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American Brands, Inc. ~ ¢,~ 2 ~ J ¢ oport 0926714-035 Jergens Lotion Titleist Franklin Life

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245 Park Avenue New York, New York 10167 March 15, 1983 DEAR STOCKHOLDER ~ The 1983 Annual Meeting of storkholders ~fill be held on ~Vednesday, May 4, 1983 at 10:00 a.m. in the Grand BaIlrcom of The Waldorf-Astoria, Park Avenue. at gOth Street, New York City. You are tug,ted to attend the meeting to consider personally the business desezlbed in the follo~ing notice of meet ing and proxy statement. At the meeting there wdl be a report to the stockholders on the progress of the Company during the past year, A discussion period will also take g place during which stockholders will have an opportunity to discuss matters of interest concerning the Company. A feature of these Annual Meetings has been the attendance in person of many stackholders, some with large holdings and some with small holdings. This has been most welcome. It is important to ensttre that your shares be represented at the lueeting whether or not you plan personally to attend. We urge yon promptly to complete, date and rettuna your proxy in the enclosed postpaid return envelope provSded for that purpose. Sincerely yours, ED~'¢ AI~O W. gVH~Tr EM O~,E Chairman o~ the Board and Chief Executive O~cer

245 Park Avenue New York, New York 10167 NOTICE OF MEETING March 15, 1983 The Annual Meeting of stocldmldars o£ American Brands, Inc. will be held in the Grand Ballroom of The Waldorf-Astoria, park Avenue at 50th Street, New York City, at 10 o'clock in the forenoo~ (Eastern Daylight Thne) on Wednesday, May 4, 1983, for tim following purposes: A. To elect directors. B. To consider and vote on: (1) Aproposal (designated Proposal 1 and set forth in the fcllowing proxy statement), approved by the Board of D~rectors, to elect Coopers & Lybrand independent auditors for the Company for the year I98S; (2) A proposal (designated ProposaI ~ and set forth in the following proxy statement) relating to cumulative voting, expected to be made by four stockholders; and (3) A pmtmsal (designated Proposal 8 and set forth in the following proxy statement) relating to the establishment of a nominating committee of the Board of Directors, expected to be made by four stoekholders. C. To transact such other business as may properly come before the meeting. Tile stock transfer books will not be ekssed, but holders of Common Stock, $1.70 Convertible Preferred Stock, $2.75 preferred Stock and $2.67 Convertible Preferred Stock, to be entitled to vote, must be holders of record at the close of business on March 7, 1983. Louis F. FERNOUS~ ~rl,, Secretarg

PROXY STATEMENT The Company's principal executive offices are located at 245 Park Avenue, New York, N.Y. 10167. This proxy statement and aceompanylng proxy are first being sent or given to stockholders on or about .March I5, 1983. The accompanying proxy is solicited by the Board of Directors. It may be revoked by written notice given to the secretar/of the meeting at any time before being voted. Proxies in this form, propeAy executed, duly returned to the Company and not revoked, will be voted for the election of directors (except to the extent that authority therefor is withheld) and on the numbered Proposals described in thls proxy statement (provided that, as to Proposals 2 and 3, they are presented to the meeting) in accordance with the tostruetion~ in the proxy. The Board of Directors is not aware at the date hereof of any matter proposed to be presented at this meeting other than the election of disecLnrs and Proposals I, 2 mad 3. If any other matter is properly presented, the persons named in the enclosed form of proxy will have discretionary authority to vote thereon according to their best iudgment. Presence at the meeting does riot of itself revoke the proxy. The only sect~ities of the Company entided to be voted are shares of Common Stock, $L70 Convertible Preferred Stock, $2.75 Preferred Stock and $2.67 Convertible Preferred S~ek and onIy holders of record at the cIose of business on March 7, 1983 o2e entitled to vote. Holders of Common Stock are entitled to one vote per share, holders of $1.70 Convertible Preferred Stock are entitled to one-fifth of a vote per share, holders of $9.75 Preferred Stock are entitled to one-quarter of a vote per share and holders of 42.67 Convertible Preferred Stock are entitled to three-tenths of a vote per share. There were 5,5,204,363 shares of Common Stock, 07,346 shares of $1.70 Convertible Preferred Stock, 5,08fi,5"28 shares of $2.75 Preferred Stock and 2,(340,661 shares of $2¸67 Cenvert~bhi Preferred Stock outstanding at March 7, 1983. ELECTION OF DIRECTORS The Board of Directors consists of eighteen members who are elected to hold o~fee until the ne~ Annual Meeting or until their successors are duly elected and quali~ed. If no eontxary indication is made, proxies in the aeeompanylng form are to be voted for the nominees named below or, in the event any such nominee is not a candidate or is unable to serve as a director at the ¢hne of the election (which is not now expected), for any nominee who shall be designated by the Board of Direetois to fin such vacancy. All nominees named hehiw are members of the present Board. There are set forth below opposite the name of each nominee his present positions and o~ees withtlhe Company and his prlneipal occupations during the past five years, his ago and the year when he was first efee~d a director of the Company. There are also set forth below opposite the name of each nominee under theheading "Shares of Common Stock beneSeialIy owned", the shares of Common Stock of the Company beneficially owned by the nominee on Fehrnary 1, 1~3, including shares of Common Stock (if any) of which the nominee had the right on such date to acquire beneficial ownership pursllant to the exercise on or before April 2, 1983 of options granted by the Company, plus the number (if any) of shares of such Common Stock held on December 31, 1982 by the Trustee of the ProfibShasing Plans of the Company and a subsidiary attributable to proof sharing and to voluntary deposits made through payroli deductions that is equivalent as of that date te his undivided proportionate beneficial interest in all such shares. In no instance does the security ownership of any of the nominees listed below equal or exceed one percent of the outstanding shares of Common Stock of the Company. The information as to security holdings is based on thformatiou received by the Company from the nominees, from the Divisional Benefits Plan Committee and from the Trustee. Nam~ William J. A]Iey° Eugene R. Anderson Shares of Year Commtm Stock Present positions and omens with the Company first beneficially and prine/pal occupations elected o~¢aed duffng the past live years Age director in) lh) (¢1 ( dl President and Chief Executive Officer of The Franklin Life Insurance Company Partner~ Anderson Russell Kill & Oliek, P.C. (law frm) 83 1979 6,Sfi2(e) 55 I980 2,000

Nmo ltober~ L. Austin Catherine M. Bedell John H. Behr Stuart G. Cameron John P. Clark Thomas C. Hays AmoId Henson° Edward J. Jemaings, Jr. ~es¢~ positions and o~ees with the Company and principal occupations during the least ~iv¢ years Vice President--SuhsldLary Administration of American Brands, Inc. since 1981 and President and Chie£ Executive Ofllcer o[ Acushnet Company (goff products) from 1978 to 198h President and Chief Oper- a~ing Offcer of Acushnet Company prior thereto Special Consultant to the White House since 1981; Commissioner of the Hinted States International Trade Commission (serving as Chairman in I980) ~sior thereto Retired; formerly, Chairman of the Board and Chief Executive Offeer of Swingline Inc. (fastening products) Chairman of GaBaher Limited (tobacco productsts) since 1980; Deputy Chaimlan o1 Gallaher Lirrfited {tom 1978 to 1980; Managing Director, Tvbacco, of Galhher Limffod prior thereto Vice P~esideut~uhsidinry AdminisrzatLqn of Amer/ean Brands, Inc. since 1979; President and Chief Executive Offcer o~ Wilson Jones Company (office prod- ucts) prior thereto Executive Vine President of The American Tobacco Compann¥ division since 1981; Vice Fresident--M~ketLng of The Amer- ican Tobacco Company division from 1980 to 1981: Pre~ideut and Chief ExeCu- tive Officer of The Andrew Jergens Com- pany (personal care products) from I979 to 1989; Executive ¥ic~ President of The Andrew Jergens Company from 1979 to 1979; Vice President- Marketing of The Andrew Jergens Company prior thereto Senior Vice President aud C.eneraI Counsel of American Brands, Ino. since 1981; paxtnor, Glmdhoume, Parke, Whiteside & Wolff (Iaw fi~n), prior thereto Shams o~ Year Gomm~a St~k first fir~eflcialb' elected owned Age directar la) ibl (~t (d) 54 1981 7,675 68 1983 i00 71 1975 12,000 59 1980 4,800 47 1978 6~20 47 1981 l~4OO 51 1081 13,160 58 I977 18,631 President and Chief Executive Of~cer of Sunshine Biscuits, Inc. (food products) S

Nam~ Virginius B. Lougeo, III* Julian J. MeShane, Jr. Char]es A. Mehos° Bober~ L. Planeher* William Swo~ R~sellP. Tmi~ Edward W. Whittemore* George It. Woedard* Shares of Year Common Stock ~Pt csent posi~ons and o~ccs ".vlt h the Company first "oe~eficially ~nd prlnelpal ~oupatlon~ ~ect~ owned during the past five year~ A~ director ~) president m~d Chief Operating Of~cer of 56 1977 33,772 American Brands, Inc. and p~sidcnt and C~ef Executive Officer of ~ie American Tobacco Company division since 1981; Executive Vice Preside~--Tobacco of American Brands, Inc. from 1980 to 1~1 end Fres~de~t ax~ Ghlef Oper~ing O~ ~r o~ The American Tobacco Company division ~om 1978 to 1981; Exe~tivo Vice President of TI~ American Tobacco Company division prior thereto Chairman of the Board and Chief Execu- 63 1981 9,455 tlve effect of James 13. Beam Distiffng Go. (disglled beverages) since 1983; President and Chief Executive Ottlcer of James B. Beam Distilling Co. from 1978 to 1982; President and Acting Chief Ex- ecutive Officer of James B. Beam Dis- ~dlllng Co. prior thereto EKeeutive Vice President and Chief Finan- 82 1967 31,987 einl Offerer of American Brmlds, Inc. Since 1979; Vice President- Finance of American Brands, Inc. prior thereto Vice President and Controller of Amerhian 51 1981 9,413 Brands, I~c. since 1981; Cootrtdler ot Amedcan Brands, Inc. from 1978 to 1981; Tax Director of American Brands, lne. psior thereto Managing Director, W m Sword & Co. $8 197{} 200 Incorporated (investment banldng) Vice President--Tobacco of American 52 1974 19,950 Brmlds, Inc. since 1981 and V'xecutive Vice President of Tho Arnericgn Tobac- co Company division Chairman of the Board and Chief Exeeu- 60 1977 50,738 tire Officer of American Brands, Inc ~inee 1981; Executive Vice President- Operations of American Brands, Inc. Srom 1979 to 1981; Vice pres~dent-- Subsldlarv Administration of Ameliean Brands, Inc. from 1978 to 1979; Presl- deut and Chief Executive Offcer of Swin~ine Inc. prior thereto Mgnagement Consultaot 77 19fl4 g,100 * Member Of Executive Committee of the Company's Board of Directors. (it) 1,013 shares at~ributable to voluntary deposits under the Pro£t-Sharing Plan of the Company are included in the number shown above for Russe]l P. Truitt. The nmnbers of shsres attrihittable to ~roflt sharing under a

the P~o~t-Shathlg PI~ns of the Conspan~" ~ed a subsidiary included in the nnmbers shown ~bo~-e are as ~ollows; Robert L..&ustin, 275; John P. Cl~rk, 420; Thomas C. Hays, 300; Arnold Henson, 558; Vuglnius B. Lougee, lII, 4,372; Julian J. MeShane, Jr., 5,532; Charles A. Mehog 6,987; Robeet L Plancher, 3,4L3; Bussell P, TI uitt, ~,fi37; and Edward %V. Whittemore, 738. (h) The nm~ther of shares OF which the nomillees had the right to acquire benefieiel ownership pursuant to tile exercise on or before April ~, 1953 of opBous granted by the Company included i11 the numbers shown above are as follows: Wilham J. Alley, fi,~)0; liohert L. Austin, 4,400; Stuart G. Cameron, 4,400; Jchn P. Clark, 4,400; Thtlmas C. Hays, 4,d00; Arnold Henson, 7,100; Edward ~. ]ent~ings, Jr., 2,500; Virginius B. Lougee, fII, 16,300; ]ulian J. MeSbane, Jr., 1,700; Charles A. Mchos, 9~600; IRobe~t L. P]anchel% 5,000; ]Russell F. "lhxiitt, 4,400; and Edward W. Whitinmore, 35,500. Inelosion of such shares does not ¢onstltute an admission by ~ay nominee that he is the beneSeial owner o~ suck sh~lres. (e) The numbea~ shown above do not include 300 shares held by the husband o~ Mrs, Bedeli through Bedell Associates. 2 shaws bold by Sir. Clark as guardian for a m/nor child, 800 shores held by the wife of Mr. Mchos as custodiar~ for two children, ~ slieaPs held dlreetly by two chiIdien of Mr. Mehos, and l,fi~3 shares owned by the wife of Mr. Woodard, In each case the nominee disclaims that he is the beneilcial owner OF such shares. {d) To the best of the Company's knowledge, each nominee has sole voting and investment power with respect to shares shown after his name above, except as follows: Mr. Hays shares voting power and investment power as a co-trustee OF various family trusts as to 3,200 sh~res; and, although the Trustee el the Profit- Sharing Plans of the Company" and a subsidiary, has agreed to vote the shares it holds in the T*"ast in accordance with instllletions received lix)m members of the plans, shares as to which instructions are not received may be voted by the Trustee as it deems proper. (e) On February 1, 1983 Mr. Alley owned individually and as custodian for his children 642 shares of $2.75 ~Preferrod Stock (representing less than one percent el such s]mres outstanding), Mr. Alley ba~ sole voting and investment pox~r with respoot to such shares. In addlton, 151,48 shares of Common Stock are held for Mr. Alley's accomat under the Dividend Bein~estment Service OF Citihenk, N.A. fsr holders of Common Stock of the Company, as set forth ha the most ~eeent statement of such ~ervice received by him. Fourteen meetings of the Company's Board OF Directors were held during the Company's last fiscal year. With the exception ~ Messi~. Alley. Cameron and Woodard, each presexrt ~ise~or ~ the ~oa~pagu att~lded at least 7~% of the aggregate OF (l} all meetings of the Board of Directors and (li) all meetings of committees o£ the Board of Directors of which he was a member, during the periods that he sezved during the Company's lost fiscal yea~ 1%1~ Cameron resides h~ the United Kingdom. Messrs. Alley and Woodard do not reside in the New York City area, but they attended nearly all applicable mcetngs except for meetings of the Executive Committee which are often held on sho~t notice and the ~ubstanc¢ of which is discussed in advance with those unable to atteDd. The Board of Directors h~ an Audit Committee, a Salary Committee and a Stock Option Committee. The Audit Committee is comprised of Messrs, Ande~son, Bchr, Sword and "vVoodard. ~ta functiorts inc,l~de recom- mending annually to the board of DirectOrs a firm of independent auditor~ to audft and review the Company's books and records and the scope OF such grin's audit, reviewing reports and reeomrnendatlons of the Compan~s indepentlent auditOrs, reviewing the so0pe of all internal ~udits and report~ and reoon~mendatinns in connection therewith and reviewing nonaudit services provided by the Company's principal independent auditors. It held twe~e meetings during the Company's last ~.scal year. The S~lar/ Commltine is comprised of ~fes~ts. Lougee. Mehos, Plancker, Trultt and Whittemore. Its ~unctions include the establJthme~t of salary administration guide- lines for the Company and its domestic subsidiaries, applioable to all employees other than el~cers OF the Company whos~ salaries are required by the By-Laws of the Compa~ay to be fixed by the Board o~ Direeto~, ~nd, in accord- anee with such guidelines, the approval o~ all salaries above a specified amount, It held twelve meetings during the Company's last g~eaI year. The S~ock Option Committee is comprised of Messrs. Anderson, Bshr and Woodard. It administers the Company's Stock Option Plaal, and i~ functions include the deslgnalion OF key employees (a~ defined in such ~P]an) to whom stock options and stock appreciation right~ may be granted, and. within limits ~et ~rth in such Plan, the number of shares that may be optioned to any such key employee. It held one meeting during the Campany's last fiscal year. In addition, ArtioI~ XII of the By-Laws proeldes for ~ 4

Incentive Compensation Committee, presently eomptised of Messrs. Henson, Lougee, Mehos and Whil~emorc, the foact/ons of which include the designation of those persons, in adgitinla to the Chairman of the Board, who shall be entitled to part/e/pate in inceuiive compensation under ArLiole XII and the allotment among such per- so~s of the amount made available for allotment, The Incentive Compensation Committee held three meetings during the Company's last ~seai year. There is no nominating committee, flint function being performed by the Board of Directors as a whole. Mr. Alley is also a director of Central Illinois Public Service Company and Firstbank of Ig~nois Co.; Mr. Anderson is a d/rector of HeywoodiWakelleld Co.; and Mr. Sword is a director of Mathematiea, Iae., Kepner-Tregoe, Inc., Roadway Express, Ine., and The Space Transportation Co. Inc. Messrs. Austin, Chir~ Lougee, Mehos, Planoher and Whlttemore are directors of Amer/can Tobacco Intematfeual Corporation. a wholly-owned subsidiary of the C~mp~ay with see~ities registered pucs.l~at to Settler, Ig of the Se~usitfes Exchange Act of I034. Wm Sword & Co,, of which Mr. Sword is the Mar~aging Director, is to be paid $40,7gL50 for investment baulking services performed in 1982 for the Company in connection with ~ possthl¢ acquisition. For information with respect to the beneficial ownership of secLuftiCS Of the Company by direetors and officers as a group, see "Certain Information Regarding Seeasity Holdings." REMUNERATION AND OTHER TRANSACTIONS Thea'e is set forth in the following tabulation all remuneration of di* £ollowing persons for servlees in all capacities to the Company and its subsidiaries while directors or officers of the Company during its ~ast ~scal year: each of the ~ve most highly compensated executive officers or directors of the Company as to whom the tc~al cash and cash-equivalent forms of remuneration exceeded $50,000; and all officers and directors of the Company as a ~up. All cash reraut~eratinn pald to these individuals th the form of salasies~ fees and incentive compensation is stated in Column (1). The value of certain insuxance benefits and personal behests received by these individuals is stated in Column (2) and the 1982 profit shares of these individuals payable to the Trustee under the Profit-Sharing Plans of the Company and a subsidiary are stated in Column (g). The contingent portion of these indivldua~g incentive compe~sat/on for the Conallany's last fiscal year is stated in Column (4), Cash and eash-ee/u~vale~t leorras o~ remll~er~olt fd) (1) ~2/ (3) ~,gg~gat~ ~ $~larles~ fa~es Insurance Defe:aed cont~agen~ and incentive forms ' benefits #nd ~rofit share Nm~ ~f ~tdivklllsi or C~pacRies ~a velrddl COml~ensa~on porson~l payable to rc~lmcra~un mmaber of t~rsmas ha ~mu~ reama~ratioa w~s r ¢~eived ~akl bendlts Trastee (a) (b) (c) gtaartG. Cameron~ Chaltmau of Galtaher Limised $ 288,580 ~ 5,327 $ -- $ -- Arnold Henson Senior Vi~ President and General 237,~00 1,371 27,079 125,~00 Virginiu~ B. Lougee, III* Charles A. Mehos° Edward W. Whtit~more • 19 d/rectors and officers as a group • Also officer of al~alhated company or companies. Counsel of American Brands, ~ne. President and Chief Operating 397,500 2,773 37,830 187,500 O~eer of Araesiean Brands, Iac. a~d President and Chief Executive O~e~r of The Amer- ican Tobae~ Company division Executive Vice President and $87,500 3,690 33,052 162,500 Chief Finaneiai OHieer of Amerfean Brands, Inc Chairma~ of the Board and Chie~ 568,589 6,828 45,475 368,589 Executive Officer of American Brands, Inc. $3,466,426 $25,673 $28S,177 $I,188,089

