<PAGE>
Exhibit 1
NABISCO, INC. CAPITAL INVESTMENT PLAN
INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS FOR THE PERIOD FROM
JUNE 14, 1999 THROUGH DECEMBER 30, 1999.
<PAGE>
NABISCO, INC. CAPITAL INVESTMENT PLAN
-------------------------------------
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Independent Auditors' Report 1
Financial Statements:
Statement of Net Assets Available for Benefits
as of December 30, 1999 2
Statement of Changes in Net Assets Available
for Benefits for the period from
June 14, 1999 through December 30, 1999 3
Notes to Financial Statements 4-13
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
Nabisco Employee
Benefits Committee:
We have audited the accompanying statement of net assets available for
benefits of Nabisco, Inc. Capital Investment Plan (the "Plan") as of December
30 1999, and the related statement of changes in net assets available for
benefits for the period from June 14, 1999 through December 30, 1999. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December
30, 1999, and the changes in net assets available for benefits for the period
from June 14, 1999 through December 30, 1999, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
-------------------------
Parsippany, New Jersey
June 23, 2000
<PAGE>
NABISCO, INC. CAPITAL INVESTMENT PLAN
------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 30, 1999
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<TABLE>
<CAPTION>
December 30,
1999
-------------
<S> <C>
ASSETS
Master Trust investments at fair value
- Notes 1, 2 & 3
Interest in commingled funds $922,028,460
Loans to participants 13,683,149
------------
Total Master Trust investments 935,711,609
------------
Receivables
Investment income receivable 8,234,170
Due from Trustee for sale of investments 841,267
------------
Total receivables 9,075,437
------------
TOTAL ASSETS 944,787,046
------------
LIABILITIES
Due to Trustee for purchase
of investments 279,458
Payable to Nabisco, Inc. 266,131
Administrative fees 53,332
------------
TOTAL LIABILITIES 598,921
------------
NET ASSETS AVAILABLE FOR BENEFITS $944,188,125
------------
------------
</TABLE>
See notes to financial statements.
-2-
<PAGE>
NABISCO, INC. CAPITAL INVESTMENT PLAN
------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE PERIOD FROM JUNE 14, 1999 THROUGH DECEMBER 30, 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended
December 30,
1999
-------------
<S> <C>
ADDITIONS
ADDITIONS TO NET ASSETS ATTRIBUTED TO:
INVESTMENT INCOME
Net appreciation/(depreciation) in fair
value of investments - Note 3 $ 50,836,014
Interest and dividends 22,111,433
------------
TOTAL INVESTMENT INCOME 72,947,447
------------
CONTRIBUTIONS
Employee 24,160,992
Employer - Note 1 6,381,770
------------
TOTAL CONTRIBUTIONS 30,542,762
------------
DEDUCTIONS
DEDUCTIONS FROM NET ASSETS ATTRIBUTED TO:
Administrative fees 629,125
Employee withdrawals - Note 4 43,190,644
------------
TOTAL DEDUCTIONS 43,819,769
------------
Net transfers to the Plan - Note 6 884,517,685
------------
Net increase 944,188,125
NET ASSETS AVAILABLE FOR
BENEFITS AT BEGINNING OF YEAR --
------------
NET ASSETS AVAILABLE FOR
BENEFITS AT END OF YEAR $944,188,125
------------
------------
</TABLE>
See notes to financial statements.
-3-
<PAGE>
NABISCO, INC. CAPITAL INVESTMENT PLAN
-------------------------------------
NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE PLAN
The Nabisco, Inc. Capital Investment Plan (the "Plan") is a voluntary
defined contribution plan for certain eligible salaried employees of
Nabisco, Inc. ("Nabisco") and its eligible participating affiliates.
The Plan was established effective June 14, 1999 for Nabisco employees
maintained under the RJR Nabisco, Inc. Capital Investment Plan (RJR
Plan) prior to the June 14, 1999 spin-off of Nabisco from RJR Nabisco.
