titleist branded golf balls declined 2% while lower-priced Pinnacle golf balls increased 12%.

The USGA has announced its intention to propose new rules addressing the initial velocity and overall distance standards for golf balls. Until more details regarding such potential rule changes become available, we cannot determine whether they would have a material effect on our group's golf ball business and/or the golf ball industry. However, the new rules being considered could incorporate regulations that would shorten the overall distance that golf balls are allowed to travel and that could hamper innovation in the design and manufacture of golf balls. The adoption of any such rules could materially impact our golf products business and/or the golf ball industry.

1999 COMPARED TO 1998 Net sales increased slightly, up $3.6 million, on sales gains in Titleist golf clubs, Titleist and Pinnacle golf balls and FootJoy shoes and gloves, reflecting volume increases principally on benefits from new products and line extensions. The increase was partly offset by a sales decline for Cobra golf clubs, reflecting discounting on older models and continued softness in the golf club market.

Operating company contribution increased $4.1 million, or 3%, on the higher sales and improved gross margin (manufacturing efficiencies resulting from increased automation). The increase was partly offset by higher operating expenses reflecting increased advertising expenses, partly offset by savings associated with 1998 and 1999 staff reductions at Cobra.

Results of Operations ------Fortune Brands, Inc. and Subsidiaries

SPIRITS AND WINE

2000 COMPARED TO 1999 Net sales decreased $40.7 million, or 3%, principally on the effect of the Maxxium joint venture (as discussed below) and lower average foreign exchange rates. Product is now sold to Maxxium, net of excise taxes in certain markets, at a lower price since the related distribution costs are now incurred by Maxxium. On a comparable basis to prior periods, excluding the impact of Maxxium, net sales would have been $52.0 million higher, or 1% higher than 1999. This underlying increase in net sales was led by volume increases and higher prices. The volume increases primarily reflect increased volumes in existing premium, super-premium and wine products, line extensions and introductions of new products, principally in the United States, partially offset by volume declines in lower-margin U.S. and Scotch whiskey brands.

Operating company contribution increased $15.5 million, or 5%. The increase resulted primarily from favorable price and volume changes for some brands in the United States, as well as reduced costs from the Maxxium distribution joint venture, partly offset by adverse foreign exchange rates.

In August 1999, the spirits and wine business formed an international sales and distribution joint venture, named Maxxium International B.V., with Remy-Cointreau and Highland Distillers, to distribute and sell premium wines and spirits in key markets outside the United States. Our spirits and wine subsidiary agreed to contribute assets related to its international distribution network and make periodic cash payments with a total estimated value of $110 million in return for a one-third interest in the venture. The investments in Maxxium are recorded at book value of assets contributed plus cash invested.

The Maxxium joint venture, the merger of Grand Metropolitan and Guinness to create Diageo in late 1997 and the pending sale of Seagram to Diageo and Pernod-Ricard reflect a trend towards consolidation in the highly competitive global spirits and wine business. The creation of Diageo and the breadth of its portfolio, as well as continued consolidation of the supplier, distributor and retailer tiers, may present pricing and service challenges for our subsidiaries and their competitors. It may also present opportunities, particularly for the most efficient competitors.

Beverage alcohol sales are particularly sensitive to higher excise tax rates. Although no excise tax increases are presently pending in the two largest markets, the U.S. and the U.K., the possibility of future increases cannot be ruled out. It is impossible to predict whether any future excise tax increases will occur, and whether they would have an adverse effect on unit sales, profitability and industry trends if they did occur.

1999 COMPARED TO 1998 Net sales increased slightly on the benefit of the August 1998 Geyser Peak wine acquisition and overall volume increases and higher prices that offset the effect on reported sales of the Maxxium joint venture (as discussed above) and lower average foreign exchange rates. Product is now sold to Maxxium net of excise taxes in certain markets and at a lower price since related distribution costs are now incurred by Maxxium. The overall volume increases reflect line extensions in the U.S. (principally DeKuyper cordial line) and new products, partly offset by lower volumes on existing brands resulting from lower shipments of Scotch products in Europe and lower-margin U.S. brands. Shipments of Jim Beam bourbon and DeKuyper cordials increased.

Operating company contribution increased $24.7 million, or 9%. The increase resulted from the higher sales and improved gross margin (principally reflecting favorable product mix and price increases) and the full year benefits of the Geyser Peak wine acquisition, partly offset by higher operating expenses, net of a reduction in distribution expenses which are now incurred by the Maxxium joint venture. The higher operating expenses were caused by increased volume-related selling expenses. Operating results improved in the United States but Scotch unit volumes in Europe declined.

Quarterly Financial Data unaudited ------Fortune Brands, Inc. and Subsidiaries

------

(In millions, except per share amounts) 2000 1st 2nd 3rd 4th ------

Net sales/(1)/ $1,377.9 $1,518.6 $1,421.2 $1,526.8 Gross profit/(1)/ 572.1 640.6 590.7 636.1 Operating company contribution 182.5 238.5 204.0 249.2 Net income (loss) 64.3 97.4 73.3 (372.7)

Earnings per common share Basic/(2)/ Net income (loss) $ .40 $ .61 $ .47 $ (2.41) ------Diluted/(2)/ Net income (loss) $ .39 $ .61 $ .46 $ (2.41) ======

1999 1st 2nd 3rd 4th ------

Net sales/(1)/ $1,304.1 $1,435.0 $1,353.0 $1,486.9 Gross profit/(1)/ 529.7 574.8 559.1 640.5 Operating company contribution 170.8 218.9 194.4 245.2 Net income (loss) 56.1 (1,096.1) 48.2 101.2

Earnings per common share Basic/(3)/ Net income (loss) $ .33 $ (6.56) $ .29 $ .62 ------Diluted/(3)/ Net income (loss) $ .32 $ (6.56) $ .28 $ .61 ======

/(1)/ Net sales and gross profit have been restated due to the reclassification of billed shipping and handling amounts in accordance with Emerging Issues Task Force Issue No. 00-10.

In 2000, billed shipping and handling amounted to $14.1 million in the first quarter; $18.0 million in the second quarter; $ 17.9 million in the third quarter; and $18.7 million in the fourth quarter. (See Note 1.)

In 1999, billed shipping and handling amounted to $11.8 million in the first quarter; $14.3 million in the second quarter; $13.7 million in the third quarter; and $14.5 million in the fourth quarter. (See Note 1.)

/(2)/ In 2000, net income (loss) and basic and diluted earnings per common share reflected restructuring and other nonrecurring charges of $ 4.5 million ($7.0 million pre-tax, or 3 cents), in the first quarter (See Note 13); restructuring and other nonrecurring charges of $7.0 million ($11.1 million pre-tax, or 4 cents), in the second quarter, restructuring and other nonrecurring charges of $7.7 million ($12.3 million pre-tax, or 5 cents), in the third quarter; and restructuring and other nonrecurring charges of $27.4 million ($42.6 million pre-tax, or 17 cents) and a write-down of goodwill of $502.6 million ($487.4 million after-tax, or $3.09), in the fourth quarter. (See Note 1.)

The sum of the quarterly earnings per common share for 2000 does not equal the amount shown for the year since assumed conversion of preferred stock and exercise of stock options is not considered in loss periods due to it being antidilutive.

/(3)/ In 1999, net income (loss) and basic and diluted earnings per common share reflected restructuring and other nonrecurring charges of $ 69.9 million ($108.8 million pre-tax, or 42 cents), in the second quarter (See Note 13) and a write-down of goodwill of $1,126 million, or $ 6.76, in the second quarter due to a change in accounting principle (See Note 1): restructuring and other nonrecurring charges of $23.4 million ($37.5 million pre- tax, or 14 cents), in the third quarter, and restructuring and other nonrecurring charges of $32.3 million ($49.7 million pre-tax, or 19 cents) and a gain of $21.2 million ($31.6 million pre-tax, or 13 cents) from the sale of a financing subsidiary, in the fourth quarter.

The sum of the quarterly earnings per common share for 1999 does not equal the amount shown for the year since assumed conversion of preferred stock and exercise of stock options is not considered in loss periods due to it being antidilutive.

Financial Condition ------Fortune Brands, Inc. and Subsidiaries

------

NET CASH PROVIDED FROM CONTINUING OPERATING ACTIVITIES Net cash provided from continuing operating activities in 2000 was $472.4 million compared with $488.4 million in 1999. The principal reasons for the decrease were: increases in inventory levels, particularly in home and golf products, a decrease in accrued taxes principally due to the reversal of a tax reserve no longer required, partly offset by a decrease in other assets.

NET CASH USED BY INVESTING ACTIVITIES Net cash used by investing activities in 2000 was $238.0 million compared with $349.2 million in 1999.

Capital expenditures. We focus our capital spending on becoming the lowest-cost producers of the highest-quality products. Capital expenditures in 2000 were $227.2 million as compared with $240.5 million in 1999. This includes $19.9 million in 2000 and $36.4 million in 1999 related to restructuring activities (principally land and buildings related to relocation of certain operations to Mexico). See Note 14 for capital expenditures. We currently estimate 2001 capital expenditures to be approximately $230 million and we expect to generate these funds internally.

Acquisitions and Joint Venture. In 2000, our spirits and wine business invested $25.6 million in its Maxxium joint venture toward its total investment of $110 million. In 1999, we acquired NHB Group, Ltd. and Boone International, Inc. and entered into the Maxxium joint venture for a total of $132.3 million, net of cash acquired. (See Note 2.)

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES Net cash used by financing activities in 2000 was $284.0 million compared with $ 107.3 million in 1999. During the year, purchases of our common stock amounted to $256.1 million and proceeds received from the exercise of stock options decreased as options exercises were lower than in the previous year.

DIVIDENDS

We paid common dividends in 2000 of $0.93 per share. Dividends paid to common stockholders in 2000 decreased to $146.9 million from $148.7 million in 1999 due to the lower shares outstanding. On December 1, 2000, we increased the common stock quarterly dividend by 4% to $.24 per share, or an indicated annual rate of $0.96 per share.

FINANCIAL POSITION

At December 31, 2000, total debt increased $113 million to $2.0 billion. Short-term debt increased $166 million and long-term debt decreased $53 million. Our total debt to total capital ratio increased to 47.8% at December 31, 2000 from 40.3% at December 31, 1999. The increase was primarily a result of the write-down of goodwill.

During 1999, we issued $200 million of 7 1/8% Notes, Due 2004.

At December 31, 2000, $1 billion of debt securities were available for public sale under our shelf registration with the Securities and Exchange Commission. We also had $1.5 billion of long-term credit facilities, substantially all of which remained unused. These facilities are available for general corporate purposes, including acquisitions. They also support our short-term borrowings in the commercial paper market.

We believe that our internally generated funds, together with access to global credit markets, are adequate to meet our capital needs.

Working capital decreased to $224.6 million at December 31, 2000 from $ 309.9 million at December 31, 1999. Increased short-term debt (reflecting purchases of common stock and an investment in a joint venture in 2000) was the principal reason for the decline, partly offset by a decline in our accrued restructuring liability. We believe that our 2000 working capital level was adequate to support continued growth.

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FOREIGN EXCHANGE

Our subsidiaries have investments in various foreign countries, principally the United Kingdom, as well as Australia and Canada. Therefore, changes in the value of the currencies of these countries affect our balance sheet and cash flow statements when translated into U.S. dollars.

MARKET RISK

We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We enter into financial instruments to manage and reduce the impact of changes in foreign currency exchange rates and interest rates. The counterparties are major financial institutions.

In conjunction with a long-term financing arrangement, we entered into derivative contracts in the fourth quarter of 1999, which were required to be marked to market. These contracts had fair market values which were principally offsetting and were no longer outstanding as of December 31, 1999.

FOREIGN EXCHANGE CONTRACTS We enter into forward foreign exchange contracts principally to hedge the currency fluctuations in transactions denominated in foreign currencies. These contracts limit the risk that would otherwise result from changes in exchange rates. We primarily hedged short-term intercompany loans, intercompany purchases, foreign-denominated trade receivables primarily resulting from sales to Maxxium and dividends declared by foreign operating companies. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions. We reflect any gains and losses on forward foreign exchange contracts and the offsetting losses and gains on hedged transactions in the income statement.

