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SCHEDULE 14A/A INFORMATION
CONSENT STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by registrant / /
Filed by a party other than the registrant /x/ / / Confidential,
for Use of the
Commission Only
Check the appropriate box: (as permitted by
/ / Preliminary consent statement Rule 14a-6(e)(2))
/ / Definitive consent statement
/X/ Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
RJR NABISCO HOLDINGS CORP.
----------------------------------------------
(Name of Registrant as Specified in its Charter)
BROOKE GROUP LTD.
------------------------------------------
(Name of Person(s) Filing Consent Statement)
---------------
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/x/ Fee paid previously with preliminary materials.
---------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid: ____________
(2) Form, schedule or registration statement no.: _____________
(3) Filing party: ____________________
(4) Date filed: _________________
===============================================================================
RJR NABISCO HOLDINGS CORP.
Proxy Solicitation
for the Board of Directors
by Brooke Group Ltd.
SPINOFF -- IT'S NOW OR NEVER FOR NABISCO!!!
===============================================================================
IF YOU WANT A NABISCO SPINOFF NOW, THIS IS YOUR ONLY CHANCE
HOWEVER...
If you really believe the tobacco companies will win every case against them for
the next 25 years
If you really believe the 60 law firms representing the nationwide Castano class
will go away
If you really believe none of the 5 grand juries investigating tobacco will
issue any indictments
If you really believe all the state Attorneys General trying Medicaid cases will
lose interest
If you really believe the FDA will say it's OK to market tobacco to children
If you really believe no more Philip Morris or other whistleblowers will come
forward
If you really believe their testimony will make no difference in any of these
cases
If you really believe RJR Nabisco's current Board will spin off Nabisco any
time soon
. . . THEN MAYBE THE MANAGEMENT PROGRAM AND NOT THE BROOKE PROGRAM IS FOR YOU
-1-
- --------------------------------------------------------------------------------
THE MANAGEMENT PROGRAM
- --------------------------------------------------------------------------------
-2-
THE MANAGEMENT PROGRAM -- MORE OF THE SAME
================================================================================
o NO SPINOFF OF NABISCO -- EVER!!!
--------------------------------
o Nominal dividend increase
o RJR Tobacco's U.S. market share continues to decline
-- Yet, Chairman Harper has taken over $40 million out of RJR in the past
three years
[GRAPHIC OMITTED]
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
RJR ...... 31.6% 32.3% 32.5% 31.8% 28.5% 29.6% 27.8% 28.8% 30.6% 26.7% 25.8%
Philip
Morris .. 35.9% 36.8% 37.8% 39.3% 41.9% 42.3% 43.4% 42.3% 42.2% 44.8% 45.8%
-3-
THE MANAGEMENT PROGRAM -- MORE OF THE SAME
===============================================================================
o The Company remains blind to the basic facts:
-- "The domestic tobacco side of our business was the STANDOUT in a year
which was essentially disappointing." (RJR Nabisco Schedule 14A,
February 8, 1996)
o These are the statistics that "STANDOUT":
Fourth Quarter Full Year 1995
Versus 1994** Versus 1994
---------------- ---------------
Volume......................... +1% -5%
Market Share................... -1.0 point -1.0 point
Net Sales...................... +5% -2%
EBITA.......................... +1% -2%
- -------------
Source: RJR Nabisco Schedule 14A, February 8, 1996
** "RJR SHIPPED MORE 4Q VOLUME THAN CONSUMERS BOUGHT AT RETAIL....4Q
SHIPMENT SHARES MAY HAVE OVERSTATED ACTUAL CONSUMER BUYING"
-- (GARY BLACK FEB. 14, 1996)
o Even RJR Tobacco International has faltered in a growing market
-- EBITA declined 15% in 1995 before a $54 million restructuring charge
-4-
- --------------------------------------------------------------------------------
THE BROOKE GROUP PROGRAM
- --------------------------------------------------------------------------------
-5-
SPINOFF -- IT'S NOW OR NEVER FOR NABISCO!!!