The account balances retained under the RJR Plan, attributable to
eligible Nabisco employees, and forfeitures attributable to individuals
who terminated employment prior to June 14, 1999, but would have been
employees of Nabisco or its affiliates on June 14, 1999 but for such
termination of employment, have been transferred to the Plan. Employees
may contribute, through payroll deductions, up to 16% of their
compensation. The Plan allows participants to make after-tax
contributions up to 16% regardless of whether or not pre-tax
contributions are made, providing the combined percentage of
compensation for pre-tax and/or after-tax contributions is a minimum of
1% and a maximum of 16%. Nabisco makes matching contributions to the
Plan equal to 50% of each participant's basic contribution (basic
contribution is 1% to 6% of compensation made on a pre-tax basis).
Pre-tax contributions in excess of 6% of compensation and contributions
made on an after-tax basis shall not be matched. Forfeitures of
non-vested Nabisco contributions are used to reduce future Nabisco
contributions to the Plan. Although it has not expressed any intent to
do so, Nabisco has the right under the Plan to discontinue its
contributions at any time and to terminate the Plan subject to the
provisions of ERISA. In the event of plan termination, participants
will become 100 percent vested in their accounts.
Effective June 14, 1999, the assets attributable to the eligible
salaried employees of the RJR plan were spun-off and transferred to
establish the Plan. As a result, net assets of $885,887,186, including
loans of $13,999,041 were transferred to establish the Plan in June,
1999.
The Loan Fund is a recordkeeping fund that holds employee promissory
notes. Participants may apply to the Nabisco Employee Benefits
Committee (the "Committee") to borrow vested funds from their account.
The Committee maintains sole discretion on whether to permit a loan in
accordance with the conditions specified under the terms of the Plan
agreement. Loans may not be less than $1,000 and are subject to a
maximum amount based on account balance and prior loan amounts. Only
one loan per participant may be outstanding at any given time.
Under the provisions of the Plan, participating employees may elect to
invest their contributions in one or more of the following investment
funds (see explanation of commingled funds in Note 2):
-4-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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1. DESCRIPTION OF THE PLAN - CONTINUED
Continuing Funds:
Interest Income Fund The Interest Income Fund seeks to achieve
long-term growth in assets through
compounding of interest income. This Fund
consists largely of a diversified
portfolio of investment contracts issued
by insurance companies and banks
("GICs"). The Fund also invests in what
are known as synthetic GICs -
fixed-income securities such as
high-grade bonds, mortgage-backed
securities, or asset-backed securities
that are "wrapped" by a contract with a
high-quality financial institution. A
"wrap" contract assures the book value of
the underlying security. The combination
of GICs and synthetic GICs make up about
75% of the Fund. The remainder of the
Fund consists of a fixed-income
Government Bond Index Fund with an
average maturity of 1 to 3 years. This
index fund invests in U.S. Treasuries and
Government Agency securities. This Fund
also maintains a very small level of cash
to provide liquidity in processing daily
transactions.
Total Stock Market Fund The Total Stock Market Fund seeks to
maximize long-term financial return
through a combination of dividend income
and capital appreciation by investing in
a broadly diversified portfolio of common
stock. The objective of this Fund is to
capture the return of the total U.S.
stock market for the investor. This Fund
is designed to parallel the returns of
the U.S. stock market through passive
investment in the Vanguard Index Trust -
Total Stock Market Portfolio. The
portfolio holds stocks of nearly 2,000
companies in an effort to match the
performance and risk characteristics of
the entire U.S. Stock market as
represented by the Wilshire 5000 Index.
The Fund will also maintain a very small
level of cash to provide for liquidity in
processing daily transactions.
Total International Fund The Total International Fund seeks to
maximize long-term total return through
a combination of dividend income and
capital appreciation by investing in a
broadly diversified portfolio of
companies located in
-5-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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1. DESCRIPTION OF THE PLAN - CONTINUED
Total International European, Pacific and emerging market
Fund - Continued nations. The Fund is designed to parallel
the return of the major-stock markets of
the world, excluding the U.S. and Canada.
