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19S2 0926716-008

annual or, FOR THE YEAR ENDED DECEMBER 31, 7952 W]TH CONSOLIDATED BALANCE SHEETS CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Executive Office 111 FIFTH AVENUE • NEW YORK 3, N. Y.

Ss952 ,9~_= Net income per common share ................. : ................ $4.79 Dividends paid per eonm]on share ............................. 4.00 19s~1 $4.64* 4.00 Net s~les ........................................................ $1,065,73B,454 Income, before taxes on income ....................... 78,351,963 Net income .......................................... 34,G68,963 Dividends pald (preferred and common) ............. 27,@95,973 Portion of ~el income invested in assets used in the h~lsi~es~ and to provide ior debenture sinking fund requirements 6,972,990 Current assets, December 31 .......................... 712,653,905 Current liabilities, December 31 ....................... 161,399,785 Net working capital, December 31 ............... 55L254,120 8'942,552,034 80,397,669 33,109,669 24,675,682 8,433,987 668,233,873 212,177,930 456~055,94,1 Nuraher of stockholders at December 31: Common ................................... 74.792 66,693 Preferred ................................. 8,166 8,324 * Ba~ed upon 6~454,110 v.hares outstanding al December 2;1, 1952. Baaed upon 5,~78,425 shares which wore outstanding ~t December 31, 1951, ~he amount wa~ $5.57 per share.

To our STOCKHOLDEII$: This letter, together with the accompany- ing financial ~tatemeots, is your Manage- ment's report on the operations of your Company, incladillg its consolidated sub- sidiarles, in 1952. The financial results for tile year are, of course, of paramouut interett to the stockholders. Some o1 the more important facts relating to 1952 opera- tions are set forth below: 1. Dollar and unit sales reached a new high and were again the largest in" the industry. Dollar sales totaled $1,065,738,454. 2. Net income f,,r the year increased to $34,068,963. 3. The sale in March 1952 of addltlonal common stock and debentures has materially strengthened your Com- pany's financial position. SALES Dollar volume in 1952 increased $123,186,420 to $i,065,738,454. About 59 per cent of the gain was due to higher unit sales of elgarettes and the remainder to the rise ht the Federal excise tax that became effective November l, 1951. Sales of the Company in 1952 increased at a rate substantially h~gher than that for the industlT as a whole. February 5, 1953 Between 19,tO and 1952 inclusive, the dollar sales volume of The American To- bacco C.mpany increased by 245 per eel,t, compared with an increase of 185 per cent in the combined dollar sales volume of the four other principal tobacco companies. This is illustrated in the following chart, in wblch 1940 salem volume fo," tl,e Com- pany and /or the four other pHncipaI tobacco companies is indexed at 100. Growth in Dollar Sales Since 1940 0940=100) ~ IM A~ ToMe:o ~r~ m Four Major Com~fitors 1940 '41 '42 '43 '44 '4~ '46 '47 '48 '49 '50 '51 '52 Tf~e Ctmlpany's ttnit sales of cigarettes in 1952 were the largest in the industry and in the Company's history. Ahlmugh LUCKY STRIKE total domestic ~ales showed a decline for the year, there are

encouraging indications dmt in potentially important groups of consumers LUCKY SIRIKE has achieved sales leadership. One o£ sltch groups is the United States Armed Forces, ~*here reports indicate that lUCKY STRIKE is the favotile brand. Also, a recent nation-wide sur~ey based on actual interviews at eighty leading col- leges indicates that cellege students prefer LUCKY STRIKE by a wide margin and that LUCKY STRIKE, during the college year September 1951 f~ ]line 1952, gained more smokers than the nation's two other principal brands combined. Sales of our two king-size cigarettes PALL MALL and HERBERT TAREYTON, increased substantially in 1952. PALL MALL is the largest-selling klng-size cig- arette in America and has advanced to fourth place among all cigarette brands. Sales of LA CORONA and ANTONIO y CLEOPATPu~, leaders in the field of high* grade cigars, were higher in I952 than in the previous year. ROI-TAN eontinued to be the large~t-selling eigar in its price class. Sales of the Company's smoking tobacco brands, wtdeh constitute a relatively minor portion of tot,d sales, decreased at about fl~e same rate as that re*" d~e industry as a whole. EAIII~INGs AND TAXES Consolidated net income for 1952 amounted to $84,068,963 and was $959, 294 higher than fog 1951_ .Income before taxes was less than for the previous year, but fieeause of lower excess p¢ofits and income tax liability, ]let ineemu increased. The lower tax liability was due principally to greater excess profits tax credit whb:h resulted ~'rom the ~ale in OI ¢ i i I I I t 19,10 '41 '42 '43 '44 '15 '46 '47 '4~ '49 '50 '51 '52 March 1952 of additional common stock and debentures. Taxes on income in 1952 were equivalent to $(;.86 per common share compared with earnngs o+' $1.79 per share after taxes. DIYI:DENDS During 1952 dividends of $4.00 per sbare were 1told on the common stock, eort- sistlng of fmu" regular quarterly dividends of 75 cents each and art extra dividend of $i.00. A dividend of S1.75 per share, consisting of the regular dividend of 75 cents and an extra dividend of $1.00, will be r~ ailed to stockhoblers on March 2, 1953. 'I'ihe March 2 dividend is the 190th con- secutive dividend paid mt the common stock siru:e the incorporation of the Company in 1904. While the amount of the dividends paid on common stock during these years hats ~,aried because of wa'iations in earnings, dividends on the preierred and tttmltnon stocks have been paid every year since tim incorporation of the Company. This is a~l ou stand ng record and one ha S espee a y