(a) Amounts showz1 in Column (3) are the dollar values as of December 3J, I982 of the Pmfl~Sbaxin$ Plat; =unlts~ constituting th~ profit shares for 1952 of the p~riicipant~ name& As of December 21, 1982, l=~n bsL~nces (other than kela~mes attributchle to voluntary deposits made through payroI! deducLion~) represer~ted by the ~lni~~ stan~ng to the c~edit of such hauled p~r~c~pant~, ine|udLng the market value olx that ~lato oE the zmmbers of shares of Common Stock of the Company held by the Trustee of the Yroflt-Sbar~g Plan o~ the Company equivaleat ou that date to th~is u~d~videcl p~opo~onate inLeres~ in the intml uumber oE such shares then heId by the Trustee attributable to pro~t sharing for all prior yesrs, hut e~elndf~g their profit-shams ~or 198~ (peyabIe to the Tru~ee ~ 1983), were ~ f~Uow~ ~ir~uiuz t~. Lou~ee, [II, ~53,13~; Charles A. MChos, $661,~80; and Edward W. Whi~emor~, 499,638; and d~rec~a~ and ofl~cer~ as ~ group, $9,~02~7L (b) Amounts show~ r~present ~he one-h~lf o£ tocentlve corupe~ation for 1982 under Asttele XII of the By-Laws as ~m~ended in 1970 that is eonttogently p~yabIe to participants on DecvraBe~ 1~, 1983. F~orn 195V throu~ 1969, Article XH provided that a po~t~on of ince~t~e compensation for each year of pa~tlelp~on is contin~ently p~yab|~ to each p~ticipa~t in t~xee etJu~d annual inst~l[ments fallowing t~rmtoation o~ empIoymefit by the Company. The respectlve annual installments in respect of such de,fred contin~ut portlons ~crnnd fo~ sll suck years of p~cfF~a~i~n peio~ to 1970 ~ ~s foflo-~v~: Cl~les A. MeShes, $6,90~; and ~irectors ~md o~cers as a group, 46,908. (e) Each direct or who is an oEicer or emp~oyc~ o~ the Company or one oJ its subsidiaries, including the ~lirectors named above, is a partlc~ant in the retlremen~ pIan of the eompany of which he is an o~eer or ~mployee. OJ~eers o~ the Company who are no~ directors o~ the Company are p~r~cipants ~n the ConupanF's ret~reme~ p]an. Because ~ach such p]au is a deEnod benefit plan in respect of which contributions ar~ actoar/a~ (~etermlno~ in the ~regato for ~11 plan ~ar~clpan~, and canno~ be readily ~alcu~ted for any in~ivldual pa~-ici~arit, amounts r~presen~in~ p~yrnc~nts oF accruals ~or the a~coun~ of omce~ and dis~ctors of the Corr~any z~n~e~ mxch retixeme~t plai~ are no~ inclu~e~. In general, th~ cove~e~ cor~pmo~at~ox~ ~C¢ most erap]~yees ~mder the ref3xemen~ plan~ of the Company and its ~ubsldiaties is substantla~y a]l comp~sation ~upor ta'olo to the Internal Bevenue Service for income tax purposes. Gal]aher ~hix/t~cl has entered into an agreement with M~. Cameron ~al~ch provides, among other things, for Mr. Cameron's employment by Gallaher a~ an annual ~alary of ~0fi01 (approximately 4105,949 based on the average e~cchange rate for 198~) and ~or Gal]a?aer to reimbtu~e him ~or ~dl reasonal0]e ompe~ses hicurred by him in the performs~co o~ hi~ duties under the a~reem~nt. The agreemeat L~ terminable by etiher parP/upon two yeaxs' notice andby GaJlahe~ upon shorter netlc~ in certain ~rcumstanees. The Company has entered into ag'reemenL~ with Messrs. l~7hi~omore. Lou~ee, Mchos and ~lenson to prey/de certain severance behests ~or them in the evez~t of their term/nation of eruployment foIIowtog a change in control o~ the Company (de~ned as the acqultition by any person, corparation or group of stock of the Company having mome tha~ 20% of the voting power of ou~standin8 s]mre~). Each agreemen~ provides thai i~ subsequent to a chamge in control, the Compmuy termtoat~ th~ employment of the oflleer other than for disability or eause, o~ ff the o~¢er elects to terndnate his employ~x~ent for good reasons, as prov/~ed hi the agreement, the o~oer will then receive three year~ of bsse salary, three ~mo~ the amounts ~or o~e y~ar of his AS~ieI~ 261I aw~xd and Pmflt-SharLng !°lan aIIocation, three additional y~ar~ of service and earaings ore~d~ under the Company's retirement pla~s ~d axramgemenf~ and three additional years of coverage under th~ Company's life, ]~ealth, accident, disability and other employee plsas. Each dise~or who is not an o~eer or employee o~ the Company or one o~ Its subsh]iaries receives an annual ~ee of $~8,000 for services aa a director. The chahim~n of the Audit Committee and the chairman of the Caplhil Apprupi~ation~ Committee receive an additional annual fee o~ 47,500 e=ch for service~ as chafiunen, and the chairman of the Stock Option Committee ~eceives an annual fee of ~,800 ~or services as ehairm=~n. Mr. Woodard is to xecefve in 1983 ann~aI co~pensatlon of 430,000 for h~s service on the Boards of Directors of su~sidiaties of the Co~npa~ly. ~r. Behr is ~o receive in 1983 a~rma] compe~sat/on of 43.~000 for his ~erv/e~ orl the Board of Direehirs of a ~ubs/diary o~ the Coml~any. The l~elireme~t Plan for ~Employee~ ~ud Former Employees of American Brands, Inc. (the "Retirement t~lsn") provides fo~ ~orm~l au~ early ~etlremex~t behests for emp[nyees o~ the Company (oth~r tb~ em~Ioyee~

of the GoIden Belt Manufacturing Company division) who meet certain age and service requirements, and also provides for disabiIity, severance and spouses' benefits in accordance with its terms. Tl~e normaI retirement benefit ~t age 65 is based on an employee's average actual earnings (as defined) during ~e 5ve highest paid consecutive calendar years of his employment. The amount of herbert is eqllal to the sum of 1 ~% of such average actual earnings multiplied by the number of years of service, plus ~ of 1% of such average actual earnings in excess of $4,800 muir/plied by the number of years of set'dee before 1900, pins ¼ of 1% of such average actual ean~ings not in excess of $4,800 multiplied by the number of years of service before ]960¸ There is no credit for service in excess of 35 years. Average actual earnings as de~ned by the Retirement Plan do not include incentive compensation paid under Article Xlr of the Company's By-Laws. Cer[aln directors and officers of the Company my be entitled to benefits under the retirement plans of the Company's subsidiaries attributable to their service with such subsid/arles, which behests are also based upon year~ of service and covered compen~atlen with such subsidiaries. Except a~ provided in the Supplemental Plan dlseussed below, the annual bcne~t payable under the retirement plans of the Company and its domestic subsidiaries may not exceed the lesser of $75,005 or the employee's average total compensation paid during the three highest paid consecutive calendar years of hls employment. A supplemental retirement pIan (the ~SuppIemental Pl~al") provides supplemental benefits to the ~oup of key employees who are a]lotted incentive compensation under Artlcle X~I, in an amount equal to the difference between the behests payable under the Retirement Plan and the amount that would be payable under file ]Retirement Plan if (i) Article X~I incentive compensation pa~d to the employee pr~or to termination of employ- ment and to the employee's normal retirement date were included in the d~finit~on of a~erage actua] earnings mad (ii) the maxlmttm limlt on annual hene~ts were raised to the lesse~ of $225,000 or the erap]oyee's average total compensation paid during the three highest paid consecutive calendar years of his employment. In eaIcu]afing supplemental benefits, no credit is Wen inz service in excess of 55 years. Berlefit payments under the Supplemental Plan are made concurrently with benefit payments under the Retirement Plan. The /oIinwlng tabulation sets forth file highest estimated annual retirement benefits payable to persons in the speci~ed remttnem'tion and years of service cla~sifleallons upon remitment at normal retirement date under the retirement plans of the Compmly and its domestic subs~d/aries (other than The Franklin Life Insuranc~ Company), o~cers of wbAch were directors of the Company during its last fiscal year, assuming election of an annuity for the life of the employee only: ~ghe st Consecu~ve ~e e~ Aver~ Covete~ Com])ens~oD Estimated Annual Retlrement Benefits for Repres~ntat lye years of Ct edlted Sexviee IO 20 30 35 $ 50,000 ............... $ 10,061 $ 17,5~0 $ 22~581 $ 26,057 75,000 ............. 15,686 26,250 34,436 59,274 lO0,O00 .... 21,311 35,000 46,311 531400 150,000 32,561 52,500 70,700 78,837 200,000 ................. 43,811 70,000 85,352 105,212 250,000 ................ 55,061 75,000 106,707 131,587 500,060 ....... 66,311 75,000 128,082 157,962 400,000 ........... 75,000 l(]O,O00 170,802 210,712 500,000 ............. 75,~00 125,000 213,582 225,0@0 600,000 ............. 75,000 150,000 225,000 205,000 700,000 .... 57,500 175,000 225,000 225,000 SOO,O00 ................ 100,000 200,0(]@ ~o25,000 225,000 900,000 ................ I1~500 225,000 225,000 225,0t]0 1,000,000 ....... I25,0~} 225,000 225,000 225,000 1,100,C@0 ............. 137,500 225,000 2'9~,000 225,000 While only those employees entitled to 'oenefits under file Supplemental Plan are entitled to receive annual retirement benefits in excess of $75,000, there was no employee not receiving incentlvc compensation in 198"2

whose annual rettieinent benefits ~ould have been r*'dueed by the $75,000 linlffatain, Normal retirement benefits under the Galiaber Limited Pension Plan (which arc based on final salary) exceed the benefits reflected above in all years di service classi£cadous. Normal retilement benefits under The Franklin Life Employees' Eetirement Plan exceed the bencllts reflected above in most years of sen'ice classi~eations, except that The Franklin Life Employees' Retirement Plan also has a maximum benefit of $75,000. In addition, The Franklin Life Insurance Company has a supplemental retirement plan sirmlar to tile C~mpany's Supplemental Plan described above, with a m&x/nmm limit on annual benefits of $gl25,000 (including amounts received under The Franklin Life Employees' Bet/rement Plan). The retirement plans of certain subsidiaries of the Company provide that benefits are offset by a portion of Sooinl Seourity benc£ts and the estimated annual retirement benefits set forth abeve do not include this offset. The years of service for \fessrs. Lougee, Mehas and Whittemore are 32, 32 and 36, respectively, and the years of service for Mr. Cameron (who is covered by the Gallaher Limited Pension Plan) are 18. Mr. Henson's benefit is computed under an arrangement that gives him years of service as if employed tinee August 1, 1961. The 1982 remuneration of Messrs. Cameron, Henson, Lougee, Mehos and Whittemore covered by the retirement plans was $105,940l, $194,500, $465,000, $400,0~ and $884,620, respectively. The Proflt-fihar/ng plm~ of Amaeaiean Brands~ /ale. covers employees of the Company (other than employees of the Golden Belt Manufaelmrir~gl Company division) who complete a year of sexviee. The Company annually contributes to the Frollt-ghazing Plan Trust a stun equal to the following percentages of consolidated Net Income Before Taxes (defined pursuant to the Plan as, mainly, net income before taxes from domestic tobacco operations ) : 3~% of the first $100,000,000, plus 5% of the next $50,000,000, plus fi% of any excess. No contribution will be made, however, for any year (a) for which Net Income Before Ta.xes does not equal or exceed 12% of net worth, (b) in which a cash dividend is net paid on the Common fitoek of the Company or (e) in exeess of the amount dadurffble for that year by the Company for federal ineome tax purposes, Subject to certain Iinatiat/nns, the contribution of the Company is reduced by the amount of forfeitures from members' accounts. Employer contributions are apportioned to Plan members on the basis of each member's Adiusted Earnings for the year in relation to Adjusted Earnings of all members. "Adjusted Earnings" for any year means earnings for that year plus 50% of such earnings in excess of the Social Security wage base. A member's balances in the Pro£t-Shaiing Plan Trust arising from employer contribntYon~ become distributable upon termination of employment. In eases of termination by retirement, death, disabgity or term/nation without fault (or upon partial or complete termination of the Plan) the full amount is distributable. In the ease of any other termination a percentage varying with the member's length of service and reaeb/ng 100% upon eompletion of twelve years' service is diataibutabIe. Distribution is made by such method of setffement--a single distribution in cash or partly in cash and partly in Common Stock of the Company, or periodic cash installments -- as the Divisional Benefits Plan Committee determines. Certain directors and o~ficers of the Company who are also emplnyees of subsidiaries of the Company *nay be entitled to participate in the profit-sharing plans of the subsidiaries under which contributions are also based on pre-tax income of the subsidiary, are apportioned among plma members on the basis of their relative annual earnings and are dista6bntable upon termination of employment Article XII of the B~Laws of tire Company provides for payment of incentive compensation to members of the Management Group (consisting of hey employees, defined pursuant to Article XII). An amotmt equal to -Ta of 1% of Net Income Before Taxes (as dallaed in Article XII) is made available for allotment annually if net income before taxes equals or exceeds 12% of net worth and a cash dividend has been paid on the "Common Stock of the Company. Of the amount available for incentive compensation, 18% is allotted to the Chairman of the Board and the remainder is available to the Management Group on the following basis: fi4% of the total amount available is a]lotted by Article XII to the members of the Management Group in proportion to their fixed salaries, and the balance Js aPottable to them by the Incentive Compensation Committee, ~ntlroly at its discretion as to amounts and individuals. Payments are made by distributing 50C2b of the amount payable in eath as soon as practicable and 50% /n ea~h on the December 15 next following the close of the year for which the allotment

was made. The deferred portion of the Article XII payment is contingent upon the employee not engaging in competitive employment prior to receipt of payment thereof. Certain directors and otheers of the Company who are also employees of subsidinr/es of the Company may be entitled to participate in the incentive compensation plans of the subxidlaries, under whinh a percentage of pre-tax income of the subsidiary is allocated annually among key employees of the su~idiary. On Oetober 27, 1981, tho Board of Directors adopted the Stock Option Plan which, as amended, was approved by the stockholders at the I952 A~nuaI Meeting. The $teck Option Plan authorizes the grant to key employees of the Company and its subsidiaries, seleetad by a Stock Op~on Committee of directors who are not employees, of options intended to qualify as "incentive stock optinaas" under the Internal Bevenue Code and options which are not intended to so qualify. Under the Stock Option Plan, there may be granted incentive stock options to purchase a maximum of 1,206,000 shares of Common Stock of the Company, and nonquaIthed options to purchase, or stock appreciation rights (as deserthed below) to receive, a maximum of 200,000 shares of Common Stock of the ComiJan)~ Not more than 180,000 shares can be optionad as nonquali~ed stock opt/ons under the Stock Option Plan to any ene person. Under the Stock Option Plan (i) the option price per share may not be less than the inis market value at the time of grant, (ii) options gonerally may not be exercisad prior to one year nor more than ten years Dora the date of grant and (hi) no option or stock appreciation right may be ~auted after October 26, 1986. The $toch Option Plan eontains additional restrictive provisions for incentive stock options so that (i) an incentive stock option may not be exercised while there is ou~standlng an earlier granted incentive stock option and (ii) the aggregate fair market value Cdeterminnd at the date of grant) of the shares for which a key employee may be granted incentive stock options in any calendar year eaanot exceed $106,000 plus any ~unused limit carryover" (as defined in the Stock Option Plan). The Stock Option Plan permits the grant of stock appreci~on rights in conjunction with the grant of a nonqualified stock option, either at the time of the option grant or thereafter during its term and in respect of all or part of such nonqualifled stock op~on. Stock appreciation rights permit an optionee, upon exercise of such rights and surrender of the related option or part theceof, to receive a payment equal to the excess of the ~alr market valuo (on the date of exercise) of the shares covered by such option or part thereof so surrendered over the option price of such shares. Such payment may be made in Common Stock of the Company (valued on the basis of the fair market value of such Common Stock on the date of exercise), in cash, or partly in cash arzd partly in Common Stock of the Company, as the Stock Option Committee may determine. N~ stock oppreciation right is exercisable prior to six months from the date of its grant, Eaab option also bears a limited righi which may be exercised within 30 days after an aequisi~io~ by some- one other than the Company of stock of the Company having more than 20% of the voting power of the Company's outstanthng shere~, The limited right entitles the optioneo to receive cash equal to the difference between the option exe, rdse price per share and the greater of (i) the ~air marlcet value of a share of Coron~on Stock at the date of exercise of the limited tight and (li) the purchase ptiee per share in the acquisition, multi- plied by the numhe~ o~ shares sul~eet to the optima. The option will be e~neelled to the extent of the exercise of the limited right. The following tabulation shows as to the directors and othcers of the Company named in the table on page 5 and as to all directors and othcers o~ the Company as a group (i) the number of shares subject to options granted during the period January i, I982 through December 31, 198~9 and the average per ~hare option exerelse price thereof, (ii) the net value of shares (market value less exercise price) or cash realized duting the p~riod January i, 1982 through December 31, 1982 upon the exercise of options or stock appreciation rights and (ill) the number and the potential (unrealized) value (market value at December 31, 1982 less exercise cr base price) of shares subiect to outstauthng options held at December 31. 1982.

Common Stosk Craated--~a~uaey 1, I982 through December 31, 198~: No~qualltlod steak o0tions with stock apprec~tlon rights .... 1,750 4,000 7AO0 g,200 21,750 4fl,1~0 Average per ~are eaerci~e prico $473123 $47.512~ $47.3123 $47 3/~5 ~¢'.3125 $47 51~3 ExercL~ed-- Jemuary :t~ 198g through December 31, 1982 Net v/flue real/z~:1 iiI shares ( m~'ket value ]~ eze*ci~e price) of cash ............ $ -0~ $ i6,87~ $ 16,87~ $ -0~ $ 16,875 $ B8,4~7 Ou~tanding at De~ember 31, 1982: ]nce.tlw $toc1¢ optlonn ..... 4~500 2,000 g.000 4~300 ~,I300 55,g~ ~cnqualit~d atc~k o~E~m v,'i~h stoat: approcfation 21ghts .... 3fl63 11,100 ~3,700 ~2~300 57,250 lgT,gff0 Yotent~al I~arsalize~I) value ~market vaI~ ~ De~mh~r All ~ese~t dln~etors and Stuart G, Arnold V/rglnlus B. Charles A. ]~dwar~ W, oi~¢¢rs as Camero= Henson Lougee, Ill Me]los Whi~temore a ~'ou Fp_ 31, 198g M*$ exercise or baso ~i~) ............... $ ~%70~ $ 47,9~5 $116,(~%3 $ 64,800 $239,~25 $TaS,7g0 ~aer$ any information in this proxy statement as to mmtmaration or other tzatisactions is called for with regard to persons holding specked positions or relationships, ln~orraation is not inc~ude~ for any portion of th~ requisite periods during which such persons did not hold any s~ch positions or relationships. ]~ropoaal 1 ELECTION OF INDFA?ENDENT AUDITORS The B~ar4 (~i Direetor~ recommends that the ~tockholder~ elec~ C~ope~s ~ Lybra~d as iadepende~t auditors for tho Company for the year 1983. In line with this reconmlencIation the Board of Directors i~tends to introduce at the forthcoming Annual Meeting the foIIowing resolution ~ designated herein ~s Proposa~ ] ) : "BESOLVED, tha~ Coopers & Lybrand b~ and they are heroby elected indcpenaent auc]ito~ for the Com- 1)any ~or the ~eax ~3Y I~ acc~dax~¢e ',~dth the Comp~my's pra~ti~e, a member o~ C~Wr~ & Lyhra~d will a~:et~d the A~auaI Meeting to make a statement ff he desires to do so mad to respond to any appropriate q~estions that may b~ asked by stockholders. The a~armative vot~ of a majoriO/ o£ the combined votes cast by tho holders o~ Common Stock, $1.70 ConvortibIe l~re~erred Stock, $2.75 Preferred Stock and ~2.b7 Conver~ble Pre~crrecl Stock voting th~eon is nuce~sary ~o~ $h~ ~doptio~ ~ ~FmV~al i. The Board of Directors recommends that you vcote FOIl Proposal 1. l0

Yroposal 2 !~ESOLUTION REQUESTLN'G CUMULATIVE VOTING PROPOSED BY FOUR STOCKHOLDERS The Company is informed that Lewis D, Gilbert, a record hoIder of 160 shares of Common Stock, whose address is 1165 Park Avenue, New York, N.1. 10028, and/or John J. GilberL a record holder of 100 shares of Common Stock, of the same address, and representing an additional family interest of 500 shares of Common Stock, and/or john C. Henry, a record holder of 3,200 shares of Commml Stock, whose address is 5 East 93rd Street, New York, N.Y. i9028, and/or David Brown, a record holder of 12 shares of Common Stock, whose address is 214-15 iSth Avenue, Bayside, N.Y. 11360, intend to introduce at the Annual Meetthg the following resolution ( designated herein as Eroposal ~) : "RESOLVED: That the stoelthelders of Amerlean Brands, Inc., assembled in annual meeting in person and by proxy, hereby- request the Board of Diret~tors to take the steps necessary to provide for cumulative voting in the elecldon of directors, which means each stockholder shalI be entitled to as many votes as shall equal the v~umber of tha~e~ he or she owns multipliezl by the namher o~ directors to he elected, and he or she may ea~t all of such votes for a single candidate, or any two or more of illcm as he or she may see fit." The proposers of the resolution have fmmisbed the fo]lowlng statement setting forth the reasons advanced by them in support of theh" proposal: '%ast year 8,251 owners of 3,402,638 shares voted in favor of our similar resolution. The vote against included the unmarked proxies. "The importance of cumulative voting has been noted in the f01Io~hng words by the Giant Por~Iand Cement Corporation in their 1974 proxy statement: 'Cumulative voting is a form of proportional representation which pernait.~ minority thl~reholders fo have representaBon on the Board of Directors. Under the e~sting by-lawJ a tharebolder is entitled to one vote for each share of stock registered in his name. Thus, the holders of a maiority of tile shares may elect all of the directors, in which event the remaining shareholders may not elect any directors. The proposed Article Ninth provides for cumulative voting in the election of directors, ha wtfieh case each stedtholder is entitled to as many cohos as he owns shareJ, multiplied by the number of directors to be elected, to be cast for one or distributed among two or more directors, as he sees fit. Therefore the prttposed amendment would permit a person or a group of persons holding a slgni£¢ant block of shares to have representation on the Board of Directors.' "If you agree, pIea~ mark 9-our pmx3r fo~ this resolution; othotvtl~e it is autematicahly ea~t a~ainrt it, un~ss you have marked to abstain." In the view of the Board of Directors, the function of a hoard of directors is lv administer the affairs of a corporation for the benegt of all its stockholders. The Board of Directors believes that a director elected by a minority through eumu]aBve voting might feel bound to act in what he colasiders the interests of the minority overt though such action might not be in the best interests of the corporation and the stockholders as a whole. It believes that the present method of electing directors, wb2ch is the corporate equivalent of majority rule, has worked successfully and should not be cl~anged. Cumulative voting was ovel~,vhe]mingly reiected at the 1964 and I969 Ammal Meetings when approximately 94.8% of the votes *~ere cast against it on each occasion, at the 1970 Ammal Meeting when aphlroximately 93.7% of the votes were cast against it, ae the 1976 Ann~ml Meeting when approximately 94.4% of the votes were east against it and at ~e 1977 Armu~g Meeting when approxi- mately 94.1% of the votes wer~ cast against it. Last year approximately 93.4% of the votes were cast against it, The at~rmatlve vote of a majority of the corablned votes cast by the holders of Coammn Stock, 81.70 Convertible Preferred Stock, 82.75 Pcefe~red Stock and $'2.67 Convertible Preferred Stock voting thereon is necessary for the adoption of proposal 2. The Board of Directors recomroenth that you vote AGAINST Proposal 2. 11

Proposal 3 RESOLUTION ON ESTABLISHMENT OF NOMINATING COMMITTEE PROPOSED BY FOUR STOCI~-IOLDERS The Company is informed that the four stockholders whose names, addresses and record holdings are set forth with respect to Proposal 2 intend to intzoduee at the Annual Meeting the following resolution (designated herein as Proposal 3 ) : "RESOLVED: That the stockholders of _4aneriean Brands, Inc., assembled in annual meeting in person and by proxy, hereby request the Board of Directors to take the steps necessary to pro~dde for the formation of a nominating committee, at least the majority of which should be composed of outside directors." The proponents of the resolut%n have furnished the followxng statement setting forth the reasons advanced by them in support of their proposal: "Last year 8,697 owners of 3,311,798 shares voted in favor of our similar resolution. The vote against included the tmmarked proxies. "The whdie purpose of having a nominating eommRtee in to be assured that independent directors, not afaliated vAth management, assume the xesponsthiliry of selecting new nominees for the Board. "Your attention is celled to the fact that more and more corporations now have a nominating committee and this has been recommended as good corporate governance by a Chairman of the SEC and the New York Stock Exchange. "Among the latest companies to adopt this practice axe: Southern Paol~e, B. Hoe, Facet Ind., Landmark Land Co., Inc., Foremost McKesson, Vista Resources, Sonesta International Hotels Corporatien, Electro Audio Dynamics, Inc., GAF Corp, First National Boston Corp., New Mexico and Arizona Land Co., Calbro Corp., Bell ~d Howell, Carter Wallace, Inc., Collins and Aikman Corporation and Claremont Capital Corporation. "Lf you agree, please mark your proxy for this zesolution; otherwise it is automatically east against it. unless you have marked to abstain." The Innetiol, of a nominating committee has been performed by the Board of Directors as a whole. Your Board believes that this function should continue to be performed by all of the Board members, It is the vlew of your Board that each member should be a person whose experience, knowledge and expertise enable him to make a substantial contribution to the work of the Board and that the selection of persons with these quali- fications can be best assured if ell members, rather than a committee, have an opportunity to participate directly in the selection of nominees of the Board. An identical resolution was overwhelmingly defeated at the 198g Armual Meeting wben approximately 93.6% of the votes were east against it. Accordingly, the resolution should lie reiected as not in the best interests of the Company and its stoekholders. The affirmative vote of a majority of the combined votes cast by the holders of Ceminon Stock. 81.70 Convertible Preferred Stock, $2.75 Preferred Stock and $2.67 Convertible Preferred Stock voting thereon is necessary for the adoption eI Proposal 3. The Board of Directors recommends that you vote A G.~INST Proposal 3. CERT.MN /iNFORMATION REGARDING SECURITY HOLDINGS The following tabulation sets forth information with respect to the beneficial o~naership of eqdity securities of the Company by all directors and ollleers of the Company as a group at February 1, 1983. Such group ownership does not e×eeed one percent of the outstanding shares of those classes of equity secutiEies of the 12