This Fund invests in the Vanguard STAR
Fund - Total International Portfolio. The
portfolio holds stocks of about 1,500
companies located in approximately 30
countries around the world (excluding the
U.S. and Canada). The Fund will also
maintain a very small level of cash to
provide for liquidity in processing daily
transactions.
Conservative Growth Fund The Conservative Growth Fund seeks to
maximize long-term total return primarily
through compounding of interest income
and secondarily through dividend income
and capital appreciation of common
stocks. The Fund provides investors with
a conservative mix of broadly diversified
investments in fixed-income securities
and U.S. and International common stocks.
This Fund invests in the Vanguard
LifeStrategy Conservative Portfolio which
invests in a combination of Vanguard
funds to achieve a target mix of 40%
stocks, 40% bonds, and 20% short-term
reserves. Bonds and short-term reserves
provide income while offsetting some of
the stock market's volatility; stocks
offer the potential for growth and income
from dividends. The Fund will also
maintain a very small level of cash to
provide for liquidity in processing daily
transactions.
Moderate Growth Fund The Moderate Growth Fund seeks to
maximize long-term total return through a
combination of compounding of interest
income and through dividend income and
capital appreciation of common stock. The
Fund provides investors with a moderate
mix of broadly diversified investment of
U.S. and International common stocks and
fixed-income securities. This Fund
invests in the Vanguard LifeStrategy
Moderate Growth Portfolio which invests
in a combination of Vanguard funds to
achieve a target mix of 60% stocks and
40% bonds. Bonds provide income while
offsetting some of the stock market's
volatility; stocks offer the potential
for growth and income from dividends. The
Fund will also maintain a very small
level of cash to provide for liquidity in
processing daily transactions.
-6-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
--------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN - CONTINUED
Growth Fund The Growth Fund seeks to maximize
long-term total return primarily through
capital appreciation and secondarily
through dividend income and compounding
of interest income. The Fund provides
investors with a broadly diversified
exposure to U.S. and International stocks
tempered with a modest position in
fixed-income securities. This Fund
invests in the Vanguard LifeStrategy
Growth Portfolio which invests in a
combination of Vanguard funds to achieve
a target mix of 80% stocks and 20% bonds.
Bonds provide income while offsetting
some of the stock market's volatility;
stocks offer the potential for growth and
income from dividends. The Fund will also
maintain a very small level of cash to
provide for liquidity in processing daily
transactions.
Nabisco Group Holdings The Nabisco Group Holdings Common Stock
Common Stock Fund Fund seeks to maximize long-term total
return through capital appreciation and
dividend income. This Fund is invested
primarily in the common stock of Nabisco
Group Holdings Corp. The Fund will also
maintain a very small level of cash to
provide for liquidity in processing daily
transactions.
Nabisco Common Stock Fund The Nabisco Common Stock Fund seeks to
maximize long-term total return through
capital appreciation and dividend income.
This Fund is invested primarily in the
class A common stock of Nabisco Holdings
Corp. The Fund will also maintain a very
small level of cash to provide for
liquidity in processing daily
transactions.
RJR Common Stock Fund The RJR Common Stock Fund seeks to
maximize long-term total return through
capital appreciation and dividend income.
This Fund is invested primarily in the
common stock of R. J. Reynolds Tobacco
Holdings, Inc. The Fund will also
maintain a very small level of cash to
provide for liquidity in processing daily
transactions. This Fund is a frozen fund
that holds stock transferred from the RJR
Common Stock Fund under the RJR Plan.
Participants are prohibited from
investing contributions or reallocating
amounts held under the plan to this Fund.
-7-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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1. DESCRIPTION OF THE PLAN - CONTINUED
Loan Fund Participant borrowings from the Plan
subject to requirements established by
the Committee.