important to stockholders who depend upon the regularity o£ their investment income, CIGARETTE PRICES At this time last year your Management reported that it was making every effort to obtain permission from the Office of Price Stabilization to raise the price of eigarottcs. 0a April 15, 1952, the Office of Price Stabilization informed the cigarette indus- try iliab based on its survey of cost and earnings in the industlT, no change in ceilings would be made at that time. 011 September 15, 1952, the Company re- quested the 0IEce ol Price Stabilization to reconsider clgarette ceiling prices. Supple- mental data was furnished to the Of~ce of Price Stabilization in connection with this request. On January 7, 1950, the Company was informed that the committee which had been appointed to review this request had~ reeomrnended disapproval of a price in- CreaSe. Slight relief from the eust-prbe ~lUeeze was obtained in August when cigar prices were decontrolled. However, slnee cigar sales represent only a very small pordon of our total sales, the relief afforded hy the rise in cigar prices is insignificant. As a consequence, your Company had to absorb the continuing higher costs of Maf tobacco, packaging materials, wages and other items without being able to recover any appreciable portion of such additional costs through increases in the prices of its products. Thus, notwithstanding substantially larg- er sales volume,--higher by $123,000,000 than in 1951, income before taxes was less in 1952 than Jn the previous year. If it had not been for diminished excess profits and income tax liability for 1952, net in- come for 1952 would have been lower than for i951. The expected expiration or terminaSon of cigarette price controls gives hope for the future. INVENTORIES As has been true fnr a number of years pasb the Company's inventories of leaf tobacco, manutactnred stock, operating supplies, etc., again increased in 1952. The amount of the increase was approxi- mately $46,000,000. Most of this was thte t~J tim larger physical quantities of leaf tobacco which are necessary to maintain adequate supplies of properly aged leaf consistent with the growth of the Company's business. Although drought eondi8ons, which were generally prevalent throughout the tobacco- g~owing areas this summe~, adversely af- fected the 1952 tobacco crops, your Com- pany was able to foresee this condition in time to make pre~season purchases of prior yoars' tobacco, thus obtaining an adequate quantity of top quality cigarettte tobacco commensurate with its production rcquire- inent~. During the period from 1940 to 1952, the Company's sales expanded from $309,325,885 to $1,065,738,454 while inventories rose from $159,428,115 to $640,753,119. The increase in the value of irlvcntories during this period was due to the larger physical quantities of leaf tobacco needed and to higher prices re- quired to be paid tor our leaf purchases. The growth in the Company's volume of sales over the years, together with the larger quantities of tobacco required in the pro-

771e ~n~can Tdmcco Compauy Growth in [uve~#ories and Sales 1940 '41 '42 '~ '44 '45 '46 '47 '48 '49 '50 '5I '52 duction of FALL MALL and HERBERT TAREYTON king-sizo cigarettes, has oc- casloned the increase in the physical quan- tity of our leaf tobacco inventories. Since 1933, except for the year 1939, the Federal Government has exercised a degree of restrictive control over the pro- duetlon of flue-em'ed and hurley tobacco crops. Marketing quotns have been in eiiect for flue~eured and bttrley tobaccos, az~d Congress has provided mandatory price support for tobaee~ wheoevcr m~rketit/g quotas are Jn effect..Largely as a conse- quence of this program, the prices paid by the Company during the past season for flue-cured and bttrley tobaccos, which are the principal cigarette types of leaf tobacco, weze more than two and ~ne-half times as higit as they were ia 2940. Funds for the larger investment in leaf tobacco inventories have been provided seasonally through short-term loans from banks. However, at periodic inter~als since 1940, the Company has funded a total of $325,000,000 of short.term debts and has obtained approximately $I0%,000~000 from the sale ot! additio~ral common stock to its stockholders. In March t952theCompany sold approx- imately $54,000,000 of common stock and sg0,000,000 of debentures, the proceeds o~ which were used to retire an equivalent amount of bank loans, which had amounted to $140,(EO,000 on Decernb,er 31, 1951, and had reaohed a peak of $162,000,000 in January 1952. Your Management takes pleasure in re- porting that of the 1,075,6~15 shares of common stock oKered to the common stock- holders at $52 per share in March 1952, 1,047,864 shares (or 97.4 per cent) were suhscrlbed for through the exercise of rights. The remaining 27,821 shares were purchased by the underwriters. Bank loans at December 31, 1952, amounted 1o $92,000,000, a decrease of $48p000,000 front the end oJf I951. During the year, fmlded debt prevthusl3' issued was reduced $10,366,000 through the operation of sinking funds. Your Mat~agement is of the oplnthu that working capital at the present time is ade- quate for tbe needs of the foreseeable future, and in the absence of unusual developments doe~ not contemplate any new financing. THE COMP~N'Y~S POSITION IN TI~E IN/)(JSTHy Each stockholder of The American To. haceo Company has the advantage of having a major slake in virtuaBy the entire field of tobacco products. Your Company is in the