================================================================================
IMMEDIATE SPINOFF OF NABISCO
PERIOD!
-6-
SPINOFF - IT'S NOW OR NEVER FOR NABISCO!!!
================================================================================
o IMMEDIATE SPINOFF OF NABISCO
-- Attorney Generals and Castano plaintiffs have agreed not to seek
injunctions
-- Eliminated risk, if there was any
-- Only Castano and the Medicaid suits are of sufficient size to have
possibly risked a fraudulent conveyance injunction (which in any
case we do not believe was likely)
-- Nabisco could be spun off in six to eight weeks
-- At stock prices on March 19, 1996, shareholders would receive $21.50 of
Nabisco stock
-- We believe Nabisco will be worth more than $25.00 per RJRN share post
spinoff
-7-
SPINOFF -- IT'S NOW OR NEVER FOR NABISCO!!!
================================================================================
o MERGER WITH LIGGETT NOT REQUIRED
o If a merger is proposed, a subsequent independent shareholder vote
is required
-8-
- --------------------------------------------------------------------------------
LITIGATION ISSUES AND SETTLEMENT
- --------------------------------------------------------------------------------
-9-
LITIGATION ISSUES
================================================================================
Overview of Litigation Environment
----------------------------------
Estimated
# of Cases(1)
--------------
o Class action cases
-- Castano (addiction): 50,000,000
-- Engle (Florida/addiction/personal injury): 3,000,000
-- Broin (flight attendants): 60,000
-- Lacey (Alabama/additives/not certified): 300,000
-- Granier (Louisiana/addiction/not certified): 700,000
o State Medicaid reimbursement claims
-- Six states filed (FL, LA, MA, MN, MS, WV) 4,500,000
o Personal injury cases
-- 40 years of successful defense in over 800 cases 140
-- Freedom to choose defense
- -----------
(1) Based on media reports.
-10-
LITIGATION ISSUES
===============================================================================
o NICOTINE ADDICTION BASED CLAIMS
-- "The most dangerous game" (Gary Black)
o New information being released constantly, disclosing alleged nicotine
and addiction relationships known by industry
o Whistle Blowers
-- Ian Uydess (Philip Morris) and Jeffrey Wigand (BAT)
-- Others to come...including, possibly, RJR employees?
o Criminal Indictments?
-11-
LITIGATION SETTLEMENT
===============================================================================
Catastrophe Insurance
---------------------
o Some cases being tried by a judge only, no jury
o No need to bond potential judgments at lower court level
o REMEMBER TEXACO!!
o Can RJR obtain a multi-billion dollar bond?
-12-
LITIGATION SETTLEMENT
===============================================================================
Overview of Litigation Environment
----------------------------------
Estimated
# of Cases
------------
o Class action cases
-- Castano (addiction-related): 50,000,000 Settled
-- Engle (Florida/addiction/personal injury): 3,000,000 Covered
-- Broin (flight attendants): 60,000 Nominal risk
-- Lacey (Alabama/additives/not certified): 300,000 Nominal risk
-- Granier (Louisiana/addiction/not certified): 700,000 Stayed
o State Medicaid reimbursement claims
-- Six states filed (FL, LA, MA, MN, MS, WV) 4,500,000 Five settled
o Personal injury cases
-- 40 years of successful defense in over 800 cases 140 Nominal risk
-- Freedom to choose defense
-- Addiction no longer a cause Settled
Over 95% Settled
========
-13-
LITIGATION SETTLEMENT
================================================================================
ESTIMATED COST OF CATASTROPHE INSURANCE
---------------------------------------
($ in millions)
RJR
- ---
RJR Domestic Tobacco 1995 EBITA $1,420
Less Pro-Rata Interest Expense (390)
Less Pro-Rata Corporate Overhead (42)
------
Pre-Tax -- Domestic Tobacco $ 988
======
Castano Payments 49
Medicaid Payments (assumes all states) 74
Less Estimated Legal Fee Reduction (40)
------
Total Cost $ 83
======
Settlement Cost Per Pack 1.4 Cents/Pack
-14-
LITIGATION SETTLEMENT
================================================================================
o Proposed settlement of Castano (nicotine addiction) class action