At December 31, 2000, we had outstanding forward foreign exchange contracts to purchase $78 million and sell $81 million of various currencies (principally pound sterling and euros) with a weighted average maturity of 41 days. At December 31, 1999, we had outstanding forward foreign exchange contracts to purchase $38 million and sell $129 million of various currencies (principally pound sterling) with a weighted average maturity of 64 days.

The estimated fair value of foreign currency contracts represents the amount required to enter into offsetting contracts with similar remaining maturities based on quoted market prices. At December 31, 2000 and 1999, the fair value of all outstanding contracts and the contract amounts was essentially the same. A 10% fluctuation in exchange rates for these currencies would change the fair value by approximately $0.4 million and $9 million, respectively. However, since these contracts hedge foreign currency denominated transactions, any change in the fair value of the contracts would offset the changes in the underlying value of the transactions being hedged.

INTEREST RATES We may, from time to time, enter into interest rate swap agreements to manage our exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount. We record the payments or receipts on the agreements as adjustments to interest expense. At December 31, 2000 and 1999, we did not have any outstanding interest rate swap agreements.

The fair market value of long-term fixed interest rate debt is subject to interest rate risk. Generally, the fair market value of fixed interest rate debt will increase as interest rates fall and decrease as interest rates rise. The estimated fair value of our total long-term debt (including current portion) at December 31, 2000 and 1999 was $1,138.5 million and $1,171.1 million, respectively. If the prevailing interest rates at December 31, 2000 and 1999 had increased by 1%, the fair value of our total long-term debt would have decreased by approximately $61 million and $64 million, respectively. We based fair values on quoted market prices, where available, and on investment bankers' quotes using current interest rates, considering credit ratings and the remaining terms to maturity.

See Notes 1 and 12 for a discussion of the accounting policies for Derivative Financial Instruments and information on Financial Instruments, respectively.

Financial Condition ------Fortune Brands, Inc. and Subsidiaries ------

STOCKHOLDERS' EQUITY

Stockholders' equity at year end 2000 decreased $602.3 million to $2.1 billion. This decrease principally reflects the write-down of goodwill and purchases of common shares.

We purchased, through open market purchases and pursuant to a systematic share purchase program, 10 million and 11 million shares of common stock during 2000 and 1999, respectively. The systematic share purchase program was terminated in January 2000.

CAUTIONARY STATEMENT

This annual report contains statements relating to future results. They are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. We caution readers that these forward-looking statements speak only as of the date hereof. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to:

. changes in general economic conditions,

. foreign exchange rate fluctuations,

. changes in interest rates,

. competitive product and pricing pressures,

. trade consolidations,

. the impact of excise tax increases with respect to distilled spirits,

. regulatory developments,

. the uncertainties of litigation,

. changes in golf equipment regulatory standards,

. the impact of weather, particularly on the home and golf products groups,

. expenses and disruptions related to shifts in manufacturing to different locations and sources,

. challenges in the integration of acquisitions and joint ventures,

. risks associated with the Company's implementation of strategic options for ACCO World Corporation, as well as

. other risks and uncertainties detailed from time to time in the Company's Securities and Exchange Commission filings.

QUARTERLY COMMON STOCK CASH DIVIDEND PAYMENTS

2000 1999 ------Payment date Per share Per share ------March 1 $ .23 $ .22 June 1 .23 .22 September 1 .23 .22 December 1 .24 .23 ------$ .93 $ .89 ======

QUARTERLY COMPOSITE COMMON STOCK PRICES

2000 1999 ------High Low High Low ------First 33 1/4 21 1/4 39 29 3/8 Second 29 22 11/16 45 7/8 38 1/16

Third 26 1/2 19 3/16 43 32 1/4 Fourth 30 15/16 24 1/16 36 3/8 30 13/16 ======

The common stock is listed on the New York Stock Exchange, which is the principal market for this security. The high and low prices are as reported in the consolidated transaction reporting system.

Consolidated Statement of Income

------Fortune Brands, Inc. and Subsidiaries ------

For years ended December 31 (In millions except per share amounts) 2000 1999 1998 ------

NET SALES $ 5,844.5 $ 5,579.0 $ 5,280.1 Cost of products sold 3,089.0 2,873.1 2,667.9 Excise taxes on spirits and wine 352.7 401.8 443.7 Advertising, selling, general and administrative expenses 1,622.3 1,596.9 1,440.7 Amortization of intangibles 79.6 85.5 108.2 Write-down of goodwill 502.6 1,126.0 -- Restructuring charges 19.7 136.8 -- Interest and related expenses 133.8 106.8 102.7 Other (income) expenses, net 5.9 (27.2) 5.0 ------INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 38.9 (720.7) 511.9 Income taxes 176.6 169.9 218.3 ------INCOME (LOSS) FROM CONTINUING OPERATIONS (137.7) (890.6) 293.6 Extraordinary items -- -- (30.5) ------NET INCOME (LOSS) $ (137.7) $ (890.6) $ 263.1 ======EARNINGS PER COMMON SHARE Basic Income (loss) from continuing operations $ (0.88) $ (5.35) $ 1.70 Extraordinary items -- -- (.18) ------Net income (loss) $ (0.88) $ (5.35) $ 1.52 ======Diluted Income (loss) from continuing operations $ (0.88) $ (5.35) $ 1.67 Extraordinary items -- (.18) ------Net income (loss) $ (0.88) $ (5.35) $ 1.49 ======DIVIDENDS PAID PER COMMON SHARE $ .93 $ .89 $ .85 ======AVERAGE NUMBER OF COMMON SHARES OUTSTANDING Basic 157.6 166.6 172.2 ======Diluted 157.6 166.6 176.2 ======

See Notes to Consolidated Financial Statements.

Consolidated Balance Sheet ------Fortune Brands, Inc. and Subsidiaries ------

December 31 (In millions, except per share amounts) 2000 1999 ------

ASSETS Current assets Cash and cash equivalents $ 20.9 $ 71.9 Accounts receivable less allowances for discounts, doubtful accounts and returns, 2000 $60.0; 1999 $63.4 952.1 956.5 Inventories Bulk whiskey 297.9 326.0 Other raw materials, supplies and work in process 303.7 284.3 Finished products 477.6 451.1 ------1,079.2 1,061.4 Other current assets 212.3 223.0 ------TOTAL CURRENT ASSETS 2,264.5 2,312.8 ------

Property, plant and equipment Land and improvements 98.5 104.5 Buildings and improvements to leaseholds 552.0 515.0 Machinery and equipment 1,498.0 1,383.9 Construction in progress 126.6 185.2 ------2,275.1 2,188.6 Less accumulated depreciation 1,070.0 1,012.1 ------Property, plant and equipment, net 1,205.1 1,176.5

Intangibles resulting from business acquisitions, net of accumulated amortization, 2000 $794.1; 1999 $937.7 1,989.4 2,592.1 Other assets 305.1 335.7 ------TOTAL ASSETS $ 5,764.1 $ 6,417.1 ======

See Notes to Consolidated Financial Statements.

2000 1999 ------

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable to banks $ 41.7 $ 35.1 Commercial paper 751.9 602.2 Current portion of long-term debt 12.4 2.7 Accounts payable 291.8 272.2 Accrued taxes 387.3 436.3 Accrued expenses and other liabilities 554.8 654.4 ------TOTAL CURRENT LIABILITIES 2,039.9 2,002.9 ------

Long-term debt 1,151.8 1,204.8 Deferred income taxes 54.9 48.3 Postretirement and other liabilities 381.6 422.9 ------TOTAL LIABILITIES 3,628.2 3,678.9 ------

Stockholders' equity $2.67 Convertible Preferred stock 9.2 9.9 Common stock, par value $3.125 per share, 229.6 shares issued 717.4 717.4 Paid-in capital 125.9 130.8 Accumulated other comprehensive income (loss) (79.6) (14.9) Retained earnings 3,919.7 4,205.2 Treasury stock, at cost (2,556.7) (2,310.2) ------TOTAL STOCKHOLDERS' EQUITY 2,135.9 2,738.2 ------TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,764.1 $ 6,417.1 ======

See Notes to Consolidated Financial Statements 37

Consolidated Statement of Cash Flows ------Fortune Brands, Inc. and Subsidiaries

------

For years ended December 31 (In millions) 2000 1999 1998 ------

OPERATING ACTIVITIES Net income (loss) $ (137.7) $ (890.6) $ 263.1 Write-down of goodwill 502.6 1,126.0 -- Restructuring charges 19.7 136.8 -- Extraordinary items -- -- 30.5 Depreciation and amortization 236.7 230.5 251.1 Increase in accounts receivable (22.6) (24.4) (38.0) (Increase) decrease in inventories (49.3) 34.7 (89.7) Decrease (increase) in other assets 17.2 (57.2) (20.6) (Decrease) increase in accrued taxes (46.8) (6.5) 38.6 Decrease in accounts payable, accrued expenses and other liabilities (68.8) (68.6) (63.1) Increase in deferred income taxes 34.0 1.2 44.0 Other operating activities, net (12.6) 6.5 (11.7) ------NET CASH PROVIDED FROM CONTINUING OPERATING ACTIVITIES 472.4 488.4 404.2 ------INVESTING ACTIVITIES Additions to property, plant and equipment (227.2) (240.5) (251.9) Investment in joint venture and acquisitions, net of cash acquired (25.6) (132.3) (271.8) Proceeds from the disposition of property, plant and equipment 15.0 23.2 6.5 Proceeds from the disposition of operations, net of cash -- -- 17.0 Other investing activities, net (0.2) 0.4 (2.6) ------NET CASH USED BY INVESTING ACTIVITIES (238.0) (349.2) (502.8) ------FINANCING ACTIVITIES Increase in short-term debt, net 159.4 316.5 92.8 Issuance of long-term debt 0.6 226.3 624.1 Repayment of long-term debt (43.4) (182.6) (376.0) Dividends to stockholders (147.7) (149.6) (147.4) Cash purchases of common stock for treasury (256.1) (397.7) (112.0) Proceeds received from exercise of stock options 2.7 80.4 56.6 Other financing activities, net 0.5 (0.6) (47.9) ------NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES (284.0) (107.3) 90.2 ------Effect of foreign exchange rate changes on cash (1.4) (0.3) (5.5) ------NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (51.0) $ 31.6 $ (13.9) ======Cash and cash equivalents at beginning of year $ 71.9 $ 40.3 $ 54.2 Cash and cash equivalents at end of year $ 20.9 $ 71.9 $ 40.3 ======Cash paid during the year for Interest, net of capitalized amount $ 140.9 $ 114.7 $ 107.9 Income taxes $ 178.1 $ 171.3 $ 124.1 ======

See Notes to Consolidated Financial Statements.

Consolidated Statement of Stockholders' Equity ------Fortune Brands, Inc. and Subsidiaries

------

$2.67 Accumulated Convertible Other Treasury Preferred Common Paid-In Comprehensive Retained Stock, (In millions) Stock Stock Capital Income (Loss) Earnings At Cost Total ------

Balance at January 1, 1998 11.3 717.4 151.1 6.9 5,129.7 (1,999.3) 4,017.1

Comprehensive income Net income ------263.1 -- 263.1 Changes during the year ------(2.2) -- -- (2.2) ------Total comprehensive income -- -- (2.2) 263.1 260.9

Dividends ------(147.4) -- (147.4) Purchases ------(112.2) (112.2) Conversion of preferred stock and delivery of stock plan shares (0.8) -- (3.5) -- -- 83.4 79.1 ------Balance at December 31, 1998 10.5 717.4 147.6 4.7 5,245.4 (2,028.1) 4,097.5

Comprehensive income Net loss ------(890.6) -- (890.6) Changes during the year ------(19.6) -- -- (19.6) ------Total comprehensive loss ------(19.6) (890.6) -- (910.2)

Dividends ------(149.6) -- (149.6) Purchases ------(397.6) (397.6) Conversion of preferred stock and delivery of stock plan shares (0.6) -- (16.8) -- -- 115.5 98.1 ------Balance at December 31, 1999 $ 9.9 $ 717.4 $ 130.8 $ (14.9) $ 4,205.2 $ (2,310.2) $ 2,738.2

Comprehensive income Net loss ------(137.7) -- (137.7) Changes during the year ------(64.7) (0.1) -- (64.8) ------Total comprehensive loss ------(64.7) (137.8) -- (202.5)

Dividends ------(147.7) -- (147.7) Purchases ------(255.8) (255.8) Conversion of preferred stock and delivery of stock plan shares (0.7) -- (4.9) -- -- 9.3 3.7 ------Balance at December 31, 2000 $ 9.2 $ 717.4 $ 125.9 $ (79.6) $ 3,919.7 $ (2,556.7) $ 2,135.9 ======

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements ------Fortune Brands, Inc and Subsidiaries ------

1. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. The consolidated financial statements are prepared in conformity with generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses for the reporting periods. Actual results for future periods could differ from those estimates.