exceptionally strong position of having three out of the seven most popular cigarette brands--LUCKY STRIKE, PALL MALL and HERBERT TAREYTON; three great cigar brands--LA CORONA, ANTONIO y CLEOPATRA and ROI-TAN; and two popular smoking tobacco brands--HALF & HALF and BULL DURHAM. Thus, each stockholder has an interest in a group of broods, whlch represents the best diversi- fication of sales in the industry. In addition to its prominent position in the standard-~ize cigarette field, which is maintained by the Company's largest hrand, LUCKY STRIKE, your Company is well established in the klng-size field with PALL MALL and HERBERT TAREYTON. ADVERTISING Your Company's products are sold in a highly eompetiBve market and the main- ,, tenance of the leading position o£ the Company's brands requires extensive adver- tising and promotion. Sales of file Com- pany's principal eiga~elte brand& LUCKY STRIKE, pALL MALL and HERBERT TAREYTON, are promoted extellslvely through televislon~ radio, magazine, news- paper and billboard advertising. Advertising is a principal factor in achieving the great volume of cigarette sales, without which the cost of manufac- turing cigarettes and their price to the con- sumer would necessarily be ruuch higher than they are today. Considerable misin- formaBon exists as to the cost of cigarette advertising. In spite of its comprehensive nattrre, your Company s c'gare e adver s- ing costs only about one-third of a cent per package of twenty eigarenes. Throughout all our advertising runs the tnaiu theme of quality, which is the most importallt factor in the popularity of LUCKY STRIKE, PALL MALL ned HERBERT TAREYTON Cigarettes. The use of quality leaf tobacco and die careful methods employed in the manufacture of our cigarette brands are eonstandy empha- sized in our advertising. During 1952, LUCKY STRIKE televi- sion and radio programs and personalities continued to receive recognition through some twenty-five different local and national awards for excellence of performance. "Your Hit Parade", herb in televisJo~ al)d radio, took top honors th the musleaI field; "Robert Montgomery Presents" was voted the best television dramatic serie% and "The Jack Betray Program" was again named the outstanding comedy show and Mr. Benny the best comedian. EMPLOYEE RELATIONS As of the end of the year the Company and its subsidiaries had approximately 19,000 reguIar fuR-tlme employees in the United States. The relafionsbJp between the Company and its employees has been satisfactory. All regular fulbtime employees in tbe United States are covered by a retirement plan and are provided wifil group life insur- ance coverage. In addition, medical attd hospital benefits are provided, as well as sick leave pay. On behalf of the Board of Directors, I should like Io expless our appreciation for the continued active intere*t of tlw ~tock- holders in the affairs 0£ o~sc Ccmq)any mtd for the cooperation of our employees and elxs~Olners. PAUL M. H~.llrt President 7

1952 OPERATIONS AT A GLANCE THE COMPANY RECEIVED FOR GOODS IT SOLD AND FROM DIVIDENDS, INTEREST AND M]SCELLANEOUS $1,067,211,000 THIS IS HOW IT WAS USED OR 54% FOR REVENUE 5TAMPS AND TAXES 27% FOR TOBACCO (incJudlng applicabEe expenses) SET ASIDE: $575,089,000 $287,852,000 15% FO~ WAGES, GOODS, SERVICES, ETC. 1% FOR BOND AND BANK INTEREST $160,302,000 $9,899,000 1/~% FOR EARNINGS RETAINED TO MEET FUTURE NEEDS $27,096,000 $6,973,000

{ ~/.)t< i ~t'~,'~J~j ~'t~///C r~E,~ ~ subsidlarie~ except The Amerlean For years ended December 31 Toba¢c° Company of ~ Orient, Ine' 19~2 l%~T SALES .............................. $1,065,738,454 Cost of sales, selling, general and administrative expenses OPEBATING PROFIT .......................... OI]]er income .............. , ........................... 1951 $942,552,034 978,021,712 8.53,438,725 87,716,742 89,113,309 1,472,029 860,124 89,188,771 89,973,4~33 Interest and related charges ...................... 9,899,263 8,957,832 Other deductions from income .................................... 937,545 617,932 Total deductions ................... 10,836,808 9,575.764 Income, before taxes on income ................................ 78,351,963 80,397,669 Federal and other taxes on income (Note 1) ................ 44,283,000 47,288,000 NET INCOME ................................................... 34,068,963 33,109,669 Retained earnings, beginning of year ............................. 112,754,074 104,320,087 ] 4~5,823,037 137,429,756 Cash dividends: Common stock, $4 pel" share .................................. 23,933,991 21,513,700 Preferred stock, $6 per share .............................. 3,161,982 3,16],982 Total dividends ...................... 27,095,973 - 24,673,682 Retained earnings, end of year (Note 2) $119,727,064 $112,754,074 Depreeialioh pravided and charged Io costs and expenses amounted to $3,I00,517 in 1952 and g2,996,883 in 1951. 9

