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J NOTICE OF SPECIAL ~EETING Flemington, 1N. J., October 26, 1953 IWOTmE IS HEREBy ¢~N that a Special Meeting of the Preferred and Common Stocldlolders of TaE AMEmCAN TOBACCO COMPA~X will be held at No. 34 Court Street, F]eming~on, New Jersey, at onc-thi*~y o'dock in the afternoon (Eastern Standard Time) on Wednesday, December 2, 1953, ~er the foHowlng purposes: (1) to vo~e for the adoption or rejecdnn of an Agreement of Merger entered into oll and dated October 16~ 1953 between the Company and its dlrectors and American Cigarette and Cigar Company, a corporation of the State of New Jersey, and is directors, merging said American Cigarette and Cigar Company into the Company and prescribing the terms am] conditions of said merger and the mode of canTibg the same into elIect, a copy of whibh Agreement of ~IeTger is attached as Exhibit 1 to ibc following Proxy Statemeat; (2) to transact such other business as may properly come before the meeting. The Preferred and Common Stock transfer hooks ~dll not be closed, b.~ holders o£ Preferred Stock a=d Common Stock to l~ mltifl~d to vote must be holders of record at the close of business on Octobsr 28, 1953. JorrN W. H~U~LON, Secretary

PROXY STATEMENT SOLICITATION OF PROXIES AND OU~rSTANDING VOTING SHARES This statement is furnished in connection with the sollcltatlo~ by the managemeat of The American Tobacco Company (herelna:Eter sometimes called American) of proxies to he used at the Special Meeting of Stoekhoiders to be held on December 2, 1953, and at any adjournment thereof. 0~l/y stockholders of record as of the close of huslness on October 28, 1953 will be entiOed to notice of and to vote at such meeting. The management know~ of no business whffih will he presented to the meeting other than voting on the adoption or rejection of the proposed Agreement of Merger, hereinafter deseribeth If any other matters are presented properly to the meeting ~or action, it is intended that the persons named in the proxies will vote thereon according to their best judgment. Any person g~ving a proxy may revoke it by notice in writing given to the Secretary of American at any time prior to the exercise thereof, hut if not so revoked the proxy will be voted and, if a choice be specified with respect to the merger proposal, will be voted ill accordance with snell speeifieatinn. If no choice is specified the proxy authorizes a vote in favor of the adoption of such merger proposal and will be voted accordingly. Attendance at the meeting does not setT¢ to revoke the proxy. The outstandhig numher of each class of voting securities of American is: Preferred 526,997 shares; Common 6,454,I10 sh~res. In voting on the adoption or rejeofion of the proposed _agreement of Merger each share of Preferred Stock and each share of Common Stock entities the holder thereof to one vol~. (Section I4:12-3 of the Revised Statutes of the State of New Jersey provides that ~n voting on the adop~on or rejection of a proposed Agreement of Merger eaelt share of capital stock entities the holder to one vote.) PROPOSED ME]tGER The purpose of the Special Meeth~g is to consider and take action on an Agreement of Merger (herein- after called the Merger Agreement) which provides for the merger of American Cigarette and Cigar Corn. party, a New ~ersey corporation (hereinafter sometimes ealied Cigarette), into Amerlean as the corporation smadvthg the merger. Cigarette and American ax'e hereinaRer collectively referred to as the Constituent Companies. American, as such stttTiving corporation, is hereinafter sometimes referred to as the Surviving Company. A copy o; the Merger Agreement is attached hereto as F~xhthlt 1, to which reference is hereby made for a complete statement o~ the provisions thereof. The Merger Agreement provides that the Smwivlng Company shall have an authorized eapllaI stock consisting of 10,0O0,000 shares o~ Common Stock~ par vaino $25 per shar% and gzg),10g shares of Pre- ferred Stock, par value $100 per share. Tills is the same as the present authorized eapltal stock of American. The S tuTiving Compa~y ~fill retain the present name of American, to wit: The Amerinan Tobacco Company. The only changes which the Merger A~q'eement would effect in the Agreement amt Act of Merger and Consolidation, dated September 9, 190~1~ as heretofore amended, eonstitatil~g the certificate o; incorporation of American, are with respect to the nmather of Directors of tlm Surviving Company, the registered o~ce of the Surviving Company in New Jersey and the Transfer Agem and Regiz~ar o2 stock oi the Surviving Company. The New Jersey Revised Statutes provide that the merger agreement shall prescribe the number, names and post office addresses of the Ptrst directors and officers of the sure,lying corporation and that they shall bold o~ce until their successors are chosen or appointed either according to law or the by-laws of the corporation. These statutes al~o provide that every corporation shall have power to adopt by-laws fixing and altering the number of its directors. The Merger Agreement glees the number, ~amos and post 2

. • [ . orifice addresses of the first directors and o~eers of the Surviving Company in compliance with these statutory requirements. The Agreement of 1904 provided that the nurnber of directors shau2d be twenty-elght. For ~nany years the By-Laws of American have FLxed the number of directors at seventeem The ~VIergar Agreement provides that the first dlrecturs immediataly upon the taking effect of the Merger Agreement shall be nineteen in number and thereafter such number as shall he fixed from time to time in the By-Laws of the Surviving Com- pany, as provided by the New Jersey statuteS. The I904 Agreement also nstned the Tryster Agent and Registrar of _Mnerican's stock at that time. The transfer agant thus named is no longer in existence. The Merger Agreement provides that the Transfer Agent and Registrar of the stock of the Surviving Company shall be the perso2ts or corporations designated as s~rch from ~ime to time by resolutio~x of the Board of Directors of the Surviving Company. The ~ergar Agreement recites the correct principal and registered ohqee of the Sm~'ivlug Company and the Agent in sharga thereof which differs fi:om the ofi~ee and agent referred to in the 191)6 Agaeement. The I904 Agreement also provided that Preferred Stock provided for therein could be issued only for the redemption and rellremenL at par of debts that by the 1904 eonso21datinn bet~ame debts of American or at par for cash ~o be used in such redemption. The i~¢exgar Agreement pro- rides for the conversion of Preferred Stock of Cigarette (exclndi*~g any slrares held by Cigarette or owned by American) lute Preferred Stock of the Suzwlving Company. The Merger Agreement also provides that the By-Laws of Ameldean as they shaU eal~t on the effective data of the merger shall be the By-La;~s of the Smwivlug Company until allered~ amended or repealed as therein provided. Upo** the merger becoming effective the Sm',Aving Compmty will have 6,512,310 shares of Common Stock of the par value of $25 per share issued and ontstanding and 3,487,690 shares of authorized hut unissued Common Stock of the par vahle of $25 per share and 527,831 shares of Preferred Stock o~ the par value of $100 per share issued and outstanding and I2,275 shares of authorized but unissued Preferred Stock of the par value of $100 per shere. There arc no present plans for the issuance of any such suthorized but unissued shares• VOTE B~QU~ TO CARRY OUT THE MERGER If the Merger Agreement is adopted at this Special ivleetlag by the votes of the holders of at Ieast two- thirds of all the capital stock~ ke., Common and Prelurred, of American entitled to vote at s~tch meeting, and at the Special Meetlug of stockholders of Cigaret~ hereinafter referred to, by the votes of the holders of at least two-thlrds of all the capital stock~ Le., Common and Pl~elerred, of Cigarette entitled to vote at sush meeting, the merger will become el~ectine upon the filing o~ the Merger Agreement in the manner provided by the laws c~f New ~ersey. When the l~ferger Agreement becomes effccfve the separate existence of Cigarette wiH cease except insof~tr as the same shall continue by statute or may be requisite for carrying out the purposes of the _Vfergar Agreement and Amerlcan as the Surviving Comp~my will succeed to all the rights and property and be subject to all of the debts, re~rietluns, liabilities and duties of Cigarette. • A special meegng o~ stockholder~ of Cigarette will be held ~or the purpose of considering and taking action on the Merger Agreement on December 4, 195g~ American is the owner and holder of 188,225 shares of the Common Stock, par value $70 per shere~ of CigaretLe ou~ of ~95,500 shares (exclltsine of 4~500 shares held in the Treasury of Cigarette) of such Common Stock o~sta*lding or approximately 96% of the outstanding Cormuon Stock of Ggarette; American is the o~vzer and holder of 3,230 shares of the Preferred Stock, par value $100 per share, of Cigarette out of 3,989 sh~res o~ such Preferred Stock out. ~andlng or approxlmatcly 81% of the ot~tstandlng Preferred Stock o~ Cigarette• Americau~ as owner and kalder of such shares of Common and Preferred Stock of Cigarette, reserves the right eldl~r to rofraln ~om voting such shares in favor of the adoption of the Merger Agreement or to vote suck shares against

the a~lopfion o:E the Merger Agreement at such special meeting of stockholders of Cigarette, i{, in the opinion o~ the Bo~d of DirecLors of Am~rlean, the merger, at the tlme of suck special meeting of ~tock- holders of Cigsrettc. is impracticable or inadvisable under then exi~tlug circumstances and con~tions. If and when the merger shall bare become effective, American intends to mail to its stockholders a notice to such effect within ten days/olluwing the effectlve date of the merger. CAPITALIZATION OF CONSTIT~'ENT cogIP.~N'IES AND nASIS OF CONVERgION O1~ MERGER As of September 80,1953 (a) Amezlcan had an authorized capltal stock consisting of 10,000,000 shares of Common Stock, par wlue $25 par share, of which 6,454,110 shal~es wer~ issued slul outstanding, and 540,106 shares of 6% Ctmmlatine Preferred Stock, par value $100 per share, o~ which 526:997 shares were issued and outstanding; and (b) Cigarette had an authorized capital stock consi~ng nf 500,000 shares of Colnmon Stuck, par value $70 per share, of which 195,500 shares wore issued and outstanding (exclusive o~ 4,500 ~arcs h'cld in the Treasury of CAgarette}, of which 188,225 share~ were owned by American, and 3,989 shares of 6% Cumulative Pxeferred Stock, par vaine 8100 per sham, of wltick 8,989 shares were issued and oul~landing of wltick 3,230 shares were owned by Americam The Merger Agrcement provides that when the merger becomes e~ective: (a) each share of Common Stock, par vahe $70 per share, of Cigarette outstanding on the efl:ectlve date o~ the merger, ~11 ha converted into eight (8) share~ of Common Stock, par value $25 per shal-e, of the Stuwlxing Company, e~cept that the. 4,500 shares o~ said Common Stock of Cigsrette held in its Treasm'y and the 188,225 shares of said Common Stock o:~ Cigarette o~ed by American ~11 not be converted into Common Stock of the Surviving Company but will cease to e:dst, and each share of 6% Cmalulatlve Preferred Stock, par vshe $i00 per share, of Cigarette outstanding on the efl'ectine date of the merger, will be converted into one and on~-tenth (l-1/I0) shares of 6% Cumulative Preferred Stock, par value $100 per share, of the Smedv~ng Company, except that the 3,230 shares of said Pr~thrred Stock o~ Cigarerle owned by AmericalL will not be converted into 6 % Cumalatlee Preferred Stock of the Survi~ng Company but will cease to exist; (b) each share of Common Stock, par value $25 per share, of Amerlcar~ outstanding on th~ e~ect fee date of the merger will continue to be one share of Common Stock, par value $25 per share, ef the Surviving Company, and each share of 6% CumuIative Preferred Stock, par value $100 per share, o~ Amcrican, outstanding on the e~ectine date of the merger will contlut~e to be on~ share of 6% Cumulative Prefe~ed Stock, par value $]00 per share, of the Surd~ng Cmapany. SCRIP CERTIFICATES FOR FRACTIONAL SHARES In ulI cases where Shares o~ Pr~erred Stock ~ the Sulking Company to be received by a holder of Preferred Stock of Ciga~ shall consist of a fraction o~ a share, a Scrip C~rtific~ ~II ha issued to represent s~ck fe~ctional interest. Such Scrip Certificates wilI, when combined with similar Scrip CerJha~tes aggregating one or more f~ shares, ha exchan~a~ for a period o~ two years from the ~lIcctive dale o~ th~ merger for full shares ~ Prelated Stock o~ the Surviving Company. Holders o~ Scrip CerL~ficates ~ll hava no vo~ ri~ht~ or rights to dlv~dends or other distr~doas. Reference is made to Article VI(e) of the Merger Agreement (Exhibit 1) for a fuller description of the [clmas and provisions of such Scrip Certificates. 4

".:..:. E DESCRIPTION OF CO~IMON AND PREFERRED STOCKS OF AMERICAN Article IV¸ of the Agmemem and Act of Merller and Consolidation, dated September 9, 1904, heretofore amended, is as follo~s: "AI~TICLE IV. The cayllM stock of the sa~d merged corporation is $304~010,500. Five Hundred Fo~, "Pnous~d One Hundred and Six (540,106) abates sh~ll be Freferred Stock of the p~x value of $100 each. Ten Milllon (10,000,000) shares shall h~ Common Stock of the par value of $25 each. The rights o~ th~ holders of the said Prethrre~l Stock and Common Stock, rc~ccfiveIyj shall be as follows: The hald~rs o~ th~ Preferred Stock shall be en~tlec[ to ~our votes for each share n~ ~ p~x value of $100 h~Id by the~, and the ~Iders of the Conm~¢n lltock shal: b~ e~tilled to one vote for ~h share o~ the par ~u~ oJ $25 hekI by them. The holders of the Preferred 5rock thaU be emitlcd to recei~re out of the ~urplus or out o~ the net pro~, anH the merged corporallon ~haI[ be bound to pay thereon aJ and when de~htecI by the Board of ][~reeL~rs, a thvi~end a~ the rat~ of~ ~u~ ne~r exeeed~ng~ $1~ per cent~ per annuxn~ v~mulative :from ~nd after the £rs~ day of OctoBer, 190~, payahl~ yearIy, haI~ 7¢oxly, or quarterly, before any ~vldend shall ~e se~ apart or paid on the Common St~ck~ provlded~ however, that when all accrued dlv~den~ o~ the Preferred Stock h~ve been ~id, the Ditec~o~ ~lm]]~ i~ m their judgm0nt the s~v~:u~ or the net proth~ after dedu~tin~ the amount o~ ~vi~enc~s to accrue on th~ Pralerted Stock ~luring the curren~ yea~ shall be s~cient for ~uch purpos¢~ have power in theis ~iscret~on to c~e~isro an~ pay a d~alden~, or dislden~, on the Common St~ck. In ease of liquidallon~ or di~o]utlon, or distribution of asset! of the ~Jd me~ge~ corpornfion, the halder~ of Preferred Stock s~ml~ be pai~ the par amount of their Preferred thare~ and th~ amom~t ~ dlviSench aec~amlate~ and uupakl he'ore any emo~mt thall b~ payable er pai~ to the hal~ers of the Cotmnon 5rock; th~ ~ahmce o~ th~ asscL~ of said merged corporal:on shall he dlvMed ratably among the hald~r~ of the Common Stock, share ~d share alike.': The Allrcement of 190~ as l~e~e[~fore amended~ contains ~o prov~s{~ls regarding p~e-empt~ve or subscription r~gh~s. In the opinion of Counsel f~r Amexican the holders of Common Stock ha~e pre- emptive rights and the ho:ders of Preferred Stock do not have pre-emptive rlgh~ with respect to th~ authorized and unissued shares nf Common Stock. Reference is also made to the caption "Restrlc~ons on Divlde~ds of Americnn" below. RANGE OF ~ECURITY PRIC~S The h~ and low s~:e~ p~ce~ ~f th~ C~mm~n ~d P'ze~e~ed S~h~ ~ Amexlca~ on the New ¥~k Stock Exehen~ for each of the eight consecutive quarterly t~crlods, the ~ast o~ which ended on September 30, 1953, compiled from The CoTnn:erc:al & Financial Chro~cle, and the h~ ~nd low b:d prices of the Commou ~d Preferred Sleeks o~ (~arct~c ~ the over-th~-counter market for each o~ the ~ame perlod~ a~ compiled from The ~National Daily Quam~ion Service, E~stem Stock Division, puMJshed by The National Quotation Bureau, I~¢. were as follow~: C~ga~tte New Yo:k Stock ~xch~tge Sale~ prices Owr ~he-Co acter Bid P~e~,s Quar t~r]y Com~D~ Sto~k pre~er~d ~tock Cor~mo~ St~ck F~ei~ed Sleek pe~iod~ Ended High Low l~ ~ Iligh L~w I~h L~w De~embex 51, I951 ...... 651/¢~ 59~/z 138~ 1281/~ 215 205 -- -- March 31~ 1952 ........... 55 57 I38~ ]29~ 220 210 125 125"* June 50, 1~52 .............. 587/s ~ 138~(1 132~ 215 215 I35 135*~ S~ptemher 30, 1952 58 55~/~ I86~/~ 131 215 215 132 I2g*~ Dccember Bl~ 1952 ...... fi57/a 55~/$ 1397/a 132 220 220 130 130 March 31, 1955 ............ 74~ 55 13,~/~ 183 250 250 -- -- J~e 30, 1953 .............. 74 683~ ]35~/~ 1301/~ 265* 250 130 125 S0pteraber 50, 1953... 77~/~ 7gsA 138~/~ 132~'~ 275 265 J27 127 *~ During the quarter eDded ~rc~ 31, 1952, there ~a~ one offering quoit:on @ 1~, du~ing thc quarter ~ded June 30, 1952, ther~ ~'a~ one o~rlag quolatiou @ 130 and d~rlng the quarter ~ndell September 30, 1952, ~here wa~ one o~rlng quotation @ :.30. Tim above bids for the Commol~ and Preferred Stocks of Cigare~ arc merely namlnal quotations and do not ncce~arily represent prlcee at ~hlch trtmsaction~ have taken place, The offerings o£ Cigarettz 5 as