-- Settles most important tobacco claim (also covers distributors)
-- 5% of domestic tobacco's pretax income each year (up to maximum
$50 million)
-- Payment terminated if remaining defendants prevail in litigation
-- If certification overturned, settlement applies if Castano-type class
certified elsewhere
-- Assured of settlement terms substantially more favorable than any
other defendant (payments could be reduced to zero)
-15-
LITIGATION SETTLEMENT
===============================================================================
o Settlement of five State Attorney General suits (FL, LA, MA, MS, WV)
-- Assuming a tobacco company merger, initial payment of $125 million
-- Annual percentage of 2.5% to 7.5% of domestic tobacco pretax income,
depending on whether additional states join the settlement
-- Settles claims of the most aggressive states with high Medicaid
populations
-- Provides mechanism for other states which sue (if any) to join
settlement
-- Payment terminated if remaining defendants succeed on merits
-- Most Favored Nation Clause: Benchmark figure of three times Brooke
Group's payments per point of market share
-16-
LITIGATION SETTLEMENT
================================================================================
o No commitment to cooperate except as required by law
-- Not waiving attorney/client or any other legal privileges
-- Continue to vigorously defend all other litigation
o Model of new agreement based on responsible co-existence
o The settlement is a no-lose situation
-- Wins if the industry wins
-- Limits liability if industry loses
-17-
LITIGATION SETTLEMENT
================================================================================
o Settlement is applicable to:
-- RJR (First Option)
-- Lorillard
-- BAT
-- American Brands
-- UST
-18-
LITIGATION ISSUES
================================================================================
Estimated cost of catastrophe insurance, if applied to:
Lorillard
Settlement Cost Per Pack 2.8 Cents/Pack
Brown & Williamson (BAT)
Settlement Cost Per Pack 1.6 Cents/Pack
-19-
SPINOFF VALUE WITHOUT SETTLEMENT
===============================================================================
RJRN Stock Could Be Worth More Than $47 Per Share
o Nabisco could be worth $38 or more post spinoff
-- $25 per RJRN share
o Tobacco could be worth $22 or more post spinoff
-- 9% yield with $2 dividend
-- Without benefit of settlement
-20-
SPINOFF VALUE WITH SETTLEMENT
===============================================================================
RJRN Stock Could Be Worth More Than $58 Per Share
o Nabisco could be worth $38 or more post spinoff
-- $25 per RJRN share
o Tobacco could be worth $33 or more post spinoff, with the litigation
settlement
-- 6% yield with $2 dividend
-21-
DIVIDENDS
===============================================================================
SIGNIFICANT DIVIDEND INCREASE
o Adopt a new dividend policy
-- At least 60% of the Tobacco Company's Net Cash Flow
===============================================================================
Net Cash Flow = Net Income plus After-Tax Amortization
plus Depreciation less Capital Expenditures
===============================================================================
o An annual dividend of $2 for the Tobacco Company, commencing in the
second half of 1996 based on I/B/E/S estimates of RJRN's earnings in
1996 and 1997
-22-
DIVIDENDS
===============================================================================
REYNOLDS TOBACCO COMPANY
COMPUTATION OF CASH NET INCOME PER SHARE -- TWELVE MONTHS ENDED JUNE 30, 1997
($ IN MILLIONS, EXCEPT PER SHARE NUMBERS)
Total Per Share
------- ---------
I/B/E/S Estimate(1) for RJR Nabisco $ 904 $ 2.74
I/B/E/S(1) for Nabisco (432) (1.31)
Plus: 19.5% Nabisco 84 0.26
------ ------
Net Income for RJR Tobacco 556 1.68
Plus: Amortization After Tax 368 1.12
Plus: Depreciation 238 0.72
------ ------
After Tax Cash Net Income 1,162 3.52
Less: Preferred C Dividends (80)
Less: Capital Expenditures(2) (223)
------
Net Cash Flow $ 859
======
Net Cash Flow per Share $ 3.15
======
Cash Dividends per Brooke Group Program $ 2.00
======
Per Cent of Net Cash Flow(3) 63%
-------------
(1) At March 15, 1996.