Including Amoti~an Cigarelle and Cigar Co~apany and all wholIy owned do~aaesti¢ subsidiaries ¢+x,~epl ~J'h+" Alll~ri,~ll Tobacco Co/flparly of the O~ielal, ~nt. As of December 31 ASSETS 1951 Demand deposits in banks and cash on hand ........................... $ 26,409,726 $ 3],992,252 Accounts receivable, customers ......................................... 44,509,503 40,571,157 Leaf tobacco, manufactured stock, operating supplies, etc., at average cost .................... 640,753,11rl 594,543,551 Miscellaneous accounts receivable ......................... 981,557 1,126,911 Total current assets ................. ., ..................... 712,653,906 668,233,871 Investments in securities of unconsolidated subsidiaric.., at amounts not in excess of cost (includes $3,400,000 in "Mmlly owned British subsidiary) (Note 3) ...... 16,500,133 Advances to unconsolidated subsidiaries .................................. 2,046,000 11,704,285 4,400,000 Insurance deposits and miscellaneous investments 2,375,356 2,320,269 Real estate, machinery, fixtures, etc., at cost. less allowance f~r depreciation, 1952, $32,856,525; 1931, $30,732,657 44,479,53g 44,247,672 Prepaid expenses and deferred charges ............................. 4,299,415~ 3,573,877 Brands, trade-marks, patents, good will, ete ................. ] $783,154,349 $734,479,975 I0

LIABILITIES ]95~ Notes payable to banks ...................................... $ 92,000,000 Accrued taxes ........................................................ Accounts payable and accrued expenses ..................... Dividend on preferred stock for quarter ended December 31 Debentures to be redeemed through sinking fund operations (Note 4) .............................................................. 195_~l $1.t0,000,000 48,032,415 50,797,675 9,626,874 11,133,759 790,496 790,496 10,950,000 9,456,000 Total current liabilities ............................. 161,399,785 212,177,930 Debentures (Note 4) .......................... ,, .................. 243,570,000 205,430,000 404,969,785 417,607,930 Minority interest in American Cigarette and Cigar Company .... 1,110,609 1,046,290 CAPITAL Capital stock (Note 5): Preferred, six per cent cumulative, par value $100 per share 52,699,700 52,699,700 Common, par value $25 per share ......................... 161,352,750 136,803,4.50 Excess of net proceeds from sale of common stock over par -9 value (Note 6) .................................. 43,'294,441 20,5 5.~ 1 257,346,891 210,078,741 Retained earnings (Note 2) .......................... 119,727,064 __112'754'074 377.073,955 322,832,815 Less, Treasury stock, at cost (93,713 shares of common stuck sold in 1952) .................................................... 7,007,060 Total 377,073,955 315.025,755 $783,154,349 $734,479,975 I1

l. fncDtdes federal excess profits taxes of $2,065,000 for 1952 and $5,050,000 for 195L Tbe 1952 amount represents a provision of $3,285,000 by a subsldia:ty, less a reduction of $1,220,000 under the carry-back provisions of Ihe Internal Revenue Code due to an unused excess profits tax credit of the Company. 2. Ur~der the provislo~ls of the indenture relatitlg to the Twenty Year 3N Debelltures, due January 1, 3.968, cash dividends declared on eoramon stock and payments made in pur- chasing shares of any class of the Company's stock subsequent to December 3i, 1947, may not exceed the aggregate of $~5,000,000 and consc,lidated net income ealned subsequent to December 31~ 1947, less dividends paid on preferred stock. At December 31, /952, approximately $89,000,000 of retained earathgs wa~ free of this restriction. 3. The net tangible assets applicable to the investmtmts in unconsolidated subgidiaries at December 31, 1.952, amounted t¢ $21,609,877, it,eluding $8,976,221 net assets of tbe British subsidiary translated into d~fllars at appro1~fiate rates of exchange. Dividends and interest of $1.,1.58,071 were received from these investments in 1952; the equity in earnings applicable to such investments amounted to $1,753~689. 4. Debentures outstanding at December 31.,'~952, corr@rise: Pr]nclpa[ Amotm~ Twe~ty yea~ 3%, due April 15, 1962 ............... $ 3.456,000 Twenty year 3%, due January l, 1968 ............. 3,000,000 Twen~.five year 3%, due October 15, 1969 .......... 3,104,000 Twenty-fi~e year 31/x%, due February 1, 1977 ........ 1,390,010 $10,950,0~0 Redeemable Redeemable Within After On~ year~ Dee. 31.1953 $ 62,666,0(10 60:000,000 72~294,000 4~,610,1(10 $243~570,0fl0 * Estimated principal amounts to he redeemed through sinking fund c,peratinns at prices as provided by the indentures. 5. Capital stock at December 31, 1952, comprises: S[l~lres "Authorized Issued Preferred ................................. 540,196 526,997 Common ..................... ~0,(]O0=t)(}O fir454.1~0 6. Tile incrca*e in Excess of net proceeds flora sale of common stock over par value resulted from the sale of ],075,685 shares of common stuck, whlcb included 93,713 shares of treasury stock. 12

The Board of Directors and Stockholders o[ THE AME~ICAN TOBACCO COMPANY. We have examined the consolidated balance sheet o~ TIIE AMERICAN TOBACCO COMPANY as o~ December 31, 1952, and the relamd consolidated statement of income and retained earnings for the year then ended. Tim financiaI statements of American Cigarette and Cigar Company, a consolidated subsidiary, were examined by other independent certified pub]ic accountants. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests o~ the accounting records of the companies (except American Cigarette and Cigar Com- pany) and such other auditing prccodu~s as we considered necessary in the cir- cumstances. We nlade a similar examination for the year 1951. In our opinion, based upon oar examinations and upon the reports of other independent cerii~ed public accomltants, the accompanying balance sheets and related statements of income and retained earnings present fnirly the consolidated position of The American Tobaccn Company and the subsidiaries included therein as of Decem- ber gl, 1952 and 1951, and the consolidated results of their operations for the years then ended, in eon~o~nity wll]l generally accepted accounting principles applied on a consistent basis. LyBRAND, l{OSS BROS. & I~[ONTGOMERY New York, February 2, 1953. 13 L