Company listed below. The information is based on information received by the Company from the directors and of~cers, from the Divisional Benefits Pian Committee and from the Trustee of the Profit-Sharing Plan o,~ the Company. Arao~t and ~a~ute Tige of of bene£elat das~ ownershlp{ a) Common Stock 250,199 shares(b) $2.75 Preferred Stock 642 shares (a) For inthrmatiori as to ~otlng power and investment power ~vlih respect to Shares owned by directors, see Notes (d) and (e) to the table under "Election of DLrectors." To the best of the Companys knowledoe, each o~cer who is not a director has sole voting and investmeot power with respect to shares owIaed by him. With regaad to voting power ia respect of skates held by the Tntstee of the Proflt-Shadnd Plan of the Company. see Note (d) to the table under "Election of Directors." (b) Includes 28,881 shares of Common Stock held on December 31, 1982, by the Trustee of the Pro£t-Shaxing Plan of the Company (incluc]ing those referred to in Note (a) to the table under "Election of Directors"), which number is equivalent as of that date to the undivided proportionate beneficial interest of the directors and officers of the Company in all such shares, and 109,000 sh~res (hlcluding those referred to in Note (b) to the tahl~ uade~ "Election of Directors"), o~ whinh the directors and officers had the right to acquire beneficial ownership pursuant to the exercise on or before April 2, 1983 of options granted by the Company. Inclusion of such 109,000 shares does not constitute an admission by the directors and officers that they are the bene~cial owners of s~Jeh shares. The ~ollowing tabulation sets forth information with rcspect to each person known to the Company to have been the benegelal owner o~ more than 5% of any class of voting securities of the C0mpally at Febraar/ I. 1983 ~d is based o~ informatioxx received by the Compauy from, or on haha|f of, such persom To the best of the Company's knowledge, no one person w~s the benellalal owner of ia excess of 5% of the outstanding voting securities of the Company at February 1, 1983. .Maount a~ad ~at~e Title o~ N~O and address of beneficial Percentage dass of bmaefleial owner _ ownersh~{a ) of class $2.75 Preferred Rtoch The Chubb Corporation 430,800 sheres 7.8% 100 William Street New York, New York 10038 (a) To the best of the Company's knowledge, the beneficial owner listed has sole voting and investment power with respect to the sllares listed. SUBMISSION OF STOCKHOLDER PROPOSALS Proposals cf stockholders intended to be submitted at the next Annual Meeting of stockholders scheduled to be held May 2, 2984 must be received by the Company on or b~ore December 18, 1983 to be eligibIe for inclusion in the Company's proxy' statem~t and accompanying proxy for such meeting. MISCELLANEOUS A copy of the Company's annual report on Form 10-K to be filed with the Securities and Exchange Commission for its last fiscal your, including the finanelal statements and the fmanalal statement sohedu]es thereto, will lie made available to stockholders vdthout charge upon written request to Mr. Louis F. ICernous, Jr,, Secretary, Ameaiean Brands, Inc., 245 Park Avenue, New York, N.Y. 10167. The Company will furnish any exhibits to Form 10-K to each stockholder requesting them upon payment of a fee of $.IO per page to cover their cost. lg

Promptly after the Annual MeetL~g stockholders will be mailed a return postcard on whluh they will he able to indic-ate their deslro to reeeiv~ a copy of the summary of the meeting, The expense of the so]iri~at~on of proxles for this me~tlng, incl~dlug the cost of mailing, wi]I be borne ]~y file Company. In addition to mai]ing copies of this material to stoe!dlolde~, the Company will request persons who hold stock in their na~es or custody, or in the names of non~luees, for the benefl£ of other~ to forward copies of such materia! ¢o the beneBcIal owi~ers of the stock of the Company and to relluest authority for the execution of the proxies. To the ext~nt deemed rieeessaly lit order to asstLro sume~ent represel~t~tiola at [he meeting, oflleers and regult~r employees of the Company will retJuest the return of I~roxies 1Jy telephone, telegram or in person. Irt addition~ th~ Company h~s revalued The Klssel-Blake Organization, Inc.. ~fl Broadway, New York, N.~L 18004, to aid lu the solicitation of proxies ~r a ~e, including its e.xpens~s, estimated at $23,50(~ TI~e total expense to be home by the Company will depend u oon the volum~ o£ sl~ares re~resented by the proxies • eeeived promptly le~ re~pons~ to the nonce of meeting. S~ockho|ders ~vho do not intend to be presen~ at the meeting are ~rged to serid in their proxies without del~y. Proalpt response is helpful, and your cooperation will be sppreeiated. March7,1983 I4

245 Park Avenue New York, New York 10167 March 15, I983 D ~r.2~ STO*CK/~LD~2~: The 1983 AnnuaI Meet/ng of stockholders will be held on gVednesday, May 4, 2983 at I0:00 a.m. in the Grand Ballroom of The "WaIdorLAstoMa, Park Avenue~at g0th Street~ New York City. You are invited to attend the meeting to eonsidcr personally the business descr:bed in the £ollovcing notice of meet- ing and proxy statement. At the meeting there will be a report to the stockholders on the progress of the Company during the past year. A discussion period will also take place during which stockholders wi]I have an opportunity to discuss matters of interest concerning the Company. A feature of these Annual Meetings has been the attendance in person of ninny stockholders, some with lmrge ho]dlngs and some with small holdings. This has been most welcome. It is important to ensure that your shares be represented at the meeting whether or not you plan persvnagy to attend. We urge you promptly to compIete, date and return your proxy in the enclosed postpaid return envelope provided for that purpose. Sincerely yours, EDWAI~D X,'~I WHITTE:XfOP~E Chairman o[ the Bocrrd and Chie[ ExecIItive Off{cer

245 Park Avenue New York, New Yoth 10167 NOTICE OF MEETING March 15, 1983 The Annual Meeting of stockholders of American Brands, Inc. will be held in the Grand Ballroom of The Waldorf-Astor/a, Park Avenue at 50th Street, New York City, at 10 o'clock in the forenoon (Eastern Daylight Time) on Wednesday, May 4, 1983, for the folIowing purposes: A. To elect directors. To consider and vote on: (1) Aproposal (designated Proposal I and set forth in the folIowing proxy statement), approved by the Board of Directors, to eIect Coopers & Lybrand independent auditors for the Company for the year 198,q; (2) A proposal (designated Proposal 2 and set forth in the following proxy statement) relating to cumulative voting, expected to bo made "oy four stockholders; and (31 A proposal (designated Proposal 8 and set forth in the following proxy statement) relating to the establishment of a nominating eommitteB of the Board of Directors~ expected to be made by four stockholders. To transact such other business as may properIy come liefore the meeting. The stoc~ transfer hooks will not he closed, but holders of Common Stock, $1.70 Convertible Preferred Stock. $2.75 Preferred Stock and $2.67 Convertible Preferred Stock, to I~e enfftled to vote, must be holders of record at the close of business on March 7, 1983. LOUIS F, FERXOU$, JR., Secretary

PROXY STATEMENT The Company's principal executive offices are ]aeated at 2t5 Park Avenue, New York, N.Y. 10167. This proxy statement and accompanying proxy are first being sent or given to stockholders on or about March 15, 1983. The accompanying proxy is solicited by the Board of Directors. It may be revoked by written notice g~ven to the secretary of the meeting at any tLme before being voted. Proxies in this form, properIy executed, duly returned to the Company and not revoked, wilI be voted for the election of directors (except to the extent that authority therefor is withheld) and on the numbered Proposals described in this proxy statement (provided that, as to Proposals 2 and 3, they are presented to the meeting) in accordance with the instructions in the proxy'. The Board of Directors is not aware at the date hereof of any matter proposed, to be presented at this meeting other than the election of directors and proposals 1, 2 and 3. If any other matte~ is properly presented, the persons named in the enclosed foim of proxy ~vill have thseretinnary authority to vote thereon according to their best judgment. PresBnce at the meeting does not of itself revoke the proxy. The only securities of the Company entitled to he voted are shares of Common Stock, $1.70 Convertible Preferred Stock, $2.75 Preferred Stock and $2.67 Convertible Preferred Stock and only bo~ders ~ record at the close of business on March 7, 1983 are entitled to vote. Holders of Common Stock are enticed to one vote per share, holders of $1.70 Convertible ]?referred Stock are entitled to one-fifth of a vote per share, holders of $2.75 Preferred Stock are entitled to o~ae-quarter of a vote per share and holders of $2.67 Convertible Preferred Stock are entitled to three-tenths of a vote per share. There were 55,204,363 shares of Common Stock, 37,146 shares of $1.70 Convertible Preferred Stock, 5=032,528 shares of $2.75 Preferred Stock and 2,040,661 shares of $2.67 Conver tibIe preferred Stock outstanding at March 7, 1983. ELECTION OF DIRECTORS The 13o~d of Directors consists of eighteen members who are elected to hoId oi~ce tmtfl the next Annual Meeting or until their suecessoz~ are duly elected and qualified. If no contrary todieatlon is made, proxies in the ac~eompanying form are to be voted for the nominees named beIow or, in the event any ~ueh nominee is not a c~didote or is unable to serve as a director at the time of the election (which is not now expected), for any nominee who shad be designated bythe Board of Directors to fill such vaeaney. All nominees named below are members of the present Board. There are s~t forth below opposite the name of each nominee bls present positions and offices withth~he Company and his principal occupations during the past five years, his age and the year wllen lie was first ulee fred a director of the Company. There are also set forth below opposite the name of each nominee under th~boathng "Shares of Common Stock beneficially owned", the tha~es of Common Stock of the Company beneficially owned by the nominee on Febrnary 1, 1983, including shares of Common Stock (if any) of which the nominee had the right on such date to acquire benelleial ov,mership pursuan~ to the exercise on or before April 2, 1983 of options granteg by the Company, plus the number (if any) of shares of such Common Stock hffid on December 31, 1982 by the Trustee of the P~'ollt-Sharing Plans of the Compmay and a ~ubsldiary attributable to profit sharing and to voluntary deposits made through payrblI deductions that is equivalent as of that date to his undivided proportionate beneficial interest in all such shares. In no instmloe dues the security ownership of any of the nominees ]isled below equal or exceed one percent of the outstanding shares of Common Sleek of the Company. The information as to security holdings i~ based on ioformatinn received by the Company from the nominees, from the Divisional Bene~ts Plan Committee and from the Trustee. Nttmo ~Villlam J. Alley* President and Chief Executive O~cer of The Franklin Life Insurance Company Eugene R. Anderson Partner, Anderson Russell Kill & Click, 55 1980 2,000 P.C. (Iaw llrm) Sh~res oE ye~x Common Stock lh'esent posltJotts and o~¢~s ~,~ilh the Co]ttp~t~ay ~qr~t betmflela]~y ~nd p,~e~pal oeottoatioas eleeted owned durfagth©p~st five y~ars Age dLreetor lal {hi (e) (d) 53 ~79 e,S~(e)

Robert L. Austla Catherine M, Bed~ll John H. Bebr S~uart G. C~meron John P. Clark Thomas C. Hays &r~told I~Iet~ou° Edward J. Jennings, Jr. FrescD¢ posRio~ and om~e$ with the Co~llpanF lind Winclpal o¢c.patlo~ during the pas~ ~ve year~ xTine President--SuBsidiary Administration of American Brands, Inc. since 1931 and President and Cbin~ Executive Officer of Acushnet Company (goIf producu) from 1978 to 1981; President and Chief Oper- ating Officer of Aeushnet Company prior thereto Special U~rtstxltant to the ~te Hou~ since 1981; Commissioner of the United States International Trade Commission (serving as Chairman in 1980) prior ~bar~to Retired; former/y, Chairman of the Board ~nd Chief E~ecutive Offieea" of Swinglino Inc. (fasteniag pl~ducts ) Chairman of Gallaher Limited (toBacco pxoducts) ~nce 19S0; Depu'~ Chairman of GaBaher Limited from 1978 to 1980; Mma~ging Director, T~baeeo, of Gallabar Limited prior thereto Vice Presldent--Subsidlary Admimstration of American Brands, Inc. since 1979; president and Chief Executive Oificer of Wil*o. lones Company (oifice prod- uets) psior thereto Exeeutine Vice Pre*ideat of The AmeTiean Tobacco Company division since 1981; V~ce Presideat--Mar~etBng of The Amer- ican Tobacco Company division from 1980 to l~l; President and Chief Execu- tive Officer of '17a¢ ?mdrew 1etgeng Com- pany (personal care products) from 1979 Co 1990; Exeeutlv¢ Vice President of T'ae Andrew lergens Comyany from I978 to 1979; Vice President- Marketing of The Andrew Jergcns Company prior thereto Senior Vice Pr~ddet~t and CeneraI CQun*ef of American Brands. Ine, since I9S1; Imrt~er Chadho~me. Pa~ke, Wh~teside & Wolff (law firm , prior thereto President ~ad Chief Executive Officer of Sunshine BisCuits, fnc. (food products) 2 Shares o~ Year Commom $~ first b~eRdalb. de~ed owned Age thre~or (al (b) le) (&) 7.675 68 19~3 i00 71 197~ I1~,000 59 1980 4,8130 47 1978 6,820 47 1981 1~.4~ 51 1881 13.160 58 1977 18,6,31

Shoxe~ of ~eer Common Stuck Pte~ent pc~Rions and o~es with the Companr flr~ I~e~d~lIy and pr fn¢ipM u¢cupn tlons ¢]eet~.d owaed N~me during the past five years ~ direetor ~l Virginius B. Lougee, III* President and Chief Operating Officer of 56 1977 33,772 American Brands. lno, and President and Chief Executive Officer of The American Tobaoco Company division since 1981; Executive Vice President--Tobaicco of American Brands, Inc. from 1999 to 1981 and President and Chief Operatieg Offi- cer of The Araertc~u~ Tobacco Compemy division from 1978 to I981; Executive Vice President of The American Tobacco Company division prior thereto Chairman of the Board and Chief Execu- 93 IgBl 0,4,~5 five enter of James B. Beam Distilling Go. (distilled beverages since /988; Pres dicnt and Chief Executive Officer of James B. Beam Distilling Co. from 1978 to 1982; President and Acing Chief Ex- ecutive Officer of James D. Beam Dis- tilling Co. prior thereto Executive Viice President and Chief Finan- 62 Ig6~7 8[,387 eial Officer of American Brands, Inc. since 1979; Vice President- Finance of American Brands, Inc. prior thereto 7 Vice President and Cont~dile~ of ,~edem~ 51 1981 9,428 Brand~, Inc. since 1981; Contro]Iet of American Brands, Inc. from 1978 to 1981; Tax DirectOr of Americma Brands, Inc. psior thereto Ma~aglng Director, W_m Sword & Co, g8 1976 200 Incorporated (investment banking) Vice President--Tobaiceo of American 52 1974 19,960 B~ands, Inc. since 1981 and Executive Vice President o~ The American Tobac- co Company division Chairman of the Bo~rd and Chief Exeeu- 60 1977 50,738 Bye Officer of American Bran&s, Inc. silace 19811 Executive Vice President-- Operations of American Brands, Inc. from 1979 to 1981; Vice President-- Subsidiary Administration of American Brands, Inc. from 1978 to 1979; Presi- dent and Chief Executive O~eer of Swingline lnic. plqor thereto Management Consultan~ 77 1964 2,100 Iugan I. MeShaa*, Jr. Charles A. Mehos* Robert L, Pla~° Wflliam Sword ! Russell E. Truitt Edward W. Whitt~noro* George H. Woodard° * Member of Executive Committee of the Company's Board of Directors. (a) 1.013 shares attributable to voluntary deposits under the Profit-Sharing Plan of the Company are included in the number shown above for RusselI P. Tl~itt. The numbers of shares attrthutabIe to profit sharing under 3

tile Profit-Sharing Plans of the Company and a subsidiary indnded in the numbers shown abo~ are as inllows: Robert L. Austin, 275; John P. Clark, 420; Thomas C. Hays, 900; Arnold Henson, 558; Virginius B. Lougee, IIL 4.375; Julian J. MeShane, Jr., 5,532; ChaHes A. Mehos, 6,987; Robert L. Plancher, 3,413; Russell P. Trultt, 2,537; and Edward W. Whittemore, 738. (b) Tile number of shares of which the nominees had the right to aerpi[re beneficial ownership pursuant to tbe exercise on or before Aplil 2, 19S3 of options granted by the Company included in the numbers shown above are as follows: winiam J. Alley, 6,000; Robert L. Austin, 4,400; Stuart G. Cameron, 4,400; John P. Clark, 4,400; Tbomas C. Hays, 4,400; Arnold Heuson, 7,II10; Edward J. leanings, Jr., 2,500; Virginius B. Lougee, III, 16,900; Julian J. MeShane, Jr., 1,700; Charles A. Mehos, 9,600; Robert L. Plancher, 5,0G0; Russell P. Truith 4,400; and Edward W. Whittemore, 35,500, Inclusion of such shales does not constitute an admission by any nominee that he is the beneficial owner of such shares. (c) The numbers shown above do not include 300 shares held by the husband of Mrs. Bedeli through BedeI1 Associates, 2 shares held by Mr. Clark as guardian for a minor child, 80fi shares held by the wife of Mr. Mehos as custodian for two children, 800 shares held directly by two ehddren of Mr. Mehos, and 1,200 shares owned by the wife of Mr. Woedard. In each case the nominee disclaims that he is the beneficial owner of such shares. (d) To the best of the Company's knowledge, each nominee has sole voting and investment power with respect to shares shown after his name above, except as follows: Mr. Hays shares voting power and investment power as a co-trustee of various family t*usts as to 3,200 shares; and, althougb the Tmxstee of the Profit- Slmrlng Plans of the Company and a subsidiary has agreed to vote the shares it holds in the Truse in accordance with instructions received from members of the Plans, shares as to which instructions are not received may be voted by the Trustee as it deems proper. (e) On February I, 1983 Mr. Alley owned individually and as custodian for his children 642 shares of 82.75 Preferred Stock (representing less than one percent of suel* shares outstanding). Mr. Alley has sole voting and investment power with respect to such sha~es. In addition, 191.48 skates of Common Stock are held for Mr. Alley's account under the Dividend Relnvestment Service of Citibank, N.A. for holders of Common Stock ef the Company, as set forth in the most recent statement of such Service received by him. Fourteen meetings of the Company's Board of Directors were held during the Company's last fiscal year. With the exception of Messrs. Alley, Cameron and Woodard, each present director of the Company attended at least 75% of tbe aggregate of (1) all meetings of the tioard of Directors and (ti) all meetings of committees of the Board of Dh'eetors of which he was a member, during the periods that be served during the Company's last fiseal year. Mr. Cameron resides in the United Kingdom. Messrs. Alley and Woodard do not reside in the New York City area, but they attended nearly all applieable meetings except for meetings of the Executbve Committee which are often held on short notice and the substance di which is discussed ti~ advance with those unable to attend. The Board of Directors has an Audit Committee, a Salary Cemmlttee and a Stock Option Committee. The Audit Committee is comprised of Messrs. Anderson, Behr, Sword and Woodard. Its functions include recom- mending annuagy to the Board ef Directors a firm of independent auditors to audit and review the Company's books and records and the scope of such finn's audit, reviewing reports and recommendations of the Company's independent auditors, reviewing the scope of all internal audits and reports and recommendations in connection therewith and reviewing nonaudit services provided by the Company's principal independent auditors. It held twelve meetings dn~ing the Company's last fiscal year. The Salary Committee is comprised of Messrs. Lougee, Mehos, Planeher, Tlaaitt and Whtitemore. Its functions include the establishment of salary administration guide- lines for the Company and its domestic subsidiaries, appBcable to all employees other than o6lcers ef the Company whose salaries are required by the By-Laws of the Company to be fixed by the Board of Directors, and, in accord- ance with such guidehnes, the approval of all salaries above a specified amount. It held twelve meetings during the Company's last risen year. The Stock Option Committee is comprised of Messrs, Andersoil, tiehr and Woodard. It administers the Company's Stock Option Plan, and its functions include the deslgnatlon of key employees (as defined in such Plan) to whom stock options and stock appreciation rights may be granted, and, within limits set forth in such Plan, the number of shares that may be optioned to any such key employee. It held one meeting during the Company's Iast fiscal year. In addition, Article XII of the By-Laws provides for an 4

Incentive Compensation Committee, presently comprised of Messrs. Henson, Lougee, Mehos and XcVhittemore, the functions of which teelude the deslgnatinn of those persons, in addition to the Chairman of the Board, who shalI be entitled to participate in incentive compensation under Article XII and the allotment among such pe~- sons of the amount made available for allotment. The Incentive Compensdiion Committee held three meetinrs duxlng the Company's last lis~al yeax. There is no nominating committee, that foncfion being po~ormed by the Board of Directors as a whole, Mr. Alley is also a director of Central Illinois Public Service Company and F/rsthank of Illinois Co.; Mr. Anderson is a director Of Heywoud-WakeSeld Co.; and Mr. Sword is a director of Mathematica, lne., Kepner-Tregee, Iue,, lloadway Express~ Inc., and The Space Trau~orint~on Co. Ine~ Messrs. Austin, Clark. Lougee, 1riches, Plancher and "vVhittemore are directors of Amerle~n Tobacco Intemat/ona] Corporation, a wholly-owned subsldiax3, of ~he Company with securities registered pursuant to Sect/on 12 of the Seeuxitins Exchange Act of 193zL Wm Sword & Co,, of which l~Lr. Sword is the Manarlnr Director, is to he paid $49.73750 for investment ban]dnr services performed in 1982 for the Company in connection w/th a possible acquisition. For informatio~ with respect to the beneficial ownership of securities of the Company by directors and officers as a group, see "Certain In£ormation Eerard/ng Security Holdinrs." LKEMUNEI~TION AND OTffiER TRANSACTIONS There is set forth in the fellow~ar tabulation all remuneration of the foalow/nr persons for settees in capaeit/es to the Company and its sub~islinries while directors or officers of the Company durinr its Iast rises/ year: each of the five most highly compensated executive o~cers or d/rectors o~ the Company as to whom the total cash and cash-equivalent forms o~ remuneration exceeded $50,0S0; and all officers and directors of the Company as a group. A]I cash remuneration paid to theso i~d/viduals ha the form of salaries, ~ees and inee~t/ve eoraponsat/on is stated in Colunm (1). The value of certain insurance benefits and personal benefits ~ece/ved b V these individuals is stated in Column (2) and the i982 proSt shares of these individuals peyable to the Trustee under the Frofit-Shering Plans of the Compo.y and a subsidiary are stated in Column (3). The contin~emt portion of these individuals" incentive compensat/on for the Company's last fisoel year is stated in Column (4). Gash and oada-eqtdvalenk forms ~ remunerat/on (4) $alade~ fees ~s~ran~ Dmferred eonl/ngent • arai neent ve beaefitsand profit shar~ fccms~ Name of hadlvld~al or C~ac~es in wbdeh compen ~6on rsonal p ~ya'ais to remuneration ~umber of i~rsons/n ~a'o~rp remuneeati~a w~s r eeelred Paid ~e~efits T~steela) (bliel StuartG. Cameron" Chairman of Collator Ltinited $ 2~3,~0 $ 5,327 $ -- $ -- Arnold H~nson S~aior Vice Fresident and General 237,50S 1,371 $7~$79 12S,000 Counsel of American Brands, In~2. Vic~u~usB. Lougee, llf* president a~d Cblef Oporat~g 327,~0(I 2,773 37,$30 187,5~ Officer of American Brands. Inc. and President and Chief Executive Officer of The Amer- ican Tobacco CvmpeJay divisi~ Executive Vice Yresffient and 287.500 3,690 33,052 162,500 Chinf Financial Officer of American Brands, Lie. C~tman of the Board and Chief 568,589 6,828 45,475 368,589 Executive Officer ~( ~eriean Brands, Inc. $3,466,4o-6 $25,673 $283,177 $1,188,089 Charle~ A. Mchos° Edward W. Whlttemore° 19 directors and officers as a group * Also officer of a~]inted company or companies.