Additional information about the Plan agreement and the vesting and
benefit provisions is contained in the Summary Plan Description
provided to participants.
2. SIGNIFICANT ACCOUNTING POLICIES
COMMINGLED FUNDS - The Nabisco, Inc. Defined Contribution Master Trust
(the "Trust") administers pooled assets and related liabilities within
various funds established on behalf of participating defined
contribution plans for employees of Nabisco and affiliated companies.
Each participating defined contribution plan owns an interest in the
fair value of net assets held in the Trust. The trustee and custodian
of the Trust is Wachovia Bank, N.A.
VALUATION OF INVESTMENTS IN MASTER TRUST - All investments held by the
Trust are valued at fair value as follows. Securities that are traded
on a national securities exchange are valued at the last reported sales
price on the last business day of the Plan year. Over-the-counter
investments traded on the NASDAQ and listed securities for which no
sale was reported on the last business day of the Plan year are valued
at the average of the last reported bid and ask prices. All other
over-the-counter investments are valued at the last reported bid. The
fair market value of fixed income investments is based on an
institutional based pricing system. Investment grade bonds are valued
on a pricing system based on treasury securities. The fair market value
of the participation units in common trust funds is based on quoted
redemption value on the last business day of the Plan year. Guaranteed
investment contracts are valued at contract value plus accrued
interest.
PLAN EXPENSES - Expenses relating to the purchase or sale of
investments are included in the cost or deducted from the proceeds,
respectively. Direct charges and expenses including investment manager
fees attributable to specific investment funds may be charged against
that investment fund. Other Plan expenses such as trustee, auditor,
general Plan recordkeeping, and Internal Revenue Service ("IRS") user
fees may be paid directly from the Trust. Other expenses continue to be
paid by Nabisco.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In September 1999, The American Institute of Certified Public
Accountants issued Statement of Position No. 99-3(SOP 99-3),
"Accounting for and Reporting of Certain Defined Contribution Plan
Investments and Other Disclosure Matters". Effective for fiscal year
1999, the Plan adopted (SOP 99-3), which simplifies disclosures for
certain participant directed investments. Accordingly, information
for both 1999 and 1998 are presented in the aggregate for all related
funds.
-8-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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3. INVESTMENTS
Within the Trust at December 30, 1999, the Plan owned 88.97, 85.51,
88.80, 88.32, 86.79, 87.82, 71.50, 86.82, 68.18, and 65.14 percent of
the total current value of the investments of the Interest Income Fund,
Total Stock Market Fund, Total International Fund, Conservative Growth
Fund, Moderate Growth Fund, Growth Fund, Nabisco Group Holdings Common
Stock Fund, Nabisco Common Stock Fund, RJR Common Stock Fund, and the
Loan Fund, respectively.
Investment income and the net appreciation (depreciation) in the fair
value of the investments held by the Trust are allocated to the
participating defined contribution plans based on each plan's
percentage interest in the fair value of such investments.
During 1999, the Trust's investments (including investments bought,
sold, as well as held during the period) appreciated (depreciated) in
fair value as follows:
-9-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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3. INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999
--------------------------------
Net Appreciation
(Depreciation) Fair
in Fair Value Value at
During Year End of Year
----------------- -------------
<S> <C> <C>
INTEREST INCOME FUND
Guaranteed investment contracts,
(contract rates ranging from 4.924%
to 7.69% at December 31, 1999) $ -- $ 195,382,755
Bond investment funds 3,036 72,516,810
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 23,839,262
------------- -------------
$ 3,036 $ 291,738,827
------------- -------------
Plan's interest therein $ (33,448) $ 259,560,770
------------- -------------
TOTAL STOCK MARKET FUND
Equity investment funds $ 68,234,607 $ 501,249,131
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 6,191,060
------------- -------------
$ 68,234,607 $ 507,440,191
------------- -------------
Plan's interest therein $ 58,354,639 $ 433,900,741
------------- -------------
TOTAL INTERNATIONAL FUND
Equity investment funds $ 5,154,123 $ 30,406,195
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 559,632
------------- -------------
$ 5,154,123 $ 30,965,827
------------- -------------
Plan's interest therein $ 4,637,694 $ 27,497,519
------------- -------------
NGH COMMON STOCK FUND
Nabisco Group Holdings Corp.