(2) Assumes Capital Expenditures total $223 in 1996 (three-year
average of Company's Capital Expenditures)
1995 $232
1994 $215
1993 $224
(3) Dividend payout ratios of comparable companies before buyback
programs (after buyback programs): Philip Morris 59% (99%), American
Brands 62% (248%), UST 62% (126%). BAT and Loews are insurance
companies with lower payout ratios.
================================================================================
-23-
PROVEN TOBACCO MANAGEMENT
===============================================================================
RONALD FULFORD TO LEAD RJR TOBACCO
o Turnaround specialist at Hanson plc from 1982 to 1996
-- Senior Associate Director of Hanson plc (market cap. $15 billion,
55% sales in U.S.)
-- Nine years of successful Tobacco operating experience at Imperial
Tobacco (38% of U.K. market)
o Chief Executive Officer:
1980-1982.................................... United Gas Industries
1982-1987.................................... EverReady Batteries
1984-1987.................................... London Brick
1987-1996.................................... Imperial Tobacco
o Fulford has developed a proven management system for turnaround
situations
-- Repeatedly implemented and refined the system during his career
-- The system has worked successfully in a tobacco company
-- Fulford provides leadership
-24-
PROVEN TOBACCO MANAGEMENT
===============================================================================
FULFORD HAS A HISTORY OF SUCCESSFUL TURNAROUNDS AT HANSON PLC
[GRAPHIC OMITTED]
EverReady EverReady London Imperial
Operating Income as South Africa Britain Brick Brick
Percent of Sales 1983-1987 1983-1986 1984-1988 1986-1995
- ------------------- ------------ ---------- --------- ---------
1983 20% 12% -- --
1984 32% 21% 19% --
1985 30% 22% 25% --
1986 28% 24% 28% 21%
1987 31% -- 31% 24%
1988 -- -- 32% 32%
1989 -- -- -- 39%
1990 -- -- -- 42%
1991 -- -- -- 42%
1992 -- -- -- 45%
1993 -- -- -- 48%
1994 -- -- -- 49%
1995 -- -- -- 50%
EverReady EverReady London Imperial
Capital Employed as South Africa Britain Brick Brick
Percent of Sales 1983-1987 1983-1986 1984-1988 1986-1995
- ------------------- ------------ ---------- --------- ---------
1983 66% 48% -- --
1984 59% 34% 46% --
1985 55% 28% 42% --
1986 52% 25% 38% 36%
1987 45% -- 40% 35%
1988 -- -- 35% 28%
1989 -- -- -- 11%
1990 -- -- -- 8%
1991 -- -- -- 8%
1992 -- -- -- 5%
1993 -- -- -- 4%
1994 -- -- -- 2%
1995 -- -- -- 1%
-25-
PROVEN TOBACCO MANAGEMENT
==============================================================================
STAGE ONE AT IMPERIAL TOBACCO: COST-CUTTING
-------------------------------------------
Head Count
[GRAPHIC OMITTED]
Stage One at Imperial Tobacco: Cost-Cutting
Head Count Number of Employees
---------- -------------------
1982 19,071
1983 15,964
1984 14,607
1985 13,369
1986 12,279
1987 9,300
1988 7,538
1989 5,931
1990 5,092
1991 4,391
1992 3,531
1993 3,109
1994 2,911
1995 2,816
Productivity
[GRAPHIC OMITTED]
Productivity -- % Improvement
-----------------------------
September, 1987 0
October, 1987 1.39%
November, 1987 2.99
December, 1987 4.52
January, 1988 7.36
February, 1988 9.05
March, 1988 9.79
April, 1988 12.32
May, 1988 14.30
June, 1988 17.14
July, 1988 18.87
August, 1988 22.22
September, 1988 26.42
October, 1988 28.88
November, 1988 32.17
December, 1988 38.85
January, 1989 37.83
February, 1989 38.17