(a) Amounts shown in Column (3) are the dollar values as nf Decomber 31, 1982 of the Pro£t Sharing Plan "units" constituting the profit shares for 1982 of the participants named. As of December 31, 1983, Plan balances (other than halanee~ attcihutable to vohi~inty depasita made through pay~olI dedaetio~) represented by the "units" standing to the credit of suck n0aned participants, including the market value nn that date of the numbers of shares of Common Stock of the Company held by thu Trustee of the Profit-Sharing Plan of the Company equivalent on that date to their undivided proportionate interests in the total number of such shaze~ then held by the Trustee attributable to proft sharing for all print years, but excluding theht profit-shares for 1982 (payable to the Trustee in 1983), were ~s fofiows: Virgmius B. Lougee, III, 8253,137; Charles A. Mehas, $661,580; and Edward W. %vhittemore, $99,632; and directors and ofi%ers as a group, $2,102,671. (b) Amounts shown represent the one-half of incentive compensation for 1982 under Article XII of the By-Laws as amended in 1970 that is contingently payable to participants on December 15, 1983. From 1957 through 1969, Article XII p~ovided that a portion of incentive compensation for each year of participation is contlngent/y payable to each partinipa~at in three equal annual installments following termination of employrnefit by the Company. The respective annual instaffinents in respect of such deferred contingent portions accrued far all such years of participation prior to 1970 are as follows: Charles A, Mehos, 88,908; and directors and officers as a group, $6,908. (e) Each dir~tnr who ~s Pax o~ce~ or employee of the Company ~ one of its subsidiaries, lncluc~ag the directors named above, is a participant in the retirement plan of the company of which he is an officer or employee. Officers of the Company who are not directors of the Company are participants in the Company's retirement plan. Beoause each such plan is a defined benefi~ plan in respect of which contributions are aetuarlally determined in the a~gregate for alI plan pattlcipants, and carmel be readily calculate6 fo~ any individual participant, amounts representing payments or aeeruaIs for the account of ofl~eers and directors of the Company under such retirement plans are not included. In general, the covered eomponsation for most employees under the retirement plans of the Company and its subsidiaries is substantially all eompensatinn reportable to the Internal ~tevenue Service for income tax purposes. Gallaher Limited haj entered Into an agreement with Mr. Cameron which provides, among other things, for Mr. Cameron's employment by Gallahar at an annuffi salary oE ~6fi,50I (approximately $105,949 based on the average exchange rate for 198fi) and for Gallaher to reimbalrse him fox all reasonable expenses incurred by him in the pm'formance of hi~ dutles under the agreement. The agreement is terminable by either party upon two years" notie~ and by Gallaber upon shorter notice in eer[ain circumstances. Company has e~tered i~to ~.gr ~eat~ ,ad_th Me~srs. Whlttemore, Longee, Mefins and Hensoa to provide certain severance benefits for them in the event of their terminatio~ of employment following a ehanfie in control of the Company (defined as the acquisition by any person, corporation or group of stock of the Company having more than 20% of the voting power of outstanding shares). Each agreement provides that if, subsequent to a change in ee~atrol, the ComPany terminates the emphiyment of the o~eer other th~n for disability or ea~ae, or if the nfficer sleets to tea'nainate his employment for good reasons, as provided in the agreement, the officer will then receive three years of base salary, three times the amounts for one year of his Article XII award and Profit-Sharing plan alhieation, three additional years of service and eantingr credit under the Company's retirement plans and arrangements and three additional yea~s o{ eove~ag~ ~r~der the Cx3mp~y's 1Lfe, healtla, accident, disability and other employee plans. Each dkeetor who is not an o~eer or employee of the Company or one of its subsLfriaries reeelves an annual fee of $95,600 for services as a director. The ehahrman of the Audit Committee and the chairman of the Capital Appropriations Committee receive an additinmaI ~mnual ~ee of $7,500 each for services as chairmen, and the chairman of the Stock Opthon Committee receives an annual fee of ~5,000 for services as chairman. Mr. Woodard is to receive in 1983 annual compensation of $39,000 for his service on the Boards of Directors of subsidiaries of the Company. Mr. Behr is to receive in 1983 annual compensation of $15~000 for his service on the Beard of Directors of a subsidiary of the Company. The Retirement Plan for Employees and Former Employees of American B~ands, 1no. (the "Retirement Plan") provides for norm~I and early retirement benefits for employees of the Company (other than employees

of the Golden Bel~ Manufaoturfeg Company dlv~sion) who meet certain age and service requirements, and also provides for disability, severance and spouses' benefits in accordance with its terms. The normal retirement benefit at age 68 is based on an employee's average actual earnio~ (as defined) during tl~ fi~'e hi~est paid consccuffve calender years of his employment. The amount of benefit is equal to the sum of 1 ¼,C'o of suab average actual earnings multiplied by the number of years of service, plus 3,'i of 1% of such average actual earnings in excess of $4,800 multip~ed by the number of years of service before 1960, plus ¼ o£ 1% of such average actual earnings not ill excess of $4,800 multiplied by the number of years of servioe before 1900. The~ is no credlt for service in excess of 35 yeats. Average actual earnings as defined by tile Retirem~'nt Plan do not include incentive compensation paid under Article XII of the Company's By-Laws. Certain directors and o~cers of the Company may by entitled to behests under the retirement plans of the Company~ snbsidiarles attributable to their service with such subsidiaries, wIfiefi benefits are also based upon years of service and covered compensation with such subsidiaries, Except as provided in the Supplemental Plan discussed helow, the annual benefit payable under the retirement plans of the Company and its domestic subsidiaries may not exceed the lesser of $7"5,000 or the empfoyee's average total compensation paid during the three highest paid consecutlvB calendar years of his employment. A supplemental retirement pl~u~ (the "Supplemental Plan") provides supplemental benefits to the group of key employees wlio are allotted incentive compensation under Article XII, in an amount equal to the difference between the benefits payable under the Retirement Plan and the amount that would be payable under the Retirement plan ff (i) Article XII incentive compensation paid to the employee prior to termination of employ- ment and to the employee's normal retirement date were included, hi tile definition of average actual earnings and (il) the ma.~dmum limit on anamal benefits were raised to the lesser of $225,000 or the employee's a~Z'rage total compensation paid during the three highest pald consecutive calendar years of his employment, tn calculating supplemental benefits, no credit is given for service in excess of 35 years. Benefit payments under the Supplemental Plan are made concurrently with benefit payments under the Retirement Plan. Tlie ~ollowing tabulation sets forth the highest estimated annual retirement benefits payable to persons in the speeifietl remunera'tion anti years of service elessifications upon retirement at normal ~tirement date under the retirement plans of the Company and its domestic subsidiaries (other than The Franklin LLfe Insurance Company), otBcers of which were directors of the Company during its last ~scal year, assuming election of an annuity for the life of the empIoyee only: Highest Consecutive Five ear Average Cove~ CompensBtiozt $ 50,000 ................. 75,000 ................ IO0,O00 ....... i50,000 • 2O0,0OO ................. 250,OO0 ................. 300,000 ........ 400,000 ....... 800,000 ............... 600,000 ........ 700,000 .... 8~,C00 ......... 900,000 ................ I,(~)0,000 ............. 1,100,000 .......... Estimated Annual llethemen~ Beneflls for Representative Years of Credited Service 10 20 3~ 35 $ 10,061 $ 17,500 $ 22,561 $ 26,087 15,686 26,250 34,436 39,274 21,311 35,000 46,311 53,400 32,561 52,500 70,700 78,837 43,811 70,0~0 35,332 t05,212 55,061 75,000 106,707 131,587 60,311 75,000 19~,032 157,962 75,00D lO0,OOO I70,$32 210,712 75,000 125,000 ~i5,582 225,000 75,000 130,000 2251000 2~5,000 87,500 178,000 225,000 225,000 100,(~0 200,(N)0 225,000 228,000 112,500 220,000 225,000 225,000 125,000 225,000 225,000 225,000 137,500 ~25,000 225,000 225,000 While only those employees entitled to lienefits under the Supplemental Plan are entitled to receive annual retirement benefits in excess of $78,000, there was no employee not receiving incentiw compensation in 1982

vdiose at~nual retiremet~t beaeKts would b:we been reduced by the $78,0f)C' limitafion. Normal retirement benefits under the Gallaher Limited Pension Plan (wlucb ale based on final salary) exceed the beneRts reflected above in all years oE service classifications. Normal retiremeat benefits under The Franklin Life Employeeg Retirement Plan exceed the benefits reflected above in most years of ~etvlee classig.caCtons, except that The Frankiin Life Employees' Retirement PIan also has a m~ximum benefit of $75,000. In addition, The Franklin Life Insurance Company has a supplemental retirement plan similar to the Company's Supplemental plan described above, with a maximum limit on atmual bene£ts of $925,000 (including amounts received under The Franldin Life Employees' Retirement Plan). The retirement plans of certain subsiflkaries of the Company provide that benefits are offset by a portion of Social Security benefits and the esinn.tted annu~.l retirement benefits set forth above do not include this offset. The years of service for Messrs. Lougee, Mehos and Whittemore are 32, 32 and 36, res]2eetiveI>~ and the years of service for Mr. Cameron (who is covered by the Gallaher Limited Pension P/an) are Ig. Mr. Henson's benefit is cor~pute~l under an arrangement that gives hin~ ~ears of service a~ i~ e~npluyed since August i, 1961. The 1982 remuneration of Messrs. Cameron, Henson, Lougee, Mebos and Whittemore covered by the retirement plaus was $105,g49, $I94,500, $465,000, $400,000 and 8884,620, re~pectively. The l~roflt-Sharlng ]?]an of Amesicoat Brands, Inc, covers employees of the Company (other than employees of the Golde= Belt Manufacturing Company division) who complete a yeax of service. The Company mmually contributes to the Profit-Sharing Plan Trust a sum equal to the following percentages oI consolidated Net Income Before Taxes I defined poxsuant to the plan as, mMrdy, net income before taxes from domestic tobacco operations ) : 3½% of the ~r~t $100,000,~0, plus 5% of ~e next $50,000,000, plus 8% of any excess. No contxthution will be made, however, for any year (a) for whlub Net Income Before Taxes does not equal or exceed 12% of net worth, (b> in whinh a cash 65vidend ~s not pzld con the Common Stock of the C omparry ~ (e) in excess r~ the amo~t deductible fez that year by the Complmy for Eederal income tax purposes. Subject to e~rtain limitations, the conhSbution of the Company is refiueed by the ~aaount of farfeitures from members" aeeounta. Employer eontt'thutions are apportioned to Plan members on the basis of each menaber's Adiusted Earnings for the year in ralation to Adjusted Eam~gs of all members. ~Adj~sted Earnings" for any year me~ns earnings for that year plus 50% of such eaxnlngs in excess of the Social Security wage base. A member's balances in the Profit-Shating Plan Trust arising from employer contributions become dlstrthutabfa upon terminatiort of employment, In eases ef termination by zethtCment, death, disability or te~'raluatioz~without fault (or ttpon parEal or complete t~rmthatlun of the plan) the full amount is distr~utable, In the case of any other termination a percentage varying with the member*s ~etagth of ~ervlce and reaehin8 I009b upon completion of twelve years' servi~e is dis~rthutable. Disttlbutlun is made by such method of settl~nent Ia single dlstribntinn in oath or partly in oath and part/y in Common Stoefi o~ the Company, or I~erlodie each in~tdilrn~s -- a~ th~ ~)ivislo'n al Benefits I~I ~.~a Committee ~eter ~'aine$. Certalr~ dir ect~r~ and etchers of the Company who are also employees of subsidiaries of the Company may be entitled to participate in the prefit-diating plans of the subsidiaries under which eOntlthuthins are also b~od on pro tax interne of the subsidiary, are apportioned ~mnnfl plan members on the basis of their relative annual earnings and are distributable upon termination of employment. Article XII of tha By l,axvs of the Company pro~ides for payment of incentive compensation to members ot the Ma~agemenI: Group (consisting of key employees, defined ~ursuan~ to Article X/I). An amount equal to of 1% of Net Income Before Taxes (as defined ira Article XII) is made availubhi for allotment annually ff net income before taxes equals or exceeds i~% of n~t worth and a cash dividend has be~n paid on theCommon S~ock ~]~ the Corap~rty. Of the amt~u~ a-~atiab~e fo~ ineent~'e con~perxs~tir~rt 18% is allotted to th~ Chairman ~ the Board and the remainder is availabIe in the Management Croup on the following basis: ~4% of the total amount avall~bhi is allotted by Article XII to the members of diB Management Croup in proportion to their fixed salaries, and ~he balance is allottabIe to them by the Incentive Compensation Committee, entirely at its flls~retinn as to amounts and individuals. Payments are made by distributing 50% of the amoun~ payable in cash as ~oon as praotieahIe and 50°/~ in cash on the D~cember 15 next following the clos~ of the year for which the allotment

was made. The dele~t~d puitinn of the Azticle Xif payment is contingent upon the employee uot engaging in competitive emplaymcnt prior to reccip~ of paymcn~ thereof. Certain ilL~ectors and o~cers of the Company who are also employees of su~sidlaries of the Company mat Be entitied to participate in the incentive compensation plans of the ~ubsidhiries, unde~ which a pcrcen~ge o~ pre-to~ income of the subskiiary i~ anocatcd ~nnuaily among key e~nplopccs of the subsldlar~ On October 27, 1981, the Boa~ of Directors adop~d the Stock Option Plan which, ~ amended, was approved by the stocklaolders at the 1982 .~mn~al Meeting. The Stock Option Plan a~thor~es th~ g~ant to key employees of the Company and its subsidiacies, selected By a Stock Option Conamittec of dircctocs ~v]~o ar~ not emplayec~, of optiens ininnd~l to qualify ~ ~incentlv¢ stock options" under the Internal B.eve~u~ Codo and options which arc net intended to so qualify. Under the Stock Option Phin, there may bc granted incentive stoel< options to purches~ a maximum of 1,200,000 shares of Common Stock of the Company, and nonquali~ed options to purchesc, or stock appreciation rights ~as deserihed below) to receive, a n~aximum ol ~0Q000 shares of Common Stock: of the Company. No~ more than I00,0~0 shares c.tn be optio~ed ag nonqueli~ed stock options under the Stock Option Plan t~ any one person, U~sr the Stock Optin~ plan {~) the option price per ~here may not he ]e~ than the fair m*trhet value *it the time of grant, <if) option~ gensrMry may' no~ be ~xerc~s~d p~o~ to otto y~ar nor m~e tlta~ ~n years from th~ d~te of gr~n~ and (i~.) no opt~ott or stock ~tpprecia~on right znay be granted a~er October ~, i~ The Stock Option Pinn contains additinnal restrictivs p~ovisinn~ rot ince~tive stocI< options ~o tha~ (i) an incentive shicl¢ option may not Be exercised while there is outstanding an carller granted inosntive ~toch option and (ii) the aggregate fair man,at value (determined a~ the date of grant) of the thares for which a key employee may be ~ranted incentive ~oel< option~ in any ca~end~r yca~ cannot exceed $100,000 plus ~ny ~un~ed llm~ can-yovcr~ ~s dofm~d in the Stock Option Plan). T'ac Stock Option pl~r~ permits the grit o~ stock app~eeloM~n rlglxtz in o~n~u~ction with the grant o~ a nonqusli6ed stock option, either at the time o~ the option grant or ther~a~er during ~ts te~rn ~nd in ~cspec~ of all o~ part of such nonquali~ed stock option, Stock appmelation zights permit an optfone~, upon exercise of such rights ~nd sm'rcnder of the ~e~ated opthm or part thereof, to ~c~ve a payment equal to th~ excess of the ~aiz macke~ value (on the dato of exercise) of the she~es covc~d by such option or p~rt thereof ~o ~a~rrendercil over the o~tion ~zicc of such shaxcs. $ttch payment may l~e naade in Common $t~ck of the Company (valued on the he.~ of the fair mar~e~ value of such Common $toelc on the date of exercise), in cash, o~ imrtly in c~ch and p~dy ia Commo~ Stock of th~ Company, as the St~ek Opdort Committee may d~ermine. N~ s~och app~eelation ri~t is exercisable prior to six months ~om the d~te oJ: i~s ~an~. Each option also hears a limited ~ight which #nay bc ~xercised within SO days offer an ~cquis~tinn by some~ ~ne other than the Company of stock of the Company having more than ~0% of the voting power of the Company's outstanding shares. Tlle ~im~tcd right entlt~cs the optionee ~o receive ca*h equal to the di~ercnce betwec~ the option exercise price per share and the greater of (i) the fair mathct va~uc of a thane of Common ~t~ck at the ~at~ ~ cx~eise of the ~Lm~t~d rlgl~t and ~ti) tlae ~ch*tsc price l~ thar~ hx the acq, risit~on~ mu~d- pI~cd by the ~umbc~ of shares subicc~ to the option. The option will bc cancoll~d to the extent of the exercise o~ the limited right. The following tabulation ~hews ~ ~o the directors and of~cexs o~ the Company named in the ~able on page 5 ~nd as to all directors a~d o~cers o~ the Company as ~ group ~) the nu~thcr of sha~s subject to options gzanted during the period January i, 198~ thxongh Dccemhe~ 81, 19S2 and th~ awrage per share optio~ e~erel~e pticc thereo~, (il) the net valu~ of shares Im~ value le~s ~.x~els~ pfi~ c~ casi~ ~ali2o6 d~in~ ~ pe~i~d }'mauary l, I~ through December 31, 1982 upon the exercise oi options or s~och apprcelatlon right~ and (iii) the numbe~ and th~ potenrial (un~¢alized~ value <m~cket value ~ Ds~emhe~ ~f~ I~S~ hisz exercise ~r hes~ ~ric~) of shares subje¢~ to ou~standin~ options held at December SI, I~.