Common Stock $ (15,689,033) $ 16,566,288
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 259,079
------------- -------------
$ (15,689,033) $ 16,825,367
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Plan's interest therein $ (11,090,825) $ 12,030,621
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</TABLE>
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<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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3. INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999
--------------------------------
Net Appreciation
(Depreciation) Fair
in Fair Value Value at
During Year End of Year
----------------- -------------
<S> <C> <C>
NABISCO COMMON STOCK FUND
Nabisco Holdings Corp. Class A
Common Stock $ (8,715,309) $ 25,802,818
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- (229,615)
------------- -------------
$ (8,715,309) $ 25,573,203
------------- -------------
Plan's interest therein $ (7,664,978) $ 22,201,759
------------- -------------
CONSERVATIVE GROWTH FUND
Equity investment funds $ 974,666 $ 36,173,818
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 707,472
------------- -------------
$ 974,666 $ 36,881,290
------------- -------------
Plan's interest therein $ 941,080 $ 32,574,647
------------- -------------
MODERATE GROWTH FUND
Equity investment funds $ 3,939,819 $ 64,205,239
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 888,475
------------- -------------
$ 3,939,819 $ 65,093,714
------------- -------------
Plan's interest therein $ 3,395,237 $ 56,497,777
------------- -------------
GROWTH FUND
Equity investment funds $ 8,105,084 $ 83,191,282
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 1,038,466
------------- -------------
$ 8,105,084 $ 84,229,748
------------- -------------
Plan's interest therein $ 7,015,276 $ 73,966,447
------------- -------------
</TABLE>
-11-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED
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3. INVESTMENTS - CONTINUED
<TABLE>
<CAPTION>
PERIOD ENDED DECEMBER 31, 1999
--------------------------------
Net Appreciation
(Depreciation) Fair
in Fair Value Value at
During Year End of Year
----------------- -------------
<S> <C> <C>
RJR COMMON STOCK FUND
RJ Reynolds Tobacco Holdings
Corp. Common Stock $ (6,638,392) $ 5,548,914
Wachovia Bank, N.A.
Diversified Short-Term
Investment Fund -- 21,980
------------- -------------
$ (6,638,392) $ 5,570,894
------------- -------------
Plan's interest therein $ (4,718,661) $ 3,798,179
------------- -------------
LOAN FUND
Loans to participants $ -- $ 21,005,493
------------- -------------
$ -- $ 21,005,493
------------- -------------
Plan's interest therein $ -- $ 13,683,149
------------- -------------
</TABLE>
-12-
<PAGE>
NOTES TO FINANCIAL STATEMENTS - CONTINUED.
--------------------------------------------------------------------------------
4. EMPLOYEE WITHDRAWALS
At December 30, 1999, employee withdrawal requests of $2,429,474 were
not accrued in accordance with the AICPA Audit and Accounting Guide
"Audits of Employee Benefit Plans".
5. INCOME TAX STATUS
The Plan has not yet received a determination letter from the Internal
Revenue Service ("IRS") that the Plan and related Trust are designed in
accordance with applicable sections of the Internal Revenue Code (the
"Code"). However, the Plan administrator believes that the Plan is
currently being operated in compliance with the applicable requirements
of the Code. Therefore, no provision for income taxes has been included
in the Plan's financial statements.
6. NET TRANSFERS TO THE PLAN
During 1999, net transfers of assets of $884,517,685 were made to the
Plan primarily due to the split of the RJRN CIP Plan, with the
remainder due to company divestitures and employees transferring
between affiliated plans.
-13-