Certain reclassifications have been made in the prior years' financial statements to conform with the current year presentation.

CASH AND CASH EQUIVALENTS Highly liquid investments with an original maturity of three months or less are included in cash and cash equivalents.

INVENTORIES Inventories are priced at the lower of cost (principally first-in, first-out and average and minor amounts at last-in, first-out) or market. In accordance with generally recognized trade practice, bulk whiskey inventories are classified as current assets, although part of such inventories, due to the duration of aging processes, ordinarily will not be sold within one year.

PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost. Depreciation is provided, principally on a straight-line basis, over the estimated useful lives of the assets. Gains or losses resulting from dispositions are included in income. Betterments and renewals which improve and extend the life of an asset are capitalized; maintenance and repair costs are expensed.

INTANGIBLES Goodwill is amortized on a straight line basis over its estimated useful life, principally over a forty year period, except for certain amounts related to businesses acquired prior to 1971, which are not being amortized because they have been determined to have continuing value over an indefinite period.

The Company evaluates the recoverability of goodwill by estimating the future discounted cash flows of the businesses to which the goodwill relates. The rate used in determining discounted cash flows is a rate corresponding to the Company's cost of capital, risk adjusted where necessary. Estimated cash flows are then determined by disaggregating the Company's business segments to an operational and organizational level for which meaningful identifiable cash flows can be determined. When estimated future discounted cash flows are less than the carrying value of the net assets (tangible and identifiable intangibles) and related goodwill, impairment losses of goodwill are charged to operations. Impairment losses, limited to the carrying value of goodwill, represent the excess of the sum of the carrying value of the net assets (tangible and identifiable intangible) and goodwill over the discounted cash flows of the business being evaluated. In determining the estimated future cash flows, the Company considers current and projected future levels of income as well as business trends, prospects and market and economic conditions. Prior to April 1, 1999, the assessment of recoverability and measurement of impairment of goodwill was based on undiscounted cash flows.

In accordance with this accounting policy, during the fourth quarter of 2000, the Company recorded a non-cash write-down of goodwill of $502.6 million, $487.3 million after-tax ($3.09 per share). This action resulted from the significant shortfall in office products earnings, the softening conditions in the office products industry and the ongoing strategic review process, which led to the implementation of additional restructuring actions.

Included in intangible assets, at December 31, 2000 and 1999 are $859.6 million and $880.1 million, respectively, of identifiable intangibles, net of cumulative amortization, comprised primarily of brands and trademarks which are being amortized over their useful life of up to 40 years.

Change in accounting for goodwill. Effective April 1, 1999, the Company elected to change its method for assessing recoverability of goodwill from one based on undiscounted cash flows to one based on discounted cash flows. The Company determined that using a discounted cash flow methodology was a preferable policy. The rate used in determining discounted cash flows was a rate corresponding to the Company's cost of capital, risk adjusted where necessary. The Company believes that fair value (i.e., discounted cash flow) is preferable because it is consistent with the basis used for investment decisions (acquisitions and capital projects) and takes into account the specific and detailed operating plans and strategies of each business. This change represents a change in accounting principle which is indistinguishable from a change in estimate and accordingly, the effect of the change was recorded in the second quarter of 1999.

This change resulted in a non-cash write-down of goodwill of $1,126 million ($6.76 per share) in the second quarter of 1999. The write-downs by business segment were: golf products - $517.7 million, spirits and wine - $502.7 million and office products - $105.6 million.

NET SALES Net sales reflect the effect of a reclassification of amounts billed to cover shipping and handling costs primarily from the category "advertising, selling, general and administrative expenses". This reclassification, which added $68.7 million, $54.3 million and $39.2 million to net sales for the years ending December 31, 2000, 1999 and 1998, respectively, was required by the Emerging Issues Task Force Issue No. 00-10. This reclassification did not result in a change in the Company's operating company contribution, earnings or earnings per share in any of the periods affected. In addition, our income statement reflects certain expenses to cover shipping and handling costs charged by third parties. These expenses, primarily classified in advertising, selling and general and administrative expenses, amounted to $174.1 million, $152.1 million and $135.8 million for the years ended December 31, 2000, 1999 and 1998, respectively.

The Company generally recognizes revenue as products are shipped to customers, net of applicable provisions for discounts, returns and allowances. The Company provides for its estimate of potential bad debt and warranty expense at the time of revenue recognition.

ADVERTISING COSTS Advertising costs, which amounted to $378.4 million, $365.6 million and $318.6 million in 2000, 1999 and 1998, respectively, are principally charged to expense as incurred.

The Company capitalizes certain direct-response advertising costs. Such costs are generally amortized in proportion to when revenues are recognized. The amounts of direct response advertising capitalized in 2000 and 1999 were $18.7 and $24.3 million, respectively. Amortization of $20.7 million, $26.8 million and $27.4 million was recorded in the years ended December 31, 2000, 1999 and 1998, respectively and is included in the above amounts.

RESEARCH AND DEVELOPMENT Research and development expenses, which amounted to $55.5 million, $55.6 million and $54.0 million in 2000, 1999 and 1998, respectively, are charged to expense as incurred.

INCOME TAXES Deferred tax liabilities or assets are established for temporary differences between financial and tax reporting bases and are subsequently adjusted to reflect changes in tax rates expected to be in effect when the temporary differences reverse.

Deferred income taxes are not provided on undistributed earnings of foreign subsidiaries, aggregating approximately $212.0 million at December 31, 2000, as such earnings are expected to be permanently reinvested in these companies.

FOREIGN CURRENCY TRANSLATION Foreign currency balance sheet accounts are translated into U.S. dollars at the rates of exchange at the balance sheet date. Income and expenses are translated at the average rates of exchange in effect during the year. The related translation adjustments are made directly to a separate component of the "Accumulated other comprehensive income (loss)" caption in stockholders' equity.

Notes to Consolidated Financial Statements ------Fortune Brands, Inc and Subsidiaries ------

DERIVATIVE FINANCIAL INSTRUMENTS Derivative financial instruments are utilized by the Company, principally to reduce foreign currency exchange and interest rate risks. The Company has established policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. The Company does not enter into financial instruments for trading or speculative purposes.

Gains and losses on forward foreign exchange contracts used to hedge the currency fluctuations on transactions denominated in foreign currencies and the offsetting losses and gains on hedged transactions are recorded in the "Other (income) expenses, net" caption in the income statement.

Gains and losses on forward foreign exchange contracts used to hedge a portion of the Company's investment in foreign subsidiaries and the offsetting losses and gains on the portion of the investment being hedged are recorded in the "Accumulated other comprehensive income(loss)" caption in stockholders' equity.

Payments or receipts on interest rate swap agreements are recorded in the "Interest and related expenses" caption in the income statement.

In June 1999, FAS Statement No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," was issued, deferring the effective date of FAS Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities," from January 1, 2000 to January 1, 2001. These statements establish accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. It requires recognition of all derivatives as either assets or liabilities on the balance sheet and measurement of those instruments at fair value. The Company will adopt FAS 133, as amended by FAS Statement No. 138, "Accounting for Certain Derivative Instruments and Hedging Activities, an amendment of FAS Statement 133", beginning January 1, 2001.

The Company currently enters into foreign currency hedges to mitigate any unforeseen risks in the fluctuation of the underlying foreign currencies. These new Statements will have an insignificant impact on our balance sheet, income statement or footnote disclosures as of January 1, 2001.

2. ACQUISITIONS, DISPOSALS AND JOINT VENTURES

In 1999, the home products business acquired NHB Group Ltd., a manufacturer of ready-to-assemble kitchen and bath cabinetry and the office products business acquired Boone International Inc., a manufacturer of dry-erase boards and markers, bulletin boards, easels and other presentation products. The aggregate cost of these acquisitions was $103.6 million, including fees and expenses. The cost exceeded the estimated fair value of net assets acquired by $78 million.

In 1999, the Company recognized a gain of $31.6 million, $21.2 million after tax, on the sale of a financing subsidiary. This amount is included in the "Other (income) expenses, net" caption in the income statement.

In 1999, the spirits and wine business formed an international sales and distribution joint venture named Maxxium International B.V. (Maxxium) with Remy-Cointreau and Highland Distillers, which began operating in August 1999, to distribute and sell spirits in key markets outside the United States. The Company agreed to contribute assets related to its international distribution network and make periodic cash payments with a total estimated value of $110 million in return for a one-third interest in the venture. The Company's investments in Maxxium were recorded at its book value of assets contributed plus cash invested. In January 2000, the Company's spirits and wine business made a cash investment of $25.6 million in Maxxium towards its total investment of $110 million. In addition, the Company guarantees certain credit facilities and bank loans entered into by Maxxium up to an amount totaling $77 million of which $68 million was outstanding at December 31, 2000.

During 1998, acquisitions were made in the home products, office products and spirits and wine segments for an aggregate cost of $271.8 million, including fees and expenses. In connection with these acquisitions, liabilities amounting to $51 million were included at the dates of acquisition. The cost exceeded the fair value of net assets acquired by $193.7 million.

These operations have been included in consolidated results from the dates of acquisition. Had the acquisitions been consolidated at the beginning of the year prior to the acquisitions, they would not have materially affected results.

3. SHORT-TERM BORROWINGS AND CREDIT FACILITIES

At December 31, 2000 and 1999, there were $793.6 million and $637.3 million of short-term borrowings outstanding, respectively, comprised of notes payable to banks and commercial paper. The weighted average interest rate on these borrowings was 6.3% and 5.2%, respectively.

At December 31, 2000 and 1999, there were $26.6 million and $12.4 million outstanding under committed bank credit agreements, which provide for unsecured borrowings of up to $59.8 million and $21.8 million, respectively, for general corporate purposes, including acquisitions.

In addition, the Company had uncommitted bank lines of credit, which provide for unsecured borrowings for working capital, of up to $76.9 million of which $10.4 million was outstanding at year end.

See Note 12 for a description of the Company's use of financial instruments.

4. LONG-TERM DEBT

The components of long-term debt are as follows:

(in millions) 2000 1999 ------Notes payable/(a)/ $ 200.0 $ 200.0 Revolving credit notes/(a)/ -- 42.7 8 1/2% Notes, Due 2003/(b)/ 106.9 106.9 7 1/8% Notes, Due 2004 200.0 200.0 6 1/4% Notes, Due 2008 200.0 200.0 8 5/8% Debentures, Due 2021/(b)/ 90.9 90.9 7 7/8% Debentures, Due 2023 150.0 150.0 6 5/8% Debentures, Due 2028 200.0 200.0 Other notes/(c)/ 11.0 11.0 Miscellaneous 5.4 6.0 ------1,164.2 1,207.5 Less current portion 12.4 2.7 ------$1,151.8 $1,204.8 ======

/(a)/ The Company maintains revolving credit agreements expiring in 2002 with various banks, which provide for unsecured borrowings of up to $1.5 billion. The interest rate is set at the time of each borrowing. A commitment fee of .10% per annum is paid on the unused portion. The fee is subject to increases up to a maximum of .20% per annum in the event the Company's long-term debt rating falls below specified levels. Borrowings under these agreements may be made for general corporate purposes, including acquisitions and support for the Company's short-term borrowings in the commercial paper market. The Company has the ability and intent to refinance $200 million of short-term notes payable; accordingly, short- term notes payable in this amount have been classified as long-term debt at December 31, 2000.

/(b)/ See Note 15.

/(c)/ The Other notes mature in 2001, with a weighted average coupon of 8.8%.

Estimated payments for maturing debt during the next five years are as follows: 2001, $12.4 million; 2002, $201.1 million; 2003, $109.5 million; 2004, $200.1 million; and no payments in 2005.