Common Sto¢k Gr~Ied--~r~u=ry I, 1982 ~E~h De~lLLber ,51, P3~2: stock DI~p~e~ttlon r~gfe~ .. 1j750 4,000 7~400 ,5,200 2],7"~0 46,150 Average per share exer~e l~r~e $4"T~12~ 847.312S $47 ~I~ ~'~7 31-~ ~4T ~1~,5 ~'~.31~5 E~ere~ed h J'a~'3xy 1, I~82 t~r~ug[t De~er~e~ 3L, ~.~ Net vaIue re~li~d m sh~r~ Imark~ v~Iue Ies~ ~erclse December 31, 1@82: Incentive stock optlo~.~ . ,. .... 4,500 ~,000 2,000 4~,~3 I~,0OD ~,~O P~tenti~l (unreal~ed) wIue $1, I9~ le~s exercise ~ b~e All prestmf directors and Stuar~ G. Arnold Vir glnlus B, Charres A. Edward W. oi~cers as C~meron Henson Lougee. l][ ~.fcho~ '*$'h~emore a group Vv~e~e ~ny ~forma~c~ in ~s prozy ~atcz~ent as to ~em=~er~t~o= or other m'~ctinns ~s callec] for v~th regard to persons bo]ding ~pec]~ec] positfon~ or re]ablon~i~, i~formadon i~ no~ included ~or any po~on of th~ req~tsi~ 9e~d~ d'~'tng w~c~ ~eI~ l~e~on~ ~d not hekl any ~ ~osi~ions or rela~onshfp~. Proposal 1 ELECTION OF INDEPENDENT AUDITORS TI~e B o ~x~d. Of Dire~or3 ~eco~mends that the s~ockixo[der s elecl: Coopers & Lybrand a~ inde~e~den~ ~udi~ors foz the Come,my for the year 1~83. In line with this recommendat~0n the Board of Directors ~ntends to introduce at the ~orlheoming Annual Me~ting the following resolution (deslgnatrd }~ereln as Proposal 1) : "RESOLVED. that Coo~e~ & Lyb~and be and they a~e hereby e~ec~ed in~]epen~ten~ auditors ~o~ th~ Corn- ~a~y f~ the yea~ ~83/' ae~d~me~ "¢dth 'the Co~l~a~ prance. ~ ~emher Of C~pers & Lybr~d wiU a~e~d the .~nT~l Meet~g to m~ke a statement: i~ Ire desires ~o do so and to respond to any appropriate q~es~ons that may be asked by ~ockhelders. The a~irmative vote Of a ~aaj'ori~y of the combined vo~es c~s~ by the holders o~ Common S~oek. $1.70 Conve~ib]e Preferred Stock, ~.7~ Preferred Stock and $2.67 C~nvertib]e Preferred S~ck voting thereon is ne~-e~sary ~ the adopF.on Of !~t ~os~l L The Bo0rd of D/rectors I"ecornmends that you vote FOR Proposal 1. I0

Proposal 2 RESOLUTION REQUESTING CugIULATIVE VOTING PROPOSED BY FOUR STOCKHOLDERS The Company is informed that Lewis D. Gilbert, a record holder of 100 shares of Common Stock, whose address is 1165 Park Avenue, New York, N.Y. 10028, and/or John J. Gilbert, a record holder of 100 shares of Common Stock, of the same address, and representing all additional fantily interest of 500 shares of Common Stock, and/or John G. Henry, a reoord holder of 3,200 shares of Common Stock, whose address is 5 Bast 93rd Street, New York, N.Y, 100"9-8, and]or David Brown, a record holder of 12 shares of Common Stock, whose address is 214-15 lgth -Avenue, Bayside. N.Y. 11360. intend to introduce at the Almual Meeting the following resolution ( designated herein as Proposal g) : "BRSOLVED: That the stockholders of American Brands, Inc., assembled in annual meethag in person and by proxy, hereby request the Board of Directors to take the steps necessary to provide for eumu]atNe voting in the election of directors, whloh means each stockholder shall he entitled to as many votes as shall equal the number of shares he or she owns mulBplled by the number of directors to be elected, and he or she may cast all of such votes for a single candidate, or any two or more of them as he or she may see gt'* The proposers of the resolution have furnished the foIlovcing statement setting forth the reasons advanced by them in support of their proposal: "Last year 8,251 owners of 3,402,638 shares voted in favor of our similar resolution. The vote against included the unmarked proxies. "The importance of cumulative voting has Been noted in the following words by the Giant Portland Cement Corporation in their 1974 proxy statement: 'Cumulative voting is a form of proportional representation which permits minority shareholders to have reprosentatinn on the Board of Directors. Under the e:dsting by-laws a shareholder is entitled to one vote for each share of stock registered hi his name. Thus, the holders of a majority of the shares may elect all of the directors, in whinh event the remaining shareholders may not elect any directors. The proposed Article Ninth provides for cumulative voting in the deetinn of directors, in which case each stockholder is emitled to as many votes as he owns shares, multiplied by the number of directors to be elected, to be cast for one or distributed among two or more directors, as he sees fit. Therefore the pzltposed amendment would permit a person or a group of persons holding a signiBcant block of shares to have representation on the Board of Directors.' you agree, please mark your proxy for th~s resolution; othex-*vise it is antomatieally east against it~ tm]ess you have marked to khstain7 In the view of the Board of Directors, the function of a board of directors is to administer the affairs of a corporation for the behest of all its stockholders. The Board of Directors helleves that a director elected by a minority through cumulative voting might feel bound to act in what he considers the interests of the minority even though such action might not he in the best interests of the corporation and the stockholders as a whole. It believes that the present method of electing directors, which is the corporate equivalent of majority rule, has worked successfully and should not be changed. Cumulative voting was overwhelmingly re~eeted at the 1964 and 1969 Annual Meetings when approximately 94.8% of the votes were cast against it on each occaslon~ at the 1970 Annual Meeting when approximately 93.7% of the votes were cast against it, at the 1976 Annual Meeting when approximately 94.4% of the votes were east against it and at the 1977 Annual Meeting when appro~5- mutely 94.1% of the votes were cast against it. Last year approx~mateIy 93A% of the votes were east against it. The a~rmatlve vote of a majority of the combined votes cast by the holders of Common Stock, $1.70 Convertible Preferred Stock, $2.75 Preferred Stock and $267 Convertible Preferred Stock voting thereon is necessary- for the adoption ef Proposal 2. The Board of D/rectors recommends that you vote AGA/NST Proposal 2. 11

Proposal 3 RESOLUTION ON ESTABLISHMENT OF NOMINATING COMMITTEE PROPOSED BY FOb~ STOCKHOLDERS The Company is informed that ~e four stockholders whose name~, addresses and record holdings are set forth with respect to Proposal 2 intend to introduce at the Annual Meeting the following resolution (designated herein as Proposal 3) : "RESOLVED: That the stoekhoIders of .~meriean Brands, Inc., assembled in annual meeting in person and by proxy, hereby request the Board of Directors to take the steps necessary to provide for the formation of a nominating committee, at least the majority ~ which shouI~t be composed of outside directors." The proponents of the resolution have Eurnished the following statement ~etilng forth the reasons adx'ancec~ by them in support of their pr0posaJ: "Last year 8,697 owners of 3,811,798 shares voted in ~av~r of our similar resolution. The vote against included ~he unmarked pro~es. "The whole purpose of having a nominating committee i~ to be assured tha~ independent directorS, not a~ilia~ed with management, assume fl~e responsibility of selecting new nominees for the Board. ~Your aRen~on is ca]led lo the fa~ that more and more corporations now have a nominaU~g committee and this has bee~ recommended as goocl cosporate governance by a Chairman of the SEC and the New York Stock Exchange. "Among the latest companies to adopt this pra¢ffee are: Southern Pacific, R. Hoe, Facet Ind, Landmark Land Co., Ine~ Foremost McKesson, Vista Resources, Sonesta IntcrnaEonai Hotels Corporation, Electro Audio Dynamics, Inc., GAF Carp., First National Boston Corp., New Mexico ~d .Mizona Land Co., Culbro Co~., BeIl and Howell, Carter Wallace, Inc., Collins and Aikman Co~oration and Claremont Capital Corporation. ~'If you agree, please ma~k your proxy for this ~esolufion; o~te~wise it is a~tomat~ea~y cast aga~st it, unless you have marked to abstaln." "£he funetio~ of a nominating committee has been performed by ~he Board of Directors a~ a whole. Your ]Board l~el!evest'hat this function should continue to be performed by all of ~he Board member~. It is the view ~ your l~oa~d that each member should be a person whose experience, knowledge and expertise enable him to make a substantial contribution to ~he work of the Boarcl and that the selection of persor~ with these quali- Ecations can be best assured if al] m~mbers, rather than a committee, have an opportunity to p~rticipate directly in the selection of nominees of the Board. An identical resolution was overwhelmingly de~eated at the 1982 Annual Meeting, whe~ approxima~eIy 93.6% of the votes were east against it. Accordingly, the resoIution should be rejected as not in the best interests of the Company and its stockholders. The affirmative vote of a m~otity of the eomblne~ v~.es cast by the holders of Common Stock, $1.70 Cenver~thle Preferred Stock, $'2.75 Preferred Stock and ~.67 Convertible Preferred Stock voting thereon is necessaW for the adoption of Proposal 3. The Board of Directors recommends that you vote AGAINST Proposal 3. CERTAIN INFOR~IATION REGARDING SECURITY HOLDINGS The following tabulation sets forth information with respect to the benedcial o~vnership of equity secm6ties of the Company by all ctirectors and officers of the Company as a group at February 1, 1983. Such group ownership does not exceed one percent of the outstanding shares of those classes ~f equity securities o~ the 12

Compa.> listed below. Tbe [nformatiou is based on information received by tbe Company from the directors and o[ficet's, f~om the Divisional Benefits Plaa Committee and from ~he Trustee of the Proft-Sharing Pla~ of the Compa~y Amoont and nature cl~s~ ownershl (a~)) Common Stock ~0,199 sknresCb) $.°.75 Preferred Stock 642 shares (~.} D3r h~fo~a~ ~ to vo~ng powez and ~nves~e~t po~'e~ with respect to sha~es o~vn~d hy d~'ec~o~% s~e Notes (d) and (e) to the table under "Election of Directors." To the best of the Company's knowledge, each off/cot who is not a director has sole voting and investment power with respect to shares o~med by him. With regard to voting power in respect of shares he~d by the Trastee of the Profit-Sharing Plan of the Company, see ~N'ote (d) to the table under ~E/eetian of Directors." (b) Ineledes 28,881 shares of Common Stock held on December 31, 1982, by the Trustee of the ProgtoSharthg Plal* of the Company (including those referred to ~n Note (a) to the table under "Election of Direetors~), which nt~mber is equ[v,dent as o{ that date to the uudivlde d proporEoaate heue6e[al interest OE the directors and ofl~cers of the Company In all such shares, and 109.(300 shares (including those referred to in Note (b) to the table under "Election of Directors"), of which the directors and ot~eers had the right to acquire beneficial ownership pursuant to the exercise on ~r before April 2, 1983 of optlons granted by the Company. Incinsicn o£ such 199,000 shares does not constitute an admission by the directors and o~cers that they ar~ the beneficial owuers o~ such shares. The following tabulation set~ ~rth inforaaatian with respect to each person known to the Company to have been the beneficial owner of more than g~ of any class of voting securities of the Company at February 1, 1983 and is based on information received by the Company from, or on behalf o£ such person. To the best of the Company's knowledge, no one person was the beneficial owner of in excess of 5% of the outstanding voting ~ecurities o[ the Company at February 1, I983. ~o~t ~tlld t%at~¢ Title of N~ne and address of bex~efidal Percentage class ~ff bene~cial o~¢aer o~raersblp [a) of class $2.75 Preferred ~toek The Chubb Corporation 430~800 shares 7.9% 10g Wi~a S~ee~ New York, New York 10038 (a) To the best of the Company's knowledge, the beneficial owner listed has sole voting and investment power with respect to the ~hares ]irted. SUBMISSION OF STOCKHOLDER PROPOSALS Proposals of stockholders intended to be submitted at the next Annual Meeting of stockholders scheduIed to be held May ~, 1984 must be received by the Company on or before December 16, I983 to be eligible for inclusion in the Company's p~oxy statemen~ and accompanping proxy for such meeting. MISCELLANEOI)S A copy o~ the C~mpany's annual report on Form 10-K to he filed with the Seeurgles mad Exchange Commlss~on for its last fiscal year, iaeludthg the financial statements and the ~aancial statement schedules thereto, will be made available to stockholders without charge upon written request to Mr. Louis F, Pernous, Jr., Secrelary, AJnerinan Brands, Inc., 245 Park Avenue~ New York, N.Y. 10197. The Company will furnisfi any exhthgs to Form I0-K to each st~kholder requesthag them upon payraent of a fee of $.10 per page to cover their cost, 13

Promptly Mter the Annual Meeting stockholders will be mailed a return postcard on which they will be abie to indicate [heir desire to receive a copy of the summary of the meeting. The expense of the solicitation of proxies for this meeting, ineludlng the cost of mailing, wig be borne by [he Company. In addition to mailing copies ot this mate~al to stockholders. [he Company will request persons who hold stock in their names or custody, or in the names of nominees, for the benefit of ethers to forward copies of such material to the beneficial owners of the stock of the Company and to request au~hotity for the execution of the proxies. To the extent deemed necessary in order to assure suf~cient representation at [he meetng, oBicers and reguIar employees of the Company will request the return of proxies by telephone, telegram or in person. In addition, the Comps~uy has retained The Kissel-Blake Organization, Inc., 26 Broadway, New York, N,Y. 10004, to aid in the solicitation of proxies for a lee, including its expenses, estimated at $'23,500. The total expense to be borne by the Company wil/depend upon the volume of shares represented by the proxies received promptly in response to the notice of meeting. Stockholders who do not intend to be present at the meeting are urged to send in their proxies without delay. Prompt l~spor~e is helpful, and your cooperation win be appreciated. M~ch%1983 14

Per Common sb0.rc Net income Without dilution Fully diluted Dividends paid Net sales Operating income lace)me before provision for taxes on incc~me Net income Dividends paid ColZlmon Preferred Number of Common stockboldevs, December 31 Average number of Common shines outstanding dud ng the year 1932 $6.55 6.30 3.50 ,.504,961 781,842 663,794 381,240 ~[92,797 20,477 110,130 111,374 1981 $6,68 6.oa9 3.212~ $6,538,161 783,540 604,997 336,127 $174,953 22,676 113,968 54,445,968 1930 $6.50 6.20 2.95 $6,801,456 761,026 628,509 377,893 $160,571 25,791 114,361 54,274,466 Operating Results By Product Line (~c~ IInmillions) 1932 Tobacco products Domestic 81,223.4 International 2,973.0 Distilled beverages 227.3 Food products 469.9 Hardware 173.5 Office products .312.8 Optical goods and seK-~ices 117.3 Golf penducts 92.6 Personal care products 120.1 Specialty businesses 795. I 6,505.0 Financial services T~tai $6,505.0 Net sales 1981 $1,177,9 33305.2 210.7 560.3 194 l 255.5 101.5 813 119.6 831.~ 6,538.2 1980 1322 , t t6.3 189.3 5:15.9 L~3.6 226.4 ;05.5 68.8 96. i L 054 ~ff115 ,;01.5 Operating income 1962 1931 1980 $344.4 $302.2 $292,5 119.6 135,7 146.6 32.6 30.6 26.6 32.1 35.0 28.1 26.7 38.2 36.9 25.4 38.8 372 i I9.4 17.7 20.9 14.i 12.0 9.3 7.0 9.5 8.4 30.8 29.6 35.9 652.1 649.3 342.9 ;'6% i29.7134.2 $781.8 $783.5 I ] I bet Plies I0 anti ~l] [tit IrLlilrt~lt[<ll(.I Business Y~.gnle n is. (2: Data l<~r 1!18[ ~,rw1191RI h.~e been r~lass}t i~d I~ ~ f~m parati~,e purl~,~s I

To Our Stockholders Our 1982 performance again defflonstra ted that our strength is our suc. ¢essful dlversffication. In the face of a severe world. wide rec~ss~n~ some of OUr busillesses were affected, but others com- pie fad the fthest year fa their fastor)~ 1992 Results Net income in 1982 declined I 'i from 1981'~ record level and sales ~re also off marginall}: Ho~evcr, profits moved ahead in each of the last three quarleps cff the year on a comparative basis, and inc~ne be[ore~ taxes for the full }'ear was up a st rong l 1% World-wide net income for 1982 w~ 8381.2 million, equal ~o ~.55 per C~nm~r~ share, compared wltb $386.1 million, or S6.68 per share, in 1981. Tt~e 1981 figure included $41. I million, equM to 76¢ per share, in nonrecurring Ualled Kingdom prior period stock relie~ tax credits, Consolidated net sales amounted m S6.5fi billion in 1982, compared with $6.54 billk~n in 1981 These small declines in sales and income would have been gait~s had exchange rates [br the British pou.d remaiiled at 1981 levels; consolidated sMes would havc been up S.577 rrfillion, and nm incom~ would have increased $6 million. Highlights of Operahens There wcre many bright sR!)ts it] our operations, despite th~ most severe economic downturn since the Great Depression Seven of our businesses had record ~ales. and five had record net [acame. Furtl~'t more. ever? one of our lines of husit~ess w~Ls profitable during 1982 The plenaler performer was tobacco. The Americar~ rlbbacco Company had another record yeal: and future prospects were brightened hy the highly suc- cessful introduction of L@' Slrd~e Low ~lr Fi#ero. Now available in o~er hal f Ihe countD: Lucky Fi2ters are firmly establlshed as one of the most su¢cessf~8 introductions in l~cent years. In the U.K. Gallaher gained market share at~:l had reco;d opcratir~g income in sterling. Our overall norltobacco operations were dc)~ n hecaLJse of the recession, but there were some notable exceptilms. In tl~: US., sales and profits ful Beam Distilling, Sunshine Biscuits and Titlelst Golf were at record levels.Jim Beam, the w(lrid's leading bourbon, gained

mm kct share dmlng 1982 and. accoldlng to a leading indust ~' an~yst, ml)ved up I c~ fc)m th position anlong all distilled bcvcmgcs in the US Sunshilm hnd ~mpre~sive gains and Titleist Goll sold a rCCOrd 72 mil- lion balls. In the LLK., GallaheFs cnginccring compaales had a much bettor year, and the optical group had a ~cord year in sterling. We tc,~k significant actions during the year to direct our assets into areas wlth exceptional promise, A substantial portion of this investn~nt was ~mne~d into existing businesses to dcvdop and promote products and lines with great potential. "¢~ also took steps to broaden our aperations by acquiring new businesses. in January 1983, ~,,e acquired Pinker t on's, Inc. Pinkm ton's ~ an excellent fit for American Brands. It is the leading company in security and investigative services, a ~i~ gl~)wth industr~ and we see great opportunities to expand this busilwsS Other significant movcs in early 1983 we~ the acquisition o~'t he largest rctall optical company in Spaii~ by Dallond &Ait chison, Gallahe~ ~pfical group and, through Gallaher's Of rex office products su bsidiaD', the acquisition of Eastlight Limited, a brand leader in ~ling and rela~ed systems. As pmviously.~nnou nced, we sold our Duffy-Mot t subsidia~ to Cadbu~ Schweppes last March. Duffy Mort, a fine company, was not in an area of the food business we have targeted for growth, and we made an excellent profit on the sale. Since our acq nisition program began in 1958, we have invested a total of $2 1 billion in new busir~sses, including imarly $200 million in just the past twelve months. ~'end #m~.,eased The dividend on the Common stock w~ rmsecl effec rive March 1, 1982, to a $3,50 indicatcd annual rate flora $3.25. Addilion to the Board Catherine M. Bedell ~s elected to our Board of l)i~ctor~, effective January 1, 1983. Mrs. Bedell, a six- term ~[ember of'Congress and the flint woman to ~crve as Chairman of the U S. International Trade C;onlmi~ion, is now a Spccial Consuhant to the White House Oullo~ Our 1!)119 perl}~rmancc again dem(msu atcd that ~kn" su~ngth is our successful diversification¸ Ir~ the Ihec of a s¢"~, ere woad-wldc rc~.:e~lot 1, ~0tnc o~ our btlsinesses weir alfred, but others c~mpleted the finest year in ihcir hisu/ry With sound operations, exciting passi- bilillc~ fl~r our newly acquired Pinkcrton~ unit, and pmmlsh~g new products in all areas, we a~ optimistic about the [tit urc Submitted on behalf ol the Board of Director, E&~ ard "¢( Whittemorc Chairman of the Board and Chief Execadve Officer FebrumT 23, 1983

The Spirit of American Brands American Brands is a group of related packaged goods and service companies with great trademarks-- premier marketers of consumer goodsj office products, life insurance and security services. American's reputation for quality is built on sales to millions of consumers of all ages throughout the world. On the next six pages, we present some of our best- known products. LOW TAR FILTERS Tareyto' I=ranKLin

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It's no coincidence that many of America's favorite brands are American Brands. New Lucky Slrike Low Tar Filters is one of the induslry's most successful new products in recent years. I| joins other famous brands m~¢kete¢( b y Anl~rican Tobacco~ including Carlton~ the nation's best-selling ultra Iow-larcigal~rtO. Consistent perfornlaRce. This has made Titleist the number one golf ban among professionals and amateurs alike, Manutac. lured by our Acushnet subsidiary, its success is supported by the well- known Bulls Eye putter and by a complete range of loll clubs~ bags and accessories. 0 Wilson Jones America's 13 million "Main Stree| ,~ b~slrtesses are en ~rlng tl~ automated a~e, And Wilson Jones ~s th~re--wilh a line of compu~f$~ So~w~rs~ forms and furnlshJngs sold through its existing network of 12 thousand "Main Slreet" ofhce products dealer~,

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We've worked hard~ from generation to generation, to build reputations America trusts. Warm evenings shared with warm company; For nearly two centuries this has been the promise of Jim Beam~ the worM's best-sellin9 bourbon and one ol Arnerisa's #op- selling distilled spirits, Other Beam products include Kanlora~ an imported coffee liqueur, and Mr arid Mrs -T~, nonalcoholic cocktail mixes. The best-selling low-far brand in the United Kmgdom~ Sdk Curls being developed as an istecnatisnal cigarette andhas recentJ'y been introduced to selected outlets ~ the United States, It is IJroduced and marketed by our London- based Gatlaher Limite¢~ JeFqens For over 7~ yearsI mo~hers have been telling their daughters abouf Jergens Lotion and establishing a tradition that has made Jergens #he best*known ~arne in hand care. Jetgens also n3arkets an extensive range of other personal care producls including soaps~ clc~Nsersj shampoos and GondJlioners, SILK CUT

The right product, at the right time- this is the spirit of American Brands. without cookies and m~lk ? Sunshine offers a wide range of cookts and Cra~ker treats and snack foOds made With natural ingredients and 100 % vegetable shortenlng~ Master Lock is the world's tsrgesl ~adfoGk manu- faCturer, From combination and keyabts Iocks~ to locks for tockers~ bicycle~ boats m andskis~Masformakesa ~ ~cktsrJusfaboutan~hing e~h locking. I=ranKun Franklin Life, for nearly a ¢ellt ury~ has heJped millions of American families plan for their future by offering a variety ot individual fife insurance and annuity products.

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@ leagerin(he:~rm,,ow_l~w I°~lln~rol~nyhr~ad. -- I Review of Operations Domestic Tobacco by domestlc tobacco opera tk)ns ¢onsist klg o f T fie American %bacco Corn pa m" arid .Mnerlcan Cigar divisions. Operating income incrcascd 14"~ to $344.4 million in L982 on a sales gailx of 4'~ to $I .2 billiol~. h'~ 1982, The American Tobacc~ Company. ~'hlch conmmcs to provide the bulk of domestic tobacco profits, had one oF the industry's most suceess~'ul ne'~ brand ~ntroduedons ~lx recent yem'~ -e~w L~c~ Strobe Lo~, T~r FUters This ne'~ fiJler cigarette~ beating one of America's best known trademarks, is posirloned in th~ tar segment that account~ for over 50% of the cigarette market, Lur~)glrikeLow TorFifler~ is fieingsupporred bya major campaign ofadvertisir~g and promotions. including the sponso~hip of events such as bowfing tournaments, dart competitions ~.nd hockey games. The brapd is CmTeutly fielv.g marketod in over hail the countrg, with exceIlcnt acceptance b~ the trade and by consumers l&~itl~ this introduction, unit sales of the overall la~ckv Strlkt |'ral~chlse ginned in 1982. CarlI~l,, the pioneer low-tar brat,d, continued as tt~ [ndust~T sales Ieader iI~ the ullra Io~-tar se~enh which accounts fo~ over 10% of t fie total cigarette rna~'ket. With eight st)qes filr various consumer prefer enecs, Carlt~n achieved rapid growth in Carlton 120's filter and rrlent hol. In keeping with the Carlton tradi~ tion, these are the Iouest in tar of all 120's. Carlto~z Box Kings remains the lowest in tar of any brand. Amcrical~'s low4ar ~ine alsr~ inclndes the leading charcoal filter brarld, ~a~etton and TareSfon lights. Other brands ale Pall :Ylal[ k@ls go0 ) filter al,d menthol and American Tobacco also marke~ the leading ~on- filter cigarette, Pall A.Iag King Tfiis brand, the fifth best-selling of any cigarette in Ihe United Siates, declined in sales in line with lhe trend for nonfilter dgarettes, but provided tremendous cash flo'~ Average market prices for leaf tobacco it~creesed in 1982 at a slower rate than in recent years. Flt~e-eured prices averaged $1.79 per pound, up 7% from I981. I~urley prices remained at S1 .g/. Du ri~gr i982, a(,d including January t9g3, cigarette pdecs were ~vased by 34%. Much of this increase resulted from a series ofpdee adjustments in the latler part of the year due to the doubling orthe tederal e×ci~e tax. This tax was raised to sg.(~ per t housaed ¢;ga~ettes, or t6¢ per pack, cflkctiveJanuaW I, 1983.