Common and Preferred Stocks listed in the notes to the above table were the ordy offerings wMeh appeared in the records duchag the eight quarters listed. As indicated, no bld~ appeared in the record for the Preferred Stock daring the last quarter of 1951 or the first quarter of 1953. BUSINESS AND PROPERTY OF AMERICAN CIGARETTE AND CIGAR COMPACTS Cigarette, wbich was incorporated in New Jersey in 1901, sol/s PALL MALL Famous Cigarettes. The PALL MALL brand together with the business and good will therein was leased by Cigarette ~om American in ¸1936 for a period to expire with the year 2030 at an annual rental of $52,000. The PALL MALL brand is manufactured by American at throe factories located at Durham, IN. C., Louisville, Ky., and Ricbmond~ Va~ and sold to Cigaretle under an agreement tern~inablo by either pa~y on one year's notice. This agreement provides that the price for the PAI~ h4ALL Cigarettez manufoetured thereunder is the sum of the cost of manmfacture (wifich includes the cost of the manufacturnd product and e~':penses incurred in the storage and shipment or delivery thereof calculated in aecordence with ganeraIly accepted principles of accounting followed by American), plus interest on the cost of leaf tobacco used in the mantffacture of such cigarettes (calculated by multiplying American's averag~ intere~ expense by its average leaf duration for the preeedlng year) ph~s a fixed amount pex thousand cigarettes representle~g gross profit to American. The price paid under the agreement by Cigarette to Amecicml fo~ PALL blALL Cigarettes manufactured for and sold to Cigarette by American during the year 1952 was $309,459,091 of wblch $301,702,388 represented the cost of the manufacturnd product and expenses incurred in the storsga and shipment or delivery thereo~, $5,033,426 ~epresented interest charge ~or the tobacco leaf carried in inventoxy for thv contract and $2,723,277 repxesented gross profit to American. In 1932 certain real and personal propertD plants, cigar brands, trade-marks, buslne~s and the good will thereof, o~wled by Cigarette were leased to American for a tetTn expiring with th~ year 2030 at an annaaI rental of $1,800,000 pins taxes assessed upon the ~ased property, insurance and other charges constltutmg additional rental. Under an agreement with American entered into in 1936 and eontinttlng ~om year to year subject to termthatlon on 30 days' notice, Cigarette is the exclusive agent in the United States of America and all its possessions for the sa~ of all clear Havana cigars manufactured by or for American. Payments by American under this agaeemcnt amounted to $696,588 for the year i952. Cigarette doe~ not o~3a any plants (except cigar plants leased to American under the ~ase referred to above) or tchacco leaf stocks. Cigarette owns an inventory of pALL MALL Cigarettes which are stored principally in public warehouses. Cigarette has investments in seeurisie~ (notes and stocks) of Cuban Tobacco Company Inc. and stocks of subsidiaries of C~han Tobacco Company Inc. Cuban Tobacco Company Inc. has various subsldinsies winch owtt real estate and fitrm lands in Cuba and are engaged in the tobacco business, ineind2ng the buying, superv~cing the g~owing by sharecroppers, wsrchousing, processing and stemming of tohaeco~, oald the manufacture of cigars and clgarettcs in Havana, Cuba. A subsidiary of Cuban Tobaccu Company the. also owns a manufacturing plant in Trenton, New J'er sey: where sigars are manufactured. BUSI3~SS AND PROPERTY OF THE AYt~a~,ICAN TOBACCO COMPANY Amerlea~ was incorporated in New dex~cy by the Agreement and Act of Merger and Consolidation, dated September 9, 1904, referred to above trader the caption "Proposed Merger". American and it8 subsidiaries are engaged in the business of manufacturing and selling cigarettes, cigars and smoking and 6

chewing tobaccos. ThenetsalesofAmericanandsuchofltssubsidiarlesasareinclndsdinitseonsolidated financial statements herewith were $1,065~738,454 in 1952 (including Federal revenue stamps of $520,420,025 agixed to the preducls), made up of 95.01 ~ Cigarettes, 3.45 ~o Cigars, and L54 % Tobaccos and Miscellaneous. The principal product of American is LUCKY STRIKE Cigarettes. The second principal product is PALL MALL Cigarettes manmfactured by American for Cigarat¢ under arrangements desccibed under the preceding caption. HERBERT TAREYTON Cigarettes are American's third principal product. A downward trend in the sale of LUCKY STRIKE Cigarettes which began in 1949 has c~ntlnned to date. Sales of PALL MALL and HERBERT TAREYTON Cigaxetles have increased during the past seven years at rates far above the ind~ttT average. Combined sales of LUCKY STRIKE, PALL MALL and HEKBERT TAREYTON Cigarettes place American in the position of America's leading manufacturer of cigarettes. The cigarettes manufactured by Ameriem, are principally for domestic consumption and are reid mainly through jobbers and to some e~ent direct to chain stores and other large retdii outlets. The brands of cigars manuinctured by American were leased to it under a inng-texTn lease with Cigarette entered into in 1932, referred to above under the preceding capfinm The prineipsI brands new being manufactured are EL ROI-TAN mode principally from domestic tobaccos, and A~NTONIO y CLEOPATRA~ mode entirely ~rom Havana tobaccos. American also manufactures HALF & t~4ALF and BULL DURHA~R Smoking Tobaccos and a number of other croaking, plug, twist, cigarette and cigar brands. American Suppliers, Incorporated, a wholly-owned subsidiary, purchases domestic leaf tobacco supplyhig to American tlm major portion of its tobacco requirements. Tobaccos for the manufacture of cigarettes, smoking and chewing tubaezos are purchased mainly on suedes markets and from dealers and govennnent agencies; cigar tobacco is purchased direct from growers and from deahira. This sub- sidiary also realties, stores and stems tobacco, raaintains warehouses for handling and storing of leaf tobacco at strategic points as reIated to the manufacturing plants and growing areas, and normally "has on hmdi a ve~T substaaBal inventory of leaf tobacco. Golden Belt Manufacturing Company~ a 94.07% owned subsidiary, manufactures cotton hags, principally used for ~e packaging of tobacco, and supplies American's requirements of bags ~or its brand BULL DURHAI~I~ mauufactures tobacco shade cloth used to cover the fields on which Connecticut Valley sbed~-grown clgar wrapper tubacco is gro~n; supplies a substantial portion of the requirements for such cloth of The [-latheway-Steane Corporation; and also manufactures labels for tobacco and cigarette packages. The Hatheway-Steane Corporation, a wholly-owned subsidiary, grows, so~s, packs and cures domestic cigar leaf tubae¢o, almost all of which is so2d to Amexieam The American Tobacco Company of the Orient, Inc., a wholly-owned subsidiary, buys, sorts and packs tobacco in the Near East known as Turhish types ~or shipment to American. J. Win & Sons, Limlted~ a wholIy-owned Englsh subsidla*7, manu- factures and sells cigarettes under the brands KENSITAS and BAR ONE. The properties uf Americnn and its subsidiaries ,ttilize d in the handllng mid manwiaeture of tobacco, generally speaking, are employed in eidier the buying, redrying, storing or stemming of leaf tobacco, or in the manufacture (including prefabrication) of the tobacco products for the market. The chief centers at which the manufact~ing operations are conducted by American are the fotrr at which it manufactures cigarettes which incinde facilities for conditioning and stemming tobacco. These axe in or near BJcinnond, ¥irglnia~ Durham and Reidsville, Nozeh CareEns and Louisville, K~ntucky. The plants in Richmond, Virginia, include a cigarette factory- and a smoking tobacco ~acto~T, redsy- ing, stemming and research facilities and storages fQr tobacco and supplies. The plants at Dtulam, Nori]~ Caralfim, include cigarette and smoking tobacco factories, redsying and stemming facilities and storages 7

~or tobacco and supplies. At Reids~ilie, North Carolina, there are a cigarette factory, redrylng and stemming facilities and storages for tobacco and supplies. The plants at LoulsviHe, Kentucky, ~rlelude cigarette and chewing tobacco faelories and facilities ~or redrylng and stemming and storages ~or tobacco and supplies. The principal cigar pIants o$ Amarlean are loeatnd at Charleston, South Carolina, Louisville, Kentucky, A~hley, Philaddphia, Scranton and Wilkes-Barre, Pennsylvania. Niost of the cigar making maddne~ is leased from the mantffacmrer. The plants at CharIeston, Louls'dlle and PhihdeIpbia are 1cased from Cigarette. The plant~ at Ashley, Scranton and Wilkes-Barre are Ieased from others. EIGARE'i~E PRICES Since January 1,1948, the llst price to eustomer~ of the principal brands of cigarettes sold by American and Cigarette have been as follows: List F~c~s er Thousand Ci szet~es Subiect to 10% T~acle mad 2% Ca~ Di~eotm~ (Ldude~ F~deral Excise Tax) pALL MALL mad LUCKY STRIKE 5TERBE8~T TAREYTON To July 29, 19~....L ................................................................................. $7.38 $7.38 To July 28, 1950 ........................................................................................ 7.78 7.78 To November 1, 1951 ............................................................................... 8.09 8.05 To February 26, 1953 .............................................................................. 8.5fi6~ 8.616" February 26, 1953 t~ date ........................................................................ 9.00 910 *Authorizcd by the Office of Price Stahl]Szation to cover inorease in Federal exchs~ tax from $3.50 per thousand cigarettes or 7¢ per package to $~.00 per thousand or 84 ]per package. EARNINGS OF CIGARETTE AND AMERICAIN The following data, fax the yearn 1948 to 1952, inclusive, have been prepared from financial state- ments which have been examined by £ndependent certified public accountants. The data for the years 194.8 to 1952, ineluslve, feinting to Cigarette, have been reviewed by Haskins & Sells and, relating to American, by Lybrand, Ro~ Bros. & Montgomery; the opinions of said firms appear iu Exhibits 3 and 2, respectively. Six Months ~nded June 30, I953 I952 I951 1859 19'~9 I94~ Net sale.~clgarette operations .................... $18%631,876 $ 333,$43,401 $286,863,408 $167,I90,619 $122,097,738 $ 97,208,089 Gross ¢0mmi~ions from cigar operatlonz, re0ataI trader indenture of lease dated IVIareh 01, 3902, dlvldend~ interest and other income ............... 1,437,387 2,918,890 2,757,557 2,766,742 2,720,055 2,711,184 Income before federal and other taxes on i~eome 14,918.206 I8,745~969 15,577,207 10,846,009 6,856,021 5,391,805 Net income ..................... 4,4~,205 5,601,969 5,032,107 5,274,609(I) 4,255,820 8,232,515 Earnings per common share (195,500 zharcs outstanding) ................ 22.65(2) 28.53 (2) 25.62(2) 26.85(2) 21.1~(2) 16AI(2) Divldends paid on com- mon ~toek per thare .... 8.00 18.00 16.00 14.00 I0.00 7.00 (1) See also nei credit of speeial items amounting to $772,705 included in Statement of Income for 1950 in Exhibit 3. (2) After deduction of dividends on Preferred $took of $11,967 in the six months cnd~d Juno 30, 1953, and of 823,934 ia each of the years 1940 through 1952. 8

AFIE P~ CA~ (CONSOLIDATED) $1x h{~atl~ cndexl June 30, I953 1952 I95] X950 19¢9 I948 Net saIes .......................... $524,780,491 $I,085~738~4~ $9d,2,559~05i $871,621,130 ~g58:gt]6,089 $$73fi66,917 Income before federal and other taxes on income 44,432~824 78~551,888 80,410,505 76,724,839 74,327,119 70,523,925 Net income .................... 17,075,117 34,058,963 83,109,669 41,782,716 45,675,L~4 43,912,204 Earnin~ per common share ............................ 2.48(1) 4.79(1) 5.57(1) 7.17(1) 7.90(1) ?..58(I) Dividends paid on com- mon dock per sha~e .... 2.50(2) &0O 4.00 4.00 4.00 8.75 Comnlon shares outstand ing at end of period .... 6,454,110 6,45~d10 5,378,425 4,878,425 5,378,425 5.378,425 (1) A~er deductlo= of dlvldpnds on Preferred Stock of $3,161,982 in e~ck oI the years I948 tlurov~h 1952 and of $1,580,991 in she six months ended June 30, 1953. (2) "l~ro reg~ar quarterly dividends of $.75 per share and a~ extra dfeid~nd of $I.00 per share paid March 2, 1953. DIRECTORS _4ND OFFICERS OF SURVIVING COMPANY UPON COlgSU~IMATION OF THE glERGER The 1V[erger Agreement provides that the Sarvlving Company ~all have 19 Director~ and names the following hldi~iduals as its first Dh'eetors: Orpheus D. BaxaIys Alfred F. Bowden Riohard J. Boylan Douglas W. Brashear Thomas P. Cormors James R. Coon John A. Crowe John H Dowd A. Gordorl Fhsdlay Preston L. Fowler Charles Ganshow Paul M. Hahn Hiram R. Hanmer Edmund A. Harvey lqarty L. Hflyar4 John R. Hulehlngs, Jr. A. LeRoy Jansen WiS~am JsL Ogshu~y James F. StMckland The Directors named above, with the exception of A. Gordon FindJay and Charles Ganshow, con- stitate the present Bosrd of Directors of American. A. Gordon Findlay has served American and its subsidiaries for a period of 21 years. He has fieen a Vice President and Director of Cignrette since 193~. During tfic past 5 pears, and ~o~ manF yea~s prdor thereto~ he has been in charge of sales and advertising of cigars fox Cigarette and its subsidiaries. Cbarles Ganshow fim~ served Azneriean and its subsidiaries for ~ pcriod of 42 yea~s. He has fieen a Vice President of Cigarette since 1950 and a Director since 1936, ha~ing served as Auditor ~rora 1936 to 1950. During tile past 5 )ears, and for many pears prior thereto, he has supervised the administration of all departments of Cigarette and its subsidla6es. Both Mr. Findlay and Mr. Ganshow have been of~c~ers and directors of'subsldiaries of Cigarette for many years.