March, 1989 40.78
April, 1989 42.98
May, 1989 48.33
June, 1989 47.89
July, 1989 49.78
August, 1989 50.77
September, 1989 53.60
October, 1989 54.84
November, 1989 55.46
December, 1989 55.48
January, 1990 57.78
February, 1990 60.20
March, 1990 63.02
April, 1990 64.87
May, 1990 66.48
June, 1990 67.84
July, 1990 66.50
August, 1990 69.00
September, 1990 68.88
October, 1990 68.61
November, 1990 68.37
December, 1990 70.18
January, 1991 71.88
February, 1991 73.20
March, 1991 74.62
April, 1991 75.04
May, 1991 78.03
June, 1991 78.88
July, 1991 80.84
August, 1991 82.08
September, 1991 84.59
October, 1991 87.80
November, 1991 91.14
December, 1991 94.05
January, 1992 93.88
February, 1992 95.87
March, 1992 98.82
April, 1992 101.51
May, 1992 104.58
June, 1992 108.93
July, 1992 111.43
August, 1992 114.85
September, 1992 119.83
October, 1992 121.91
November, 1992 124.29
December, 1992 128.30
January, 1993 131.41
February, 1993 135.87
March, 1993 141.40
April, 1993 144.04
May, 1993 145.55
June, 1993 147.18
July, 1993 148.28
August, 1993 148.80
September, 1993 149.70
October, 1993 151.51
November, 1993 154.97
December, 1993 155.52
January, 1994 156.18
February, 1994 152.84
March, 1994 151.87
April, 1994 154.18
May, 1994 155.81
June, 1994 157.80
July, 1994 157.53
August, 1994 160.06
September, 1994 168.70
October, 1994 168.81
November, 1994 172.43
December, 1994 174.78
January, 1995 176.06
February, 1995 177.28
March, 1995 178.43
April, 1995 180.38
May, 1995 180.82
June, 1995 183.38
July, 1995 188.08
August, 1995 191.87
September, 1995 195.37
October, 1995 196.74
November, 1995 199.58
December, 1995 198.74
o Change the organizational structure to achieve a low cost structure
-- Decentralize into profit centers
-- Create financial targets: transfer prices and benchmarking
-- Incentivize management based on divisional and corporate
productivity and working capital
-- Create a self-governing organization
-26-
PROVEN TOBACCO MANAGEMENT
==============================================================================
STAGE TWO AT IMPERIAL TOBACCO: MARKETING STRATEGY
-------------------------------------------------
[GRAPHIC OMITTED]
Market Share
---------------------
ITL Gallaher
------ ---------
December, 1981 50.00%
January, 1982 48.76
February, 1982 49.18
March, 1982 48.55
April, 1982 48.33
May, 1982 48.08
June, 1982 47.66
July, 1982 47.28
August, 1982 46.63
September, 1982 46.62
October, 1982 46.47
November, 1982 46.33
December, 1982 46.08 30.00%
January, 1983 45.92
February, 1983 45.69
March, 1983 45.48
April, 1983 45.27
May, 1983 45.10
June, 1983 45.02 33.00
July, 1983 44.94
August, 1983 44.90
September, 1983 44.90
October, 1983 44.88
November, 1983 44.83
December, 1983 44.76 32.70
January, 1984 44.65
February, 1984 44.53 32.90
March, 1984 44.43 32.70
April, 1984 44.31 32.90
May, 1984 44.14 32.50
June, 1984 44.00 32.22
July, 1984 43.66 31.70
August, 1984 43.72 31.90
September, 1984 43.67 31.70
October, 1984 43.46 31.60
November, 1984 43.38 31.70
December, 1984 43.36 31.60
January, 1985 43.30 31.50
February, 1985 43.20 31.70
March, 1985 43.06 31.90
April, 1985 42.88 32.30
May, 1985 42.67 32.50
June, 1985 42.37 32.70
July, 1985 42.11 32.90
August, 1985 41.92 33.10
September, 1985 41.74 33.30
October, 1985 41.66 33.40
November, 1985 41.35 33.60
December, 1985 41.08 33.80
January, 1986 40.89 34.00
February, 1986 40.73 34.20
March, 1986 40.68 34.50