Anter~a;t Clg~r Qua#~ pr~ucta, led by the pop, ut~ A),C ~rn~lers, con~nuetopmvi~ pa,~ Mafi Red m t;~e fll'ih beM.ae//M~ ¢/garette/n ~ Ur~t~d S~ a~d ~L,~ron gs b~e/ea~ng ~'~r~af f/Jibe brsnd, Fie~;u~uforsmc, ke*si. b~e U.S, and m~my f~g~ co~ntnns. Amedcan "lbbacco's unit sales of mu)king tobacco-- Half and Half, Pu/Min Blad~hel~y and Bourbon Ble~d declined as did that segment oftbc indusu2/. The brands marketed by Amedcan Ciga~Sal/, Flying Dutchman and Clan, imported fi"om the Netherlands where they are produced by" Niemeyel; a subsidiary of Gallaher Limited, ,as well as Blue Boar, a domestic mixture--also showed sales declines. American Cigar manutZact urcs such popular cigar brands as A ntonioy Cleopatro, Roi-Tan and the famous La Cor0~a. AntonIoy Cleopatra, Ameliean Cigar's largest volume aad profit producer, is our most popular brand Famous for ks Grer~uti:rs size, AyC cigars oKer a blend of quality imported and domestic tni~accos in many sizes and shapes. In 1982, the packaging and advertising were t e~fsed to st reds AyC's natural leaf wrapper The La Corona line includes the premium-priced La Corona Imported Handmade cigars and other quality' cigar sizes. It also includes La Corotza Wh~; a miniature pat- temed on a popular European style. The demand for Whi~;- has been grc~wing steadily and, in 1982, they" continued to run counter to the industW trend by posting a fifth consecutive annual increase in unit volume, International Tobacco The Company's irlternational tobacco busln~ con- sists al most entirely of the tobacco operations of Gallaher Limited, which posted l~ecord sales and operating income in pounds sterling of£I .7 billion and £67.7 million, up 14% and 2%, respectively, from 1981. Howeve~ substantially lower exchange rates for the British pound resulted in declines being recorded in dollars Overall opm afing income of$119.6 million and sales of $2.97 billion ,compared with $1357 million and $3.01 billion in 1981. GaJlalver gained market share in 1982 in tbe face of condnuing dep~essed industw-wide ux~it sales of 13 |

~ln~br~t~g,Tt~U,K, G,~/aher has a/lffge ~ore ~ zhe p;pe tobacco morke~ paced by Corm~r, cigaret tea ;~msed b~ the rceessicm hi lll~ [ "oiled Kingdom and the sub~tanti~ i ncl~:~es in tobacco taxes that went intoett~ct thef~ i~ 1981 and 1982. Gal[aher~ T~K cigm~tte sales wcre og-~mly m~Mest]~ compared wit h a declinc of S~ for the indust~ Pac.ed by continuing gmns in ~les of Bo~o,~ rind Hed£esg~etlalFi/ter. "¢¢hlc'h furtherstrcngthet~ed its poskion as the leading brand in the U.K., C, allaher's share of the UK. cigarette market rose nearly a full percel~tage poln~ to 30%. Ber~e[0 E~tra .adild Klng Size, introduced it, d~ p 6.c~r year, al~c~ made aa important contribution to the companyk improved po~itk)n. Silk Cht remained the leading 1o~* -tar brand in I he U.K. and the third largest selling king size br~md. Greater distribution of this interr~atlonal brand was achieved in other markets, inclurling the U~itcd States, where it can now be purchased in selected oudets. During th~ year, Gall aher ~so strengthened its cigmvtte business through the launching of t~o product extensions Berkeley Luxur)' Length narlalmll? and Benson and Hedga~ LoNer Lenglh in the soatbeast of EngLand. Gal!aher again i ncre~i~ed its share of tbe L'.K. cigar market Its share approximates 46% The gain u~s led by Hamlel, which continues as the reading brand, and Benson and Hedges Small Clgals. The company also gaiiled a greater share of the market for pipe tobacco. CoM, r continued as the ~op-selling brand. The roll- ?vur-own segment, which had been a prime benefi- ciary 0fthe switch from higher paced cigarettes in 1981, experienced a modest declinc in 1982, However, Old ll~[bora remained the second large~ selling brand in this segment. I n the Netherlands, Gallaher's Niemeyer subsidiaD sho,~d good improvement While Niemeycr~ home market was generally depressed, its export business was up significantly: particulariyin West Germang ~ here rl~e company captured a ~owing share of the roll-your-own, pipe tobacco and cigarette markets. Ritraeester, which manufact uws cigm's, experi- enced a poor year due to intense competition in b~rh its domestic and export marke~s.

rrmTA;~&lro~ w/thor~r $18billl~noflnaturan~eln f~me, offma v,r;ety o# iml;gies t~et a~ ta,~ t~m~teache#enl~ r, ee1~. Financial Services AJnedcan Brands' 8nanciM y,e~wie~ b~s~nc~ is rep]~- ~ented by The Franklin Life [nsura~ce Company Fnu'tk [in is a strong, sound and profitable company u lib s ubstantial ~sc~rccs m~ no debt Ho;~ev=~ ~hc cut h'e industry" is m~dergoing a pedod of transition as it [hce~ the twin challcnges of recession and high interest I'll [~ available to consut~er~ on alternative in\'cstrnents. Retlceting these conditions, Franklin's operafing hw~.z~e declined 3% to 8129.7 million, and ~t incc~e was Sgh5 million, off 5% from 1981. However, the basic indica ~oes ofir~urance ~ales, insurance in force a~d premium islcome all mo~vd ahead• Insurance sale~, as measured by fl~e face amount of new policies, rose 36% to $4.6 billion, exceedlng $4 bil- lktn for the flrs~ time, This i~¢rease reflected Ihe trend [n the industry toward the demand f.r more term bksurance and Franklin's success with an innovative tcrm policy; featuring adjustab[e premiums, called the Challenger 90, Total insurance ix~ force w~ $18.2 billion. up 8% from 1981, and assets were $30 billion, cam- pared whh $2.9 billion a }~ar ago Capital and surplus totaled $805.7 mitfion at December 31,1982, an increase of 849.4 millLon, or 7%. Total mvemle~ o1"$53 Z 7 m{l~ion welv up 7% and itmiuded $319.2 million ofpren,inlnS and $2093 mil- lion of net invest rnent incoine Growth of invest- mcm income in 1982 continued despile the out ~ow of pdicy funds and declining interest rates available on ne'.~ invgstlnents. .M Franklin entem its I00th yea;; it continues to have otto of the strongest fi na~mlal tbundations in tim life insurance ind usUhq Franklin's ratio of assets to liabili- ties on December 31, 1982, was l.a,-toq, This ratio is a key measure of financial strength and the company'~ ability to meet its obligations to policyholders. FrmMin~ theme for 1983 is *Meeting the C fiallenge oi Change." F1 anldin is accderafing the inlmduction ~f aew policies, such as the Cha/&t~er 90. Dudng 1983, tim company plans to introduce a aeav serics ofcom- petigve annuities and a new lo~er premium ordina~3 lile plan. A nex~ eomputerlzcd system will aid the agent} a~sociates in cu stain tailoring combinations of several Fo~n~s of insumnct' f.r each client. 15

Jim Beem~ ~e rxm~bpr ¢:~o bou~ m tiz, e we.Nd~ by 9ah~ markt t 8h,~ Kam~a lm~orled Coifs- L*qUeur co~,~ue, s to ga;n gn~te r manket penetra~ona~tis ~-comm~afavo~fe all~r d~ne~r llque~ Distilled Beverages Tile disti[led beverage opecadons ofJamm B. Beam Distilling Co. again achie~ ed record results. In 1982. operating income rose 7'4 to $32.6 million from $30.6 million in the prior yeac Sales were $22Z3 million, a gain of 8% over 1981 k $210.7 million. Jzm Beam, the number one bourbon in the world, gained in do8ar volume and market share i. 1982, reflectlng an aggressive advertising and marketing program and also continued to show impressive income gains. This program included sponsorship in March of the '~]im Be.am Spind Stakes,' a major race for top rated dloroughbmds. In June, Jim Beam's American Out- post, located on the distiller3, grounds in Clen nonh Kentucky, opened its doors to the public. The Outpost allows visitors to view a film explab~ing how bourbon is made. to admire the woridk only pubfidy dlsplayed complete collection of Beam-Regal China Decanters, and to purchase Jam Be~n novelties and advertising specialties.Jim Beam Spied Stakes and Jim Beam's American Outpost reinforce Beam's Kentucky roots, ~ hich date back to 1205 and make Beam the oldest continuing industry in the state. These activities emphasize Beam's tvnt inuing program to maintain Jim Bem~, as dw market leader. Among other bourbons, Beam's Blax-k Label, the cam pany's plvmium sour mash whiskey, continued 1o show impressive sales increases. Beam) Choice Bourbon also scored sales gaitts in 1982. Other domestic distilled products that posted gains were Beam's 8-~tar Blended Whlskgo and Dark Eye~" Vodl, a, which offset declines in the company's llne of cordials. Beam Impot* Co. had a very successful )vat Kamora Impaired Cofl;~ L~queur, acquired in October 1981,6~y RwalScotctl and Beamero 7?qmla all made contributions. Distribution ofK,z, nora, in particular, wa~ beoadened significantly Also in I982, Beam Import acquil~l Margarita ~quilo Co,-~laiL the only margmita imported fix~m Mexleo It also obtained marketing rights lbr Chaaerny Brandy, a product of Martel de Mexico, and,in January" 1983, Beam import became the exclusive importer ofA alborg Aa~z~it, a Danish specialty distiliod spirit. Beware lmpoi~ is act lvely pursuing other prod- ur'ts to enhance its line 16

,,Grest cookm c;oo "/ ;:¢nna FIng~m ~¢k/es. ~rebakedwlthlO0% ~etab~e shG¢~enlng. Tile international market, in which Beam products are sold in 150 countries, also cnntribntod to the sales gain. Sales to Australia and New Zealand continue to expand dtamatlcally in both units and market share, aodffm2 Beam is rapidly becoming one of the leading brands of spirits in both countries. Beam~ distribution of its products to U.S. Armed Forces stationed throughc, ut the world also continued to show sales and profit gains Food Products 1982 sales and pl,ofits from continuing food pond uct opetations showed g~Jc~l improvement. However, comparison of overall resnits was distorted by the sale of Duffy-Mott Company, Inc. in March 1982 and Gallaher's Niemeyer food business in 1981 Overall operating income in 1982 amounted to $82,1 million, on salcs of $4h9,8 million, compaled with $35 million and $560.8 million, respectively, in the prior year: Exduding Duffy-Mott and Niemeyer from both yoalx, operating income would have risen 11% to $30.4 million on a 4% increase in sales to $441 2 million. Sunshitle Biscuits, Inc.. our major factor in tim food segment, again had record results. Sunshiiae set these new marks despite the recession and intei~sified com- petition in all product lines. The Biscuit Division, which posted sales and profit records, l~spondod to the competitive pressures with an aggressive marketing program. This included the use of television advertising and increased newspaper ads which contained coupons. Kria~¢ Crackers and PIydrox Cookies, in p~mleular, benefited from this activity and showed increased unit sales and share of market. Also ot importance was Sunshines resiMng to smaller; Iower-priced packaging of its sandwich cookie Iine in most of the country. This n,ove was backed by" advertising and a pro- motional effort featuring the theme, "Giz-at cookies don't have to be exponsive2' Consumers and retailers Mike responded positively to the smager size packaging 17

Mr ah~ MrJ " T" B4r~k~y Mary Mtx ~anhm,e~ to MBs~ i.cCk ~ml~mue~ ~:addnewl~,,uch~ a~s4~tm~naUml izadlm~k, to l~ m:atr~, t~ ~,fTo~ks. and sales moved strongly ahead The division ~dso benefited fi'om new products, inciuding.D0uble Cho~lote Cremerh Peanut Butter Oemets and ClnT~amon Graham Crerners cookies. A number of other cookie products have been in test mmkets and are. expected to be distributed more broadly in 1988. These include Chocalate Chocolale Chip, Coun/~y SOle Oatmeal and Ctnttamon Ratsm cookies. In the czacker line, Snack "N Omon crackers ~re rolIed out llatlonally: $unshirae's 15.$. Snack Division in 1982 maintained its leadership in its marketing areas on the West Coast as the "Natural S1)de" producer of snack chips. This lh~e was extended during the year with the introduc- tion al'"No Sak Added Potato Chips Y Chlpp&~ imta.to chips, which were added in 1981, continued to gain in popularity. Humpty Dumpey Foods Limited, Sonshine?s Canadian subsidia~; also had higher saies in 1982.Con- tributing to the improvement was the introduction of Corn Chips, Tortilla Chips and Ringalos. Durhlg the year, a m~jor corn chip production line was i~stailed in the Montreal, Quebec, pla~t nod eoastruode~ was ~',ar ted on a snack plant in Hartland, New Brunswkik. Taylor Foods, a Beam subsidiary and producer of the leading .a//r aM.&rs ~'T"Bbmdy.44a~ Mix arid other mix~, also recorded higher sales and opelating income in 1982. Hardware and Security The hardware segment in 19B2 consisted of Mas~er Leek Compaw and units of Swing|ine Inc. and MCM Products, Inc. l?¢Tailc rmt irmluded in L98'2 'S results, tbe security busine~ was added to trim segment through the acquisition of Pinkertods, Inc. in January 1983. In 1982, sales of the hm~ware group were $173.5 million, dm~n 11% from the prior year, and opera ring income decreased 30% to $26.7 million. These dedines were generally acros~ the board and relieved the adverse effects of the recession, which resulted in reduced demand for hardware produet~ domestically and in export markets. However, new product devel- opment, along with the implementation ofco~t-saving mea~u yes, place our hardware companies in a good position to benefit from a turnaround ~n the economy Bucking the downtrend in 1982 was Marson Corpo- ration, a subsidiary, of MCM Products, Inc. Marsen, a rr~ker of auto body repair e.nd rlveting products, added a total of 51 new products, which contributed sigrdficantly tc~ the company's strong performance

MCM~s D:.~t hne ~sSo,~d ~r, d dtMl. during the yeac The Step Staol Mask-Mnte. a paper masklngdi~penser used in repaJ nd t*g automobiles, ~as ~mong the introductions ~11 recelwd by the trade. Other MCM eompaides are "~g R. Case & Sons Cutlery Co., a manufacturer of quality ktfives, shears and scissors, and Marvel Lighting Corporatiuit, a maker ofl~ng-llfe incandescent light bulbs. "vVhile deck,eased consumer demand anti l'~or~anJzal~ion coeds8 peltallzed Case's profirab8i~y in the first half, ~pera- tlons were on a firmer footing in the latter part of 1982. Marvel Lighting also experienced a difficult year due to pricing presswe from competitors. Master Lock, our major u1~it in the hardware seg- menb is the world's largest padlock manafaetu~er Master prnduces key-type, combination and locker locks, with the major contribum~ being the company's laminated cylinder padlock lithe, 15"ornising new products introduced in 1982 included a tesettable eombitaarion padklck, art interchangeable cylinder padlock that can be mat¢]~xt rouse the ~me key as door leeks, and a high-securlty shackle bike lock. "¢~]~ile Master Lock remains a strotag factor in its traditional distribution channels, the company, in 1982, made significant inroads in achieving greater distribution of its p~duc~s i~ major mass merchant ~etall chains. 1982 was a ~'ear of retrenchment for 8winglh~s hardware business, which includes manual and elec- tric staple guns, glue gum, laall drivers and ri~ters. A re~c~se~srne nt of its product line resulted in discontin- uance of products with ]imited profit potential, while placing greater emp~ms~ on items affording higher margins. The acquisition of Pinkerton's~ Inc. adds not oNy another gt~at trademark, hut also a new dimension to our opemtio~xs. Founded in 1850 as a private detective

WHsm: ~ r~w offers mlcrr~cm#utersF~fems ~si~ved to autom~(e "Mel~Sb~et "b~sfnesses. P~J~r~, Umbel~ knownnamelnthe sa~u~ty~vTd~Vttstlgatlve ~m a ~ub~d;ary Jn agency. Pinkertor:s today is the oIdest and lm'gest nou- goverxlmental organization in t[~ ~rld providing ~¢¢u~ty and investigative servio¢~. Apart from being a leader in its field. Pinker t otis hrln g'~ American Brands a seasoned management team, a strong record ofeartfings growth over the past ten years and a solid financial position, Based on excel- lent gro~xh prospects for security and investigative services. ~ are optimistic about Pinker totl~ future. Office Products Our MTice products segment includes ~Vilson Jotles Company; the Offex Group (a u rht of Gallaher Lim- ited), 8wingline Inc., Acme VisiNe Records, Inc. and SwingIine of Canada, Ltd. (a subsidiary of MCM tS~tucts, Inc.). ,although 1982 was a successfu[ year for new product int txMuetlons and entry into ~ew markets, overall r t'sult s were adversely affected by ~be rece~ic~. With the inclusion of the Ofrex Group resuhs for tim entire year, world-wide sales rose to $312.8 million from $255.5 million in 198I. Operating income declined to $25.4 million from $38.8 million, Wilson Jones, ionga leading manu Pacturer oflo(~se- lea f blnders, accounting forms, cohtmi~ar pads arid diaries, inmxtuced more new products in 1982 thmx in any of the past 20 years, Nlost were related to its com. purer and c~ce automation ~ines. Although the~e new products were well received, Wilson Joles did not escape the impact of the recession. Its t radi'donallbms, in partieulm; were hard bit as reduced demand led to intense competitive pricing. However, auguring v, eli for tbe fu ure is Wilson Jones' changing product mix, which is shifting to accommodate the r~ew demands of the automated offme. In 1982, two Wilson Jor~'s mlcrocomp uter systel~s were in*r ~duced. One is designed to be sold by once products dea/ers to the "Main Street" market consis- ting of 13 million small businesse~ The system includes the computer, printer, software, forms and furniture, Tim other computer system was designed for

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A~I W,Cb~ Tl~m# W~, 464 brar, L~F~ ~ U~K~. Limited. Eastiight manufactures storage and reEv~eval filing systems as well as ring binders and other spe- ciahy office products¸ Sv¢ingline Inc.. maker of the best-kIlown stapler in the world, strengthened its position with the" introduction in October of two nc~ products that met ~ida immediate success. These were t he &crag/me 5000 Eleclromc Stap/~'r, which loads with a disposa hie car- tfidge, and the 7677vla~mal Slap/e, The company also added two new busilless math nies the~,(JOMld-Size Bt~rster and the g/30 Co*ltltlwJl*s fom~s F,,eder, which attaches to photocopy mac}lines. In 1982, Aeme Visible Records. Inc, placed gmatel emphasis on its computer-related product line, which includes terminal stands, modular cabinets and trans- tx~rt carts. At the same time, Acme eliminated a number of products with little potential |br growth. Swing]ine ofGanada, Ltd.~ a subsidiary of MCM Products, manu f~c~m~:s and distributes Swinglir~e and Wilson Jones products in the Canadian marker, ~,ehich was also adversely affected by the tecession in 1982, Optical Goods and Services The Dollond & Aitchison Group~ a unit of Ga/laher, performed ~ve[1 i~ 1982 as il be.~efited from acqoisi- tions made in the prior year in pounds sterling, oper- ating income moved up 27% to £11 1 million on a 33% increase in sales tr~ £8g I million. Due to lower exchange rates, operating income in dollaea wa-~ up a more modest 10% to $194 million, and sales were up 16g to $11Z 3 million. Dollond & Aitchlson is the largest optiea/group in the United Kingdom wkh 464 branches, mostly in prime trading locations. These branches are supported b~' three majcw prescription faeilides v, hich manu~Zac- ture conlact ]eiases and spectacles in glass and plastic. The largest optical company in Italy with 73 blvmches is also parr of the gruup and the largest optical company in Spain was aeqnired in,January 1983

Jer~ens" soap bus;ness ;n 1982ccntlnued~ln ;nu~tv~andmark~t sh~e. Golf Products Our wel/-k no~ n gulf pnMucts ale manufactured by the Titleist Golf Division of A, ush net Compan,~ In 1982, "1 itleist Golf a~aln scored record resu hs. Opm atlng income of $14. I million was up 17% over 19gl on a 14'5 rise in sales to $92.6 million. Our excellenl performance in this area reflected continuing success of the Pil~*de ball Tidd~-t remained the leading ball on the pro toue Increased sales of golf clubs also added importantly to 1982's gains, as did ~he introduction of new products. These included a morn durable and longer distance Titlelst DTbaU offered in both fluorescent orange aod yellow as we[I as the tradi- tional whke coveE Also introduced were thr~e new B~lls Eye putter models and Pinnacle metai woods. All were well received By golfers. Acushnet Limited, the company's U.K. golf subsid- laD; showod good improvement in pounds sterling for the yean Howevm; after translation to dollars at lower exchange rates, h contributed only modestly to the overall gain. Personal Care Products The personal cm~" products segment conals~ of the operations of The A~lrew Jergens Company. Sales of personal care products edged ahead to a record $120.1 million from $I19,6 million, although operating income declined in 1982 to $Z0 million from $9.5 million. The decline in operating income r~ulted primarily from increased competition in the market for hand lotion which required the company to significantly increase marketing support for its products. Addition- all~; Jergens' ind uatriai skin cleanser business w~s severely impactod by the drop in industrial employ ment caused by the reccsalon. However, the year ended on a positive n(~e, wlth operating income posting a gain in the final ql~arten Two major mm'ketlng successes were scored by the company in 1982 J~gep~ Alue & Lanolin Lotz~m, which was roiled out nationally late in 1981, received exeal- lent consumer acceptance and helped the cornpan} inet~=ase its share of the hmad lotion market. F~esta deodorant soap also was a standout success. Fteslals refreshing fragiance and high lather, plus distinctive packaging and ad~vrtising, established the product a-s a significant brand in the deodorant soap categol2,: On an o~raiI basis, new products inmadueed over the past five years accounted for 42% of Jergens' 1982 domestic sales 23

Sparked by the success ofFle.rta,Jergens'soap busi- nesa in 1982 ccmtinued to gain in unit volume aod market share. To meet this inct~za~ing demand, Jergens is itTstalling new hlgh-speed packaging equip. ment at its Cincinnati, Ohio, plant and is expanding soapmaking capacity" at its Burbank, California, pIar~t. Specialty Businesses Included in this ~muping is our GoMen Belt Marm faet~rilig Compaay divisiota; Galiaher'~ fondling, wholesaJing and engineering (pump and vMve) operafio~s; Acushnet's Rubber Dix~,sion a~Kl Beam's Regal China subsldia~ In 1982, these businesses accounted for $~)g milllc~, or 4% of total American B~'ands operating income, atKl $795.1 million, or 12,% of sales. This compared wlth uperating income of $29.6 million and sales of $831.6 milllon in 1981. In retailing, Gallaher's Forbu eys Limited, which operates 435 newspaper, confr'cfioncry and stationery outlets, en~c~'ed a good year. xTending and Tobacco Ki u~ks, howe~vr, bad lower profits clue to a declir~e in consumption of tobacco products in the U.K. The pump and val~e operations (Mono Group, Saunders ~v'ah,-e and PIP) as a group overcame continued depressed economic condklons and strawed a signifi- cant rebound in profit ahilit ,~: Golden Belt, specializing in rotogravure printing and paper-foil lamination for consumer prod uct pack- aging, had record sales and profits. A[thuugh intra- company sales remain a part of its business, salcs to outsiders continued to grow in 1982. R eg'ai China, the leading maker of trophy decanters, also makes ceramic lain p bases and other specialty ceramic products. RegaPs sales to outsiders increased, result- ing in higher profit for this Beam subsidia~! The Acushnet Rubber Division, on the other hand, ~:ts adversely affected by depressed ¢ooditions in ils key markets automofive, construction aod oil drilling.