The Merger Agreement also designates the following individmals as the first Officers of the Surviving Company: Paul M. Hahn, President Richard J. Boylan, Yiee President James R. Coon, Vice President and Comptxoller Joha Al Crowo, Vice President Prszton L. Fowler, Vise Preside~ Edmu~ A. Harray, Vice President Har~ L. I{ilyard, Treasurer A. LeRoy Janson, Auditor A~red F. Bo~en, A~istomt to the I~msldcnt John ~ H~alon, Secretary J. Wesley Dale, Assistant Auditor Edward D. Flah~rty, Assistmat Auditor Frederick W. Kecmy, Assls~at Secretary Joseph R. Watetho~se, A~istmat Treasurer INTEREST OF DIRECTORS AND OlrlrlCERS OF CONSTITUENT COMPA~'I~S ~nerlcan has been advised that no director or officor of Amerieat~ or of Cigarette and no associate of any such person has any substantial interest, direct or thdircet, in the proposed mesg~c other tha~ as an officeD director or ~ockholder in one or both of the Constituent Companies. The amount o£ Common Stock and Preferr~t Stock of AmericAn and Cigarette owned beneficially, directly or indlrecfl~, as of September 30, 1953 by the directors and offmers of each as fm-nlsbed by them is as follows: stock of AmoHeau Stook o~ Cigarette Name Orpheoz D. Baxalys George E. Bolivar Alfred F. Bowden Richard J. Boylaa Doughs W. Brashear Thorctas P. Cormors James R. Coon John A. Crowe Joha F. Dillon John S. Dowd A. Gordon Findlay Preston L Fowler Charles Gan~o~¢ Alan C. Garratt _~dber t Gold Paul M. Hahn John W. Hanlon Hiram IL Hanmer Edmund A~ Harvey Harry k Hilyard John P~ Hutchings, di-. A. LeRoy Ja~so~ John & La~g William H. Og~hnry Si&aey Schon James F. Stricldm~d H~dBcnefl~a~y O~ae¢ Commo~ preferred Director of Amedcan 1,061 62 Secretary o~ Cigarette Director and Assis~an~ to the President of 150 America= and Director of Cigarette Director and Vice Pre~ide~ of Araerloan2~2g0 450 20 Dh'e~or o~ ~sa~rlcan220 Director o~ ~aericma 174 Director, Vice Presiden~ and Comptroiler of 783 50 4me~ean Director and Vice President of American a~d 720 105 Director of Cigarette Auditor of Cigarette 36 Director of Amerlean 400 Director anil Vice President o{ Cigare~e 250 Director and Vise Pre~idcaat of American and 720 100 Director of Ciga~Jte Director and Vice President of Cigarette I01 Director of Cigarette 1 Director and Vice President o£ Cigarette 523 Director aad President of American mad 2,504 285 Director and President of Cigarette Sc~etary of American 32 Director o{ Araerleaa 144 Director and Vice President of American and 800 40 28 Director of Cigarette Direotor and Treasurer of Awa~rlcan and 350 Director o~ Cigarette Director of A~mrlcan 200 Dire~*tor and 4uditor of Araeriran 318 Director of Cigarette .5 Director of Axaericma 150 50 Director ~nd Treasurer of Cigarette 2 Director of Amerlcan 420 Common Preferred 10

American is sis9 informed tlmt associates of the fDIlowing individuals owned benefioially, as ul Septem- ber 30, 1953, securities of American and Cigarette as indicated: James R. Coon, 83 shares of Cigarette Preferred Stock; Preston L. Fowler, 120 shares of American Corn,non Stock; Paul M. f~[aln~, 85 ahal"es of Cigarette Common Stock; tliram R. Eanmcr, 39 sharcs of Amcxican Common Stocl~; and A. Le, Roy Janson, 24 shares of Americas Common Stock and 10 ?hares of Cigarette Common Stock. RECOgI~IENDATIONS OF THE BOARDS OF DIRECTORS The Board~ of Directors of American and Cigarette, a~tcr careful consideration, conceded at rebec- five meetings held on October I6, I953, that ~he merger ~uld be advamageo~s to the respective Constlt~e~t Companies and their ~tockholders. Of the twelve members o~ the Board o~ Directors of Cigarelte, six are also members of the Board o~ Di~cto~s of Amerlcan. Ciga~¢~e stockholders will halo as stockholders o~ the Survlv~g Company a direct interest in the as~ct~, includi~ ~af inventories and plants, and in the business of Amebean which has a much larger capi~l and has for almost ~ty years consi~eatIy e~oycd a favorable earnings and dividend record a~ one of the leading corporations in the tobacco indus~T. Also the shares of Amebean which are listed on the New Yock Stock Exchange a~d are actively dealt in enjoy a much broader market ~an do the shares of Cig~re~le ~]lloh a~o ~ot listed on any exchange. The Pre- ~e~Ted Stock o£ American as the Surviving Company will h~ve ~our votes per share whereas wi~h respect to most corporate matters the Pre£erred Stock o~ Cigarelte ha~ no voting rights. American stockholder? will share in the full gene's of Cigar~tto's operations. The merger ~vi~ aLqo make possible the ellraln~t~on o~ r~mn~" duplications in the operations o~ the two companies as separate entities. At present PALL MALL Cigarcttes and LUCKT STRIKE Cigarettes, alLhough manufactured in the same p]~n~s and stored in the same warehouses, must be shipped to customers 1ruder separ~e bl]ls of lading, notwith~andhlg such s]gpments ~re to the same eustomem. Separate records must he maintained and each company billed separately ~or warehouse and shipping expenses. It i~ not possible to take advantago of certain mlnimthn ¢a~ex rates ~ecause o~ Ihese separate ~h~meats. Cn~tomers must either su~¢r the inconx,enience of dealing with two compadies ~han ordering PALL MALL and LUCKY STRIKE Cigarotte~, or, ff as daily happens~ they combine oeders for both cigarettes in on~ order~ the company rece/vlng the order ~u~t transcribe a~d tr~nsmiE a portion thereof to the o~¢r company. Similar di~cul~ arises whea, as happens practically dai~ c~stomers combine remittan~s ~or PALL N/ALL and LUCKY STRIKE Cigarettes in one check. Because at present it is neoessary to maintain separate accounts receivab]e and s~parate credit departmen% with respeot to the same customers~ greater latitude unavoidably results than would be the ca~e if the customers' credit was eontro]~cl by one comFany. There is also conslder~Ie dl~plicatien in m~intalning warehouse inventories, tax, payroll, mail and other depaxtment~ and in recording and depositing remittanee~ ~rom e~tomers, writing and slgding check% banking alTangements, stock transfers and dividend disbursing. Most, if not all, of these duplications would be eliminated by the mozgex. In fixing the bases ~f con~ezslon in the "~erger A~reement as here~nabove set forth ~nder the caption "Capitalization of Constituent Companies and Basis of Conve~ion on ~erger", consideration was given, w~t]~ respect to both companies~ primarily t~ p~t and pre~enL ea~n/ng~ and f~mre pro~ects. In addltion~ consideration was also given to marhat ~alues of shares so far as ascertainable, hook values, dividends, capita| funds, developments Ln the cLgarette i~tdustr~ a~td o~her factors deemed relevant, ineled~g those mentioned hereinahove under this caption. 11

TAX-~FILEE NATUT~E OF THE MERGER It ~ t/~e op~n~on of co~nseI for the ConstiL~cnt Companie~ ~al, v~r t~e Internal Rovenue Code now ~n e~Tect, the merger will constit~t~ a ta×-~e reorganization ~nd that nci~er ~aln nor loss for Federal Income Tax pu~oses wiH be r~al~zed by reason of th~ me~er by e~cr of th~ Const~ont C~mpanies or by t~e ho~d¢~ o~ Co~mon ~ock or Preferred Stock o~ either ~ the C~nstitttent C~mpanie~, except in the e~se of sto~khoIders who m~y dissent and Le paint the market vahte of their stock ~ appro~ appraisal proceedings. RIGHTS OF DISSENTING STOCKIIOLDER$ Any stoc]dlO]der o~ Amp'lean wi~hi~ to take advantage of the apprai~aI ~to o~ New J'~rsey (Sect~on~ ]~:I2-6 ~n~t 14:I2-7 of the Revised St~t~s o£ t~e Stat~ of ~c~- Jer~) must (a) g~ writ~cn ~otlce to ~¢rlca~ o~ ~s dissent at any ~mc p~or to the ~ote on the mer~cr at t~e Spe~L -Vleetlng ~ Stockholders o~ Amcrlcan referred to herein, and (~) either noL vo~e on th~ merger or vote ~ga~t ~e merger at ~ach Specla] _V~cetlng. Se~tlon 14:12~7 of the Revlsed Stat~te~ o£ the StaLe of ~ew J'er~y provides, in connection ~ mcr~r of corporation, that ~y stoc~older n~t voting Lu ~avor of the Agreement of Mer~r m~y dissent £rom such A~reement ~t any time prior to the vote on ~uch m~g~r by glvln/~ th~ corpora~on in ~]lic~ he is a ~o~k/~old~r wrlt~cn notice o~ d~sent; at any time wi~iu thirty days after ~he a~optlon and ~]ing o~ t~e Agreeme~ of Merger ~uch ~]i~n~g ~ckh~der by action in the Sup~rlor Court m~y ap~y for the appointment o~ three dlsintereste~ appraisers to ~ppr~is~ t]~e £tt~I m~et v~tt~ o~/~ stock ~ithout re~rd ~o ~y ~ree~ation or appreclat~on thereof" in ¢onscqucnce of the merger. $~id Section I4:12-7 a~d Set,on 1~:I2-6 ~r~er pro~de ~t the ~ard of the appraisers, or the majority of them, ~h~ c~nfirm~d by the Court, ~all be final ~nd concluslw on aH p~. I~ the awar~ confi~i~n by ~ch Court the ~m~unt of the ~ard sh~11 l~e a judgment against such eo~'por~io~ a~ may be c~]ected as ot~r j~gmcnt~ i~ ~ch Court are by law collectlble. On re~elv~ng such payment such s~ckho~d~r must transfer hls stoc~ to the ~urvlvlng corpora~on t~ be dlspo~ed ~ by ~ directors the~o~ or to ~ retaln~d ~or ~e b~n~fit oJ" ~le r~m~inln~ stccl~o~ders. Thv Cou~t may dlrect t]~e d~s~en~i~ ~tockholc~ex to ~n~t his certificate o~ stock to ~ Cler|~ of t~le Cn~rt ~or noratlon ~crc~n o~ the pe~ency of tile a~prai~al proceedings and ~ t]~e ~t~ckh~lder fai~ to comply ~vi~ ~uch dlrect~a the Court m~y disn~s the proce~i~. Any stockholder o~ CJ~rettB ~hln~ to ~Ice advant~go o£ ~v app~alsa] statut~ o1" ~ew J'~rs~y, prior to the vote on the mer~er ~ ~ Special Meeting of sto~ho~ers o~ C~rette to be held for the purpose o~ voting t]~reon and (]~) either not vote on file merge~r or vo~ a~ain~t ~e merger at ~uch Special Meeting o~ ~ockho~ers of Cigarette. RESTRICTIONS ON DIVIDENDS OF AI~IERICAN In the indenture dated J'anu~ry ~, 1948, r~htlng to American's T~en~ Year 3% I)e~ntur~ ~B Jan~a~ 1, I968, American ha~ co~ena~ed ±~t it ~i]I n~t declar~ ~ny divldends (vth~r ~n ~t~ ~I~v~den~s ) o~ an~ c]~s ~ ~ts ~oc~ or make any paymen~ on account of th~ p~_rchase~ r~dem~t~on~ or ~ther retirement of ~ny shares ~f ~uch st~ck, ~r mal~ ~ny distribution in respect thereof, if the effect of ~uch paym~ts or cash ~r~butlo~ wi~| ~ to ~eee~ the s~m o£ $15,000,000 plus (~r m~m~ in the ease of ~ deScit) ~h~ 12

consolidated net income of American and its consolidated subsidiaries subsequent to Janua~'y 1, 1948, subject to the right of American to declare or pay dividends on its preferred stock at any time outstanding, but all such dividends on its preferred stock after December 31, 1947, shall be included in all subsecluent computations m~der such dividend restriction, and subject also to the right of American to retire thare~ of any cIass of stock by exchange got el" out of the proceeds of the substantially concurrent sale of other classes of stock. For the purpose of such restriction, dividends in property of American shall be incIuded at the book value of such property. At June 30, 1953, approx!mately $88,400,000 of retained earnings was free of this restriction. FI~U~CL~L STATEMENTS There are annexed hereto, as Exhibit 2: ~naneial statements of American and its consolidated sub- sidiaries; and as Exhibit 3: financifil statemen~ of Cigarette. Ft~rther financial statements of American and of Americ~m and its consolidated subsidiaries, including Cigarette, arc on file in the attire o~ the SecL~rilles and Exchange Commission at Washington, D. C. and at the office of the New York Stock Exchange. h ~4 V EFFECTS OF MERGER ON CAPITAL A~D SURPLUS OF SU~VIVII~G COMPANY If the proposed merger had been effected as of June 50, 1953, then, on such date, the outstanding capital stock of American, as the Surviving Company, weald consist of 527,831 shares of Preferred Stock having an ag~egate par value of $52,783,100 znd 6,512,310 shares of Common Stock having an aggrcgale par value of $162,807,750. The paid-in surplus x~ould amount to $46,173,346 ; the increase o£ $2,878,905 over the amount shown by the consolidated belance sheet of Amerinan in Exhibit 2 represents thv excess of then approximate market values of shares of American to be received by stockhofilers of Cigarette over the par value thershL Retained earinngs of American and its consolidated subsidiaries, as shown in Exhibit 2, would not he changed. Tke excess of the market value, on the ¢ffeetlve date of the Merger, of shares of American received by s'tockho] ders of Cigarette over the minority interest o~ such sLockhalders, based ~pon the balance sheet o~ Cigarette at December 31, 1953, wilt be added to the intan~blc a~set account of the Surviving Company. Such excess based on ma~ val~es and minority interest at June 30, 1953, amounted to $3,200,112. ~, i; TRANSPORTATION TO FLEMINGTON Flemthgton, N. J., is reached by the Lehigh Valley Ra/lroad. The present train schedule, which is s~bjeet to chmtge and choLdd be confirmed, is as follows: Leave Pennsglvania Station (33rd Street and SeveathAvcnuc, l~ewYorLN. Y.) lO:55A.M. ArriveFlemingtonJmlction12:03P.M. LeaveFIemington Junction 5:25 P.M. An'ire Pez~xsylvania Stafinn 6:40 P.M. Amerlcan will procure transportation from New York *o Flemlngton by railroad and rettun by railroad or, if e.xpressly reque~ed, re~rn by bus, at Company expense for any stockholder of record desirous of attending the meetlvg, on his notifying the Secretary in w~iting prior to November 27, 1953, that he wishes such transportation obtained. If yo~t do not plan to attm~d, you are urgently recpaested to execute the enclosed proxy and mail it to the Company promptlb/. 13

EXPENSES OF SOLICITATION The cxl~enses of preparLug, assembling~ printing and mailing fl~¢ ~o~ra of pr~=cy, notice of meeting and proxy stat~mellt w~lI be paid by American. In addition to the solicitation o~ proxles~ ~ne~can w~H x-eque ~ persons who hold stock in their name or ~ustody or in the name ~f nom~ees ~ others, to fol~'ard copes o~ suc~ mater~aI to thc;s~ persolm for whom they hoM stoc~ o~ American and to retest authorlty ~or the e~,:eeut~on of t~ proxies, Aracrican may reimburse such persons fox" their ou~o~-pocket expens~ and clerical charges in co,me cr0on therewlth~ which oxpcn~¢s a~ estiznate¢t to be abo~t ~4,000. To the ext~nt necessary in order ~o a~sure su~clent repr~- seatatlon at the meeting, o~cers and some regtdar ~nployees of American and approximately six employees o~ PhiI~ G. Cameron Company w~II request the return o~ l~roxles by telephone, telegram or in person, at an estimated cost of abo~ ~14,000. The amom~t of the expense to be ~orne by Amebean will depend upon the volume of shares ~pre~ented hy the proxies rccclv~ promptly in response ~o the Notice o~ Meeting. I~ proxies are not received promptly, it raay b~ necessary ;or An~erican to send tdegr@ic solic~atlon to those ~tocF~olders who have not responded. The e~xpez~se o~ such t~eg~aphie soIicltatio~ wotJd be about $2,500. Stoo~ders Mio do not in~ to he present at the _~Ice~i~g are tLrgcd to se~ in their Proxies without delay. Prompt response is help£uI, and your cooperation will be appreciaLed. October 16, 1953 14

/ EXBIBIT I AGREEMENT OF MERGER h~tween THE AMERICAN TOBACCO COMPANY (a Ne,~ Jersey COrl~Oration) a~d tire Directors t~tereof an~ ~-MERICAN CIGARETTE )JfD CIGAR CO~PA~ (a l"~ew Jersey corporation) a~t t~¢ Directors tllexe<s~ Foe the merger of American Cigarutte and Cigar Company into The Amerlcan Tolmcco Contpa~y~ p~wsvant to Ch~p~er 1~ of Title 14 of the Revised 5taLutes of the State o{ New J~sey.