April, 1986 40.47 34.70
May, 1986 40.37 35.00
June, 1986 40.20 35.30
July, 1986 40.05 35.70
August, 1986 39.50 35.90
September, 1986 39.50 36.20
October, 1986 39.22 36.40
November, 1986 38.88 36.60
December, 1986 38.72 36.80
January, 1987 38.60 37.00
February, 1987 38.30 37.30
March, 1987 38.13 37.60
April, 1987 37.85 37.80
May, 1987 37.80 38.10
June, 1987 37.57 38.30
July, 1987 37.58 38.60
August, 1987 37.46 38.90
September, 1987 37.35 39.10
October, 1987 37.20 39.30
November, 1987 37.02 39.50
December, 1987 36.86 39.70
January, 1988 36.87 40.00
February, 1988 36.48 40.20
March, 1988 36.28 40.40
April, 1988 36.10 40.60
May, 1988 35.91 40.80
June, 1988 35.73 40.90
July, 1988 35.67 41.00
August, 1988 35.42 41.10
September, 1988 35.30 41.30
October, 1988 35.10 41.50
November, 1988 35.08 41.60
December, 1988 34.95 41.80
January, 1989 34.90 42.00
February, 1989 34.83 42.00
March, 1989 34.78 42.10
April, 1989 34.72 42.20
May, 1989 34.68 42.30
June, 1989 34.65 42.20
July, 1989 34.55 42.30
August, 1989 34.65 42.40
September, 1989 34.65 42.50
October, 1989 34.61 42.70
November, 1989 34.67 42.80
December, 1989 34.54 42.90
January, 1990 34.50 43.00
February, 1990 34.46 0
March, 1990 34.38 43.30
April, 1990 34.22 43.40
May, 1990 34.17 43.50
June, 1990 34.00 43.60
July, 1990 33.64 43.70
August, 1990 33.67 43.60
September, 1990 33.61 0
October, 1990 33.41 43.50
November, 1990 33.35 43.40
December, 1990 33.31 43.40
January, 1991 33.25 43.50
February, 1991 33.19 43.60
March, 1991 33.13 43.70
April, 1991 33.14 43.60
May, 1991 33.21 43.70
June, 1991 33.33 43.80
July, 1991 33.45 43.60
August, 1991 33.58 43.00
September, 1991 33.71 42.90
October, 1991 33.83 42.80
November, 1991 33.91 42.70
December, 1991 33.95 42.60
January, 1992 34.01 42.60
February, 1992 34.05 42.50
March, 1992 34.07 42.40
April, 1992 34.04 42.30
May, 1992 34.02 42.10
June, 1992 34.01 42.00
July, 1992 34.03 41.90
August, 1992 34.03 41.80
September, 1992 34.05 41.70
October, 1992 34.07 41.60
November, 1992 34.08 41.50
December, 1992 34.13 41.40
January, 1993 34.22 41.30
February, 1993 34.33 41.20
March, 1993 34.46 41.10
April, 1993 34.68 41.00
May, 1993 34.68 41.10
June, 1993 34.79 41.20
July, 1993 34.85 41.30
August, 1993 34.93 41.10
September, 1993 35.01 41.00
October, 1993 35.10 41.00
November, 1993 35.21 41.00
December, 1993 35.31 41.00
January, 1994 35.44 40.00
February, 1994 35.50 40.00
March, 1994 35.68 40.00
April, 1994 35.83 39.90
May, 1994 35.97 39.80
June, 1994 36.10 39.70
July, 1994 36.23 39.60
August, 1994 36.35 39.50
September, 1994 36.46 39.60
October, 1994 36.66 39.50
November, 1994 36.63 39.40
December, 1994 36.70 39.50
January, 1995 36.75 39.00
February, 1995 36.79 38.90
March, 1995 36.84 38.90
April, 1995 36.88 38.80
May, 1995 36.92 38.70
June, 1995 36.93 38.60
July, 1995 36.99 38.50
August, 1995 37.05 38.40
September, 1995 37.08 38.30
October, 1995 37.13 38.30
November, 1995 37.20 38.20
December, 1995 37.28 38.10
January, 1996 37.38 38.00
o Take control of the marketing strategy
-- Reinvest a portion of the cost savings
-- Adopt a portfolio approach to marketing (de-emphasize brand
management)
-- Introduce regional brand strategies
-27-
PROVEN TOBACCO MANAGEMENT
===============================================================================
STAGE THREE AT IMPERIAL TOBACCO: INTERNATIONAL SALES
[GRAPHIC OMITTED]
Pound Sterling in Millions