For years muted December 31 {Jn Thaosand,) ,9s__j= tgs, ,gso 1,42 ,9_._~ NET SALES ......... $I,065,738 $042,552 $871,621 $858,996 $873,467 Cost of sales ........................ 978,021 853,439 785,026 775,712 794,248: OPERATING PROFIT ..... 87,717 89,113 86,595 8.3,284 79,219 Other income -- Net ..... 534 243 1,095' 490 283 88,251 139,356 85,500 83,774 79,502 Interest and related charges 9,899 8,958 8,736 8,952 8,568 lacome before taxes cr~ itteome 78,352 80,398 76,764 74,g22 70,934 Taxes on income .............. 44,283 417,288 35,031 29,147 27,022 NET INCOME ............. 34,069 £;3,110 41,733 45,675 43,912 DIVIDENDS PAID: Preferred .......... Coiili11oll ............ 3,162 3,162 3,162 3,162 3,162 23,934 21.514 21,514. 21,514 20,169 27,096 24,676 24,676 24,676 2.3,331 P~)r~ion of net itm~me irtve~ted in assets used ill the business and to provide for debenture sinking fund requirements ......... $ 6,973 $ 8,434 $ 17,057 $ 20,999 $ 20,581 # Deduction 14 l"

As of December 31 ASSETS l*s~ lts~ Cash ................................... $ 26.410 Accounls receivable, customers ..... 44.809 Inventories ...... 640,753 Miscellaneous accounts receivabie 982 Total current assets ...... ~12,054 Investments in unconsolidated sub- sidiarles ................. Other receivables and investments Plant and equipment- net Prepaid expenses, ere ......... Brands. Lrade-marks, etc ................. Total assets ......... $783.154 (im lhouland$} 19s..~o 194~ lv4s $ 31.992 $ 22.157 $ 17.949 $ 16,176 40,571 36.783 33,128 36.020 594.544 532,679 531,558 514,958 1,127 1.407 1,127 729 668.234 593.026 583,762 567.883 16,500 11,704 12,848 ]4.080 14.446 5.221 6.720 4,801 5.813 4,873 44.480 44.248 43,747 43,507 41.859 4,299 3,574 2.983 3.345 3.515 ., -- -- 54,099 54.099 $734.480 $657.405 $704,606 $686,675 LIABILITIES AND CAPITAL Notes payable ..................... $ 92,000 Accrued taxes .............. 48.032 Accounts payable and accrued ex- penses .................... 9.627 Preferred stock dividend ......... 790 Funded debt due within one year 10.950 Total current liabilities ..... 161.399 Funded debt ..... 243.570 Minority interest .......... 1.111 Capital ........... 257.347 Retained earnings .............. 1t9.727 Treasury siock (deduction) -- Total liaIDilities and capital $783,154 $140,000 $ 73,000 $ 80,000 $ 72,000 50.798 39.942 34.906 34.949 11,134 8.919 7.542 9.487 790 790 790 790 9.456 10.722 9,694 9,211 212.178 133.373 ]32,932 126.387 205,430 215.653 226,375 236~69 1.046 987 865 784 210.079 210,079 210.079 210~79 112.754 104.320 ]41.362 120,363 (7.007) (7.007) (7,007) (7,007) $734,480 $657805 $704,606 $686.675 Ill m

INCORPORATE:E) DIRECTORS 0RpBEU~ D. BAXALy$ ALFNED F. BOWD~N RICHARD J. BOYLAN DOUGLAS W. BRASH~AR T~O~AS P. C0~NORS JAMES R. Coo~ JOHN A, C~OWE JOH~ S. DOWD PRESTON L. FOWLV~R PAN, M. HXaN HIRAM R. ~ANVIER XDMUD[D A. HARVEY HARRY L, HILYARD JOHN R. HUTClllNGS, JR, A. LERoY J~J~sos WILLIAM ~, OGSBUI~¥ J~B F. ~TRICKL%ND OFFICERS PAUL M. HAhN ............. Pr~dem RICI~RD J. BOYLAN ......... Vice Pre~ideng J~.MES R. CooJ: .......... Vice Pr~slden; JOHN A, CROWE .......... Vice Pr~*ident PRESTOI~ L. ]7OWLL~ ........ Vice Pre~iden~ ~MIT~D A. HAItV~X ......... V~C* Pr¢~de~ HA~R'Z L. I~n.'A~D ........... Treasurer A. LxRo~ JA~SO~ ........... AMitor ALFBED F. BOWDEN * . , . . . As~st,~r~t m the Pres~ds,iI JO~N ~. ]~hNLON ........... Secretory J. WE~LR'f D.~LE ......... st~ds~aa~ Av~i~¢ ]~D~/ARD D. ~LAI{ERTY ....... ~g-~lgt~ ~tt~or FKEDERICK ~, K~NNy ....... ~lssixtctit Se~ret~ry JOSEpI~ }{. WATEKDIOI[SE- , ..... Assistant Tteasgrer Executive Office: Corporate Office: Transfer Agent: Registrar: IIi FIFT~ AVENUE, NEW YO~X 3, N. Y, I[7 M~.IN STR~T, FI.EMINCT()~, N. J. GU~ANT~ ~[I~UST COMPANY (12 N£W YOR~, ~EW YORK 15~ iN, Y. C~Y B~< FAa~Ea~ ~UST (:O.~pm~, NEW yORZ~ 15, N. Y. h