! AGREEMENT OR ~ERGEE AGREEMENT made and entered into this 16th day of October, 1953, by and between TIrE /lxtm~zcAie TOBACCO C0~eA~', a co~porati0n of the State of New ~e~say (hereinafter some- thnes called '~Ametfican"), and the Directors thereof, parties of the hrst part, and A~EmICAbr CI~A~ETTZ A~ CICA~ CO~A'~V, a corporation of the Sta~e of N~w Jersey (hereina£ter ~ometlme~ called "Cigarette"), and the Directors thereof, parties of file ~econd p~rt, said two corporations behig heralna~ter collectively called th~ '~onsfituent Companies"; W~F~ZAS, the prlnc~pal a~d registered o~¢e of _Ame~icom i~ ~e State of lqew Jersey'is at -No. 117 1Vialn S~reet, in the Borough of Meraln~on, ~n ~he County ot Hunte~don, l~ew Jersey, and George lZnowles Large la the Agent there~n, in cbarge thereo~, ~nd upoz whom proces~ against ~ald corporation m.~y be served wllhia s~d Sta~e; and WII~s, the prlllcipal and registered office of Cigsxet~e in the ~te of New ~ersay is at ~o. I~Y .%'Ialn StreeS iu tbe Borough o~ Flemin~ton, in the ¸County of H~nterdon, New Jersey, aa~d Get~r~e I(uowle~ Large ~ tht Ag'er~t there{u, in al~a~ge the~e~, ~d uloo~ ~hom p~e~ against said corporation may be ~erved within said State; and W~EREAS, the authorized Capital Stock of American consists o~ 10,O0O,O00 shares of Common Stock, par valu~ $25 per share, of which 6,454,110 ~hares are issued and ou~standlng and 540,106 shares of Preferred ~tock, par value $100 per sh~r¢, o~ which 526,997 shares are issued and WI~RR~AS, the authorized Capital Stock of Cigarette consists of 500,000 shares of Coramoa Stc~l~, p~r ~a~u~ ~0 p~ share, o~ which 200,0~3 ~haxe~ ~e ~u~d ~ud ~utst~dlag, i~cIu~u~ 4,500 8hares beId in its Treasur~ and also including I~,225 share~s owned by American and 3,989 sha~e~ o~ Preferred Stock, par vaIue $100 pe~ share, of which 3,989 share~ are issued and outstandlng~ ffieludln~ 3~230 shares owned by &meri~a; and WEER~As, the aboYe-mentloned corporatiotls are organized for tJ~a purpose of carrying" o~. \¥~E~s, the Boards of Directors of said corporations dee;n it to the heneht and advantage of th~ Cou~tit~ent C~rapa~s ~d their st~ul~h~lde~s xtud~r ~re~et~tly ~xisting ci~cum~ta~c~ t~ enter into tiffs 2kg~eeme~t of ~erger under and pursuan~ to the provls~o~s of Chapte~ 12 o~ Title 14 of tll~ Revised Statutes of New Jersey and #.¢ts supplementa~ thereto or ~mendatory thereof, \ Now, TK~E~'oms~ in consideration of tile premises and mutual agreements, provis~otls~ cove- nants and graots herein contained, it ia hereby agreed by and between the parties hereto, and in accordance with said Acts of the Legislature of the $~te o¢ I~ew ~ersey. that said Cigarette shalj be and the same hereby is merged into said 2kmerlCan, and said American does hereby lnerg~ into i~salf said Cigarette. And the parties h~reto by these p~'ese~ts agree to arid p~cscribe th~ terms and conditions of said lnerger atld the mode of earI~rhlg the same into efl:~ct, which terms and conditions and mod~ of ca~eying the same into effect the said partla~ hereto do mutually ~nd severally eovena~lt to observe, keep and perform, tha~ is to say: 1

ARTICLE I The Ame1"{ean Tobacco Company, hlto whlek CigaretLe is hereby mer~'ed~ as aforesaid, shall he the corporation con[hl~ing after the merger and the narae of the corporation shall be and remain the same• (SMd corporation shall hereinafter ~omefimes be referred to as the "StlrvfvinK Company"). AR'PICLE II The m~mber of the first Directors of the Sm~,ivlng Company shall be nineteen (19) and thereafter dle number of D~rect0rs shall be the number fixed from time to t~me i~ ffie By-Laws of the Surviving Company. The **ames and post-office addresses of the first Directors of the Zurvivlng Company who sh~]I hold office ~ntll their suecessor~ are chosen or appointed aeeording to tfie By-Laws of the SurvPeing Company are as follows : iq~trnes Orpheus D, Baxalys Alfred F. Bowden Richard J. Boylan Douglas W. Brasfiear Thomas P. Connors James R. Coon foh~ A. Crowe ~ohn S. Dowd A. Gordon Findlay Prestml L. Fowler Charles Ganshow Paul M. Hahn IIiram R. Hanmer Edmund A, Harvey Harry L. Hilyard ~ohn R. Hutchings, Jr, A. LeRoy Jansen VIilIiam ~. Ogsbnry James F. Striekland Post-office Addresses III Fifth Avenue New York 3, New York llf Fifth Avenue New York 3~ New York III Fifth Avenue New York 3, New York P. O. Box 6-P Richmond 16, Virg{n{a 1II Fifth Avenne New York 3, New York Ill Fifth Avenue New York d, New York 11I Fi~th AvenlIe New York 3, New York P. O. Box 808 Lonisville 1, I~entucky 111 Fifth Avenue New York 3, New York IIi ~ifth Avenue New Yolk 3, New York 111 F~¢th Aven~e New York 3~ New York 111 Fifth Avenue New York 3, New York P. O. Box 4178 Richlnond 24, Virginia 111 Vifth Avenue New York 3, New York 11I Fifth Avenue New York 3, New York a°ettigrew & BlaekweH ~treets Durham, North Carolina llf F{fth Avenue New !ror]c 3, New York Pettlgrew & giackwelI Streets Durham, North Carolina Pettigrew & BiaekweR Streets DurhanL Nu~th Caro]bla

The ~rst officers of the Survi~[ng Company shall be fourteen (14) ia number and shal] be a President, five (5) V{ce Presidents, one of whom shall also be the Comptroller, a Secretary, a Treasure~, ~tt Audita~ two Aaalstant Auditor~, ~.u As~t~ut Sear~t~ry, ~tL ~%b.~t qfrea~t~er and an Assistant to the Preslden% and their nara~s and post-office addresses are as follows : Paul z~f. H~lm Richard J. Boylan ~ames R. Coon 7okn A. Crowe Preston L. Fowl~i" Edm~nd A. ~arvey Itarry L. H~lyard A. LeRoy Janson Alfred tl Bowdea Jolm W. I-Lanloa 7. lYe~ley DaIe Edward D. Flaherty I~rededek W. Ke~ny ~osepk R. Waterhouse President Vice President Vice President ~nd Comptroller Vice President Vice President Vic~ President Treasurer Auditor Assistant to the Freside~t Secretary Assistant Auditor Assistant Auditor A~i~tant Se~elary As$1$fa~t Treasurer paint-alice Ad,~ a~e.~ 111 [Fifth Avenue New York 3, New York 111 F{fth Avenue New York 3, New York . 111 Fi{th Avemie New York 3, New York II1 Fifth Avenue New Yo~k 3, -~$env York ll1 Fifth Avenue New York 3, New York III [FHth Avenue New York 3~ New York ll/ ~'ifth Avenue New York 3~ New York lll Fifth Avenue New York S, New York Ill Fifth Avelme New York 3, New York ~fl F{fth Avent~e New York 3, New York III Fifth Avenue New York 3~ N~xv York lll Fifth Avenue New York 3, New York 111 Filth Avenue New York 3, New %fork 111 Fi{eh Avenue New York 3, New Yolk ARTICLE III The total authorized Capital Stock o~ the Surviv{ng Company is and shall be te~ miIIion (10~(K]O,000) shares of Common Stock of ~he paz waIue of $25 per ~hare and five hundred forty thousand one hundred sfix (340,i06) ~hares of Preferred Stock of the par ~lue of ~100 per ska~e. 2['he Transfer Agent aud the Re,strut of the stock of the S~rviv~ng Company sh~lI be the i parsons or eorporatioils des~guated as such from t{m¢ to thlle by resoIt~tlon Of the ~oard of Directors, ARTICLE IV The Agreement and Act of Me~'g'er and Consolidation of American, dated September 9, 1904, pn!'suant ~o which Amerlc~n was created, gs such Agreement of Sep~enlbet' 9~ 1904 has heretofore beet* ~rsended, slla[], upon the date on wh{ch th~ merg-¢r becomes effectlvd under the laws of the ~t~te o1 New Jersey, be deet~ed ~o be amended ft~r~her by th~s Agreement nsofal~ ~ slleh A~'ee Ille~t O~ ~e~)tenxber 9, 1904, ~ her~tofc3;~ arae~.ded, is i~%on~st~n~ %v~th any p~o~d$1oll o{ thls A~reemc~t ARTICLE V The By Laws of ~he Surviving Compgny skmll be the By~Law~ of ArnerJea~ as those shall exist oa the effective date of the tn~rger until ~ltered, amended or ~epe~letl as ~herein provided.

ARTICLE VI Tim manner of converting the Capital Stock of the Constltue~lt Companies into the Capital Stock of the Surviving Company shall be as follows: (a) Each share of Common Stock, par value $70 per share, of Cigarette which shall be issued and outstanding on the effective date of the merger (excluding any shares then hMd in the Treasury of Cigarette and excluding ~ny shares then o~ed by American, which shares shall cease to exist and the certificates representing such shares shall be canceled) shall be converted into e~ght (8) shares of Common Stock, par value $25 per share, of the Surviving Company and each share of Preferred Stock, par value $100 per share, of Cigarette which shall be issued and outstanding on the effective date of the merger (excluifing any shares then held in the Treasury of Ci~rette and excluding any shares then owned by American, which shares shall cease to exist and the certificates representing such shares shall be canceled) shag be converted into one and one-tenth (I-1/10) shares of Preferred Stock, par value $100 per share, of the Surviving Company; and (b) Each share of Common Stock of American, par vMue $25 per share, isstled and outstanding on the effective date of the merger shall continue to be one share of Common Stock, par value $25 per share, of the Surviving Company and each share of Preferred Stock o~ American, par value $100 per share, issued and outstanding on ~he effective date of the merger shMl continue to be one share of Preferred Stock, par value Sf0D per share, of the Sure,riga Company; and (c) After the effective date of the merger each holder of an outstanding certificate or certificates representing shares of Common Stock, par value $70 per share, of Cigarette shall surrender the same to the Surviving Company and such holder shall be entlffed upon such surrender to receive in exchange thereLor a certificate or certificates representing eight (8) shares of Conlmon Stock, par value $25 per share, o£ the Surviving Company for each share of Conmion Stock of Cigarette so surrendered. Until so surrendered, each outstanding certificate which, prior to the effective date of the merger, represented sfi~res of Common Stock, par value $70 per share, of Cigarette, shall be deemed for alI corporate purposes, other than voting and the payment of dividends or other distributions, to evidence tim ownership of the shares of Common Stoek~ par value $25 per share, of the Surviving Company into which such shares hayb been so converted. Unless and until any such outstanding certificates shall be so surrendered, the holders thereof shall have no voting rights in respect thereof and no dividend or other distribution payable to the holders of record of Common Stock of the Surviving Company as of any date subsequent to the effective date of the merger shall be paid to the holders of such outstanding certificates, but upon such surrender of any stzck outstanding certificate or certificates there shall be paid %0 the record holder of the certificate or certificates for Common Stock of the Surviving Company issued in exchange therefor the amount of dividends or other distributions which theretofore became payable wffh respect to the number of shares of Common Stock of the Surviving Company represented by the certificate or certificates so issued in exelmnge. (d) After the effective date of the merger each holder of an outstanding certificate or certificates representing shares of Preferred Stock, par value $100 per share, of Cigarette shall surrender the same to the Surviving Company and such holder shall be entitled upon such surrender to receive in exchange therefor (subject to the provisions of subdivision (e) hereof ~xdth respect to fractional shares) a certificate or certificates representing one and one- tenth (l-1/I0) shares of Preferred Stock~ par value $100 per share, of the Surifiving Company for each share of Preferred Stock of C~garette so surrendered. Until so surrendered, each out- standing certkficate which, prior to the effective date of the merger, represented shares of Pre- ferred Stock, par value $I00 per share, of Ciga~et to, shall be deemed for all corporate purposes, other than voting and the payment of dividends or other distributions, to evidence the ownership of the shares of Preferred Stock, par value $i00 per share, of the Surviving Company into which such shares have been so converted. Unless and until any such

outstanding certificates shale be so surrendered, the holders thereof shag have no voting right~ in respect thereof and no dividend or other distrlbutinn payable to the holders of record of Preferred Stock of the Surviving Company as of any date subsequent to the effective date of the merger shall he pald to the holders oi such outstanding certificates, hut upon sueil surrender of any such outstanding certificate or eertlgcates there shall he paid to the record holder of the certificate or cerrigcates for Preferred Stock of the Surviving Company issued in exchange there/or the amount of dividends or other distributions which theretofore became payable with respect to the number of shares of Preferred Stock of the SUrviving Company represented by the certificate or certificates so issued in exchange. (e) No iractionaI shares o{ stock chalI be issued by the Surviving Company in respect o~ stock of Cigarette, hut each holder of shares of Preferred Stoc~ of Cigarette entitled hereunder to receive a fraction of a share of Preferred Stock of the Surviving Company shall recede for each such fraction of a share a non-votin~ non-divifiend and non~dlstribution paying Scrip Certificate of the Survi~ng Company for the fraction of a share o{ Preferred Stock to which he is entitled: Each Scrip Cerft~ca~e wiU entitle the holder (incinding the Surviving Company if it shall have acquired the same) of such Scrip Certificate to receive, on surrender thereof within two years after the date on which the merger becomes effective, together with other Scrip Certificates of like tenor, representing in the aggregate rights in respect of one or more full shares of Prefarred Stock of the Surviving Company, certificates for shares of Preferred Stock of the Surviving Company equal to the number of full shares of Preferred Stock ~n respect of which such Scrip Certificates were ~ssued and the amount of dividends and other distr~but~ons theretofore declared in respect of such ~ull shares and new Scrip Certificates of a llke tenor for the remaining ~action of a ~hare, if any. AII such Scrip Certificates which are not ~urrendered within the time aforesaid shall be vold and of no effect whatsoever on and after a date whleh shall be two years after the date on winck the merger is et~ective (hereinafter referred to as the "expiration date") except that the holders thereof thall be entfitled to receive within two years and ten month~ a~ter the expitafion date their pro rata portion of the proceeds resulting from the sale of the full shares of Preferred Stock represented by the thereto/ore unsurrendared Scrip Certificates, together with their pro rata share of dividends and other distributions theretoforc declared in respect of such full shares upon surrender of such Scr~p Certificates; such srJe shall be made within one hundred eighty da)s after the expitation date (pubhcly or prlvately at then eurrentIy prevailing market prices) by the Surviving Company or the transfer agent of the shares with respect ~o which such Scrip Certificates were issued, as the agent for and on behalf of the holders of such Scrip Certificates, or, at the election of the Survinlng Company, may be made to the Surviving Company at a price equal to the average closing price of the stock on the 2qew York Stock Exchange for the twenty fuli business days immediately following the expftatlon date. Any proceeds resulting from such sale not claimed wkh~n such two year and ten month period shall he paid by the transfer agent to the Surviving Company and be held by the Surviving Company as part of its general funds free and clear of any claim of those previously enftfled thereto. The shares of stock of the Surviving Company represented by Scrip Certificates shall be issued upon the merger ' becoming effective and shalI be held and disposed of by the Surviving Company or, at its option, by ~n agent designated by it, as herein provided. ARTICLE VII Except insoinr as in this Agreement otherwise specifically set forth, or as p~ovified by statute, the corporate name~ purposes, power % objects, franchises, entity, existence, rights and organization "of American shall remain intact and be vested in the Surviving Company, and the corporate franchise, entity, existence and rlght~ of Cigaretta shali be continued in and merged into the Surviving Company~ and the Surviving Company shah [~e ~ully vested therewith, and upon the filing in the Office of the Secretary of State of New Jersey of this Ageeement, when adopted hy the stockholders of each Constituent Company as hereinafter provided, the organization and 5