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Ou~r~ fln~n~ data~ unaud~ (In mllliom ~cept ~r ~e a~ms) Netsales $1,700.4 $1,510.3 $1,(~33 ~I,61L0 ~cc~ pm~ 3;8~ 37KI ~,9~ ~i5.2 P~'et in¢~ 94.7 89.2 93.5 103¸8 Net in~,r~ per Common sham Witl~xJt dilution 1.~ 153 1.59 I BO ~lly dilu~d 159 lAB 1.56 175 Or~profit 38Z2 ~3.9 374.1 391.~ ~t ineon~ 113// 823 87.6 1(12.8 Net inco~ p~r Common sham Wah~t di~t~ 1.9~ [,41 1.51 178 Full~, d~ut e~ 1.~ I.~ 1.~ 1.93 "gtse flra* q uarter of I~BI indude* $28,9 mil]io~ in nenrccumn8 [~ credlt s a~ 1 a pm',i~ of $12, 2 rNt~ f~t ~lrtin~l 6ra r~i~ dgarette facto~ The ~ a~ ~t~mld quit tera o f 1982 ind ode galr~ on t/re d ~p~lion ~I)aff~-Max t o f ~8 million and $8~ million, te*pc~ivel~a Income taxes increased $68,684,000, principally from lower United Kingdom stc~k rchet" tax credits mM net income of $381,240,000 in 1982 was down $4,~B7,000, or 1%. See pages 41 through 44 for a disc ussion of the impac~ of in~ation and changing prices on t~ Com- pany's net sales and net income. Net sales of $6,538,161,000 decreased $263,295,000, or 4070. Tobacco products derrea~d $115,463,0015, or ~%, principally due to tmmlation of Gallaher's sales at lower foreig~ eurrenW exchange rates and lower ciga- rette volume, partly offset by higher selling prices (a large portion ofwhleh rmu[ted from excise tax increases in the United Kingdom). 1"he Office prod- ucts, Food products and Distiiled beverage~ segments were up on higher selling pfie~s and volu me. The Other industry segment reflected gains in domestic sales of $45,077,000, while foreign busine.ss~s declined $278,877000, reflecting translation at lower foreign currency exchange rotes and the disposition of certain operations. ,. Operating income was up $22,514,000, or 3%. Tobacco products were offslighfly a~ a Domestic tobacco gain of $9,821 ,O00, which b~ne~nd from improved margins and lower operating expenses, Idtxmst offset a dectine of $10,903,000 in International tobacco. Operating income for nontobacco operations was $211,482,000, as compared to $203,744,000. Records were set by Domestic nontobacco operations principally on improved sales and gross margins; for- eign businesses declined as Optical Goods and Services and pumps and valves were severely impacted by the recession in the United Kingdom. The equity in the pretax earnings of Frarfldin increased $18,058,000 on higher premium and investm¢nt income. Interest expense increased 20% to $135,519,000 resulting from higher average domestic borrowings andinterest rates. Results reflected aggregate provi- sieas of $34,240,000 f~r the ee~t of clo~ing a domestic cigarette facto~T and the disposition of certain unprof- itable Gallaher operations in 1981 and reflected a pro- vision for the settlement of litigation in 1980. Net income of $386,127,000 ~as up 2% and reflected $58,100,000 in United Kingdom stock rehef tax credits in 1981 as compared to tax cmdlts of $28,085,0(30 in stock relief and $9,362.000 from the United States- United Kingdom tax treaty in 1980. :i 26

Income before taxes $720 54O 450 73 74 7~ 76 77 78 m MinOrity in)el est m Net inco~ Earn/rigs and d/vWends pa/d per mmm'mn share s6ao 5,95 5AO 4.25 ~49 ?-55 1.70.85 BI 73 75 76 m F.~ni~ pet sl~,e Financial Review Eamlngs Earnings per Common share were $6.55 in 1982, com- pared with $6.68 in 1981. The comparison was adversely affected by the existence of nonrecurring United Kingdom prior period stock refef tax credits ha 1981 totaling $41,071,000, or 76¢ per share. In addi- tion, lower average exchange rates for the t ransladon of the British pound accounted for a reduction of $10,991,000 in net income, or 20¢ per Common share in 1982. Income before taxes increased by $63,797000, or 11%, for the year ]'he pretax comparison was favor- ably affected by lover int e~est costs, a gain from the sale of Duffy-Mott and the inclusion, in 1981, of charges relating to the closing of a cigarette plant. Effective with the March 1, I982 payment, the quar- terly dividend on Common stock was increased by 8% to 67 ~2¢ per share. This increase raised the dividend to $3.50 per share fixm, the $3.2125 per share paid in 1881. Total dividends paid on Common stock in 1982 were $192,797,000, compared with $174,953,0G0 paid the year earliee Preferred stock dividends paid decreased from $22,676,000 to $20,477,000 as a result of purchases of $2.75 Preferred stock in the open market and conversion of preferred share~ into Common stock. The annual dividend of $3.50 per share paid in 1982 provided a yield of 8.3% on the average market price of the Common stock. During the last five years, the Company's yearly Common stock dividend inci~eased by 135%, while the dividends paid by the 30 compaaie~ compriaing the Dow Jone, Industrial Average increased by 18%. A mericeaa Brands is one of the companies included in this average. Taxes on income during 1982 amounted to $287~554,000, comimred with $218#70,000 in 1981. U.S. federal excise taxes amounted to $325,417000, or 22% of distiUed beverage and tobacco sales, and United Kingdom excise taxes on tobacco products were $2,153,734,000, or 73% of GMlaher's tobacco sales. 27

Cmph ~Po v,~ d~/dends a nd 73 74 75 7~ 7'7 7~ 79 ~0 8~ 8"g R Ca~ flcm t'r~x~ ~ I cap~ ~pendlt~,~ I Catlx~ and a~ctt~qa~ (In millloas) $29O 175 125 25 ~l Ca#~ expendkun:s ill Oe~leciatlon and am0r tizatlun The federal exci~ tax on cigatettes doub[ed on January I, 1983, increasing the tax per package of 20 cigarette* from 8¢ to 16¢. In addition to domestic excise taxes, state and mualcipel taxes are also le'ded against tobacco products and distilled beverages. The Company's cash flow from operations of $445,732,000 in N82 was up by $33,656,000 over 1981 and was suf~cient to meet capital expenditure require. ments and record cash dividends to stockholders while still providing $85,422,000 for general corporate pur- poses. Over the last five years cash flow from opera- dons ha~ exceeded amounts required for capital expenditures and dividends by $318,897,000. Working capital amounted to $787, i04,000 at year- end compared with $766,880,000 in 1981. A/though invcmorles of $i,400,730,00~ were down slightb] from 198l, tlacy exceeded total debt by $487,234,000. Accounts receivable were $560,687000, down Sgl,87B,000, Largely as the result of the lower exchange rate for the British pound. Accounts receivable turned over 10 times, or every 3Zdays during the year. More than half of total ~ssa-ts of $4 billion are classified as current, evidencing the Company's financial liquidity The Company's businesses are not capital intensive and expenditures are directed mainly toward the improvernent of productlon and packaging efficierl- cies. The installation ofhlgh-speed equipment for the manufacture of cigarettes and cigars, both dom~ tically arid interrtailonfilly, ha.~ continued. The manu- facture of golf balls, the packaging of peI'sonal care products and the hotl:ling of distilled spirits also ben- efited from the continuation of similar eost-reducdon projects. The investment in these and other programs involved capital expenditures of $147,036,000 in 1982, down from the prior year total of $161,183 000. Capital expenditures for 1983 are estimated to be around $150,000,0¢J0 reflecting continued modem- ization and expansion of production facilities. The funds neces.m~, for these expenditures are expected to he generated internal|~ Deplxciation and amortization in 1982 was $83,146,000, compared with $88,326,000 in 1881. The investment tax credit for 19132 was $6,971,000, about the same as in 1981. 28

Invenlo~es and to~l deb# {In milllo~) 1,140 73 74 5 76 77 78 79 ~} 81 ~1"2 In~cr~ori~ am Tot~ deb~ Tota/debt and stockhok~ers" eq~ty" 0~ miLfi°ns) } 1,750 I 76 77 78 79 80 81 82 Rafic ~76 89 ~82 ~70 ,79 ~I ~5~ ~2 ~ ~ Debt ~ and Lines of Credlt In May, long-term debt was reduced through an exchange of $17,796,000 and 468,006 Common shares from the treasut3, for $34,781 ,(DO principal amount of 8~% Notes due 1985 and $5,177,0(10 principal amount of 5y8% Dehentu~ due 1992. In October, the Company filed with the Securities and Exchange Commission a "shelf registration state- ment" for $300,000,000 of debt securities. Shortly thereafter, following the substantial decline in interest rates, $150,000,0(D of seven-year Notes were issued at an interest rate of 11 ~g%. The proceeds of this herrowlng were used primarily for the repayment of floating rate debt. At the end of the year long-term debt amounted to $534,557,000, or 20% of total capitalization. Short-term borrowings were reduced to $378,939,000 at year.end from $477,544,0(D at the end of 1981. The Company's total borrowings were $913,496,000 at the end of 1982, down from the year-end 1981 level of $1,051,106,000. The ratio of total debt to equity at year-end was down to 46% from 55% in 1981, the lowest ratio in the last 15 years. The Company maintains credit facilities with major domestic banks~ as well as with banks in other coun- t rie_s where it does business. At December 31,1982, the Company and Gallaher had short-term lines ofcvedlt amounting to $871,883,000, the unused portion of which was $765,673,000. The Company aim main- rains long-term revolving credit facilities totalling $680,00),000 with maturity dates through 1988. Interest experme during 1982 amounted to $121,235,000, representing a decm_ase of $14,284,000 from the previous year. Acquisitions On January 6, 1983 the Company acquired Pinker- ton~s, Inc., the premier nongovernmental security at~d investigative service organization in the world, for $158,800,000 in cash. The acquisition adds another well-known trademark to the Company's list of out- standing brand names and furthers the objective of redeploying assets into st tong companms with attrac- five growth and cash flow characteristics. Pinkerton's, established in 1850, will continue to operate under its present management as a subsidiary o f American Brands. 29

e~t'y~m $:~.90 13.50 9.(JO 430 73 76 ?9 ~c 81 Gallaher,in 1983, " " " with the purch~ of the [ar~st opfw~l e~mp;~n~ it= Spain, and East[ight Limited, a British office s cm'npan~z for $5,241,283,000 in sales and $428,138,000 in o ating income; 81% and 55%, respectively, of consdi. dated zesults. ¢,ort.~nmn $¢o~dm~'e~ ' ~*al,/ During 1982, Common stockholders' equit) " from $I ,B25,962,000 at the beginalng of the war to $1,924,891,000, a gain of $98,929,000 and ~n~ounted i 72% of total capita]izatlon. The Company delivm~d 837,779 shares of Common stock from the treasury m i982 upon the conversion of 5~% Convertible Deben- tures and convertible preferred stocks, upon the exer- Ose of stock options, and in exchange for portions of the 84% Notes and 5~% Debentures. A total of 471,150 shares of Common stock was r~acquirnd during the yea~ At year-end there w~re 2927,339 shares of Common stock in the mmsury, sufficient to co~r the cocxvcr~io~x 6 f our~tandittg convertible securities. Common stud ~otde~' equlty per shzre inc~v.~s~;t from $33.32 to $34.89 at the end of the yea~ 198[ ~ym~nt ~nt Payr~=rlt Arnouat Date ~t%r Share Dam ~:r S]xam 3/I/82 [, .875 3/2/81 $ 7750 6/1/82 .875 6/t/81 8125 9/ /82 875 9/i/8[ .8125 ]2/I/82 g7~ 12/I/81 .812~ Total $350 $3.2125 1982 1981 Quarter High Low Hi~h F~r~l 41 35~b '~9~ 34~ Seoord 44'¢; 38~ 46 37~ T~h"d a6~ 37~ 42½ 34 Fourth 5] 43~ ~0~ 35~ p~ m~,]*:et ~or t h~ ~eco,~t y. The high a,td low pxicts ~r~ as repotted in I[~e ~i- dated l~a r~act too rtp~r I[r,g sy~l~m

V Consolidated Statement of Income and Retained Earnings (IniFx~l~q ~r !ea~ eaded [k~e tuber 31 ~t B~fes Cost of sales G~ml l~rultt Adve~ising, selling and adminis wative ot penses Equity in pretax earnings of The Franklin Life Insurance Company ~m InTerest and related charges Other (income) deductions, r~t Corporate administrative expenses #r,~-ome beqore p/~Vill/on for I~IXeS on lW.cmne Provision for taxes on income Ihtlw Retained earning.sat beginrhng of year Cash dividends declared Common stock $2,75 Preferred stock $2,67 Conv~ tible Preferred stock $1.70 Convertible Preferred stock Retalned earnl~3s at end of year Nel in~ome per C~nmon share Wil~t diiutlon Fully ditutnd D/vldends pa/dper Common share Araerlcan B~tods, In~ and $ubs~dlaNe~ 1982 $6,504,961 4 932 554 1,572.407 652~146 129696 781 842 121,235 (28,412) 20 225 113048 668.794 287 554 381,240 I 784518 2 165 758 192,797 14,505 5,899 73 1981 $6,538.161 5 036 015 1,502,146 852 791 649,355 134 185 783 549 135,519 26,338 16686 604,997 218870 386,127 198~147 174,953 15,148 7,366 162 1980 $6,801,456 5302 822 1,498,634 855 735 642,899 118127 761 026 113,242 3,972 15 303 132 517 628,509 250 616 377,893 1 360 124 1 738017 123,998 11,360 6,460 179 197629 $1 952 484 $1~ $~ ~.~ $3.2125 $6.55 $6,38 $3.50 $6.50 86.20 $2.95 Sez [Sutnma:'~ of%ignificant Aeeounting PoIici¢~ and Ntaes Accompanying Firtancial Statemenls 3~

Consolidated Balance Sheet (In th¢~l~J~ls) December :!1 Gur~nt ~ts Cash Accounts ~ab~, customer, [~ ~l~es for dL~oun~, doubtful accounts and returns, 1982, $17,927; 1981,$16,462 Invento~es Leaf tobacco Bulk whiskey Ot her raw materials, supplies and work in process Finished products Other current assets l~a/om't~nt ~ InVeslment in The Franklin Life Insurance Company Land,im pmvements to land and leaseholds Buildings Machinery and equipment Constraction in pmgrcas Le~ accumulated depreciation and amortization lntangJW.es mm~Vmg from ~m~u a~ltion~ Ot~.e ~ts I982 198t ~ 24~4~0 s~ 560 687 642 565 675,104 693,3t9 109,L63 99,306 239,832 262,606 376 631 396 089 1,400730 1 451 34I 62,797 51 275 ~048 634 2 159 972 g05,fi75 756 257 33,206 33,238 306,09tl 326,703 873,824 866,420 ~8 703 4~256 1,251,823 1,272,617 ' 590 366 603.230 661,457 669.387 ~,483 449 508,131 41,117 39277 $4 040 332 $~ 133~24

Amencan Brands. lnv ,I nfl Suhsidlaries December 31 Ourrent ~ab~/~es Notes payable to banks Commel~cal paper Accounts payable Accrued taxes Accrued expenses and other liabilkies L~ng.tenn debt Deferred income taxes Red~ P~l?e~sbc~ $2.75 Preferred stock, without par value, stated value and mandatotT redemption price $30.50 per share C~,t vet tBz/e P~rrea a~Gks redeemable at Company~ option $2.67 Convertible ISe fermd stock, without par value, stated value $30.50 per shrove $1.70 Convertible Preferred stock, without par value, stated vMue $20 per share Total convertible preferred stocks ~ s medcll~ta~'e ' ~lu/~/ Common stock, par value $3.125 per share Paid-in surplus Equity in net ~nrealized depreciation on investments in m~rketable equity securldes of The Franklin Life Insurance Company Equity adjustment from traI~slating foreign currency financial statements Retained earnings Tl~easury stock, at cost Total common stockholder~ ' equ&'Y Tol~l nabUities and stockholders' equify 1982 $ 122,899 250,1)61 273,982 356,936 257652 1 26L530 _ 101,945 153 492 65,153 764 63 917 179,352 63,409 (18,492) (179,137) 1,952,484 ~725) 1 924 891 $4,040.332 1981 $ 161,745 310,274 298,082 382,156 240835 1 393092 573 562 98661 72,795 972 73.767 179,352 57~33 (32,281) (84,332) 1,784,518 1.82.5 962 $4.133 024 33

Consolidated Statement of Changes in Financial Position (In ~housandq) ~or yeals ended fJccember 31 8ources o f funds from operab'ons Net income Depreciation and amortization Equity in uodistdhated earnings of The Franklin Life Insurance Company Noncut~ent deferred income taxez Fundw pro v~d (uae~ b~ oper~lons "VVorldng capital, exduding short-term debt Additions to property, plant and equipment Oispmition of property, plant and equipment Other ~d~etat~ns Effect of foreign exchange rate changes on working capital I~t ~t~nW's~n~ea~ ~lt~a~s Dividends to stockholders Increase (decrease) in short and long-term debt Punchase~ of Common stock for treasury Net rmneurrent assets of hasi~ sold (acquired) Cost in excess of net assets of businesses acquired Manet value oftre~u~ stock delivered in exchange for Iong4erm debt $2.75 Preferred stock reacquired ~ ~1Jnc,~h 1982 $981,240 83,146 (35,629) 88,010 (147,036) I 1,737 ~) (213,274), (181,50o) (2o,o98) 24,828 17,796 I981 1980 $386,127 $377,893 ~,326 77,920 (~,378) (19,771) 434,27~ (63,619) I (81,719) (161,183) i (187,7~) 15,743 22,117 15,~7 ~00,~l (197,629) (141,~7) 67,193 2,385 (15,978) (53,~7)' (~,775) (49,26a) (196,5~7) ~609) ~) $ 6,792 See Summary of Significant Ae~.lnt Jng Pericles a~d Notes Aoeompan'¢ing Fioancled Statements. ~4

Summary of Significant Accounting Policies ~ of consm~datlon The consolidated financial statements include the accounts of the Company and all subsidiaries other than The Franklin Life Insurance Company, a wholly owned subsidlarg, which is accounted for by the equity method. Fiscal year-emls ofcertaln subsidiaries of Gallaher Limited range from September 30 to Novem- ber 30 to facilitate Gallaher's year-end closing. The 1981 and 1980 consolidated statements of changes in financial position have been restated to conform to the 1982 presentations. tmamtm, l~t Inventories are priced at the lower of cost (average; first-in, fLat-out; and minor amounts at Last-in, first- out) or market. In accordance with generally recog- nized trade practice, the leaf tobacco and bulk whiskey inventories are classified as current amets, although part of such inventories, due to the duration of aging processes, ordinarily will not be sold within one yea~ The last-in, first-out inventory included in the con- solidated balance sheet is $1,690,000 in excess oftho valuation reported by a subsidiary for federal income tax purposes, resulting from a revaluation ofthls asset to fair value at the date the subsidiary was purchased. Proper~ plane andlequlpment Depreciation~nd amortization are provided, princi- pally on a straight-line basis, over the estimated useful lives of the a~ets. Profits or losses resulting from dis- pasinor~ are included in income. Betterments and renewals which improve and extend the life of an asset are capitalized; maintenance and repair costs are expensed. Intangibles resulting from business acquisitions, com- prised of brands and trademarks and cost in exce.~ of net assets of businesses acquired, are considered to have a continuing value over an indefinite period and are not being amortized, except for intangibles acquired after 1970, which are being amortized ($3,081,000 in 19~2, $2,632,000 in 1981 and $2,.547,000 in 1980) on a stralghtdine b a.~ts over 40 years. Inm~ne faxes Provision is made for deferred income taxes relating to differences in the timing of recognition for book and tax p~ of certain items. Deferred income taxes are not provided on undistri- hoted earnings of foreign subsidiaries and domestic international sales coq~,ladons, aggregating approx- imately $453,700,000 at December 31,1982, as such earnings are expected to be perrnanemly reinvested in these companies. The investment tax credit is accounted for as a reduction of taxes on income cmTently payable. Pemion expense, which is being funded, is determined by independent actuaries and includes amortization of unfunded prior service co*is principally over 40 years.