--------------------------
1987 37
1988 43
1989 42
1990 43
1991 49
1992 55
1993 61
1994 75
1995 117
o Identify growth opportunities, especially international
-- Prioritize resource allocation
-- Aggressively enter newly developing markets
-- Attain critical mass regionally, or exit
-28-
PROVEN TOBACCO MANAGEMENT
===============================================================================
RESULTS AT IMPERIAL TOBACCO: OPERATING PROFIT GROWTH 1987-1995
[GRAPHIC OMITTED]
Pound Sterling in Millions
---------------------------
Operating Profit
---------------------------
1987 144
1988 171
1989 222
1990 249
1991 256
1992 284
1993 308
1994 328
1995 348
-29-
CORPORATE GOVERNANCE
===============================================================================
o Dale Hanson to join Board of Directors
-- CEO, CalPERS from 1987 to 1994 (third largest pension system in
the world)
-- A leader of the shareholder rights movement
o Independent Nabisco
-- Neither Brooke nor its affiliates will exercise any management
control over Nabisco
o Restrictions on affiliate transactions
-- Transactions greater than $2 million per year between RJR Nabisco
and Brooke Group will be subject to approval by stockholders of
RJR Nabisco
o No staggered Board of Directors or poison pill at RJR Tobacco or
Nabisco
o Confidential voting on all future matters to be acted upon by
shareholders
o Termination of Directors' Retirement Plan
-- Current plan grants $60,000 per year for up to 15 years
-30-
===============================================================================
PROPOSED BOARD OF DIRECTORS
===============================================================================
-31-
PROPOSED BOARD OF DIRECTORS
===============================================================================
o The Shareholder Board is a stronger Board than the Management Board
-- Both Tobacco operating experience and understanding of legal
issues
Brooke Group Management
Program Program
------------ ----------
Tobacco Operating Experience(1)............ 5 1
Attorneys.................................. 3 1
Academics.................................. 1 1
Investment Bankers......................... 1 0
Corporate Governance Experts............... 1 0
Food Operating Experience.................. 0 2
"Honorary" Appointees...................... 0 5
-- --
Total.............................. 11 10
== ==
- -------------
(1) More than three years
-32-
PROPOSED BOARD OF DIRECTORS
===============================================================================
The Brooke Group Program
Director (Age) Experience
- ------------- ----------
Arnold Burns(1) (65) Former U.S. Deputy Attorney General
Rouben Chakalian(2) (60) Chairman of Liggett, Ex-EVP, RJR International
Robert Frome (56) Partner, Olshan Grundman Frome
Ronald Fulford (61) Ex-CEO, Imperial Tobacco
Dale Hanson (53) Ex-CEO, CalPERS
Richard Lampen(2) (42) General Counsel, New Valley
Bennett LeBow(2) (58) Chairman, Brooke Group
Barry Ridings(1) (43) Managing Director, Alex. Brown
William Starbuck (61) ITT Professor of Management, NYU
Peter Strauss (63) Ex-SVP, American Tobacco
Frederick Zuckerman (61) Ex-Treasurer, RJR, IBM and Chrysler
- ---------------------
(1) New Valley Independent Director
(2) Brooke Group Insider
-33-
===============================================================================
SUMMARY