5. $2.67 CONVERTIBLE PREFERRED STOCK--REDEEMABLE AT COMPANY'S OPTION

Shares of the $2.67 Convertible Preferred stock issued and outstanding at December 31, 2000, 1999 and 1998 were 302,399 shares, 323,325 shares and 344,831 shares, respectively. Reacquired, redeemed or converted authorized shares that are not outstanding are required to be retired or restored to the status of authorized but unissued shares of preferred stock without series designation. The holders of $2.67 Convertible Preferred stock are entitled to cumulative dividends, three-tenths of a vote per share (in certain events, to the exclusion of the common shares), preference in liquidation over holders of common stock of $30.50 per share plus accrued dividends and to convert each share of such stock into 6.205 shares of common stock. Authorized but unissued common shares are reserved for issuance upon such conversions, but treasury shares may be and are delivered. Shares converted were 20,926 shares, 21,506 shares and 25,108 shares during 2000, 1999 and 1998, respectively. The Company may redeem such Preferred stock at a price of $30.50 per share, plus accrued dividends.

A cash dividend of $2.67 per share in the aggregate amounts of $0.8 million, $0.9 million and $0.9 million was paid in each of the years ended December 31, 2000, 1999 and 1998, respectively.

6. CAPITAL STOCK

The Company has 750 million authorized shares of common stock and 60 million authorized shares of Preferred stock.

There were 153,508,867 and 163,243,041 common shares outstanding at December 31, 2000 and 1999, respectively.

The cash dividends paid on the common stock for the years ended December 31, 2000, 1999 and 1998 aggregated $146.9 million, $148.7 million and $146.5 million, respectively.

Treasury shares purchased and received as consideration for stock options exercised amounted to 10,021,166 shares in 2000; 11,181,299 shares in 1999; and 3,444,180 shares in 1998. Treasury shares delivered in connection with exercise of stock options and grants of other stock awards and conversion of preferred stock and debentures amounted to 286,992 shares in 2000; 3,540,070 shares in 1999; and 2,472,461 shares in 1998. At December 31, 2000 and 1999 there were 76,061,157 and 66,326,983 common treasury shares, respectively.

Notes to Consolidated Financial Statements ------Fortune Brands, Inc. and Subsidiaries ------

7. PREFERRED SHARE PURCHASE RIGHTS

Each outstanding share of common stock also evidences one Preferred Share Purchase Right ("Right"). The Rights will generally become exercisable only in the event of an acquisition of, or a tender offer for, 15% or more of the common stock. If exercisable, each Right is exercisable for 1/100th of a share of Series A Junior Participating Preferred Stock at an exercise price of $150. Also, upon an acquisition of 15% or more of the common stock, or upon an acquisition of the Company or the transfer of 50% or more of its assets or earning power, each Right (other than Rights held by the 15% acquiror, if applicable), if exercisable, will generally be exercisable for common shares of the Company or the acquiring company, as the case may be, having a market value of twice the exercise price. In certain events, however, Rights may be exchanged by the Company for common stock at a rate of one share per Right. The Rights may be redeemed at any time prior to an acquisition of 15% or more of the common stock at a redemption price of $.01 per Right. Until a Right is exercised, the holder, as such, will have no voting, dividend or other rights as a stockholder of the Company. The Rights expire on December 24, 2007.

All 2.5 million of the authorized Series A Preferred shares are reserved for issuance upon exercise of Rights, and at December 31, 2000, outstanding Rights would have been exercisable as described above in the aggregate for 1,535,047 of such shares.

8. STOCK PLANS

The 1999 Long-Term Incentive Plan authorizes the granting to key employees of the Company and its subsidiaries of incentive and nonqualified stock options, stock appreciation rights, restricted stock, performance awards and other stock- based awards, any of which may be granted alone or in combination with other types of awards or dividend equivalents. Such grants may be made on or before December 31, 2004 for up to 12 million shares of common stock, but no more than 2 million shares may be granted to any one individual. Stock options and stock appreciation rights may no longer be granted under the Company's 1986 Stock Option Plan and stock options, stock appreciation rights, restricted stock, performance awards and other stock-based awards may no longer be granted under the Company's 1990 Long-Term Incentive Plan, as amended. Outstanding awards under the 1990 Long-Term Incentive Plan may continue to be exercised or paid pursuant to their terms. Stock options under the Plans have exercise prices equal to fair market values at dates of grant. Options generally may not be exercised prior to one year or more than ten years from the date of grant. Options granted since November 1998 generally vest one-third each year over a three year period after the date of grant. Stock appreciation rights, which may be granted in conjunction with option grants, permit the optionees to receive shares of common stock, cash or a combination of shares and cash measured by the difference between the option exercise price and the fair market value of the common stock at the time of exercise of such right.

The Company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations in accounting for its stock plans as allowed under FAS Statement No. 123, "Accounting for Stock-Based Compensation." Had compensation cost for the fixed stock options granted in 2000, 1999 and 1998 been determined consistent with FAS No. 123, pro forma net income (loss) and earnings per common share would have been as follows:

(In millions, except per share amounts) 2000 1999 1998 ------Net income (loss) $ (152.7) $ (897.6) $ 252.9 ======Earnings per Common share Basic $ (0.97) $ (5.39) $ 1.46 ======Diluted $ (0.97) $ (5.39) $ 1.43 ======

Changes during the three years ended December 31, 2000 in shares under options were as follows:

Weighted-Average Options Exercise Price ------Outstanding at January 1, 1998 12,103,799 $ 27.57 Granted 2,612,300 35.01 Exercised (2,230,843) 25.58 Lapsed (69,930) 34.55 ------Outstanding at December 31, 1998 12,415,326 29.45 Granted 2,225,401 34.23 Exercised (3,284,072) 26.10 Lapsed (198,311) 34.21 ------Outstanding at December 31, 1999 11,158,344 31.30 Granted 3,184,450 24.46 Exercised (122,941) 22.09 Lapsed (426,179) 33.56 ------Outstanding at December 31, 2000 13,793,674 $ 29.73 ======

Options exercisable at the end of each of the three years ended December 31, 2000 were as follows:

Options Weighted-Average Exercisable Exercise Price ------December 31, 2000 8,710,980 $ 30.63 December 31, 1999 7,641,037 $ 29.84 December 31, 1998 9,732,526 $ 27.92

The weighted-average fair values of options granted during 2000, 1999 and 1998 were $6.15, $8.80, and $6.70, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2000, 1999 and 1998:

2000 1999 1998 ------Expected dividend yield 3.4% 2.7% 2.7% Expected volatility 30.0% 28.0% 21.0% Risk-free interest rate 6.0% 6.0% 4.8% Expected term 4.5 Years 4.5 Years 4.5 Years

Options outstanding at December 31, 2000 were as follows:

Weighted Weighted Average Average Range of Number Contractual Exercise Exercise Prices Outstanding Life Price ------$20.98 to $24.50 4,329,511 8.0 $23.67 26.03 to 33.41 3,622,157 4.8 28.66 34.19 to 39.88 5,842,006 8.0 34.89 ------$20.98 to $39.88 13,793,674 7.2 $29.73 ======

Options exercisable at December 31, 2000 were as follows:

Number Weighted-Average Exercisable Exercise Price ------2,685,339 $ 24.40 2,789,095 31.16 3,236,546 35.35 ------8,710,980 $ 30.63 ======

At December 31, 2000, performance awards were outstanding pursuant to which up to 144,750 shares, 222,150 shares, 156,000 shares and 207,750 shares may be issued in 2001, 2002, 2003, and 2004 respectively, depending on the extent to which certain specified performance objectives are met. 99,781 shares, 117,690 shares and 81,569 shares were issued pursuant to performance awards during 2000, 1999 and 1998, respectively. The costs of performance awards are expensed over the performance period.

Compensation expense for stock based plans recorded for 2000, 1999 and 1998 was $3.5 million, $3.4 million and $4.3 million, respectively.

Shares available in connection with future awards under the Company's stock plans at December 31, 2000, 1999 and 1998 were: 6,465,498; and 9,752,818; and 6,843,255, respectively. Authorized but unissued shares are reserved for issuance in connection with awards, but treasury shares may be and are delivered.

9. PENSION AND OTHER RETIREE BENEFITS

The Company has a number of pension plans, principally in the United States, covering substantially all employees. The plans provide for payment of retirement benefits, mainly commencing between the ages of 60 and 65, and also for payment of certain disability and severance benefits. After meeting certain qualifications, an employee acquires a vested right to future benefits. The benefits payable under the plans are generally determined on the basis of an employee's length of service and earnings. Annual contributions to the plans are made as necessary to ensure legal funding requirements are satisfied.

The Company provides postretirement health care and life insurance benefits to certain employees and retirees in the United States and certain employee groups outside the United States. Many employees and retirees outside the United States are covered by government health care programs.

Notes to Consolidated Financial Statements ------Fortune Brands, Inc and Subsidiaries ------

The components of net pension and postretirement costs are as follows:

Pension Benefits Postretirement Benefits ------(In millions) 2000 1999(a) 1998 2000 1999 1998 ------

Service cost $ 31.4 $ 33.6 $ 31.4 $ 1.8 $ 2.2 $ 2.1 Interest cost 55.8 52.9 50.5 7.8 7.8 8.5 Expected return on plan assets (76.1) (70.0) (66.3) ------Net amortization and deferral 1.0 5.9 4.2 (4.4) (2.3) (1.5) ------$ 12.1 $ 22.4 $ 19.8 $ 5.2 $ 7.7 $ 9.1 ======

(a) The above costs, for 1999, exclude: special termination benefits ($17.4 million); a curtailment loss ($8.5 million); and a settlement loss ($3.8 million) which were recorded as a component of employee termination costs in restructuring charges. (See Note 13).

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The reconciliation of beginning and ending balances of benefit obligations and fair value of plan assets, and the funded status of the plans are as follows:

Pension Postretirement Benefits Benefits ------(In millions) 2000 1999 2000 1999 ------CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 816.4 $803.7 $ 108.9 $ 121.6 Service cost 31.4 33.6 1.8 2.2 Interest cost 55.8 52.9 7.8 7.8 Actuarial loss (gain) 9.8 (30.7) 8.7 (16.8) Participants' contributions 2.4 3.0 1.1 0.9 Foreign exchange rate changes (21.9) (8.1) (0.7) (0.2) Benefits paid (58.9) (52.2) (9.0) (7.2) Other items 0.2 14.2 1.4 0.6 ------Benefit obligation at end of year 835.2 816.4 120.0 108.9 ------CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year 858.0 806.5 -- -- Actual return on plan assets 39.2 79.3 -- -- Employer contributions 37.3 23.5 7.9 6.3 Participants' contributions 2.4 3.0 1.1 0.9 Foreign exchange rate changes (23.6) (8.6) -- -- Benefits paid (58.9) (52.2) (9.0) (7.2) Other items 0.5 6.5 ------Fair value of plan assets at end of year 854.9 858.0 ------FUNDED STATUS 19.7 41.6 (120.0) (108.9) Unrecognized actuarial loss (gain) 3.5 (29.1) (22.9) (36.3) Unrecognized transition 10.5 (2.8) -- -- loss (gain) Unrecognized prior service cost 20.6 21.9 (0.8) (2.4) Other 0.9 (0.4) ------Net amount recognized $ 55.2 $ 32.0 $(143.7) $(147.6) ======

Amounts recognized in the balance sheet are as follows:

Pension Postretirement Benefits Benefits ------(In millions) 2000 1999 2000 1999 ------Prepaid pension benefit $ 87.7 $ 75.8 $ -- $ -- Accrued benefit Liability (51.1) (57.9) (143.7) (147.6) Intangible assets 10.7 8.9 -- -- Accumulated other comprehensive income 7.9 5.2 ------Net amount recognized $ 55.2 $ 32.0 $(143.7) $(147.6) ======Weighted-average assumptions: Discount rate 7.2% 7.2% 7.4% 7.4% Expected long-term rate of return on plan assets 9.6% 9.2% -- -- Rate of compensation increase 4.9% 5.0% 4.9% 5.0% ======

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $216.0 million, $205.6 million and $176.0 million, respectively, as of December 31, 2000 and $129.4 million, $118.8 million and $80.1 million, respectively, as of December 31, 1999.

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The assumed health care cost trend rate used in measuring the health care portion of the postretirement cost for 2000 is 7 1/2%, gradually declining to 5% by the year 2007 and remaining at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for postretirement benefits. A one-percentage-point increase in assumed health care cost trend rates would increase the total of the service and interest cost components for 2000 and the postretirement benefit obligation as of December 31, 2000 by $0.9 million and $10.0 million, respectively. A one- percentage-point decrease in assumed health care cost trend rates would decrease the total of the service and interest cost components for 2000 and the postretirement benefit obligation by $0.8 million and $9.2 million, respectively.