eMstence of said Cigarette shall cease, except insofar as the same sbMl continue by statute or may be requisite for carrying out the purposes of this Agreement. ARTICLE VIII Upon the effective date of the merger herein provided for, all and ~ingular the rights, privileges, powers mid franchises of each of the Constituent Companies, both of a public and private nature, and all proper~y, real, personal and mixed, and all debts due on whatever accounts, as well {or stock subscriptions as all other things in action, belonging to each of said Constituent Companies shall be vested in the S~trvivlng Company without further act or deed as effectually as they were ve~ted in ~he Constituent C6mpa~es ; and all and every ~tbc~ interest oI the Cm~stlt~t C~m- panics shall hereaffer be as effectually the propert~ of the SurvGJng Company as they were of the Constituent Companies; and the title to any and all real estate, whether by deed or otherwise, vested in either of said Constituent 'Companies shall net revert or be in any way impaired by reason of the sold meager; and all rights of creditors and all liens upon the propert~ of the Constituent Companies sball be preserved tmimpadred; and the Con~titaent Companies, parties hereto, may be deemed to continue in .x/stence in order to preserve the s~me; and all debts, li~h~Ktles, restrictions ~nd 4gsles of the Constltuent Comp~i~s shall ~orth~vith uttu~h to the Surviving Company and may be enforced against it to the same extent as if said debts, llabilitlas~ restrlctinns aim duties had been incurred or contracted by it, it being expressly provided that the merger of the Constituent Companies shaII not in any manner impair the rlghts of any creditor or creditors of either of the Constituent Companies. If at any time the Survi%dng Company shall deem or be advised that any further assignments, assurance~ in the law, or things are necessary or desirable to vest in the Surviving Company the ~itle to say property of the Constituent Coml~nles. the Cmn~£[tue~t C~mpanies ~nd their proper officers a~d dlreators sh~tl ~tg will execute all proper assignments and assurances in the iaw, and do all things accessory or proper to vest title to such property in the Surv~ving Company and otherwise to ear~y out the purposes of this Agreement. It is expressly declared and American hereby covenants that the Surviving Company shall be sub~ect to the remedies and liabilities in such c~e prescribed in the acid Chapter I2 of Title 14 of the Revised Statutes of New Jersey and the several supplements tr, and amendments thereof, ~a~6 shelf be entitled to ailof the r~ghis, po~ve~s, pfflvllages and lament%ins accorded ~o a corpo- ration organized under said Act, and the several supplements to and amendments thereof, whether now or hereafter eaacted. ARTICLE IX The Surviving Company shall pay all expenses of this merger. ARTICLE X The Surviving Company reseives the right to amend, alter, change or repeal any provision contained in the Agreement and Act of Merger and Coasolidation, dated September 9, 1904, pursuant to which American was created, as s~eh Agreement of September 9, I904 has heretofore been amended and as amcnded by this Agreement, or contalr~ed in this Agreement, in the manner now or berealter prescrihed by statute, and all rights conferred upon stockholders of the Snrvlwh~g Cmnpaoy are ~ran~ed subject to this reservation, ARTICLE XI This Agre*ment shall be submitted to die s~ockholders of each of the Constituent Companies as provided by law and shall take effect and be deemed and taken to be the agreement and ac~ of merger of the Constituent Companies upon the adoption thereo£ by the votes of the bolders ~f two thirds oI all the capital stock of each of th~ Constituent Companies and upon the doing of sueb other acts and things as ~hall he reqnired by Chapter 12 of Title I4 of the Revised Statutes of New fersey and the several supplamen*s ~hereto and acts amendatory thereof.

IN ~VITNESS ~VH~-REOF~ said Constituent Companies, parties to this Agreement, have caused their respective corporate seals to be hcrcunto affixed and these presents to be sigaled by ±heir respective P~esldents or one of their re~pectlve Vice Presldent~ and attested by their respective Secretaries or Assistant Secretaries, all thereunto duly authorized, and the D~rector~ of each of said Corporation~ have hereunto set their hands and seals as of the day and year first above mentioned. TH~ A~RICAJ~ ro~*kcco ~O~pAN~Z THE AMERICAN TOBACCO Co~p~.~y CORI~OllATN SNA2L By P.aUL 1~1. HAEN (Paul I~L I~alm) .President . ATTEST : JOH~r W. HAIffLON (John W. Hanlon) Secretary Signatures of Directors of The Amelican Tobacco Company: OP, i~ntEus D. BA~XALyS (Orpheus D. BaxaIys) (L. S.) PA~L -~i. HAHN (Paul 1,~. ~ahn) (L.S.) ALFRED P, J~OWDEI~ (L. S.) (AI2red F, rlowdeffi HIRA~I R. HANMEIt (IIiram R. Hmm~er) (L. S.) Ricaaao J, BOVL~N (to S.) (Richard L BoyIan) ~D~UND A, ~zkl~c~y (Edmund A. Harvey) (L. S.) DOUGLAS ~" BRAS~AR (Douglas ~V. Brashear) (tos.) IIA.aRy L. HILY~D (Harry L. H~yard) (toS.) TEO~AS P. CoggoRs (L.S.) (ThomasP. Connors) JOHN R. HUTCI~INGS, JR. (John R. tlutehhlgs, Jr.) (toS.) JA~ES R. COON (to S,) (JamosR, Coon) A. gERoY Ja~so~ (A. LeRoyJanzon) (L. 5,) JO~N A, Cxou~ (L. S.) (JohnA. Crowe) ~/-ILLIA[t{ I-[. OCSIIUR'~- (~¢Villiam H. Ogsbury) (L.S.) JOHN S. DOWD (L S.) (John S. Dowd) TXMES P. N~CKLAN~ (James F. StHekland) (L. S. ) PRESTON L. FOWLE~ (LS.) (Preston L. Fowler) 7

.A_N[~CAIq CIGARETTE &ND CIGAR C0~PANy CORPOEATE SEAL ATTEST : GEORGE E. BOLIVAR (George E, Bollw~r) Secretary AAfEEICAN CIGARETTE AND CIGA~t C0~PANy By CEARLES GAI'TSHOW (Charles Ganshow) Vice President Signatures of Directors of A~erlcan Cigarette and Cigar Company: ALFRED F. B0WDEN (L. S.) (Alfred F. Bowden) ALBERT GOLD (Albert Gold) PAUL hr. FM~N (Paul ~L, Hahn) EDMUND A. HARVXy (Edmmld A. II a.t~-ey) HAR~Y L. Hi~'xrm (Harry L, Hily~r d) JOEN G. LA~ (John G. Lang) Joi~ .4. CRo~ (L.S.) (John A. Crowc) (A. Go~don Fiadlay) Prmszo~ L FOWnER (L. S.) (Preaton L. Fowler) C~,~LES Ga~s~ow (L. S.) (Charles Ganshow) AL~Z~ C. GA,I~.'yr (L. S.) SID?~EY SCEOU (Alan C. Garratt) (Sidney Schou) (L. S,) (L. S.) (L S.) (L. s.) (L. S,) (L. S.)

S'FAT~ OF NEW YORK 1 COIJNTY OF NEW YORK ~S~: BE IT xx~zm~mD that on this 16th daY of October, in the year One Thousand Nine Hundred and Fifty-three, before me, the subscriber, a Notary Public of the State of New York, County of New York, authorized to take acknowledgments and proofs in said County and State, personally appeared John ~r. Hanlon, known to me to be the Secretary of The American Tobacco Company, one of the companies named i~ the within Agreement, who being by me duly sworn on his oath said and m~de proof to nly satisfaction that he is such Secretary', that he well knows the common seal of said Company, that the semi affixed to the within Agreement is such common seal and was thereto affixed by Paul ?~I. Hahn, the President of said Company, and that said Agreement was by said i3resldent signed and dellvercd as and for the voluntary act and deed of said Company in the presence of said deponent who thereupon mtbscrlbed his name thereto as attesting witness, and that the within Agreement was si~ed by all the Directors of said Company. JoE~ W. ~Lt~no~ Sworn %0 and subscribed before me, a Notary (John W. t:fanlon) Public in and for the County of New York in the State of New York, in said County and State, this I6th day of October, 1953. ]glAI~IE S. I=~FFEaNAN Notary PuBic in and for th~ C~tm~ of N~ York in the State of New York (SEAL) Date of Expiration of Con~nfission March 30, 1955. STATN OF NNW yORI~ |aS. ¢ COUNTY OF N~gW YORK BE IT F¢]L/~]~I~IBE/tE9 tha~ on ~]%is 16th day of October, in the gear One Thousand Nine Hundred and Fiftg~hree, before me, the subscriber, R Notary Ptthlic of the S[afie of New York, County of New" York~ authorized to take ~¢knowledgments and proofs in sald County and State, personally appeared George E. Boli~rar, known to me to be the Secretary of A~nerlean Cigarette and Cigar Company, one of tile companies named in the within Agreement, ~vllo being by me duly s'~'orn, on his oath said and made proof to mg sat{sfaction thai he is stlch Secretary, that he well knows the common seal of said Company, that the seal affixed to the within Agreement is such common seal at]d was thereto affixed by Charles Gansho~v, a Vice President of said Company, and that said Agreement was by said Vice President signed and delivered as and for the voluntary act and deed of said Company in the presence of said deponent, who thereupon subscribed his narlle thereto as attesting ~dtness~ and that the within Agreement was signed by all the Directors of said Company. ~E01~GE ~. BOLIVAR Sworn to and subscribed before me~ a Notary (George E, Bolivar) Public in and for the Count)- of New ~ork in the State of New York~ in said Coanly and State, this 16th day of October, 1953. ~AIIIN S, H~E~lkTAN Notary Public in and for the County of New York in the Nl~te of N~W York (SEAL) Date of Expiration of Commlssion l~Iarch 30, 1955.

C~I~T~ICATE I, )'oH~ W. H~NLO~, Secret~ry of The Amez~can Tobacco Cornpa1~y, a corporation organ~ed and existing under and by virtue o~ the laws of the State ol New ~ersey, one of the Constituent Companies described hu the ~or~oing Agreement of Merger, do hereby certify in accordance with Title 14 of the New Jersey Revised Statutes as amended and partlcularly R. S. 14:12-3 ~ereof that : i. The ~regolng Agreement of ~Vle~er o~ sMd corporation and Ammcan Cigarette and C~gar Company wa~ entered into by the Directors of said The American Tobacco Company, under the corporate seal of said corporation, pursuant to resolutions adopted by the Board of Directors o~ sMd The American Tobacco Company at a duly convened me~t~ng thezeo~ hd~ o~ October 16, 1953, ~ which meetlng a Speclal Meeting o~ the Prefcrrcd and Common stockholders of s~id eorpor~ion was called, in ~ccordance with the B~Laws, to be held on lhe 2d day of December, 1953 for the purpose o~ considering the same. 2. SMd Agreement was duly submitted to the Preferred and Commo~ stockholders o~ said The American Tobacco Company at a special meeting thereof called ~s aforesaid and duly held at $4 Court Street ~n the Borough of ~Jlemington, in the County of Hunterdon, New Jersey, of which meeting twenty days~ notice o~ the uime~ place and object thcrco~ was marled to the last known post office address of each of ~Md stockholders. 3. Said Agreement w~s considered by the Prcferred and Common ~tockholders at said meeting and ~ vote of sa~d stockholders w~s duly taken by ballot for the adoptlo~ or rc~ect[on oi sa~d AgTeement, each share of stock entitling lhe holder thereof to one vote, and the ballots of the stockhoMers were duly cast by the stockholders in person or by proxy and stockholders owning more than two-thi~ds of all the capital stock o~ sa~d The Alneri~n Tobacco Company voted ~n favor of the adopt{on o~ said Agreement. 4. The mceting of the i°relerred and Common stgckholders of The American Tobacco Company ~nd the said vote ~ b~IIot upon the adoption of sald Agreement were held and taken separately [zom the meeting of tile stockholders and vote of said American Cigarette ~ud Cigar Company. 5. The prlnclpal o~ce of The Amcrican Tobacco Company in the State of New Jersey i~ 117 Ma~n Street in the Boroogh o~ Flemington, in the Coun~ o~ Ilunterdoa, New" Jersey, ~nd George Knowles Large is the Agent tbere~n, in charge thereo~, and upon whom procea~ against said co~ora~on may be served wi~hln said State. IN W~TNESS WI~In~EO~ I h~ve hereunto s~ned my name ~s ~ecretary and affixed the seal o{ said The American Tobacco Company this 2d day of December, 1955. (CORPORATE SEAL) (John V'Y. ]~allloll) Secretary I0

CERTIFICATE I, GEORGE E. BOLXVAR, Secretary of American Cigarctt¢ and Cigar Company, a corporation organized and existing under and by virtue of the laws of the State of New Jersey, one of the Constituent Companies described in the foregoing Agreement of ~Ierg'er, do hereby certify in accordance with Title 14 of the New jersey Revised Statutes as amer*ded and particularly R. S. 14:12 3 thereof that: 1. The foregoing Agreement of Merger of said corporation and The American Tobacco Company was entered into by the Directors ol said American Cigarette and Cigar Company, under the corporate seal of said corporation, pursuant to resolutions adopted hy the Board of Directors of said American Cigarette and Cigar Company at a duly convened meeting thereof held on October 16, 1953, at which meeting a Special Meeting of the Preferred and Common stockkoIders of said corporation was caged in accordance with the By-Laws, to be held on the 4th "day of December, 1953 for the purpose of considering the same. 2. Said Agreement was duly submitted to tile Preferred and Common stockholders of said American Cigarette and C~gar Comp~.ny at a special meeting thereof called as aforesaid and duly held at the at:rice of the corporation at i17 ~aln Street in the Borough of Flenlington, in the County of 1~unterdon, New Jersey, of which meeting twenty d~ys' notice of the time, place and object thereof was mailed to the last known pos~-office address of each of said stockholders. 3. SaldAgreementwasconsideredbythePreferrcdand Commonstoekholdersatsaldmeetlng and a vote o~ said stockholders was duly token by ballot for the adoption or rejection of said Agreement, each share of stock entitling the holder thereof to one vote~ and the ballots of the stockhglders were duly cast by the stockholders in person or hy proxy and stocidlalders owning more than two~hirds of all the capital stock of said American Cigarette and Cigar Company voted in favor of the adoption of sa~d Agreement. 4. The meeting of the Preferred and Common stockholders of Aanerican Cigarette and Cigar Company and the said vote by ballot upon the adoptioa of said Agreement were held and taken separately from the meeting of the stockholders and vote of said The American Tobacco Compauy. 5. The principal office o~ American Cigarette and Cigar Company in the State of New yersey is at 117 l~ain Stree+- in the Borough of FIenthlgton, iu the County o1 tiunterdon, New Jersey, and George Know]es Large is the Agent therein, in charge thereof, and upon whom process ~gainst said corporation may be served within said State. IN ~VITI~ESS W]~:E~EOF, I h~v~ hereunto signed my name as Secretary and affixed the seal of said American Cigkrette and Cigar Company this 4th day of December, 1953. (CORPORATE SEAL) (George E. Bolivar) ~ecretary