===============================================================================
-34-
BROOKE GROUP LTD.'S RETURNS
===============================================================================
Annual Rates of Return Since
RJR's IPO in 1991
[Reprint of the
"LeBow . . . LeBankrupt" Brooke Groupe 29.3%
advertisement publicized
by RJR Nabisco in various RJR Nabisco -0.5%
papers on March 27, 1996.]
===============================================================================
-35-
THE BROOKE GROUP PROGRAM
===============================================================================
o An immediate spinoff of Nabisco
o $2.00 Tobacco dividend
o Tobacco operations led by Ronald Fulford, ex-CEO of Imperial Tobacco
(Hanson plc)
o Corporate governance guidelines overseen by Dale Hanson
o First option on litigation settlement
-36-
APPENDIX
(Pursuant to Rule 304 of Regulation S-T)
1. Page 3 contains a description in tabular form of a graph which represents
the comparison of U.S. tobacco market share of RJR Nabisco and Philip
Morris for the years 1985 through 1995, which graph is contained in the
paper format of this Additional Soliciting Material being delivered to
stockholders.
2. Page 25 contains a description in tabular form of a graph describing
"Operating Income as Percent of Sales" and "Capital Employed as Percent of
Sales" at the following companies during the following years: (i) EverReady
South Africa (1983-1987); (ii) EverReady Britain (1983-1986); (iii) London
Brick (1984-1988); and Imperial Tobacco (1986-1995); which graph is
contained in the paper format of this Additional Soliciting Material being
delivered to stockholders.
3. Page 26 contains a description in tabular form of a graph entitled "Head
Count" which represents the comparison of the number of employees during
the years 1987 through 1995, which graph is contained in the paper format
of this Additional Soliciting Material being delivered to stockholders.
4. Page 26 contains a description in tabular form of a graph entitled
"Productivity" which represents the comparison of the Percentage
Improvement from September 1987 through December 1995, which graph is
contained in the paper format of this Additional Soliciting Material being
delivered to stockholders.
5. Page 27 contains a description in tabular form of a graph which represents
market share of (i) Imperial Tobacco from December 1981 through January
1996 and (ii) Gallaher from December 1982 through January 1996, which
graph is contained in the paper format of this Additional Soliciting
Material being delivered to stockholders.
6. Page 28 contains a description in tabular form of a graph which represents
international sales in millions of U.K. pounds during the years 1987
through 1995, which graph is contained in the paper format of this
Additional Soliciting Material being delivered to stockholders.
7. Page 29 contains a description in tabular form of a graph which represents
operating profit growth for the years 1987 through 1995, which graph is
contained in the paper format of this Additional Soliciting Material being
delivered to stockholders.
8. Page 35 contains a description in tabular form of a graph which represents
a comparison of annual rates of return of RJR Nabisco and Brooke Group
since RJR Nabisco's IPO in 1991, which graph is contained in paper format
of this Additional Soliciting Material being delivered to stockholders.