The Company sponsors a number of defined contribution plans. Contributions are determined under various formulas. Costs related to such plans amounted to $21.9 million, $21.3 million and $22.7 million in 2000, 1999 and 1998, respectively.

10. LEASE COMMITMENTS

Future minimum rental payments under noncancelable operating leases as of December 31, 2000 are as follows:

(in millions) ------2001 $ 55.3 2002 48.6 2003 37.5 2004 31.4 2005 27.2 Remainder 111.8 ------Total minimum rental payments 311.8 Less minimum rentals to be received under noncancelable subleases 15.7 ------$ 296.1 ======

Total rental expense for all operating leases (reduced by minor amounts from subleases) amounted to $53.9 million, $50.3 million and $49.8 million in 2000, 1999 and 1998, respectively.

11. INCOME TAXES

The components of income (loss) from continuing operations before income taxes are as follows:

(In millions) 2000 1999 1998 ------Domestic operations $(60.2) $(320.0) $407.1 Foreign operations 99.1 (400.7) 104.8 ------$ 38.9 $(720.7) $511.9 ======

A reconciliation of income taxes at the 35% federal statutory income tax rate to income taxes as reported is as follows:

(In millions) 2000 1999 1998 ------Income taxes computed at federal statutory income tax rate $ 13.6 $(252.2) $179.2 Other income taxes, net of federal tax benefit 20.5 21.3 17.4 Goodwill write-down and amortization not deductible for income tax purposes 183.2 418.5 33.4 Miscellaneous, including reversals of tax provisions no longer required (40.7)(a) (17.7) (11.7) ------Income taxes as reported $176.6 $ 169.9 $218.3 ======

(a) Includes a $30 million reversal of tax reserve that is no longer required.

Income taxes are as follows:

(In millions) 2000 1999 1998 ------Currently payable Federal $ 83.9 $ 45.8 $106.7 Foreign 34.5 98.9 35.3 Other 28.5 28.2 25.3 Deferred Federal and other 26.1 (6.8) 42.2 Foreign 3.6 3.8 8.8 ------$176.6 $169.9 $218.3 ======

Notes to Consolidated Financial Statements ------Fortune Brands, Inc and Subsidiaries ------

The components of net deferred tax assets (liabilities) are as follows:

(In millions) 2000 1999 ------

Current assets

Compensation and benefits $ 9.2 $ 10.6 Other reserves 22.5 30.9 Capitalized interest-inventory 14.7 13.9 Restructuring 5.7 17.7 Interest 1.9 1.9 Accounts receivable 13.7 14.9 Miscellaneous 33.1 29.5 ------100.8 119.4 ------

Current liabilities Inventories (12.2) (12.3) Miscellaneous (21.5) (16.9) ------(33.7) (29.2) ------

Deferred income taxes included in Other current assets 67.1 90.2 ------

Noncurrent assets Compensation and benefits 51.9 48.9 Other retiree benefits 30.3 30.8 Other reserves 31.7 28.2 Foreign exchange 1.2 1.3 Miscellaneous 26.7 31.4 ------141.8 140.6 ------

Noncurrent liabilities Depreciation (72.7) (70.4) Pensions (4.9) (6.4) Trademark amortization (81.1) (74.1) Miscellaneous (38.0) (38.0) ------(196.7) (188.9) ------

Deferred income taxes (54.9) (48.3) ------

Net deferred tax asset $ 12.2 $ 41.9 ======

12. FINANCIAL INSTRUMENTS

The Company does not enter into financial instruments for trading or speculative purposes. Financial instruments are used to principally reduce the impact of changes in foreign currency exchange rates and interest rates. The principal financial instruments used are forward foreign exchange contracts and interest rate swaps. The counterparties are major financial institutions. Although the Company's theoretical risk is the replacement cost at the then estimated fair value of these instruments, management believes that the risk of incurring losses is remote and that such losses, if any, would be immaterial.

The Company enters into forward foreign exchange contracts principally to hedge currency fluctuations in transactions denominated in foreign currencies, thereby limiting the Company's risk that would otherwise result from changes in exchange rates. The periods of the forward foreign exchange contracts correspond to the periods of the hedged transactions. The Company periodically enters into forward foreign exchange contracts to hedge a portion of its net investments in U.K. operating companies.

At December 31, 2000, the Company had outstanding forward foreign exchange contracts to purchase $78 million and sell $81 million of various foreign currencies (principally pound sterling and euros), with maturities ranging from January 3, 2001 to December 21, 2001, with a weighted average maturity of 41 days. At December 31, 1999, the Company also had outstanding forward foreign exchange contracts to purchase $38 million and sell $129 million of various foreign currencies (principally pound sterling), with maturities ranging from January 3, 2000 to December 22, 2000, with a weighted average maturity of 64 days.

The Company may, from time to time, enter into interest rate swap agreements to manage its exposure to interest rate changes. The swaps involve the exchange of fixed and variable interest rate payments without exchanging the notional principal amount. At December 31, 2000 and 1999, the Company did not have any outstanding interest rate swap agreements.

The estimated fair value of the Company's cash and cash equivalents, notes payable to banks and commercial paper, approximates the carrying amounts due principally to their short maturities.

The estimated fair value of the Company's $1,164.2 million and $1,207.5 million total long-term debt (including current portion) at December 31, 2000 and 1999 was approximately $1,138.5 million and $1,171.1 million, respectively. The fair value is determined from quoted market prices, where available, and from investment bankers using current interest rates considering credit ratings and the remaining terms to maturity.

Concentration of credit risk with respect to accounts receivable is limited because a large number of geographically diverse customers make up the operating companies' domestic and international customer base, thus spreading the credit risk.

13. RESTRUCTURING AND OTHER NONRECURRING CHARGES During 1999, the Company recorded pre-tax restructuring charges as follows:

(In millions) Restructuring ------Home products $ 24.0 Office products 16.2 Golf products 11.4 Spirits and wine 18.8 Corporate office 66.4 ------$ 136.8 ======

Home products includes reductions in force (856 positions) as a result of the move of substantially all of the lock assembly operations and certain specialty plumbing operations to Mexico.

Office products includes reductions in force resulting from the move of labeling and printing production to Mexico as well as other reductions in force in the U.S. and Europe. The total reduction in force was 406 positions.

Golf products includes asset write-offs and reductions in force (180 positions) principally resulting from consolidation of golf club facilities from six to three.

Spirits and wine charges include termination of distribution contracts, lease cancellation costs and employee severance costs (50 positions) related to the formation of the Maxxium joint venture.

Corporate office includes employee-related and lease termination costs related to the relocation of the Corporate office to Lincolnshire, Illinois. Employee costs represent severance payments, costs related to a voluntary early retirement program, and expenses for long-term incentive and pension plans. These costs related to 130 people who either did not relocate or whose positions were eliminated.

In connection with the restructuring program established in 1999, the Company recorded pre-tax restructuring charges for the year ended December 31, 2000 as follows:

(In millions) Restructuring ------Home products $ 3.6 Office products 13.3 Golf products 2.8 ------$ 19.7 ======

The above charges include costs associated with the elimination of 648 positions for the year ended December 31, 2000.

Home products includes charges related to employee termination costs (89 positions).

Office products includes charges related to employee termination costs (462 positions) and asset write-offs.

Golf products includes charges related to lease cancellation and employee termination costs (97 positions).

Notes to Consolidated Financial Statements ------Fortune Brands, Inc and Subsidiaries ------

Reconciliation of the restructuring liability, as of December 31, 1999 is as follows:

Total Cash Non-Cash Balance at (In millions) Provision Expenditures Write-offs 12/31/99 ------

Rationalization of operations Employee termination costs/(1)/ $ 86.8 $ (14.1) $ (34.4) $ 38.3 Other 6.6 (4.9) (0.2) 1.5 International distribution and lease agreements 34.1 (0.6) (17.2) 16.3 Loss on disposal of assets 9.3 -- (8.5) 0.8 ------$ 136.8 $ (19.6) $ (60.3) $ 56.9 ======

/(1)/ As of December 31, 1999, 1,005 of the 1,622 positions were eliminated.

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Reconciliation of the restructuring liability, as of December 31, 2000 is as follows:

Balance at 2000 Cash Non-Cash Balance at (In millions) 12/31/99 Provision Expenditures Write-offs 12/31/00 ------

Rationalization of operations

Employee termination costs/(1)/ $ 38.3 $ 14.8 $ (37.6) $ (1.2) $ 14.3 Other 1.5 (0.6) 1.5 (2.4) -- International distribution and lease agreements 16.3 2.1 (2.5) (8.3) 7.6 Loss on disposal of assets 0.8 3.4 -- (2.6) 1.6 ------$ 56.9 $ 19.7 $ (38.6) $ (14.5) $ 23.5 ======

/(1)/ Of the 2,270 positions planned for elimination, 2,052 had been eliminated as of December 31, 2000.

The Company expects that all remaining activity will be completed within the next twelve months.

During 1999, the Company recorded other nonrecurring charges as follows:

Cost of Sales SG&A (In millions) Charges Charges Total ------Home products $ 3.5 $ 1.7 $ 5.2 Office products 2.3 5.1 7.4 Golf products 25.2 5.5 30.7 Corporate office -- 15.9 15.9 ------$ 31.0 $ 28.2 $ 59.2 ======

Other nonrecurring charges include charges related to the 1999 restructuring activities:

Home products includes relocation costs for certain manufacturing facilities.

Office products includes inventory write-offs due to discontinuance of certain product lines, relocation costs for manufacturing facilities and a loss on the sale of a business.

Golf products includes inventory write-offs due to discontinuance of club product lines, additional warranty costs and a write-off of a note receivable related to a previously sold operation.

Corporate office includes relocation costs associated with establishing a new corporate headquarters, and the 1999 amortization of corporate furniture and leasehold improvements no longer utilized.

During 2000, the Company recorded other nonrecurring charges as follows:

Cost of Sales SG&A (In millions) Charges Charges Total ------Home products $ 11.3 $ 2.9 $ 14.2 Office products 25.1 8.7 33.8 Golf products 0.2 2.8 3.0 Corporate office -- 2.3 2.3 ------$ 36.6 $ 16.7 $ 53.3 ======

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Other nonrecurring charges include charges related to the 2000 restructuring activities:

Home products includes costs associated with a plant relocation and the establishment of a distribution center.

Office products includes relocation costs for manufacturing facilities, product line discontinuances, and the write-off of a note receivable related to a previously sold operation.

Golf products includes relocation costs for certain manufacturing facilities and inventory write-offs due to the discontinuance of certain product lines.

Corporate office includes relocation costs associated with establishing a new corporate headquarters.

14. INFORMATION ON BUSINESS SEGMENTS

The Company's subsidiaries operate principally in the following business segments:

Home products includes: kitchen and bathroom faucets, as well as plumbing supply and repair products manufactured, marketed or distributed by Moen; locks manufactured, marketed or distributed by Master Lock; Aristokraft and Schrock kitchen cabinets and bathroom vanities manufactured by MasterBrand Cabinets; and tool storage products manufactured by Waterloo.

Office products includes paper fastening, document management, computer accessories, time management, presentation and other office products manufactured, marketed or distributed by ACCO World subsidiaries.

Golf products includes golf balls, shoes, gloves and clubs manufactured, marketed or distributed by Acushnet Company.

Spirits and wine includes products produced, marketed or distributed by Jim Beam Brands Worldwide subsidiaries.

The Company's subsidiaries operate principally in the United States, the United Kingdom, Canada and Australia.

Net sales and operating company contribution for the years 2000, 1999 and 1998 and segment assets for the related year ends by business segments and by geographic areas, are shown on page 56.