~IT 2 THE AMERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIARIES FINANCIAL STATEMENTS

Opinion of Independent Certified Public Acco~tants THE Bosom OF DZRECTOR$ AND STOCKEOLDERS OF THE AM~CAN T0~ACC0 COB£PANy We haw eaiamined the financial statement~ of The American Tobacco Company and its consolidated subsiddnrles, set furth in ]Exhibit 2, as oi Deceanber 31, 1952, and for the years 1952, 1951 and 1950. The flnanclal statements of American Cigarette and Cigar Company, a consolidated subsidiary, were examined by ~r~askins & segs, whose opbfion appears ia Exhibit 2. Our examination was made in accordance wgh g~nerMiy accepted ~udifing standards, and accordingly included such tests o{ the accounting reeorda of tbe companies (except xgmerlcan Cigarette mad Cigar Company) and such other auditing procedm'es as we considered necessary in the ¢irctun~tances. We e.xamined or tested accountlng records and other data supporting th~ prices at which cigarettes manufactured ~or Americsn Cigarette and Cigar Company were bilIed to ~Ilat subsidiary during the years i952, 1951, 1950 and 1949, and have reported to Hasidns & SeUs that, in aur opinion, such prices were fairly deterrc~ned in accordance with the pr~vlslons of the agreement, effectlve ]'anuary 1, 1949, b~tween the ¢ompanles. We previously made yearly e~xamlaations similar in scope to that indicated in the preceding para- graphs of the financial statement~ of The ~ln~rinan Tobacco Company and it~ consolidated subsidiaries for the years 1948 and 1949. We ~mve reviewed the data appearing trader the captlo~, "Earinngs of C~garette and Amesican" relating to The Alnerican Tobacco Company and its consolidated subsi~arJes for the years I948 to 1952, inclusive. In our opiinon, based upon our examinations and the report of t{askb~ & Sells, ~lle accompa~ylng fina~¢~oi statements (]~xhlbit 2) present fairly the conso]idat~d i~nanciM position of Tbe American Tobacco Compsny and the mIbsidi~sies included theredl ~t December 31, 1952, and the results of their operations for the years 1952, 1951 and I950 and the data relating to The American Tobacco Company and its ¢onsogdated subsidiaries, a9pearing under the ~apdon "Ear~ing~ o~ Cigarette and American", present ~Mrly the net {~cotne m~d other information shown therein for the years 1948 to 1952, inclusive, in conformity with generally accepted accounting principles apglied on a consistent basis. LYBRAN~, ROSS BI(os. & I~fONTGO~I~ERy, New York, February 2, I953.

f THE AMERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIAEIE8 (NOTE i) CONSOLIDATED STATEMENT8 OF INCOME For the Six Months Ended ]xL~e 30, 1953- Not Examined by Independent Certi~ed Public Accountants ~'or the Years 1952, 1951 and 1950-- Exataxined by Independent CerLi¢ied Public A¢countants Six :Mo~ths Ended dtme 30,195S Net sales .................................................................................... $524,789,4Pl Ce~t ~ sa/es (Note 2) ..................................... : .......................... Gloss profit ............................................................ Selling, adver 6slug, genera[ ~nd admhl~stradve expenses Add: D{~4dends sod interest ~rom ~n~estme~s hi subsidi- aries (Note 10) ............................................................ Other income ....................................... Deduc~ : Inter~t on debentures ....................................................... 3,849,494 l~edempt[on premitml (dlscomlt ~n 1953) ~nd amor~ fization o5 discount on deban~res ............................ 20,489* Other interest and discovnt ................................. 1,762,910 Frovislon for reserves a~mnst kuvestments in sec~ri~ fi¢~ (applied ~ direct wrlta-downs of investment 1952 I9~1 1950 $1,065,738,454 $942,552,034 ~71,621,130 453,760,193 940,821,656 819,973,$56 753537,591 71,020~98 125,416,798 124,878,478 117~83,439 20,717,043 32,70~,055 35,425,916 31,066~725 50,303,255 87,716,742 89,152,562 86,516,714 181,297 1,I88,071 489,467 686,5t9 130,030 313,958 372,657 35S,299 50,6I~582. 89,18~77I P05I~686 8~658,532 7,572,300 6,573,971 6,963,552 181,603 192,802 286,602 2,145,860 2,217,476 1,546,694 ~ozolnt~s) ...................................................................... portion of n¢'c income of Amerlcma Cigaret+e and Cigar Company applicable to minority interest I67,061 Other expenses aad losses .............................................. 422,~82 Total deductions ...................................... 6,181,758 Income before federal mad other taxes on income ........................................................... 44,432,824 1,484,304 212,I27 i91~56 230~54 725fl18 426,276 422~51 10B36,808 9,602,181 10,934,I93 78,351#63 80,410,505 76,724,339 23,165,000 39,335#00 40,008,000 31,759,000 3,389,000 2,06~,000 5,050,000 2,703,000 1,629,000 2,883,000 2,680,000 2,982,~00 2~,133,000 44,283,000 47,738,000 37,454,000 16,299,824 34,068,963¸ 32,672,505 39,270,339 775,293 -- 437,I64 2,462,377 Feder~I income taxes ...................................................... l~'cdc~aI excess profits taxes (less cart?t-back credk of the Company in 1952 of $1,220,000) ............................... O~her income taxes .................................................................... Refund and adjustment of prior years' fedorM and state I~axes, ~ncludlng in~erest~ less rela~e~ expert,s .................. ~-qet hao2me ..................................................... S 17,075,117 $ ~4,068,06a ~ 33,169,659 $ 41,732,715 * Denotes credlt. The necompanying notes are an ir~egral part c,~ the financial statements. (See page 10 Ior additional ivAormation relative to~e distributloIt of certain expenses and for amomlt 6~ revenue stamps included in sales.)

THE AMERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIARIES (Note 1) CONSOLIDATED BALANCE SHEET~ June 30, I953--Not Examined by Independent Certified PuhL{c Accountants December 31, 1952--Examined by Independent Certified Public Accountants ASSETS Demand deposits in banks and cash 06 bane[ ........... &ccaunt~ receivable, ettstomers ........................... Los*, Provision {or cash discotm~s allowable ....... :.YZisc~IIaneo~s accounts receivable ............................. Inventories (Note 2) : Lea~ tobacco ............................................. ~annfactx~red stock ...................................... Supplles ..................................................... Revenue stamps .................................... Cash on deposit with sinking [and trustees for re- demption of debentures .................................... Recei~xbles from suMi~aries ............................... Total current assets ................. Investments in securities of subsidlaries, at amounts not in excess of cost (Note 3) : ~bo]Iy owned B~itlsh s~bsidiaw ................... Oth*rs, less resettles of $96,666 and $1000079, ~espectlvely ........................................... Advances to subsidlaz'y ' ................................... Insurance deposits and miscellaneous investulen~s . Real estate, machlnery, fixtures, etc., nt cost (Note 4) : Real estate and httiIdings ............................... ~ach~nery and equipmeut .................................. Other ................................................................... Less, Allowance Eor depredation (Note 4) Prepaid expenses and de[ezred charges: Discount on note~ and debemures (Note 5) ...... Oilier .......................................................... Brands, trmie-marks, patents, good will, etc. (Note 6) 3tme 30,1953 .December 31, Ifl52 $ 37,903,501 $ 25,409,726 $ 49,459,035 $ 45,312,838 893,661 48,565,374 803,335 44,509,503 958,946 7~8,156 535,370,473 576,826,637 59,259~582 41,110,928 16,712,779 27,830,127 4,z~15,422 62&828~56 4#85,427 640,753,119 3,001,616 485 84,979 192,916 706,342,672 712,653,905 5,400,000 5,400,0D0 21~279,128 16,679,218 11,200,133 i6,500,133 2,780,000 2,846,000 2,248,322 2,375,356 39,581,858 38,889,060 34,092,319 33,278,901 5,728,180 5,168,099 79,402,357 77,336,060 34,247,562 45,154,795 32,836,585 44~479,535 The acconapanyhlg not~ are a~ hlte,,*rw.l part o~ file fillmac~al statellle/lt$, 2,135,682 2,253,975 2,916,679 5,052,361 2,043,444 4,299,419 1 1 $778,257,269 $783,154,349

THE AMERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIARIES (Note i) CONSOLIDATED BALANCE SHEET~ June 39, igS3--Not Examined by Independent Certified P~ffiHc Accountants December 31, 1952--Examlned by Independent Certified Publlc Accountants LIABILITIES Ix'otes payable to banks .................................. Accounts payable, ~rade ....................................... Dividends on preferred stock ...................................... Accrued interest ............................................... _A_ccrued taxes ................................................ Advertising" and other accrued expenses .................... Axno~nt due to officers ................................................ Debentures to be redeemed ffirough sln!dl~g fund operations (Note 7) ................................................. Payables to ~ubsidiaries .................................. Total current liabilities ............... Debentures (Note 7) ...................................... Minority interest in American Cigarette anti Cigar Company: Capltalstock ........................................................$ Retained earnings ................................................ June 30,1953 December 31,1952 $102,000,000 $ 92,000,000 5,712,433 5,210,888 790,,196 790,496 1,499,782 1,561,583 39,995,574 48,032fi13 3,585,908 1,990,026 272,081 587,690 3,873,000 101950,000 472,996 27G687 158,202,270 161,399,785 242,405,000 243,570,000 400,607,270 404,969,785 585,150 $ 5g-5,150 532,043 1,217,193 525,459 1,110,609 7 CAPITAL Capital stock : Preferred, six per cent cumuIatlve, par value $i00 per share, authorized 540 106 shares ssued and outsmnd ng 526,997 shares ........... $ 52,690,700 Common, par vabm $2,5 per share, authorized 10,000,000 shares, issued and outstanding 6,454,i10 shares .................................................. 161,352,750 $ 52,699,700 161,352,750 Excess of net proceeds from sale of comuloit stoc~ over par value (Note 12) ..................................... Retained earnings, as annexed (Notes 8 and 9) .... 43,294,44I 43,294,44I 257,346,89i 257,046,891 119,085,915 376,432,806 119,727,064 377,073,955 The accompanying not~s are ml integral part o9 the financial statements. 5 .~778,257,259 8783,154,349

TI-IE AMERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIARIES (Note 1) CONSOLIDATED STATEMENTS O1~ P,~TAINED EARNINGS For the Six Mouths Ended ~une 30, 1953- Not Examined by Independent Certified PubIic Accountants For the Years 1952, Ig51 and 1950- Examined by Independent Ce~diled Public Accountants Six IVIonthl Ended 3une SO, 19~ B alar~ce at b~ginni~g o~ perlod ...................................... ~119,727,064 ~-ct raceme for 1)er~od ..................................................... 17,075,11~ Total ................................................................. 136,802,1~1 195~ lg5! I~5_2~ $112,754,074 $I04,320,087 $141,862,4~ 34,065~963 35,109,669 41,732,716 146,B25,f137 1,37,42~,756 1~3,09S,199 ~)educt ~ Cash dJvidendJ : Preierred stock, $3 9er share in six mnnths ended June 30j 1953 and $6 1)er share in I952, I981 and 1950 ...................................................................... 1~580,~91 3,161,982 6,161,982 3,161,98~ Common stock, ~.50 per share ill SLX m~ths ended Itmc 30, I953 mad $4 per share in 1952, I961 and 1950 ..................................................................... 16,135,275 23,93~,99i 21,513,700 21,513,700 W~'jte-c~ o~ brands, tro~te-rrmr~rs, patea~ts, gooc~ w~ll, etc. (Note 6) ................................................................... 17,716,266 Balan~ at end of ~erlod (Note~ 8 and 9) ............................. $119,0~,915 -- -- 54,099,430 27,095,973 24,675,68~ 78~775,11~ $I19,727,064 $115,754,074 $104,320,087 The acco~pmaylng" holes are an ill~egi~] part Ol th~ finat:ci~J statements. 6 m

THE AMERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIARIES Notes Accompanying Fins~uclal Statements f I. ghe ~nancla/ statements of Amermma Cigarette and Qgar Company (96.28~o or the common capital stock of which is owned by the Compaxty ) and those ot all wholly owned domestle subsidiaries of the Company, except The America~t Tobacco Company of the ONent, Inc., which is not sJgatil~eant, are included in the consolidated financial statements. 2. lnve~toria~ used in the ccanpni~fi~ of ¢r)at cA ~Ie~ are priced at costs w~rh result from the averaging monthly of transacdot~s reflected in the inventory accounts except that revenue stamp inventories are priced at actual costs. The amounts of iaventorles at the beginning and end of the permds•were as follows : ~eginehag ~n4 of of P~od l~eriad June 30, 1953 ......................................................... $640,753,I19 ,$615,828,256 1952 ......................................................................... 594,543,551 640,753,119 1951 ...................................................................... 532,679,223 594,543,551 1950 ........................................................... 531,557,886 532,679,223 It is a generally recogafized trade practice to classify the total amotmt ot leal tobacco hwentory as a current asset althotagh part of such inventory, doe to daration of aging processes, ordinarily would not be realized witb2n one year. It {s not practicable to estimate that portior~ of the leaf inventory anmunts at June 30, 1953 and December 31, i952, which might rerosJn in the ~nventorias at June 30, 1954-and ~3ecerrnhef $1, 1953, resgectlvety. 3. Based upon finmaci~l statements o1 the subsldJarias, tiae equity in net assets of these subsidiaries was as followg : Jmte ~,0,1953 ~)ecmber BI, 1~$~ Wholly owned BrRish (traNslated into U.S. doIlars at appropriate rates of exchange) ................................ $ 9,714,I28 $ 8,976,221 Others (includes intanglible assets of $2,833,925 at June 30, 1953 and $2,~66,594 at December 31, 1952) 15,687,892 15,400~250 4. The policy of the Company and its consolidated ~absidiaries with re~peet to depreclatio~ of oil assets subject to depreciation and obsolescence is to set aside in a reserve account such amount as is estimated wS1 equal the cost of the property by the end of its usefuI li~c. The provision thus made i~ accuraulated on the st~aight-Iiae method. Rates of depreciation are varied depending upon location, use and type of eqalpment. The rates used to compute the annual amounts for th~ major items are as follows: Buildings : Concrete .................................................................. 2~ Brick and stone ...................................................................... 3% Galvanized iron ................................................................... 5N Machinery and equipment ...................................................... 5~ Office f~rnlture and eqaipment .................................................... 5N to 53~/~N Passenger automobiles .................................................................... 24~ Trucks .................................................................................................. 12% and 24~b It is the policy of the Company and its consolidated subsidiaries to adjust the reserves for depreciation for the accumulated amounts of depreciation appfic~ble to each item of property, plant and equipment retired or otherwise disposed of. Profits or Io~es resultil~g from such dispositions are included in the statement of income. )¢J[ahlfenano~ and repair e~pendJtnres are charged to cost or e~xp~tlse, Betterments and renewals which improve and extend the ii~e of existing property, plant mad equipment are capitalized. It is the practice of American Cigarette and Cigar Company with regard to a~els leased fo The American Tobacco Company to anaortize its inves~nents ia such assets over the term of the lease (99 years). Under such policy amortization of $42,928 wa~ deducted in the sh: months ended June 30, 7