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NOTICE OF MEETING Flemington, N. J., March 2, 1953 NOTICE IS HEREBY GIVEN that k~le Anuual Mcoting of the Preferred and Commort Stockholders of TIIE A~aI~II~CAN TOBACCO CoMI~m~r w~]l be hehl at No. 34 Court Street, Flemington, New Jersey, at one-t~rty o'clock in the a~ternoon (Eastern Standard ~me) on Wednesday, April 1, 1953, for the ~ollowing purposes: (1) to elect Directors; (2) to con~der and vote upon a proposal (designated Proposal A and set ~orth in the following proxy state- J merit) made by three stockholders; and (3) to transact such other business as may properly come before the meeting. The Preferred and Common Stock txansfer bo~s will not be closed, but holder~ of Preferred Stock and Common Stock to he cntifled to vote must be holde~ of record at the close o~ business on March 2, 1953. JO~N ~. tigLON, Secretary

PROXY STATEMENT The enclosed proxy is solicited by and on behalf <ff the Management and is revocable in writin$. Proxies in the form enclosed, property executed by stockholders and duly rerurland to the Management and not revoked, will be voted and, if a choice be specified with respect to matters to be acted uport, will 2~e vo~ed in accordance ~'ith such speclficattons. The outstanding number of each class of voting securities of the Company is: Preferred 526,997 shar~s; Commotl 6,454,110 shares. The Preferred Stork is entitled to four votes per share. The Common Stock is entitled to one vote per share. Year First Eleet~l Directol Common ]?referred L940 1,061 62 Alfred 17. Bowden Assistant to the President, The Amedca~ 1951 150 Tobacco ~ompany *Richard J. Boylan Vlce-Presldent, The Amerlca~Tahaeco ~929 2.135 B15 Cmnpany Douglas W. Brashear Vice-President, Amcrieau Suppliers, 1948 220 Iacorporated Thomas P, Cormora Director of Tra~e, Tile American 1946 174 Tnbacco Compaay James K. Coert Vie¢-Presldent, The American TobacQo 1936 783 50 Company John A. CrowQ Vlee-Preslde~t. ']The American Tobacco 1931 720 105 Company John $. Dotal E*ecative VicePreslde~t, American 1946 400 Suppliers, Incorporated Prestc*n L, Fowler Vice-Presidc~t, The Ameriea~ Tobacco 1941 720 100 Company Paut M. Hahn President, The Amerieaa Tobacco 1931 2,504 Company Hiram R. Hanmer Director of Research~ The American 193~ 144 Tobacco Company Edmund A. Harvey Vice.Pre~ideat, The American Tobacco 1932 800 40 Company Harry L Hilyard Treasurer, 39m American Tobacco 1944 350 Company Jahn B. Hutehlngs, Jr. Vice President, American Suppliers, 1951 200 lacorporated A. LeRoy fanson Auditor, The American Tobacco 1948 518 Company Y4Fdiiam II. Ogsbury Assistant Chief of Manulacture, The 1930 150 50 American Tobacco Company Jame~ F. Stricldand President, American Suppliers. 1946 420 Incorporated ELECTION OF DIRECTORS The Board of Directors consists of seventeen members who are elected to ]told office until the next AnnttaI Meeting or until their successors are duly elected and qualified. It is the inteution of the Proxy Committee to vote at this Aunua~ Meeting for the nominees named below. These nominees constitute the present Board and have served as director~ of the Company for the periods commeucahg with the da~s set alter their respect~e names. The Company is informed that these nominees were directly or indirectly the beneficial owners of outstanding securities of the Company at the close of business on February 2, 1953~ as set forth after their respective names. Nara~ P?[neipal Oc~u]Jatiou Or oh~s D. BaxaIya ~ce-Prcsid~nt, The American Tobacco Company of the Orient, Inc,