Operating company contribution, the key measure by which we gauge performance, is net sales less all costs and expenses other than restructuring and other nonrecurring charges, write-down of goodwill, amortization of intangibles, corporate administrative expenses, interest and related expenses, other (income) expenses, net and income taxes. A reconciliation of operating company contribution to consolidated income (loss) from continuing operations before income taxes is as follows:

(In millions) 2000 1999 1998 ------Operating company contribution $ 874.2 $ 829.3 $ 798.3 Restructuring charges 19.7 136.8 -- Nonrecurring charges 53.3 59.2 -- Amortization of intangibles 79.6 85.5 108.2 Write-down of goodwill 502.6 1,126.0 -- Interest and related expenses 133.8 106.8 102.7 Non-operating expenses 46.3 35.7 75.5 ------

Income (loss) from continuing operations before income taxes as reported $ 38.9 $ (720.7) $ 511.9 ======

Reconciliation of segment assets to consolidated total assets is as follows:

(In millions) 2000 1999 1998 ------Segment assets $ 3,617.5 $ 3,642.9 $ 3,473.2 Intangibles resulting from business acquisitions, net 1,989.4 2,592.1 3,761.3 Corporate 157.2 182.1 125.2 ------$ 5,764.1 $ 6,417.1 $ 7,359.7 ======

Notes to Consolidated Financial Statements ------Fortune Brands' Inc and Subsidiaries ------Long-lived assets are as follows:/(A)/

(In millions) 2000 1999 1998 ------United States $ 956.3 $ 911.7 $ 852.3 United Kingdom 153.2 188.6 194.8 Canada 24.9 25.4 21.2 Australia 12.1 14.1 16.8 Other countries 58.6 36.7 34.8 ------$ 1,205.1 $ 1,176.5 $ 1,119.9 ======

/(A)/ Represents property, plant and equipment, net.

Depreciation is as follows:

(In millions) 2000 1999 1998 ------Home products $ 55.5 $ 43.1 $ 41.8 Office products 43.2 38.8 42.5 Golf products 23.0 21.6 20.0 Spirits and wine 35.0 38.8 35.7 Corporate 0.4 2.7 2.9 ------$ 157.1 $ 145.0 $ 142.9 ======

Amortization of intangibles is as follows:

(In millions) 2000 1999 1998 ------Home products $ 32.8 $ 32.4 $ 31.7 Office products 22.8 21.7 23.3 Golf products 3.1 6.5 17.4 Spirits and wine 20.9 24.9 35.8 ------$ 79.6 $ 85.5 $ 108.2 ======

Capital expenditures are as follows:

(In millions) 2000 1999 1998 ------Home products $ 117.1 $ 113.0 $ 57.6 Office products 30.4 55.5 107.2 Golf products 35.0 37.2 39.9 Spirits and wine 44.3 34.4 46.3 Corporate 0.4 0.4 0.9 ------$ 227.2 $ 240.5 $ 251.9 ======

15. EXTRAORDINARY ITEMS

During 1998, the Company purchased the following principal amounts of its outstanding debt: $31.4 million of 7 1/2% Notes, Due 1999, $50.4 million of 8 1/2% Notes, Due 2003, $10.5 million of 9% Notes, Due 1999 and $32.7 million of 8 5/8% Debentures, Due 2021, and the Company also redeemed the outstanding $50.1 million of 12 1/2% Sterling Loan Stock, Due 2009. The extinguishment of debt resulted in a charge of $30.5 million ($46.9 million pre-tax), or 18 cents per share.

16. EARNINGS PER SHARE

Basic earnings per common share are based on the weighted average number of common shares outstanding in each year and after preferred stock dividend requirements. Diluted earnings per common share assume that any dilutive convertible debentures and convertible preferred shares outstanding at the beginning of each year were converted at those dates, with related interest, preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds exercise price, less shares which could have been purchased by the Company with related proceeds. The Convertible Preferred stock and stock options, amounting to 2.5 million and 3.7 million shares, were not included in the computation of diluted earnings per common share for 2000 and 1999, respectively, since they would have resulted in an antidilutive effect.

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The computation of basic and diluted earnings per common share for "Income from continuing operations" is as follows:

(In millions, except per share amounts) 2000 1999 1998 ------

Income (loss) from continuing operations $ (137.7) $ (890.6) $ 293.6 Less: Preferred stock dividends 0.8 0.9 0.9 ------Income available to common stockholders - basic (138.5) (891.5) 292.7 Convertible Preferred stock dividend requirements -- -- 0.9 ------Income available to common stockholders - diluted $ (138.5) $ (891.5) $ 293.6 ======Weighted average number of common shares outstanding - basic 157.6 166.6 172.2 Conversion of Convertible Preferred stock -- -- 2.2 Exercise of stock options -- -- 1.8 ------Weighted average number of common shares outstanding - diluted 157.6 166.6 176.2 ======Earnings per common share Basic $ (0.88) $ (5.35) $ 1.70 ======Diluted $ (0.88) $ (5.35) $ 1.67 ======

17. COMPREHENSIVE INCOME

Comprehensive Income is defined as net income and other changes in stockholders' equity from transactions and other events from sources other than stockholders. The components of and changes in other comprehensive income (expense) are as follows:

Accumulated Other Foreign Currency Minimum Pension Comprehensive (In millions) Adjustments Liability Adjustment Income (Loss) ------

Balance at January 1, 1998 $ 19.9 $ (13.0) $ 6.9 Comprehensive income changes during year (net of taxes of $7.1) (7.4) 5.2 (2.2) ------Balance at December 31, 1998 12.5 (7.8) 4.7 Changes during year (net of taxes of $2.4) (24.4) 4.8 (19.6) ------Balance at December 31, 1999 (11.9) (3.0) (14.9) Changes during year (net of taxes of $2.3) (63.5) (1.2) (64.7) ------Balance at December 31, 2000 $ (75.4) $ (4.2) $ (79.6) ======

Notes to Consolidated Financial Statements ------Fortune Brands, Inc. and Subsidiaries ------

18. PENDING LITIGATION

TOBACCO LITIGATION AND INDEMNIFICATION On December 22, 1994, the Company sold The American Tobacco Company subsidiary to Brown & Williamson Tobacco Corporation, a wholly-owned subsidiary of B.A.T Industries p.l.c. In connection with the sale, Brown & Williamson Tobacco Corporation and The American Tobacco Company ("the Indemnitors") agreed to indemnify the Company against claims including legal expenses arising from smoking and health and fire safe cigarette matters relating to the tobacco business of The American Tobacco Company.

OTHER LITIGATION In addition to the lawsuits described above, the Company and its subsidiaries are defendants in lawsuits associated with their business and operations. It is not possible to predict the outcome of the pending actions, but management believes that there are meritorious defenses to these actions and that these actions will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company. These actions are being vigorously contested.

19. ENVIRONMENTAL

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 and are not discounted.

While it is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly remediation and other compliance efforts that the Company's subsidiaries may undertake in the future, in the opinion of management, compliance with the present environmental protection laws, before taking into account estimated recoveries from third parties, will not have a material adverse effect upon the results of operations, cash flows or financial condition of the Company.

Report of Independent Accountants and Report of Management ------Fortune Brands, Inc. and Subsidiaries ------

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF FORTUNE BRANDS, INC.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, cash flows and stockholders' equity present fairly, in all material respects, the financial position of Fortune Brands, Inc. and Subsidiaries at December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with generally accepted accounting principles 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 financial statements in accordance with generally accepted auditing standards 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.

As discussed in Note 1, effective April 1, 1999, the Company changed its accounting policy for assessing recoverability of goodwill from one based on undiscounted cash flows to one based on discounted cash flows.

/s/ PricewaterhouseCoopers LLP

Chicago, Illinois 60601 January 24, 2001

TO THE STOCKHOLDERS OF FORTUNE BRANDS, INC.

We have prepared the consolidated balance sheet of Fortune Brands, Inc. and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated statements of income, cash flows and stockholders' equity for each of the three years in the period ended December 31, 2000. The financial statements have been prepared in accordance with generally accepted accounting principles. Financial information elsewhere in this Annual Report is consistent with that in the financial statements.

The system of internal controls of the Company and its subsidiaries is designed to provide reasonable assurances that the financial records are adequate and can be relied upon to provide information for the preparation of financial statements and that established policies and procedures are carefully followed.

Independent accountants are elected annually by the stockholders of the Company to audit the financial statements. PricewaterhouseCoopers LLP , independent accountants, are currently engaged to perform such audit. Their audit is in accordance with generally accepted auditing standards and includes tests of transactions and selective tests of internal accounting controls.

The Audit Committee of the Board of Directors, consisting solely of outside directors, meets periodically with the independent accountants, internal auditors and management to review accounting, auditing, and financial reporting matters. The auditors have direct access to the Audit Committee.

/s/ NORMAN H. WESLEY NORMAN H. WESLEY Chairman of the Board and Chief Executive Officer

/s/ CRAIG P. OMTVEDT CRAIG P. OMTVEDT Senior Vice President and Chief Financial Officer

Information on Business Segments/(1)/ ------

Fortune Brands, Inc. and Subsidiaries

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(In millions) 2000 1999 1998 1997 1996 1995 ------

BUSINESS SEGMENTS NET SALES/(2)/ Home products $2,215.0 $1,950.7 $1,636.8 $1,394.0 $1,374.1 $1,306.8 Office products 1,435.4 1,381.0 1,403.3 1,294.2 1,228.7 1,206.1 Golf products 965.2 977.7 974.1 911.6 811.4 579.3 Spirits and wine 1,228.9 1,269.6 1,265.9 1,244.7 1,303.5 1,288.6 ------Ongoing operations 5,844.5 5,579.0 5,280.1 4,844.5 4,717.7 4,380.8 Other businesses/(3)/ ------547.3 ------$5,844.5 $5,579.0 $5,280.1 $4,844.5 $4,717.7 $4,928.1

OPERATING COMPANY CONTRIBUTION Home products $ 340.4 $ 300.2 $ 252.5 $ 222.9 $ 214.1 $ 208.4 Office products 79.5 88.5 134.0 128.1 116.3 105.5 Golf products 145.2 147.0 142.9 138.2 125.3 84.2 Spirits and wine 309.1 293.6 268.9 257.2 244.1 241.9 ------Ongoing operations 874.2 829.3 798.3 746.4 699.8 640.0 Other businesses/(3)/ ------6.8 ------$ 874.2 $ 829.3 $ 798.3 $ 746.4 $ 699.8 $ 646.8 ======SEGMENT ASSETS/(4)/ Home products $1,143.3 $1,008.3 $ 826.2 $ 735.8 $ 752.7 $ 738.1 Office products 936.4 987.6 1,011.5 861.4 856.9 794.1 Golf products 603.0 604.8 667.6 617.1 579.8 361.9 Spirits and wine 934.8 1,042.2 967.9 899.4 986.9 939.4 ------$3,617.5 $3,642.9 $3,473.2 $3,113.7 $3,176.3 $2,833.5 ======GEOGRAPHIC AREAS NET SALES/(2),(5)/ United States $4,501.4 $4,196.2 $3,852.9 $3,432.4 $3,330.6 $3,116.5 United Kingdom 426.4 494.0 552.0 499.5 522.8 498.6 Canada 261.4 238.2 236.0 223.9 194.2 184.7 Australia 151.9 157.1 158.4 199.6 190.9 160.6 Other countries 503.4 493.5 480.8 489.1 479.2 420.4 ------Ongoing operations $5,844.5 $5,579.0 $5,280.1 $4,844.5 $4,717.7 $4,380.8 ======

/(1)/ See Note 14 for further Information on Business Segments. /(2)/ Net Sales have been restated for 1999 and 1998 to conform to the 2000 presentation due to the reclassification of billed shipping and handling amounts in accordance with Emerging Issues Task Force Issue No. 00-10. Amounts prior to 1998 have not been restated as amounts are not available. /(3)/ Other businesses included retail distribution and housewares sold during 1995. /(4)/ Represents total assets excluding intercompany receivables and intangibles resulting from business acquisitions, net. /(5)/ Net sales are attributed to countries based on location of customer.