.. :i. • .... .LI .!. Notes Accompanymg Fhnancinl Staten~ents- (Continued) I953 and .$85,856 in each of the years 1952, 1951 and I050. For income tax purposes, however, depreciation in the aplor oximate ara~unts of $53,000 is claimcd in the six months ended June 30, 1953 and $112 000 $127 000 said $147,000, respectively, ifi the years 1952, 195I and 1930. On consolidation, depreciation claimed for income tax purposes is substituted for amortization (See Note g). 5. Discount is being amorhaed over the lives o1 the related notes and debentures. 6. ]Prior to I9~50, intangible a~sets of the Company were refleete¢1 at fixed aalounts as ~tated in the accounts at December 31, 1913. In the opinion of management, the present value of the bra~ds an4 other intangibles is conslderably in excess ot the arnon~t at which they had beert carried, as their total value has bee~ a~ected aiui h~reaaed by substantial advertising and other ~xpendltures which have been charged to income from year to year. Accordingly, in view o1 the 1913 valuation of such intangible assets having llttie reasonable relation to present ~alue and having no apparent historical significance, in 1950 the Board of Directors authorized the write off" of such assets to a nominal vahm of $1 by a ch~-ge to retained earnings. 7. Debentures outstanding comprise the following principal amounts: Twenty year 3%, due April 13, 1962 Twenty year 3~, due January t, 1968 ................................................. 3,000,000 Twenty five year 3~, due October i5, 1969 .................................... Twenty-five year 3.~, due Febru- ary 1, 1977 .................................... June 30,1953 December 31,1952 i~edeemabIe ~Redeemable Recleernable Redeemable Within One After Within O~e After Year* June 30,19s4 . Year* Dee* 3I, 1953 $ 508,000 $ 62,080,000 $ 3,456,000 $ 62,666,000 60,000,000 3,000,C~30 60,000,000 365,000 71,736,000 3,104,000 72,294,000 48,589,000 1,390,000 48,610,000 $3,87a,000 $242,405,000 $10,9S0,00~ $243,590,000 * Estimated prinelpal amounts to be redeemed through sinking fund opergttions at prices as provided by the indentures less at 3une 30, 1953, $3,029,000 of Twenty Year 3yb Debentures, d e Apri 15. 1962, and ~2,932,000 of Twenty-five Year 3% Debentures due October 15, 1969, acquired for retirement an July i3, 1953, through sinking/und operations. The estimated ag~egate amoam of payments to the sinking funds for the years 1953 to I957 incifi~ive, ar~ as follows: 1933, ~11,972,280; 1954, $12,231,183; 1955. ~12,303,224; 1956, $12,787,448; 1957, -$13,078,055. 8. A reeoncilatinn of retained earnings o1 the Cuml)a~ly, separately, and consoIidated retained earalngs follow : June 30, December 31, 1~53 I952 Retained earalilgs of the Company, separately .................. $100,199,581 $103,949,124 Excess of equity of the Company, in n~ assets of con solldated subsidiaries, as shown by their belauce sheets, over book amount o~ the Company's investments in such subsidiaries ($I5,177,495 and $12,419,840 of such excess, rcspeetlvely, arises ~i"onl consolidatiort o1 American Cigarette and Cigar Company) ............... 26,020,265 21,568,875 125,219,846 125,517,999

Notes Ac¢ompanylng ~iamnaial Statements~(Confthued) L~ss : Intercompsany profits in invcntorles, including $305,595 and $113,008, respectively, in American C garette ~nd Cigar Company's inventories Substitution of depreciation for amortLzation pro- ~dded hy lessor (Amerkmn Cigarette and Cigar Company) wlth respect to certain assets covered by an imercompany lease with the Company ........ June 30, December 31, 19sa 19,~ 711,255 386,770 5,422,673 5,404,165 6, I33,931 5,79fi,935 Consolidated retained earnings ............ $119,085,915 $119,727,064 9. Under the pro,Aalons of the indenture relating to the Twenty ~gear 3~ Debentures, due Jmauary I, 1968, cask dividends decIared on common stocks and payments made in purchasing shares of any class of the Company's stoeh~ subseque,tt to December 21, 19471 may not exceed the aggregate of $15,000,000 and consolidated net income earned subsequent to Ceceanber 31, 1047, less dMdends paid en preferred stock. Approxguately $88,400,000 mad $89,000,000 of retained earnings was l~ee u~ thi~ re~trietio~ at June 30, 1953 ~md Decembe~ S1, 1952, re~pe~alvely. I0. The equity of the Company and its consolidated s~hsidlarles in earnings o~ unconsolidated sub- sldlaties (including the wtmgy owned British subsidiary) ammunted to $1,026,715 for the s~x months ended June 30~ 1953 and $1~753,fi89, $1,831,879 and $1,6a4,193, respectively, for the years 1952, 1951 and 1950. The earnings of the wholly owned British subsidiary translated at appropriate rates o1 exehanlgle were $737,906 for the six months ended June 30, 1953 and $1,089,774, $1,205,679 ~nd $773,457, respectively, for the years 1952, 1951 and 1950. 11. A noncontributory Retlrement Plan providing unfimded (pay-tts-y~u-go) benefits for empIoyees h~ame ~ff~eXi~e as c~ January t, 1949. Subject to oanditio~ contained in the plan, retirement benefits (normally commealefng at age 65) and disability. Iaenefits are available after 12 years of ¢ontinuotts service. The normal retirement benefits and disabdity benefits art based upon rates varying between lr/~% and 2~ (a) o1 annual compensation on the effective date for each appllcabla year of past service and (b) of annuaJ earnings for each appUeabIe year o~ ~t~re service, sub,ceil to a deduction oatual to Otle-t~I~ o1 the primary ,~ociai security benefit• The maximttm annual benefit is 50~ of the first $10,000 of the employees average earnings during his last five ).ears of employment, plu~ 309o of any excess, and shall net exceed $25,000. The Plan also provides severance benefits for employee* at least 50 years of age with 20 years of s~rvice. Under the Plan the Company has the right to amend, modify or terminate the Plan in whole or in part at any time or from time to time. The foregoing is a brief description of the essential provisions of the PIan mid is not intended to be complete. Payments made under the ]Jlaaa and charged to consolidated income were $162,423 ha the six months ended June 30: 1953, and $288,068, $224,1189 and $136,943, re~peetlvaly, ~ the years 1952, 1951 and 1950. It was estimated by independent aett~arles at the inception of the Plan (o~z the basis of the wage and saIary scales and other facts and conditions them existing or asstuued) that tmnnal payments would increase to an ukima~e rate after I979 of $2,431,450 for the Company and its consolidated subsidiaries and of SI,941,150 for the Compnny alone. Such annual payments include esthnated amounts payable whether measured by past or future services. There is no commitment to fund the ga3nuents trader t/ie Plan and no estimate o1 the past service cost has been made and to make suzh an estimate would require Unreasonable eff6rt and experme. 12. 111 1952, the excess of net proceeds from saIe of common stock over par value increased 822,718,850 • s a result of the ea[e of i,t37~,68[ shares ai common stock, wtf~ch incIuded 93,713 abates ef Treasury slock. There were no other changes in tiffs account during the three years and six months ended Jm~e 30, 1053. 9

; ,.~_.-~. " ;= ....r." • " .~: "15~'~¸- ):. THE Ag~ERICAN TOBACCO COMPANY AND ITS CONSOLIDATED SUBSIDIARIES SUPPLEMENTARY PROFIT AND LOSS INFORMATION ~or the ~x Months Em~xl June 30, 1953- Not Exam{ned by Independent Ce~dfied Public Accountants For the Years 1952, 1951 and 1950-- Examined by Independent Certh%ed I~ubllc Accountants Co l~'nn A Colunm B Column C Column D Ch~rg~ D~r~tly to Profit ~Rnd LoS~ To Costs ~ Charged ta Other Operating ~ Accounts Item ~xpenses Ohhe~ Account Ar~ount Tc~al l~alnt ~n~nee ~d reDirs: Six moml~ ended June 30, 1953 $ 1,90~,442 $ 78267 y~ar 1952 ........................................ 3,388,622 I14,297 year 1951 ................................ 3,113,390 170.289 De~redadon : S~x m~th~ ended I~ae 30, I~53 1,427,351 159,567 Y~ 1952 ...................................... ~795227 ~0~,29Q Year 1951 .............................. • ...... 2,690,668 306.215 Year 1950 ................. 2,624,246 277,598 Taxes other t~an h~¢or~e ~nd ~.xce~s pro~t$ t~xe~ : ]~v~nue ~±am~s : Sb: months ended lune 30, 1~53 250,408,61~(1) 234,460 X~r 1952 ...................................... 520,5~,2~7(1) 419079 Year 195I ................................. 435,I86,2~9(1) 36~,937 year 1950 ...................................... 407,489.924(I) 368,040 Others (lkrote $2 : S~ months ended I.ne 20, 1953 t.804,5I~ 515,329 Year 1952 ................................ 3615,692 988.208 Year 195I ................................... 3,5 2,117 974,045 year 1950 .................................. 3,282,061 966,113 ~ran%~emefl% and s~rvieg eot~tI~ ~ee5 : None. Re~ts ~ ro~ttie~: Rent~ (Note 3) : Six months ended June -30, 1953 148,567 154d51 Year 1952 .................................. 347,778 324,276 ¥~a~ t951 ........................................ 321,19g 319,$I5 Year 1950 ............................... 293,678 297,641 Koyalties : 5~x months endel June 30, 1953 252,820 Year 1952 ..................................... 543,303 year 195i ....................................... 552,056 year I950 ....................................... 522,72 I hTor~s : $ 1,98t,699 3,502,919 3,283,679 2,954,777 1,586,918 3,1~0,517 2,995,883 2,901,844 250,643,142 520,9~4,~ 435,552,176 407,857,964 2,319,841 4,6D3,90~} 4~486.152 4,348174 297,718 672,054 6~5515 591,319 25~,B,20 543,303 552,036 522,721 (1) Exceeds the ~mo~at ineludcxt in $ale~ by ~q,~5, $I4~,262, $122,328 and $98:766~ rczpeedvely, far the six months ended June 3~), 1953 and for the },ears 1952, 1951 mad 1950. The major portion of such exee~s rcprcseats the cost of revenue stamps attached to manufactured stock dlstrihutcd to factory employees vriflaout charge* (2) Comprises : Six MonO~ Ended June 30, I953 1952 1951 19~ State t~xes not ~as~d on income .............................. $ 348,794 $ 740 415 $ 72~,696 $ 63Z875 Unemployanenl ioauranee and old-age benefits taxes 765,918 1,620,547 1,706,203 1,477,630 Real estate ~std other ~axcs ................................... 1,207,129 2,242,942 2,05%263 2,137,669 To~aIs ..................................................... $2,319,841 $4,603,900 $4,486,162 $4,248,174 (3) The ren ~ho~ comprl e snb~ta~tlally all of ~he rear of the Company and its consolidated ~ubgdSaries. S~ndry rellt expenditures nor substa~t{al ~a the aggregate, were hactlrred and dJ~tx~buted through w'&r~us ¢o~t and expense ac~c4lnts. The sura o~ these htt~er ex~¢tldiOlres is not obf~ina~le wJtl~out /lgreasonabI~ effort and ~p~rlse* 10

AMERICAN CIGARETTE AND CIGAR COMPA~rY FINANCIAL STATE}IENTS

Opinion o~ Independent Certified Puhlle Accountants To TIIE B OA P~I~ O~q~ D~ECTORS, AI~ERICAN CIGARETTE AND CIGAP. COMPANy. ~,rge have examined the financial ~tatements of Amerlca~ Cigarette and Cigar Company~ set forth in Exhibit 3, as of December 3i, 1952, aad for the years 1952, I951 and 1950. The cigarettes sold by the Compa~,y were manufactured for it by an affiliate, The American Tobacco Corapany, under an agree- ment effective January 1, 1949. Our e~'<ambaadon of the prices pa~g for the cigarettes so mannfactnred for the Company was llmked to an inspection of the related involce~ but Lybrand, Ro~s Bros. & ~Iont- gomery have rei~rted to us that in their oplnlon, based upon a test examinagon, the prices at which the manufactured cigarettes were billed to the Compat~y were fairly determined in accordance with the terms of the said agreement. We have also examined the financial statement~ of Cuban Tobaeo~ Company ~nc. and of its subsidiaries (aot presented herewith) as of December 31, 1952, and for the years 1952, I951 and 195D. Our e,'cam~nation was made ~n accordance with generagy accepted auditing staadards, and accordingly included such tests of the accound~lg records and such other auditing procedures as we considered nercssat3, in the circumstances. V~re prevlo~sly nlade )~arly ~xam~nations s~milar in scope to that indicated in the preceding para~ graph o1 the financial statements of the Company for the years 1949 and 1948 eyc~pt that in the year 1948 the ciff~rettes sold wcre manufactured by the Company and in respect of fllat year our examination was extended to the rnannf~rthr~ng accounts. \Ve have reviewed the data appearinG under the caption "~arnJngs of Cigarette and American" reinting to American Cigarette and Ciff, tr Company for the years 1948 to i952, inclusive. In our opiinc% b~scd upon our examinations and the above meutlc~aed reports of Lybrand, Ross Bros. & ~dontgomery for the years I952, 1951, 1950 and 1949, d~e accompanylng finandal statements (Exhibit 3) present bahgy the/'maneial position of Amer{can Cigzrettc and Cigar Compaay at December 31, 1952 and the res~Its of it~ operations for the year~ 1952, 1951 and I95{) and the data relating to AmerJcem Cigarette and Cigar Company, appearinG under the caption "Earnings o1 Cigarette ~nd Ameri~n", present fairiy the net income and other information shown therein for the years 1948 t~ 1952, inciusive, in eordormlty with generally accepted acco~ating principles ~ppl[ed on a consistent basis. HASKIN$ & SELLS " New York, February 2, 195&

AMERIC~N CIGARETTE AND CIGAR COMPANY BTAT~MENTS OF INCO]~Z]~ For the Six Months Ended June 50, 1953- Not Examined by Independent Certified Public Accountants For the Years 1852, 1951 8rid 1950-- Rxan~ned by Independent Certified Public Accountants Six Moaths Ended June 30,1953 Ig52 I951 195(} ~et opera'Lug prc6f of cigarette ~nd cfg~ department: Net sales (Note 4) .............................................................. $284631,876 $333,343,491 $236,363,408 $167,190,619 Cost of sales (Notes i a~d 4) ........................................ 167,469,959 3!8,694,894 210,3752~57 I~4,945,650 Gross profit on sales ...............................................................17,16[,117 22,649,407 17,888,551 12,244,969 Add: Gross eommissiotts earaed undo" a cig~r sales s~ency agreement With The ~er~C~l~ Tobacco Company ......................................................................... 515,182 696,888 ~ 889,28~ 17,476~29~ ~ 18,623,355 12,834,~57 Deduct : Sel9ng, advertising, general and adralalst ~GVe expense~ (Note 5) ........................................................ 3,631'427 6,708,661 0,070,885 4,093,I58 ~ental trader indeztur e of lease with The American Tobac~ Company dated March 31~ 1932 ............................................... Dividends and interest on ia;'estments in secarities of sub- sidi~rles: Dividends (Note 2) : CnB~ Tok~eco Come, my Inc~ ........................................ Subsid[arles of C~bm~ Tobacco Com.pauy lac ............. Interest: Cub~m Tobacco Company Ine ..................................... OflJer income : Interest oil ~lv~ees to subsldiatqes ................................ Other -.,...~ ............................................................................... Deduct ; Amortization---Ieased properties (Note 6) .......................... Other expenses and losses ................................................... ~leome be~ore f~dclal arid other taxes On ]neom~ Deduct: Fedecal income taxes ................................................. Federal exee~s profit~ t~:es ................................................... Other ~eolne taxes ................................................................... Net it ~eome .................................................. S~ecied iteros : Cancdlatlon and adjustment of provltio~ls for prior years~ federal itlcOgle and exce~$ profits ~axe~ and state ~,nr~s, includlog interest, less re/ated expens~ .... Less: Reduction in carrying ~lue of scarifies of a subsidiary Cuban Tobacco Company Inc. restoring the inve~meu~ to ~ts ~arry~g- v~ae (not fla e-,~ee~s . of cost) at December 14, 1926 ............................................ 10,8~A,872 16,636,334 13,552.376 8,741,102" g00,000 1,800,000 1,800,1300 1,800,000 14,744,872 18,436,134 ~ 10,541,102 23,335 932~7 44,672 38,615 49'48fl 59,358 t3,925 20,214 108'482 lg0,704 142,1ff2 248,450 I81,297 333.349 200,698 307279 40,465 84,412 111,482 80,172 443 4,~41 I0,172 10,803 40508 80,953 121,654 90,175 - 14,967,G77 10,858,636 ~ 42,~28 85,856 85,856 85,856 5,g43 26,811 11,660 #~,691 4g,871 112,667 97r516 92,647 14,918,206 18,745,969 15,577,207 10,846,809 7,576,01]fl 9,505,000 7~765,757 4~280,800 2,621,000 3,285,000 2,536,543 8g0,000 28I,Q00 354,000 143,000 ~92,000 1(L478,000 13,544,000~ t0~4~,I00" ,~ ,872,110{) 4,440,206 5,601,969 5,032,107 5e274,~09 -- -- 2,831,726 -- -- -- 1259,821 . -- -- 772,705 Net income and speEml items ................................. $ 4A40206 $ 5,601,969 $ ~ $ * Federal and other taxes on income are reduced by $95,I60 representing net over prov{~ions ~n 1950. The ~c~mDanyhag not~ are an i~tcgr~l par~ of the finm~¢~l stab~men~. 3