owners on February 2, 1953 of omstanding securities of subsidiaries of the Conlpany, other than dirc~h~rs, ' qnalifying shares, as set forth after their respective names: Alfred F. Bowden, 50 shares of Compnon Stock of American Cigarette and Cigar Company; Richard J. Boylan, 20 shares of Common Sto~'k of American Cigarette and Cigar Company; James R. Coon, 5 shares of Preferred Stock of Amedcan Cigarett~ and Cigar Company; John A. Crowe, 1 share of Common Stock of Cuban Tobacco Compa~Wlne.; Preston L. Fowler, 1 share of Common Stock of Cuban Tobacco Company Inc.; Paul M. Hahn, 285 shares of Common Stock of American Cigarette and Cigar Company; Hiram R. Hanmer, 1 share ol Conunon Stock of Cuban Tobacco Company Inc.; Edmund A. Halwey, 28 shares o1 Common Stock of American Cigarette and Cigar Company; Harry L. Hilyard, 1 share of Common Stock of Cuhart Tobaeco Company Inc.; William H. Ogsbury, 2 shares of Common Stock of Ctthan Tobacco Company Irlz. Although the Management does not contemplate the possthllity, in the event any nominee is not a c~mdidate or is unable to serve as a director at the time of the election, it is intended that the proxies will be voted for any nominee who shall be desi~mted by the present Board of Directors to fill such vacancy. Information regarding the remuneration of directors is hereinafter set :[orth under the caption **Romtlnel-atioll~. Proposal A The Company is in~ornled tba[ Lewis D. Gilbert, whose address is 1165 Park Avenue, ]Yew York 28, New York, J'ohn J. Gilbert, whose address is 1165 Park Avenue~ New York 28, New York, and John Campbell Henry% whose address is 5 East 95rd Streeh New York, New York~ stockholders, intend to introduce at the forthcoming Annual Meeting the-~ollowing resolution (designated herein as Proposal A) : "REsoLvED: That the stockholders hereby request die Board of Directors to take appropriate steps to submit to stockholders an amendment to the Certificato of Incorporation pmvh]ing for cumu- lative voting, that is to say that at all elections of directors, the stockholders shall have the right of cumulative voting, which means each shareholder shall be entkled to as many votes as shall equal the number of directors to he elected multiplied by his shares o1 stock and he may cast all such votes for a single dia~ctor or may distribute them among the number to he voted for~ or any two or more of them as he may see fit.~ The proposers of this resolution, Messrs. Gilbert, Gilbert and IlemT, have furnished the foIlo~vthg slatement setting forth the reasnrls advanced by them in support o±" ti~eir proposal: "That many Amerlcaz~ Tobacco owners do want independent, non-management directors oll their hoard was shown last year when our similar proposal received lbo support of the holders of 251,O10 votes. It is also interesting to observe that Graham & Dodd, in 'Security Analysis,' third edition, McGlaw Hill, 3951, pagc 619, indicate their questionnaire to the members of the New York Society of Secmdty Analysts showed they favored cumulative voting by a two to one ratio. If you agree, mark your ballot FOR, or it will he automatically casl against the proposal." The same proposers introduced snhstantlally identical proposals at the last :Four Ammal Meetings. Each of these proposals was overwhelmingly rejected by the stocldlolders. At the 1952 Anntml Meeting, stockholders cast 5,326,4,13 votes t~pposed to dais proposal. The long-contlnHed record of successful operation of the Company's business by directors giving their entire time and effort to the service of the Company and its subsidiaries indicates, in the opinion 3

of the Management, that the directors )lave managed the business in the interest of all the stockholders said that it would not be in the interest of the Company to initiate this amendment. The Managemer~t reco~mends tht~t ?ot~ vote AGAINST Proposal A. The Management is not aware at file date hereof of any other matter which is a proper suhject for action that is intended to be presented at this meeting. REMUNERATION Remtzneratio~ o[ Directors and O~cers. There is set forth in the follo~vJng tabulation the aggregate remuneration, on an accrual basis, paid by the Company and its subsidiaries during its last fiscal year to the following persons for services in all capacities: each director and each of the three highest paid officers of the Company whose aggregate remuneration exceeded $25,000; and all directors and ¢,ffieers of the Company as a group. Estimated annual retirement benefits to the same indlvldua[s at normal retirement date under the ]Retirement Plan for employees adopted by the stockholders at the 19~19 Annual Meeting are stated in Column (5). (ll Name ~I indlv~du~I or identity ~ group Orpheus D. Baxa~ Alfred ~ Bowden Pdehard J. Boylan Dougla~ W. Rra~ear Thomas p. Connors James R. Coon(h) John A. Crowe(b) John S. Dowd Preston L. Fowler(b) Paul M. Hahn(b) Hiram R. Hanmer Edmtmd A. Itarvey 12l Capaeilies in wlaieh remuneration ~as rc~:elve~ Vlee-Presldent and Managing Director, The American 'J['oba¢co Compan'¢ of the Orle,~h lne. (a) Assistant tc~ the Pre~dent, The American 35,000 12,500 Tobacco Company Vice-President and Director of Fur- 50,900 ~ 94,030.34 17~000 chases, The American Tobacco Com- pany Yiee.Prc~ident, American Suppliers, In- 45,t)00 14,584 corp~rated (a); General Ma~aager of Sternmeries Director of Trat~e, The AmeHca~ To- 34,000 11,575 hncco Company Vice:Pr~dent and Comptroller, The 50,099 94,9~0.34 I7,000 Atnerican Tobacco Company V~ce-Presldent and Assistant Chief o£ 50,009 94,930.3~ 17,000 ~vIanufacmre, The American Tobacco Company Executive Vice President, American Sup- 69,1300 ]7,9gg pliers, Incorporated (a) V~ce-Pres~clent and Chief of Manufac- 50,900 94,~330.34 14,816 tur~ The American Tobacco Company President, The Ar~ls~ican Tobacco Corn 120,000 1]7,53"L93 25,000 pany; Pre~degg American Cigarette and Cigar Company Director of Iiesearch, The American 40,~00 13,938 Tobacco Compaay Vice-President in Charge of Sales, The 59,000 94,030.84 17~00 Ameriear~ To]3acco Company (a) Al~Jiated company engaged in purchase and handling of ]ea~ to~0aeeo. (b) Also offtser of a~tliated compa~xy or companies. (5l ~stima~d annual retlr~roellt benefit (4) at normal (3) Pa~iclpati,~n retlr~me~t S~Imrle~ i~ profits date $ 50,000 $]6,268