Six- Year Consolidated Selected Financial Data ------Fortune Brands, Inc and Subsidiaries

------

(In millions, except per share amounts) 2000 1999/(2)/ 1998/(2)/ 1997 1996/(2)/ 1995 ------

OPERATING DATA/(1)/ Net sales/(3)/ $ 5,844.5 $ 5,579.0 $ 5,280.1 $ 4,844.5 $ 4,717.7 $ 4,928.1 Gross profit/(3)/ 2,439.5 2,304.1 2,168.5 1,885.4 1,863.4 1,816.4 Depreciation and amortization 236.7 230.5 251.1 242.7 238.3 224.0 Operating company contribution 874.2 829.3 798.3 746.4 699.8 546.8 Interest and related expenses 133.8 106.8 102.7 116.7 165.5 136.6 Income taxes 176.6 169.9 218.3 98.2 157.9 171.5 Income (loss) from continuing operations (137.7) (890.6) 293.6 41.5 181.7 185.9 Income from discontinued operations ------65.1 315.1 357.2 Extraordinary items -- -- (30.5) (8.1) (10.3) (2.7) Net income (loss) (137.7) (890.6) 263.1 98.5 486.5 540.4 Earnings per common share Basic Continuing operations $ (0.88) $ (5.35) $ 1.70 $ .24 $ 1.04 $ .99 Discontinued operations ------.38 1.82 1.91 Extraordinary items -- -- (.18) (.05) (.06) (.01) ------Net income (loss) $ (0.88) $ (5.35) $ 1.52 $ .57 $ 2.80 $ 2.89 ======

Diluted Continuing operations $ (0.88) $ (5.35) $ 1.67 $ .23 $ 1.03 $ .98 Discontinued operations ------.38 1.79 1.89 Extraordinary items -- -- (.18) (.05) (.06) (.01) ------Net income (loss) $ (0.88) $ (5.35) $ 1.49 $ .56 $ 2.76 $ 2.86 ======

COMMON SHARE DATA/(1),(4)/ Dividends paid $ 146.9 $ 148.7 $ 146.5 $ 242.3 $ 347.2 $ 376.2 Dividends paid per share $ .93 $ .89 $ .85 $ 1.41 $ 2.00 $ 2.00 Average number of shares outstanding 157.6 166.6 172.2 171.6 173.3 186.9 Book value per share $ 13.85 $ 16.71 $ 23.92 $ 23.31 $ 21.48 $ 21.61 ======BALANCE SHEET DATA/(1)/ Inventories $ 1,079.2 $ 1,061.4 $ 1,087.6 $ 955.2 $ 1,037.9 $ 950.9 Current assets/(5)/ 2,264.5 2,312.8 2,265.3 2,095.6 2,842.1 2,112.5 Working capital/(5)/ 224.6 309.9 420.7 327.1 774.0 651.7 Property, plant and equipment, net 1,205.1 1,176.5 1,119.9 980.9 972.6 904.3 Intangibles, net 1,989.4 2,592.1 3,761.3 3,674.1 3,730.7 3,103.2 Net assets of discontinued operations ------520.7 Total assets 5,764.1 6,417.1 7,359.7 6,942.5 7,737.3 6,833.4 Short-term debt 806.0 640.0 504.7 404.6 782.2 470.0 Long-term debt 1,151.8 1,204.8 981.7 739.1 1,598.3 1,063.0 Stockholders' equity 2,135.9 2,738.2 4,097.5 4,017.1 3,676.0 3,864.0 Capital expenditures 227.2 240.5 251.9 196.9 199.7 175.6 ======

/(1)/ See pages 25 through 34 of Financial Section. /(2)/ See Note 2. 1996 includes the acquisition in January of Cobra Golf Incorporated. /(3)/ Net Sales and Gross Profit have been restated for 1999 and 1998 to conform to the 2000 presentation due to the reclassification of billed shipping and handling amounts in accordance with Emerging Issues Task Force Issue No. 00-10. Amounts prior to 1998 have not been restated as amounts are not available. /(4)/ On January 31, 2001, there were 33,759 common stockholders of record, not necessarily reflecting beneficial ownership. /(5)/ 1996 include net assets of discontinued operations as current assets.

EXHIBIT 21

SUBSIDIARIES OF REGISTRANT

The following is a list of subsidiaries of Registrant as of the date hereof and the state or other jurisdiction of incorporation of each. Except as indicated below, each subsidiary does business under its own name. Indentations indicate that the voting securities of a subsidiary are wholly owned by the subsidiary immediately preceding the indentation, unless otherwise indicated.

The names of certain subsidiaries are omitted. Such subsidiaries would not, if considered in the aggregate as a single subsidiary, constitute a significant subsidiary within the meaning of Item 601(b)(21)(ii) of Regulation S-K.

State or Other Jurisdiction Subsidiary of Incorporation ------ACCO World Corporation Delaware ACCO Brands, Inc. Delaware ACCO Canada Inc. Ontario, Canada ACCO Europe PLC England ACCO Australia Pty. Limited Australia ACCO Eastlight Limited England ACCO-Rexel Limited (1) Republic of Ireland ACCO UK Limited England Hetzel Vermogensverwaltungs GmbH Germany Hetzel GmbH & Co. KG (Limited Partnership) Germany ACCO France S.A.S. France ACCO Mexicana S.A. de C.V. Mexico Boone International, Inc. Delaware Day-Timers, Inc. Delaware Day-Timers of Canada, Ltd. Canada Day-Timers Pty. Limited Australia ACCO Italia S.p.A. Italy Acushnet Company Delaware Acushnet Cayman Limited Cayman Islands Acushnet Lionscore, Ltd. (2) Cayman Islands Acushnet Foot-Joy (Thailand) Limited Thailand Acushnet Foreign Sales Corporation Barbados Acushnet International Inc. Delaware Acushnet Canada Inc. Canada Acushnet Manufacturing Inc./Fabrication Acushnet Inc. Canada ______1 66.67% owned by ACCO-Rexel Group Services Limited and 33.33% owned by ACCO World Corporation. 2 40% owned by Acushnet Cayman Limited.

State or Other Jurisdiction Subsidiary of Incorporation ------

Acushnet Golf Thailand Ltd. Thailand Acushnet Japan, Inc. Japan Acushnet Limited England Acushnet-Danmark ApS Denmark Acushnet France S.A. France Acushnet GmbH Germany Acushnet Nederland B.V. Netherlands Acushnet Osterreich GmbH Austria Acushnet South Africa (Pty.) Ltd. South Africa Acushnet Sverige AB Sweden Cobra Golf Incorporated Delaware Fortune Brands Finance Canada Ltd. Ontario, Canada Fortune Brands Finance UK plc England Fortune Brands International Corporation Delaware Jim Beam Brands Worldwide, Inc. Delaware Alberta Distillers Limited Alberta, Canada Carrington Distillers Limited Ontario, Canada Featherstone & Co. Limited Ontario, Canada Bourbon Warehouse Receipts, Inc. Delaware Maxxium Worldwide B.V. (3) Netherlands Jim Beam Brands Australia Pty. Limited Australia Barwang International Pty. Limited (4) Australia JBB (Greater Europe) PLC (5) Scotland Jim Beam Brands Co. Delaware James B. Beam Distilling International Co., Inc. Barbados JBB Spirits (New York) Inc. New York Jim Beam Brands Canada, L.P. (6) New Brunswick, Canada John de Kuyper & Son, Incorporated Delaware Wood Terminal Company Delaware MasterBrand Industries, Inc. Delaware Fortune Brands Home & Office, Inc. Delaware MasterBrand Cabinets, Inc. Delaware MasterBrand Industries Foreign Sales Corporation (7) Barbados

______3 33.3% owned by Jim Beam Brands Netherlands, B.V., a subsidiary of Bourbon Warehouse Receipts, Inc. 4 50% owned by Jim Beam Brands Australia Pty. Limited. 5 428,055,999 shares owned by Jim Beam Brands Worldwide, Inc; 1 share owned by Jim Beam Brands Co. 6 99% owned by Jim Beam Brands Worldwide, Inc.; 1% owned by Bourbon Warehouse Receipts, Inc. 7 Owned equally by MasterBrand Cabinets, Inc., Master Lock Company, Moen Incorporated, Waterloo Industries, Inc. and 21/st/ Century Companies, Inc.

State or Other Jurisdiction Subsidiary of Incorporation ------

Master Lock Company Delaware Master Lock de Nogales, S.A. de C.V. (8) Mexico Master Lock Europe, S.A. (9) France Moen Incorporated Delaware Creative Specialties International California Creative Specialties International Company Limited (10) Hong Kong Moen China, Limited (11) Hong Kong Moen de Mexico, S.A. de C.V. Mexico Moen Guangzhou Faucet Co., Ltd. (12) China Moen, Inc. Ontario, Canada Moen International, Inc. Connecticut Moen of Pennsylvania, Inc. Delaware Moen Sonora S.A. de C.V. (13) Mexico 21/st/ Century Companies, Inc. Delaware Waterloo Industries, Inc. Delaware Waterloo de Nogales, S.A. de C.V. (14) Mexico 1700 Insurance Company Ltd. Bermuda

______8 49,996 shares owned by Master Lock Company and 4 shares owned by John Heppner, Executive Vice President and Chief Operating Officer of Master Lock Company. 9 99.68% owned by Master Lock Company. 10 60% owned by Moen Incorporated. 11 Owned 99% by Moen Incorporated and 1% by Moen International, Inc. 12 66.03% owned by Moen Incorporated. 13 49,999 shares owned by Moen Incorporated and 1 share owned by Bruce A. Carbonari, President and Chief Executive Officer of MasterBrand Industries, Inc. 14 99.9% owned by Waterloo Industries, Inc. and 0.1% owned by MasterBrand Industries, Inc.

EXHIBIT 23(i)

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference into (a) the Registration Statement on Form S-8 (Registration No. 333-95919) relating to the Fortune Brands Retirement Savings Plan, the Registration Statement on Form S-8 (Registration No. 333-95925) relating to the Fortune Brands Hourly Employee Retirement Savings Plan, the Registration Statement on Form S-8 (Registration No. 33-58865) relating to the 1990 Long-Term Incentive Plan of Fortune Brands, Inc., the Registration Statement on Form S-8 (Registration No. 333-95909) relating to the 1999 Long-Term Incentive Plan of Fortune Brands, Inc., the Registration Statement on Form S-8 (Registration No. 333-51173) relating to the Fortune Brands, Inc. Non-Employee Director Stock Option Plan, and the prospectuses related thereto, and (b) the Registration Statements on Form S-3 (Registration Nos. 33-50832 and 333-76371) of Fortune Brands, Inc. of our report dated January 24, 2001, relating to on our audits of the consolidated financial statements of Fortune Brands, Inc. and Subsidiaries as of December 31, 2000 and 1999 and for the three years ended December 31, 2000, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by on Form F-2 reference of our report on the consolidated financial statement schedule which appears on page F-2 in this Annual Report on Form 10-K.

PricewaterhouseCoopers LLP

Chicago, Illinois 60601 March 9, 2001

EXHIBIT 24

POWER OF ATTORNEY

The undersigned, acting in the capacity or capacities stated with their respective names below, hereby constitute and appoint NORMAN H. WESLEY, MARK A. ROCHE, EDWARD P. SMITH and A. ROBERT COLBY, and each of them severally, the attorneys-in-fact of the undersigned with full power to them and each of them to sign for and in the name of the undersigned in the capacities indicated below the Annual Report on Form 10-K of Fortune Brands, Inc. for the fiscal year ended December 31, 2000, and any and all amendments thereto:

Signature Title Date

/s/ Norman H. Wesley ------Chairman of the Board February 27, 2001 Norman H. Wesley and Chief Executive Officer (principal executive officer) and Director

/s/ Craig P. Omtvedt ------Senior Vice President February 27, 2001 Craig P. Omtvedt and Chief Financial Officer (principal financial officer)

/s/ Michael R. Mathieson ------Vice President and February 27, 2001 Michael R. Mathieson Chief Accounting Officer (principal accounting officer)

/s/ Patricia O. Ewers ------Director February 27, 2001 Patricia O. Ewers

/s/ Thomas C. Hays ------Director February 27, 2001 Thomas C. Hays

/s/ John W. Johnstone, Jr. ------Director February 27, 2001 John W. Johnstone, Jr.

/s/ Sidney Kirschner ------Director February 27, 2001 Sidney Kirschner

/s/ Gordon R. Lohman ------Director February 27, 2001 Gordon R. Lohman

/s/ Charles H. Pistor, Jr. ------Director February 27, 2001 Charles H. Pistor, Jr.