*. J • AIVIERICAN CIGARETTE AND CIGAR COMPANY BALANCE SHEETS June 30, 1933--Not Examined by Independent Certified Public Accountants December 81, 1952--Examined by Independent Certified Public Accountants ASSETS ~'une 80,195a Demand deposits in banhs and cash on hand ....................... $ 5,006,16i Accounts receivable, customers ....................................... $16,677,737 Less, Provision for cash discotmts allowable ............ 307,003 15,370,734 MisceiIaneoas accounts rcccivable ..................................... 273,386 -DeeemberdI, 195Z $14,827,948 268,441 lnvetatorles : Finished goods (Note 11 ........................................... 15,436,953 Supplies ............................................................................ 1285 15,438,248 Receivables fi-om subsidiaries ................................................ 89,155 Total current assets ................................ 37,17],684 4,562,127 1,124 $ 5,55~616 I4,659,5W 122,382 4,563,25i 208,366 26,011,122 $55,486,857 The accompanying" not~_~ are an integral pal~ of tile finaucial ~ b~telne~t s. 4 • $44,nL728 Investments in securities o1 subsidiaries, at muounts not in excess of cost (Note 2) : Collateral notes and stocks of Cuban Tobacco Corn paWInc .................................................................. 7,110,357 7,027,6ff2 Stocks of subsidiaries of Cuban Tobacco Company Inc ............................................................................... 1,539,321 8,649,678 1,446,504 8,474,106 Advances to a subsidiary ................................................... 2,780,000 2,846,600 Oflaer investments, at cost ................................................. 12,000 12,000 Real estate, fixtures, etc., at cost ................................ 108,885 104,955 Less, Allowance for depreciation .............................. 48,719 60,166 46,388 58,567 Prepaid expenses .................................................................... 212,122 77,798 Assets leased to The Amerleaa Tobacco Company for a term o1 99 years under indenture ef Ieaze &aed March 31, 1932 (Note 6) : Real estate, maehinetT and fixtures, at cost, as of December .3I, 193t, less allowance for deprechticn aqcumnlatod as of that date ................................... 8,499,775 8,499,776 Brands, trade-marks and good will ................... 1 1 8,499,777 8,499,777 Less, Allowance ~or amortization ................................ 1,904,570 6,595,207 1,861,642 6,638,135

H AMERICAN CIGARETTE AND CIGAR COMPANY ~IALANCE SHEETS June 30, 1953--Not Examined by Independent Certhqed Public Accountants December 31, 1952--Examlned by Independent CertiBed Public Accountants LIABILITIES Accounts payable, trade: Due to affiliate ............................................................... $i0,644,308 Other ............................................................................... 388,063 Accrued t~xcs ......................................... : ............................... Advertising and other accrued expenses .............................. Total curreut IiabiliBes ............................ June 30,1953 December 81,1952 $ 2,124,12i} $I1,232,371 445,815 $ 2,569,935 13,488,780 13,446,884 93,541 292,983 24,814,692 16,309,802 CAPITAL Capital stock : Preferred, six per eeut eumuiatlve, par value $100 per share, authorized, issued and outstanding 3,989 ~hares ..................................................................... 398,900 Conmlon, par value $70 per share, authorized 500,000 shares, issued 200,000 shares, including 4,500 shares in Treasury .............................................................. 14,000,000 14,398,900 Retained earnings, as annexed (Note 3) ........................... 16,985,030 31,383,930 Less Treasury stock, at cost (Note 3) : 4,500 shares of common stock .................................... 711,765 398,900 14,000,000 14,398,900 14,I20,791 28,519,691 30,672,I65 711,765 27,807,926 ?. [" $55,486,857 The accoml0anyiag not~ are an integral part of the financial statements. 5 $44,117,728

H AMERICAN CIGARETTE AND CIGAR COMPANY STATEMENTS OF ~ETAINED EADNINGS For the Six Months Ended ~uae 30, 1953- Not Examined by Independent Certified Public Accountants For the Years 1852, 1951 ~ud 1950-- Examined by Independent Certified Public Accountants Six Month~ Ended June 30, Ig53 1952 Ig51 1950 r Balance at beglnnin~ cf 0cried ............................................................... $12,t22,791 $12~061,756 $12,181,383 $ 6,895,803 Nct ~ncome (izeluding {n 1950 $772,705 spedel ite~us) ~or geriod_. 4,442,206 5,631,g69 5,032,107 6,~46,714 Tota~ .......................................................................... 12,~62,997 Deduct: Cash divldeads : Pre~er:ed stock, $3 pcr share ~n s~x ~nonths ea6ed Jua~ 30, I9~3 and $6 l~r share in 19~2, 195l mad 1950 ..................... I1,957 C~rar~¢n ~ock, ~ I~ sh~ ~ dlx ~ath~ ~nded ~un~ ~O, 1933~ $18 per share in 1952, $16 9e~ slmre in ~9~1 and $14 ~er ~h~re ~n 1950 ........................................................... 1,~64,000 1,575,937 Balznce at e~d ~ per~od (Note 3) .......................................................... $16,93~,030 3,519,000 2,I28,(300 2,737,000 3,542,934 3,131,934 2,760,934 $14. i20.791 $12,061,7.56 $10.181,583 Tile ~ecolapan} ing notes are an integral part o~ the ~maucJal statem~uts. 6

AMERICAN CIGARETTE AND CIGAR COMPANY NotQs Accompanying Financial ~tatements 1. In connection with the manufacture o1 cigarettes for the Company• The Amerlcan. Tobacco Company charged the Company wl~h (a) m crest on cost of leaf, (b an amount m excess cf the cost o1 manufacture of cigarettes and (c) brand rental, eli aggregating $4,639,631 in the six months ended June 30, 1953, $7,808,703 in 1932, $6 302 067 in 1951 and $4,366,675 ha 1950. It is estimated that rater-company profits (to The American Tobacco Company) amounting to approximately $396,000 and $113,000 were included in the values of the Company's inventories of finished goods at June 30. 1953 and December 31, 1952. respectively. Inventories used in the compatation of cost o1 sales are priced at average cost except that revenue stamps included therein are priced at actual.cost The amounts of inventories at the beginning and end of the periods were as follo~ : Beginning End of of Period period June 30, 1953 ..................................................................... $4,563,251 $15,438,248 1952 ................................................................................ 4,467,469 4,563,25I I951 .................................................................. 1,757,468 4,467,469 1950 ................................................................................. 2,340,230 1,757,468 2. Based upon financial statements o1 the unconsolidated subsidiaries (Cuban Tobacco Company Ine. and its subsidiaries) : The eqtdty of the Company, applicable to its investments in scem'ifies of subsidiaries, in the net asset~ of the subsidiaries at june 30, 1933 was $12,328,855, represented by tangible assets amounting to $9,600,523 and intangihIe assets amounting to $2,728,53li. The comparable figures at December 51, 1952 were $12,183,965, .$9,524,058 and $2,659,907. respectively. The equity of the Companp in net profit and loss of these suhsidlaries was as follows: Applicable ~o Applicable %0 Preferred and Common sceuritles eft subsidP Stocks o~ Cuban TGbmeco aries of Cuban Tobacco ComI~any Inc. on a Compmay I~c on an consolidated basis individual basis Preferred Common Six months ended June 30, 1953 ............. $23,335 $3i,360 ]oss* $46,452 Year 1952 .................................................. 46,617 54,764 111,150"* Year 1951 ................................ 44,672 51,315 23267 Year 1950 ....................................... 38,615 85,1 i4 25,396 * Determined alter provision for c~vldend on preferred stocbL ** The Company's investment in securities of subsidiaries o1 Cuban Tobacco Company Inc. was substantially increased duriug 1932 and was further increased during the six months ended lune 3% 1953. In computing the equities in net assets and profit and hass 05 the unconsolld~ted subsidiaries referred to above, no cognizance is taken of any income or other taxes that may become payabie on declara- tion of dividends by domesdc or foreign subsidiaries of Cuban Tobacco Company Inc. The amounts of suvhi taxes will be dependent on future dividend pcileles of the companies and on tax laws and rates applicable in the years in which any dividends may be declared. 3. Oi the retained earnings at J'une 30, 1953 and December 31, I952, $711,765 is represented by Treasury stock, t{ad such Treasury stock beeaa retired by statutory proceedings and capital reduced accordingly, ca[xltal would thereby have been reduced by $315,000 and retained earnings by $396,765 at each o1 those d~tes. 4. Sales a~d cost of sales include revcnne stamps as fnllows: Sales CoBt of Sales Six mollths ended June 30, 1953 ................................. $ 91,534,159 $ 91,534,079 Year 1952 .................................................... : ............ 170,017,615 170,017,583 Year 1951 ............................................................ 113,965,d75 113,965,422 Year 1950 ............................................................ 81,882,537 81,882,537 Y

Notes Accompanying ~'Jn~ncial Statements- (Co~ued) 5. With respect to its empluyees, the Company participates 51 The American Tobacco Company's Retirement plan (referred to herein as the PLan . The Plan is administered by The American Tobacco Corapanv Js non o~ntributory and provides for retirement, disalul{ty andseverance bene- fit~ to ernplDyee~ ~f The American T~b~c~ C~mp~uy ~a~6 ~r~in affiliates Lv~l~dln~ fia~ Cometary. It bec~ane egfecfi~e~ January i, 19~9 and ~s sub ecL to amendment, modification or termln~tion. No provislon has been made for the ftmding or ~nsurlng of the Plan cr ~ny b~nefits thereunder and no estimate of the past service cost of the Plum ha~ been made. The Company charged to income $2.388 in the six months encted Ju~ 30, 1953, $4,839 in 1952, $4,I94 in 195~ and $3A36 in 1950, whlah amountB it paid to The American Toha~co Company in reiiaabursemeglt of payment~ under ~he lalan to former employees of the Col~patly. For furtherp~rtluular~ of the essential provisions of the plan, reference is m~de to Note 11 accom- panying the ~nancJal statealents o~ The .~ler~can Tobacco Co~pany aI~d its conso~id~£ed subsidiaries, included in Exhibit 2 herewith. 6. The policies of the Company in respect of ?~xed ~s~s and related rezerves are as folluws : ~eali e~tate~ ~xtures, etc. : Income i~ ~barged with p~ovislons for depreciatlun a~ ~he following rat~s: furniture 63~% a~d automobiles 24~. All expenses in respect of main~=mance and repairs ~re charged against income. Oenerally, renew,~ls and betterments t~re treated as additirms to fixed assets ~nd the items replaced are trca~ed ~s vef tlrera~nt~. The a¢cuna~ated depreciation agpheable to items sold or retired is charged.against the re~erv~ accounts and the net profits ~r Iosses resulting from s~ch di~osltlons ~r¢ included in the statements of income. Assets lc~s~d to The #ane~can Tobacco Company {or a term of ninet-g~ine years: These asset~ ~re being amoz'tized over the term of the le~e, the annu~I charge to lucerne being $85,856. It is quite p~s~ible that the entire a~ets will be, ou~ of servlee b~ore th~ ~xpJr~don of the la~ bu~ AtneI~can Cigarette and Cigar Company s focorae ~rom the Iease ~ill not be bnpalrecl by au~ diminution of the assets. In consequence, t has been decided that the eased assets are subjec~ to aniortiz~on r~ther than depreciation though for income tax proposes depreciation la ciahned, in substitution for ~morflaation, lu the approxnvate ~motmts of $53,000 lu the six months ended 3une 30, i953, $112,000 ~n 1~52, $127,~00 in 19~1 and $147,000 in 1950. ~xpenses ~n respect of malutenance, repairs, renewals and betterments are incurred hy and for account ~f the lessee. No adjustment~ are made at the time proj0erflas ~r~ ~laposed of or retired. 8

AMERICAN CIGARETTE AND CIGAR COMPANY SUPPLEMENTARY P~OPIT AND LO~ INFORIVIATION For the Six Months Ended June 30, 1953- Not Examined by Independent Certified p~bllc Accountant~ For the Years 1952, 1951 and 1950- Examined by Independent Certified Public Accounts Column A Cclunm Charged Direcdy to Profit and Loss To Costs or Ol~rafing Item Exp~ns~ other Colmnn C Column D Charged to Oth~ ~Acco~ts ~ Amount 'loCal l ]~Jllt~uaucc and repair ~ : Six months ended June 30, 19S3 .... $ $ 1,249 Year I952 ................................................. 2,017 Year I951 .................................................... -- 1,675 Year 1950 .................................................... -- 1,5~3 Dewedation and amor t~zafion of fixed assets: Six mooths ended June 30, I953 ............ 47,074 Year 1952 .................................................... 98,964 Year 1951 .................................................... -- 93,859 year I950 ................................. -- 92~5~7 Taxes, ofller than income a~d ex~is r4-o~tfl taxes (see Note) : Six mo~flls ended J~ne 30, 1953 ............ 11,476 58,678 Year 1952 .................................... 23,290 96,559 5teat 1951 .................................................... 468,900 79,492 Year 1950 ................................................... 7,942 58,151 ~vamgement mad sere-ice contract ~ees : None. Rents and ro3ahies: ]Rents : Six months ended June 30, 19~3 ............ 26,000 11,037 Year 1952 .................................................... 52,0(]0 72,073 Year 1951 .................................................. 52,000 20,073 Year 1950 ................................. 52,000 I9,673 Royaitles : NOrE: The totaIs comprise: ~'~deral tax on floor stocks as o~ November 1, 1951 ~ate ta~s not based o~1 ~neollae ............................... I~¢mp[oyment ~sur~/l~ alld OI~ age b,merits taxes ~e~l estate mad other taxes .................. , ........................... Totals ................................................... ~.. $-- $ 1,249 -- 2,017 -- 1,676 -- 1,523 -- 47,074 -- 93,964 -- 93,839 92,507 The Amerlean Tobacco Company 104 70,258 The American Tobacco Cvmpany 203 120,052 The American Tobacco C~mpany 202 548,594 The American Tobacco Company 176 66,269 -- 3Z037 -- 24,073 -- 72,073 -- 71,673 Six Months Ended June 30, 1953 1~2 1951 1950 $ $ -- $4~8,2~6 $ -- 31,247 50'215 32,234 24,325 9,484 14,325 15,190 12,053 29,527 55,512 42,934 29,89I $70,258 $120,0~2 $548,$94 $66,269