(5) Estimated ~nttual benefit (1) (2) (4) at normal Name ~[ indlv~dua] Capacities in which (3) Participation rcllrement ~r idenfi~y ot group remun~r~llon was recelve~i ~arle~ ~,~ ~r~%~ date Harry L. Hilyard(b/ Trea~urer~ The American Tobacco Corn- $ 5f~,000 $12,293 pauy John R. Hutchings, It. Vice-President, A~nerlcan Suppliczs, In- 40,006 11,09.8 corporated (a) A. LeRoy Jansoo Auditor, The American 'Yobacco Corn- 5~,000 15,669 pany William IL OgsburyAaslstant Chief of Manufacture, The gffi000 17,000 Am~ican Tobacco Company James F. Strlckland Presidet~t, American Suppliers, Inter- 75,00f) 16,476 poratcd (a] Directors and O~ccrs Directozs and O~cers as a group 91ffi~00 $587,689.63 as a group (g) A~Iiated company e~gaged in purchase and bandIing of Ieaf tobacco, th) A~ ~,~ ~ mC~i~6 c~m~n7 vz ~om~i~. The amounts stated Bt Column (4) above were accrued as incentive eompcnsatlon (ba~ed on amount of Company profits), under Artiole XII of the By-Laws, as amended by vote of the stockholders at the 1951 Almual Meeting. No amount was set aside or accrued :~or the Company's last fiscal year by Ihe Company and its subsidiaries ~mder any pc~lo~, ret{rem¢~t or othe& deferred rtxz~neration plax~ 1~ the b~ue~t of ar~?" director or o~cer of the Company or for the directors and officers as a group. The Retirement Plan for employees adopted by vote o{ the stockholders at the 1949 Annual Meeting co~ers approximately 19,100 regular i~]l-t;me employees of the Company and its subsidiaries. The aggregate amount o1 remuneration for the fiscal year 1952, received from the Company and its subsidiaries, ddreetly or indirectly, oi~ an accrual basis, by all the directors and officers of the Company a~ a group, was approximately fourteen one-hundredths of 1% of the Company's consolidated net sales. 31ISCELLA~NEOUS Any stockholder making written request ~ere~r to the Secretary di the Company ~ill he ft~rdished at summary of the Annual Meeting that will he prepared n~ter the meeting has h~en held. Messrs. Lybr and, l~s ~s. & Montgomery have {or rcany 3"e~l:s heex~ the independent ~udltors for the Company, and are appointed by resolution of the I]oard of Directors. In accordance with the C.mpanyb customary practice, a member of the firm of auditors will attend the Annual ~,ieeting and respond to questions which may be asked by ~teckholders. Comments or snggestion~ by stockholders with regard to the audit are welcomed, as they are with regard to all other matters aft'coting the Company's interests. Flemington, N. J'., is reached by the Lehigh Valley Railroad. The preser~t train schedule, which is subject to change and should be confirmed, is as ~ollows: Leave Pennsylvania Station (33rd Street and Seventh Avenue, New York, N. Y.) 10:55 A. M. Arrive Flemington Jtmction 12:03 P. M. Leave Flemington Junction 5:22 P. M. Arrive Pennsylvania Station 6:40 P. M. "fhe Compat~y will procure trar~sgortation from iX~ew York to Fbmington by railroad and return by railroad or, i/expre.~sly requeste~l± 5

return by bus, at Company expense for any stockholder of record desirous of attending the meeting, on his notifying the Secretary in writing at Ill Fifth Avenue, New York 3, New York, prior to March 28, 1953, that he wishes such transportation obtained. It you do not plan to attend, you are urgently requested to execute the enclosed proxy and maiI it to the Company promptly. Expense of Solicitation. The expense n{ tile sollcitadon of proxies for thi~ meeting, including the cost of mailing, will be borne by the Company. In additioa to mailing copies of this material to stockho[ders, the Company will request persons who hold stock in their names or custody or in the names of nominees for others, to forward copies of such material to those persons for whom they hold stock of the Company and to request authority for the execution of the proxies. The Company may reinthurse such pe~ons for their out-of-pocket expcnses and clerlcal charges in connection therewith, which expenses are eslimated to be a}dout ~3,000. To the extenl necessary in order to assure sufficient representation at the meeting, ofticers and some regular employees of the Company and approximately 6 employees of Philip G. Cameron Com- pany ~I1 request the return of proxies by telephone, telegram or in person, at an estimated cost of about $14,000. The amount of the expense to be borne by file Company will depend upon the wflume of shares represented by the proxies received prornpt~x~ in response to the Notice of Meeting. If proxies are not received promptly, it may be necessary for the Company to send ~legraphic solicitatiort to those stockholders who have not responded. The expense of such telegraphic solicitation would be about $2,500. Stockholders who do not intend to be l~resent at the Meetlng are urged to send in their Proxies without d~ heI ~ul, aM our cooleration will be aEpreeiated. February 12, 1953.