/s/ Eugene A. Renna ------Director February 27, 2001 Eugene A. Renna

/s/ Anne M. Tatlock ------Director February 27, 2001 Anne M. Tatlock

/s/ David M. Thomas ------Director February 27, 2001 David M. Thomas

/s/ Peter M. Wilson ------Director February 27, 2001 Peter M. Wilson

EXHIBIT 99

List of Pending Cases

The following sets forth the principal parties to the proceedings referred to in Item 3 of this Form 10-K in which Registrant is currently named as a defendant, the court in which such proceedings are pending and the date such proceedings were instituted against Registrant:

Acomo, P. v. American Tobacco Company, et al., District Court of New Mexico, Santa Fe County, June 16, 1999;

Adkins, C. v. The American Tobacco Company, et al., Circuit Court of Kanawha County, West Virginia, May 31, 2000;

Alexander, E. v. Philip Morris Companies, Inc., et al., USDC, Eastern District of LA, St. Landry Parish District Court, September 27, 1999;

Anderson, D. v. The American Tobacco Company, et al., Circuit Court of Kanawha County, West Virginia, May 30, 2000;

Anderson, J. v. The American Tobacco Company, et al., Circuit Court of Knox County, Tennessee, May 23, 1997;

Badon, C. v. RJR Nabisco, Inc., et al., Judicial District Court, Parish of Cameron, Louisiana, May 23, 1994;

Bellows, B. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, December 1, 1997;

Bergeron, D. (Trustees of Massachusetts Carpenters) v. Philip Morris, et al., Eastern District of New York, September 29, 1999;

Brazil (State of Goias) v. Philip Morris Companies, Inc., et al., Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida, November 17, 1999;

Caiazzo, B. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, September 26, 1997;

Carll, J. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, July 20, 1997;

Cavanagh, D. v. The American Tobacco Company, et al., Supreme Court of New York, Richmond County, May 6, 1997;

Cochran, O. v. R.J. Reynolds Tobacco Company, et al., Circuit Court of George County, Mississippi, February 6, 2001;

Colenberg, E. v. R.J. Reynolds Tobacco Company, et al., Circuit Court of Jefferson County, Mississippi, October 18, 2000;

Collins, J. v. The American Tobacco Company, et al., Supreme Court of New York, Westchester County, May 16, 1997;

Condon, R. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, May 13, 1997;

Connor, C. v. The American Tobacco Company, et al., Second Judicial District Court of Bernalillo County, New Mexico, October 10, 1996;

Cotroneo, L. v. Fortune Brands, Inc., Supreme Court of New York, Queens County, October 21, 1997;

Coyne v. American Brands, Inc. n/k/a Fortune Brands, Inc. et al., USDC, NDOH (Federal) Cuyahoga, September 17, 1996;

Crane, J. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, April 4, 1997;

Creech, W. v. The American Tobacco Company, et al., Supreme Court of New York, Richmond County, January 6, 1997;

DaSilva, JC v. The American Tobacco Company, et al., Supreme Court of New York, New York County, April 3, 1997;

Decie, W. v. Fortune Brands, Inc., United States District Court, Eastern District of New York, April 21, 2000;

Dierker, J. v. R.J. Reynolds Tobacco Company, et al., Thirty Fourth Judicial District Court, Parish of St. Bernard, State of LA, January 6, 2000;

Doss, E. v. R. J. Reynolds Tobacco Company, et al., Jefferson County, Mississippi, March 21, 2000;

Dzak, D. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, December 8, 1996;

Eiser, L. v. The American Tobacco Company, et al., Court of Common Pleas of Philadelphia County, Philadelphia, March 30, 1999;

Evans, R. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, August 23, 1996;

Felix v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, December 1, 1997 (formerly reported under the caption "Guilloteau";

Fleming, E. v. Philip Morris, Inc., et al., Circuit Court, Kanawha County, West Virginia, November 2, 2000;

Frankson, G. v. The American Tobacco Company, et al., Supreme Court (State) New York, Kings County, August 24, 2000;

Gales, C. v. R.J. Reynolds Tobacco Company, et al., Circuit Court of Jefferson County, Mississippi, October 18, 2000;

Geiger, W. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, May 1, 1997;

Gelfond, M. v. Fortune Brands, Inc., et al., Supreme Court of New York, New York County, May 1, 1998;

Golden, R. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, July 10, 1997;

Greco, A. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, June 27, 1997;

Guillory v. The American Tobacco Company, et al., Circuit Court of Cook County, Illinois, July 7, 1997 (formerly reported under the caption "Denberg" and "Daley");

Hansen, C. v. The American Tobacco Company, et al., Supreme Court of New York, Suffolk County, October 16, 1997;

Honduras, (The Republic of) v. Philip Morris, Inc., et al., Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, October 5, 2000;

Iacono, A. v. The American Tobacco Company, et al., Supreme Court, Kings County, New York, August 20, 1997 (formerly reported under the caption "Mednick");

Jaust, T. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, September 10, 1997;

Jennings, M. v. R.J. Reynolds Tobacco Company, et al., Circuit Court of Claiborne County, Mississippi, November 2, 2000;

Juliano, S. v. The American Tobacco Company, et al., Supreme Court of New York, Richmond County, July 24, 1997;

Kaiser Aluminum & Chemical Corporation v. RJR Nabisco, et al., Circuit Court of Jefferson County, Mississippi, December 15, 2000;

Keenan, T. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, September 15, 1997;

Kestenbaum, D. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, May 23, 1997;

Knutsen, D. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, October 11, 1996;

Kotlyar, Y. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, December 1, 1997;

The Kyrgyz Republic v. The Brooke Group Ltd., Inc., et al., Miami-Dade County Circuit Court of the Eleventh Judicial Circuit, January 24, 2001;

Labriola, R. v. The American Tobacco Company, et al., Supreme Court of New York, Suffolk County, May 28, 1997;

Leavitt, C. v. Fortune Brands, Inc., et al., U.S. District of Maine (Bangor), May 6, 1998;

Lehman, R. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, July 10, 1997;

Leibstein, S. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, June 30, 1997;

Lennon, L. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, November 5, 1997;

Lien, L. v. The American Tobacco Company, et al., Supreme Court of New York, Suffolk County, April 28, 1997;

Litke, S. v. American Brands, Inc., et al., Supreme Court of New York, Kings County, May 7, 1997;

Lombardo, S. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, June 6, 1997;

Long, J. v. The American Tobacco Company, et al., Supreme Court of New York, Bronx County, September 24, 1997;

Lopardo, T. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, September 25, 1997;

Lucca, J. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, February 3, 1997;

Lynch, R. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, September 24, 1997;

Magnus, A. v. The American Tobacco Company, et al., United States District Court for the Eastern District of New York, May 6, 1998;

Margolin, F. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, November 22, 1996;

Martin, G. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, June 30, 1997;

McDowell, L. v. The American Tobacco Company; 5th Judicial District, Parish of Franklin, State of Louisiana, March 3, 2000;

McGuiness, D. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, May 28, 1998, (formerly reported under the caption "Arnett");

McGuinness, J. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, June 30, 1997;

McLane, J. v. The American Tobacco Company, et al., Supreme Court of New York, Richmond County, May 13, 1997;

Miele v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, June 30, 1997, (formerly reported under the caption "Cameron");

Mishk, J. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, May 2, 1997;

Mitchell, S. v. The American Tobacco Company, et al., Iowa District Court for Wapello County, October 18, 2000;

National Asbestos Workers Medical Fund v. The American Tobacco Company, et al., United States District Court, Eastern District of New York, March 27, 1998;

Newberg v. The American Tobacco Co., et al., Supreme Court of New York, Kings County, July 14, 1998 (formerly reported under the caption "Krochtengel");

Newell, K. v. The American Tobacco Company, et al., Supreme Court of New York, Suffolk County, October 3, 1997;

Norton, W. v. Brown & Williamson Tobacco Corporation, et al., United States District Court for the Southern District of Indiana, May 3, 1996;

Owens, J. v. R.J. Reynolds Tobacco Company, et al., USDC, Eastern District of LA, December 28, 1999;

Panama (The Republic of) v. The American Tobacco Company, et al., Civil District Court for the Parish of Orleans, New Orleans, Louisiana, August 25, 1998;

Parsons, D. v. AC&S, Inc., et al., Circuit Court of the State of West Virginia, Kanawha County, February 27, 1998;

Perez, P. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, June 23, 1997;

Perri, A. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, October 17, 1997;

Piccione, Y. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, September 29, 1997;

Portnoy, L. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, October 21, 1997;

Reitano, L. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, August 22, 1996;

Rico, S. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, November 30, 1998;

Rubinobitz, L. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, May 28, 1997;

Russoff v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, January 6, 1997 (formerly reported under the caption "Rinaldi");

Sao Paulo (State of) of the Federative Republic of Brazil) v. The American Tobacco Company, et al., State of Louisiana, February 14, 2000;

Schulhoff, E. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, October 7, 1997;

Schwartz, I. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, May 19, 1997;

Schwartz, P. v. The American Tobacco Company, et al., Supreme Court New York, Kings County, December 9, 1996;

Senzer, B. v. The American Tobacco Company, et al., Supreme Court of York, Queens County, May 13, 1997;

Shapiro, M. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, June 17, 1997;

Siegel, P. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, August 22, 1996;

Silverman, P. v. Lorillard Tobacco Company, et al., Supreme Court of New York, Kings County, July 7, 1999;

In re: Simon (II) Litigation, District Court Eastern Division of New York, September 6, 2000;

Smith, BJ v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, August 27, 1997;

Sola, L. v. The American Tobacco Company, et al., Supreme Court of New York, Bronx County, July 16, 1996;

Sprung, L. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, May 13, 1997;

Standish, J. v. The American Tobacco Company, Supreme Court of New York, Bronx County, July 11, 1997;

Tajikistan, The Republic of v. The Brooke Group Ltd., Inc., et al., Miami- Dade County Circuit Court of the Eleventh Judicial Circuit, January 24, 2001;

Temple, C. v. The American Tobacco Company, et. al., USDC, Middle District of Tennessee, September 11, 2000;

Tennessee (Beckom) v. The American Tobacco Company, et al., United States District Court, Eastern Division of Tennessee, May 8, 1997;

Thomas, E. v. The American Tobacco Co., et al., Circuit Court, State of Missouri, Jefferson County, October 9, 1998;

Tsango v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, July 2, 1997 (formerly reported under the caption "Leiderman");

Ukraine Soviet Republic (The) v. American Brands, Inc. n/k/a Fortune Brands, Inc. et al., USDC, The District of Columbia, November 19, 1999;

Valentin, A. v. Fortune Brands, Inc., et al., Supreme Court of New York, Queens County, September 2, 1997;

Wagner v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, April 17, 1997 (formerly reported under the caption "Levinson");

Walgreen, C. v. The American Tobacco Company, et al., Supreme Court of New York, New York County, May 23, 1997;

Welch, C. v. The American Tobacco Company, et al., Iowa District Court of Shelby County, October 16, 2000;

Werner, R. v. Fortune Brands, Inc., et al., Supreme Court of New York, Queens County, December 12, 1997;

Young, A. v. The American Tobacco Company, et al., Civil District Court for the Parish of Orleans, Louisiana, November 12, 1997;

Zarudsky, W. v. The American Tobacco Company, et al., Supreme Court of New York, Nassau County, May 28, 1997;

Zeringue, E. v. The American Tobacco Co., et al., District Court of Louisiana, Jefferson Parish, September 9, 1998; and

Zuzalski, W. v. The American Tobacco Company, et al., Supreme Court of New York, Queens County, April 3, 1997.

List of Terminated Cases

The following cases, previously listed as pending, have been dismissed and not previously reported as such:

Avallone, J. v. The American Tobacco Company, et al., Superior Court of New Jersey, Middlesex County, April 23, 1998, Dismissed;

Benavidez, P. v. Philip Morris, Inc., et al., Superior Court of the State of California, County of Alameda, November 5, 1999, Dismissed October 12, 2000;

Crayton, R. v. The American Tobacco Company et al., Superior Court of the State of California, County of Alameda, March 22, 2000, Dismissed;

Hansen, P. v. The American Tobacco Company, et al., United States District Court for the State of Arkansas, Western Division, November 4, 1996 (formerly reported under the caption "McGinty"), Dismissed October 25, 2000;

Krigbaum, W. v. The American Tobacco Company, et al., Superior Court of California, County of Santa Clara, December 20, 1999, Dismissed September 13, 2000;

Maisonet, B. v. The American Tobacco Company, et al., Supreme Court of New York, Kings County, May 12, 1997, Dismissed December 22, 2000;

Miller, A. v. Brown & Williamson Tobacco Corporation, et al., Circuit Court, Kanawha County, West Virginia, January 26, 1999, Dismissed;

Scott, G. v. The American Tobacco Company, et al., United States District Court for the Eastern District of Louisiana, Orleans Parish, May 28, 1996, Dismissed November 14, 2000; and

Sweeney, E. v. The American Tobacco Co., et al., Court of Common Pleas, State of Pennsylvania, Allegheny County, October 30, 1998, Dismissed November 9,2000.