Notes Accompanying Financial Statements Invesbmmt ~ The Fratddln Life Insurar~e Company Summarized financiM statements fur Franklin are as follows: 1982 1981 Assets (In thc~ands) InVestmentS $2,388,9124 $2,295,623 Other ~etn 652,251 587,374 Total $3,C21,2Z5 $2,882,997 R~erve~and liabitlt k~ Imunmee tesexves and clz~rm $2,071,901 $2,016,066 Ge.aeml fiabiSti~ 14~6~9 t ~,,67~ 2,215.5,50 2,~2634~ Gapkal 8~5,675 ?56.257 To~.ll $3;021,225 $2,882.997 1982 19B1 1980 Income On tla~nd.~) P~miun~ $319,245 $301,849 $294,659 l~t invc~o/x'nt ino~l~ ~O9,253 1~,191 177,105 Other income 9,1~ 2,-'2~ I 2/;27 537T~6 50"2,321 4"3~.A91 ~o¢Tam pald ~t ~,~ided 336,16t 31"~',6~2 30~5,3~ gxp~ 71,948 58,552 52.047 Net teali~.ed ga~m on in,x~men~s (119) (SS) {63) Fed~r'A b~ ~ 45,16"1 ~5,~ 36,766 458,157 4IS,t96 393,13~ UndisU'ibuted earnings of t~anldln, included in con- solidated letained earnings as of December 31, I982, amounted to $1~2,525,000. Ur~r it~sura~ tax rtg~Iatlons, a pardon of Franklin's ~ccumtt[ated stat.u~ory incoroe bed not heetl subject to tax. Should the aggregated untaxed income exceed certain prescribed maximums or cash divi. dends to fts parent company exceed the accumulated taxed portion, the excess would be sub jeer to federal income tax. Tzxes have not been provided on the untaxed income, which aggregated $191 ,~0,1~0 and $1~3,000,000 at December 31,1982 and 1981, respec dvel>; since Franklin doe~ not contemplate distributing such inco~ne ia the fo~'e'seeable fur u*'e. ,I Foreign subs~ries Tbe consolidated financial statements include the fol- lovdng related to operations, principally in the United Kingdom, of Gailaher Limited and its subsidiaries: 1982 19~1 19~0 ;~ Total ~ets $1,293.978 $1,426,702 $1,~0,964 ~ Total liahilitie~ 79~,525 ~,649 ~35,15~ Oge~tit~i~e,a~ L595t 7 I67,754 [88,688 • Net Jn¢onv 74,162 140,720 114,475 Acq~ls~l~n In January 1983, the Company purchased all the out+ standing stock of Pinkerton~, Inc., a secu~ty a~d i£~vestigatis'e set v~c.e or~zati~, at a cash cost of approximately $t58,800,0~). Such cast is esdvaated to exceed the net assets acquired by $115,000,000. ~ ~ ot ~d~t and comp~t~r~ b~l~nces Pursuant to inform~ agreements with lyank~ in con- *~-ctic~ ~[th d~m~zdc bank lirte~, oi'credit asgregatlng $220,000,000 at 12¢~ember 3L 1982, a portion of which is compensated on a i/~% fee basis, the Corn- pany maintains average compensating balancez equal to the greater of 10% (5% fora minor portion1 of the line or 20% oftbe average boo-owings during the yeae Compensating balances averaged approximately $8,300,000 during 1982. All cash baiances were unre- stricted as to use at any time. At December 31,1982, the Company~ including ~laher Limited, had $765,673,000 of unused bank liras of c~edlt. £olW-terra la~bt ~9~ (In th~,~ndt ) Notes payable $225,003 ~ t ?/~% trat~% dae t989 tS0g~o0 ! 8 ~% not~,d~e 1985 115,219 ;~ 9 ~% Dmeh florin bormwlng% du~ 1983 throagh 1989 9,148 ~ 5 ~% debemur~, dtm ]992 4,~=:4~ O~igzti~.~ u~er ¢a#~teclle~es 2L~83 Miscella~o~as barrowmgs 14,143~: 12~currem portion .~,979 "l~al $534,557 At December 31, 1982, the Company had unused domestic revolving credit agreements, aggregating $680,000,000, which expire 1984 through 1988; the interest rate is fixed at the time of each borrowing. A commhinent tee, ranging from t/~% to }~% Ix:," annum, is paid ~n ~he aver'age unused credit. Tb.e Company,

in the event that it becomes advisable, intends to exer- else its rights under these agreements to refinance $225,000,000 of short-term notes payable; accord- ingly, short-term notes payable in this amount have heetx cMssified as tong-temx debt. Estimated payments for maturing debt and sinking fund requirement s during the next five years are as follow~: 1983, $5,979,000; I984, $4,595,000; 1985, $/19,I04,000; 19g6, $3,556,000; 1987, $3,084,000. The Company has 30,000,000 authorized shares of Preferred stock and 100,000,000 authorized shares of Common stock. There were 5,032,528 shaves of tile $2.75 Preferred stock i~ued and outsla~ing at December 31,1992 and 5,507,528 shares at December 31,1981 and 1980. The holders of the $2.75 Preferred stock are entitled to cumulative dividends, to one<luar ter of a vote per share (in certain events, to the exclusion of the Common shares and other Preferred stock issues) and to preference in liquidation over holders of Comrtum stock of $30.50 per share plus accrued dividends. Wbenever six quarterly dlvldend payments on the Pre- fened stock are in default and until ail such dividends have been paid, such holders (in addition to the right to vote wRh the Common stock and other l%e fer~od stock for the election o~fdirectors) may vote separately as a class to elect two of the dime*ors then being elected. The Company will be reqnircd on March 10, 1985, and each year thereafter to redeem 3%, and will have the noncumulative option to redeem an addi- tional 3%, of the number of shares of original issue at a price of $30.50 per share, plus ax'craed dividends. The 3% annual mandatory redemption amounts to 165,226 shares, or $5,040,000. The Company may also redeem such Preferred stock on or after March 10, 1989, at prices beginning at $31.88 per share and declining to $30.50 per sham otl March 10, 1999, plus accrued dividends. Them m~e also certain lestrictions against the declaration or payment of dividends on Common stock or the acquisition of Common stock by the Company if it ix in default on any dividends on the $2.75 Preferred, and the Company may not pay any dividends on Common stock or purchase or redeem any shares of Commot~ stuck or shares of any pre~ent series of Pre fei~ed stock if the Company is in defauh on redemption payments on the $2.35 Preferred. Converlible preferred sfock~redeemable at Company~sopfJon Shams of the $2.67 Convertible Preferred stock issued and outstanding at December 31,1982,1981 and 1980 vaere 2,070,595 shares, 2,386,705 shams and 3,149,913 shares, respectively The holders o1"$2.67 Convertible Preferred stock axe entitled to cumulative dividends, to three-tenths of a vote per share (in certain events, to the exclusion of the Common shams), to preference in liquidation over holders of Common stock of $30.50 per share plus accrued dividends and to convert each sham of such stock into 1.02 shares of Common stcclc At~the riz~d but udi~ued Coml~ shares are re~erved for issuance upon such conversions, but treasury shams may he substituted. During 1982,1981 and 1980, 316,I 10 shares, 763,208 shares and 2,194,134 shams, mspeedvely, vcere converted. Tbe Corapany may redeem such Fre fen~d stock on or after March 10, 1984, at price~ heglmfi ng at $32.50 per share and declining to $30.50 per share on March i0,1989, plus accrued dividends. Shares of the $1.70 Convertible Preferred stock issued and outstanding at December 31,1982,1981 and 1980 were 38,201 shares, 48,602 shaves and 122,353 shares, respectlvd]a The holders of the $130 Convertible Preferred stock are enfided to cumniadve dividends, to 0he-fifth of a vote per share (in certain evcms, to the exclusion of the Common shares), to preference in liquidation over holder~ of Common stock of $20 per share plus accrued dividends and to convert each share of such stock into 0.96 share of Common stock. Authorized hut unissued Common shares are reserved for issmance upon such conversions but treasury shares may be substituted. During 1982, 1981 and 1980,10,401 shares, 73,751 shares and 89,344 shams, respectively, were converted. The Company may redeem s~eh Preferred stock at a price of $21.00 per share and declining to $20 per share on May 1, 1984, plus accrued dlvldends.

eammmm mlo~l~m~'m~" ~ Them am 57,392,506 Common shaa~ ~sued, of which 55,165,167 shams were outstanding at December 31, 1982. Ghanges in t~asulT shan~ and paid4n surplus during the three years ended December 3 l, 1982, were as follows: *flOck ~imtlmm The Stock Option Plan, which was adopted by th Board of Directors in October 1981 and approved the stockholders in May 1982, authorizes the to key employees,. qualified stock options to purchase a maximum of 1,200,000 shares and 200,000 shares, respectively, of the Company's C<>mmoa stock at f~ir market ",,',dues dates of grant. Options gener~fl]y ma~ prior to one year nor more than ten years from the dat e of grant. Stock appreciatioa rights, whlch rtm granted in conjunction with the grant of nonqualified stock options, permit the opdonee to receive shares of Common stock, cash, or a combination of shares and cash measured by the difference between tb.e o ptie~'t i price and the fair market vll/ue of t he Common stock at the time of exercise of such rights. Changes during 1982 in daaxes under ~pden w~re as follc~vs,, ! At December 31, 1982, options for 230,250 shares were exercisable and 918,100 shares were available for future grants under the plata. Treasury shares ace delivered on exercise of options. ~ttmp/~mt . The Company and its eonsolldated subsidiaries have a number of petx~[on plato covering suhstm~tially all employees. The plans provide for the payrnem of 7 retirement benefits, normally commencing at age 65, and al~ for the payment of certain dlsabiIity and sev- erance benefits. After meeting certain qualifications, an employee acquires a vested fight to future benefits. The benefits payable under the plans are ge.r, erally determined on the basis of the employee's length of ser- vice and earnings. Pension expense, including provi- sion for prior service ccats, was $66,620,000 in 1982, $67,380,000 in 198t aud $70,t92,~00 in 1980. 3~

The actuarial present value of accumulated plan benefits, which is based on assumptions different, in certain respects, from those used for the plans' funding requirements, and plan net assets for the Company's defined benefit plans as of January I, 1982, the most recent valuation date, and January 1,1981, are as follows: 19BI (In t hous~'~dsI Actuan~d pr~ent value ofao',Jmulated p~a[i be;le[its; ~bsted $:~82,297 $350,055 Nonve~ted 27,872 29,167 "R~tal $410,169 $379,222 Net aszels availal2e for benefits $335.614 $328,944 The weighted average of the assumed rates of return used in determining the actuarial present value of acvumulated plan benefits was approximately 8% for both years. Benefits and net assets of foreign subsldi- arie~' plans are not included above as such plans are fully funded and not subject to the Employee Retire- ment Income Security Act. Incon~ taxes The components ofincotne befol~e provisions for taxes on income are as follows: 1982 19gl 1980 Dorexstie opcratlc+,~ l'breign o p~ratiunsl Total (In t hou~nds) ~29,041 $438,676 $444,363 139,753 166,321 184.146 $6¢a&794 $024.997 $628,509 The provisions for taxes on income are as follows: 1982 1981 ]980 (In thou~rtds) Cure.rely payable Federal $t82,784 $170,083 $181,952 Foreign 43.739 :t~,475 40,812 Other 23,4qq 23A4~9 24,a 79 Deferred Federal aad ot her 26,t 75 7,!RI3 0,6~,2 Foreign 1],357 ([8,061) (6,2fi9) Tt~al $287,554 $218,870 $250,616 A reconciliation &the provisions for taxes on income at the 46°70 federal statutory income tax rate to the tax provisions as reported is as follows: 1982 1981 198C* (In thou~ar d~) pm~io~ ¢~xa~ p uteri at fedcral star utory incume t~x rote $307,645 $278,299 $289+11', Other inc~r~ taxes, net of federal tax benefit 12'8~g) [2,673 13+219 lqa~£gn it i,#olne t av~a at ra~ higher than feder;d statutory tale 8,326 3,450 9,346 U.K sto:k relleF t ax e rediIg (10,747) (58,1(20) (20,085) L~-r el:[eclavc iricome tax rate for/ire Lnsurance companles (Fmnklln) (11,348) (13,951) (20,141) Investment tax credits (6,971) (7,049) (5,418) Transact i~ns at rate Io~r than federal ,;lat ut eay rate (6,174) Ret m~elive t a x eredlt w~ulting from U S-U K tax tea v - (9,362) Other _ (5,867/ 3,548 1,943 As repar ted S287,554 $9-18,870 $250,615 As a result of United Kingdom legislation enacted in 1981, stock ralieftax credits are calculated by refer- ence to the increase in an "all stocks price index" applied to the value ofopealng inventories and such credits can now be recaptured only in certain limited circumstances- As none of these circumstances is likely to arise in the future, such tax credits are now accounted for as a reduction of pmvislons for foreign income taxes currently payable. Prior to 1981, stock relief tax credits were deferred and taken into income only when it was determined that they would not or weR~ not expected to be recaptured. The 19~0 stock relief tax credit of $28,085,C00 and $41,071,0~0 of the 1981 credit related to reversals ofprlor years defezwed stock relief tax credits. The provisions for deferred income taxes relate to the following: 1982 1981 1@~0 ([n th0usands) De preclati~l $18,481 $ 16'83q $t7,118 [nsumrm= opera fi~ls 11,556 8,461 9,12~ Foreigr~ iaventories -- (34,283) (20,869) OI]~r 7,495 (975) (1,999) Tmal $37,532 $(I0,158) J; 3,37:~ 39

7 Future minimum lease payments under capital leases together with present value of net minimum lease payments as of December 31, 1982, are as follows: {In thou~nd0 t983 $ 3,6t6 1984 3,219 191~5 "2,gll [986 2,6[6 19B7 .~182 Remainder 107,655 TotzJ mi~mum lea~ payraen~ 122,129 Less amoam reprme~ting interelt 99,716 l?a~nt v~lue o f r:el miolmtwa le~e [:4yrnet~ts $ 22.3~3 Future minimum rental pl~.yments under noncan- eelablc operating leases as of December 31,1982, axe as follows: 1983 $ 21.342 1984 18,834 19~5 16,697 1986 15,001 1987 13,8,38 Remainder 93,581 T.a~l mi~imu m oe~tall~ytvea~ 179,293 Le~ mlnimum reata~ to be rec~ve~l tinder r~r~:ar~etalge ~e~ 4,905 $[74,388 Total rental expense for all opezafingleases (reduced by minor amounts from subleases) amounted to $27,194,800 in 1982, $25,219,C00 in 1981 and $24,660,000 in 1980. IntmmaOon on Ouskm~ tmgz~o~ The Company operates in the following segmems: Tobacco products include cigarettes and smoking tobaccos manufactured by American Tobacco and Oallaher and cigars martufactured by American Cig,~ and Gallahe~ Distilled beverages include products produced by Beam, Food products include crackers, cookies and snacks manufactured by Sunshine Biscuits, cocktail mixes manufactured by a subsidiary of Beam and pmduct~ of Duffy-Mot t, which was sold in March 1982. Hardware includes locks martufz~ztu~d by ~tex Lock, stapling equipment and fastening tools manu- factured by Swingline, and incandescent lamps, cut- hey and riveting products manufactured by subsidiarles of MCM. Office products include office statiort.ry and sup- plies manufactured by Wilson Jones, Ofrex (a subsid. o fGallaher), Swingline, and in formati~a storage and net rie'cM s~stems manufact u~ed by Acre~ Visili¢ Records. The Other industry segment is principally com- prised of the operatiom of Golden Belt, personal care products manufactmed by Jergem, golf and rubber products manufactured by Acushnet, and Gallaber's opdcal, pumps and valves, retailing and wholesaling suh~idia6es. The operating i~ of Fr~nki'm is represented by "Financial s ervice~." In 1982, Distilled beverages is shown as a separate industry segment rather than under the Other seg- ment and the office products business of Swlngline has been reclassified [mm Hardware to Office products. Accordingly, all prior year information has been reclt~ssifie~l. The Company operate~ in the United State*, Europe (principally the United Kingdom) and in other areas (prin¢ipal]y Canada). 4~

Sales to unaffiliated customers and operating income for the ~ars 1982, 1981 and 1980, and identi- fiable a~ets for the related year-ends by industry seg- ments and by geographic are~ are shown on page 48. Reconciliation of identifiable assets to consolidated total assets is ~ follows: 1982 1981 1980 (In tl,o~nd~) Idenfifiable~ts $3,193,932 $3,362,605 $3,288,219 Inve~lmen~ in Fea~ldin .805,675 75~257 721,415 Corpontte 40,725 -- 14,162 14,506 Total $4,010,332 $4,]33,024 $1,024,170 Depreciation and amortization by industry seg- ments arc as foUo~; (In theu~ane~) Tobacco products $27,570 $.36,268 $28,927 Distilled beveragc~ 14,637 12,957 10,480 Food pmduct~ 7,937 9,9t39 9,765 Hard,a~ve 4,845 4,272 3~997 ~ p[oducts 7,686 4,7~ 3,757 Other 20,471 20,139 20,994 Tnt~l ~8~3,146 ~ $77,920 Capital expenditures by industry segments me as follows: L982 1981 1980 (ln~) Tobaoeoproduets' $ 68,333 $ 78,I94 $ 93,183 DistilLed beverag~ 16,700 17,329 t6,203 Food products 10,408 19,L74 17,963 Hard.are 5,119 8,38I I0,156 Offace products L0,110 8,080 9,944 O~her 36,366 30,025 40,295 Total $147,036 $161,183 $187,744 Supplementary proflt and loss l~ 1982 L981 Lq~ (In ~'~,~ s) F~er~ ar~ foreign ~c~- i~]ud~in~ar~l~tof~r~ ~79,I51 $2,499,065 $2,524.929 ~a~:h a~ deve~pr~.~ expen~ 18,751 20,758 21,272 "Other (income) deductions, net" in 1982 includes gains of $12,966,000 from the sale of Duffy-Mott and $6,466,0C0 from early extinguishment of debt and l~eflects aggzegate provisions of $34,240,000 for the co6t of closing a domestic cigarette factory and the dispesition ofcerufin unprofitable GaSaher operations in 1981. E~ma~m Net income per Common sham withcut dilution is based on the weighted average number of Common shares outstanding in each year, and after pre feaa'ed stock dividend requirements. Fully diluted net income per Common share asssurnes that any conversible preferred shams out- standing at the beginning nfeach year were converted at those dates, with preferred stock dividend require- merits and outstanding Ccmamon shares adjusted accoldingl~ It also assumes that outstanding Common shares were increased by shams issuable upon exemise nf those options as to which market price exceeds exer- cise price, less shares which could have been pur- chased with related proceeds. The following information, required by FASB State- merit No. 33, presents a supplementary income com- putation, that ~res the effects of changes in the specfific prices ofinve~torles and property, plant and equipment used by the C.~npany (current o~st). The results shown under this supplementmy coraputation me at best an impreckse raeasuremem of the effects of inflation and t he*efore a~e not necessarily indicative of the present or future economic condition of the Com- pany. Information portraying the effects of general inflation is no longer required since a significant por- tion of the operations are measured in currencies other than the U.S. dollar; accordingly, such data is no~ presented.

ConsoliLI,uxxl statement of income and other data adjusted tht '~:ect s of changlng prices is as follows: 1982 Hi~t orical e~t Current cost ~ln th~0~) Net s~es $6,501,961 ~,6,504,961 Ce, st of~les 4~fl73,560 ~,955,182 Operating ~xl'~'~ ~,'~ ~6,169 896,109 DePreciat~lll mM ~*,~vtlzatlon 82/,146 128,3213 5,852,815 5,979~61 I 652,146 525.350 Equity in pre u~.~llngs of FranMin 12~3,fi9~ I29,~ Operating i~, 781,8,12 655,11t6 Inter~t a°d re~t ~ I~a ,rges 121.2~5 121.235 Otberincome, I~,~ (8.187) (8~187) 113,04g 113.(34B I ncen~ be fore ~x ~ f~r ~mes~ income 668,794 541,998 P~vL4m~ f~r t ~\~-~ ,~ incemr 2~,5!~44 2'8~,554 Netioeome $ 3gI,24Q $ 254,444 Changein equll\ ~.~tmer~ [r~ll t ~mlatlng t~xl',,~ ~n~e~cy fitlancJaI Gain fre~ deel~ ~ i~a ,~h a~ing pre~r of net ~r~t~ ~ $62,136 Ir~enlone~ S1fl00,730 81,542,781 Net Pr°Pevq~ PI~ &~l eq u~pment $661,457 $1,073,fi32 The incree~,itl general price level oginvemories and net pmpert)~ ~axt and equipment over incve~e in specific pric~ ~1~ a ¢unent cost basis amounted to $29,765,000 ~| is comprised as follows: Net p~l~er~~ plant ar~t Tool [nvenUmes e~rnenl (In th~wnds) I~cre ~e i~ 8~e~e~'~i !~'~'e lewel $119,09] $6B,C:I~ $50,431 1 ncre~e in sPeeil~ i'~'~'~ 89,326 60,026 29,300 $ 2~,765 $ 8,634 $2L1~1 The concept of current cost is based upon the assumption that the Gompaoy, at current costs, pre- duced or purchased the same inventories and acquired fixed assets of exactly the same service potential as were owned at the end of the year Cm~ent cost for leaf tobacco, bulk whiskey and related components included in raw materials and finished products is based upon latest available prices at De~,evaber 31, 1982, for comparable quality and quantities at terms at which the Company normally purchases these items. Overhead related to the duration of aging pre- cesses of rinse inventories is adjusted to current cc~t, The historical cost of the remaining inventorles is gen- eraliy equivalent to current cost Inventory values reflect adjustment [or deprerlation based on e~tima~ed current cost of fixed a~sets, Current cost indexes were applied to substantially all fixed a~ets. These exter- nally published indexes are based on actual cost incurred for typical machinery and equipment used in specific industries and industrial plants located in par- ticular geographic areas. Construction in progress is included at historical cost. The Company believes that the r~suh adfieved is a reasonable approximatlen of the cun~ent epst of its productive ~ets. Cost of sales and depreciation and amortization under this supple~ne~tary computation were based on invemory costing rr~heds and depre~lati~x~ rates ~nd methods used for historical financial reporting. ~2

Five-year comparison of selected data expressed in average 1982 constant dollars is as follows: ] 1982 I981 1980 1979 1978 Net s~Jc,~ CUCN~ItL CC~( Income ]n¢ome per C¢~mn'x~ ~¢e Net a~t~ at yca~end Change in equity adjustment f~a tramlating fondgn currency finallda[ slaten~nls Gain f~ declineln purchasihg pov~r of net mo~eta~ i~n~ Other in£onnatlon Inc rea~ in ~ez~al prk~ level o[ inventor~ and ~wl p~op~'r ty plant and eq ulp roe nt over inc tea~ in specific p~c¢~ Dividends paid per C.~m n~m sh~ C.0m ra~1 stock pdceat year~ nd A~ra~e Consurc~r Pnee I nde~ (In miRiona ez~mpt p~¢ sham amaun~s) $6,505.0 $6,937.0 $7,964.6 $7,775.2 $7,661,5 254.4 281A 3qO.[ 3068 4.Z5 4 73 5.73 5.07 2,529.8 2,645.9 2,810.6 2,8465 (125,4) (t62 3) 87.4 97.9 62.1 144 3 214.4 222.2 29,8 587 2609 174,8 3.50 3AI 3,45 3.08 2.68 45.37 37.74 43.36 42.69 35 89 289.1 272.4 246¸8 217¸4 195A In concept, constant dollar accounting removes the effects of genexal inflation by restating historical ddlar co~ts of inventories and property, plant and equipment into dollars hax4 ng the same purchasing power. The Company measures a significant part &its operations in functional currencies other than the U.S. dolla~ The United Kingdom Retail Price Index was used to restate British pound sterling amounts into constant foreign functional currency before tramlating those amounts into U.S. dollars. The Consumer Price Index for all Urban Consumers ("CP1-U') was applied to the remaining values. Application of these indexes to the historical value~ of monetary assets and liabilities attempts to show the purchasing power gain or lcss from holding net monetary items during an inflation- ary period. Managemem's analysis of changing prices informa- tion follows: In estimating net income under the cmTent cost method, adjustments have been made to historical amounts reported for cost of sales and depreciation and amortization. Specific prices the Company would have paid to produce the inventories sold would have inca~ased cost of sales $81,622,000, or 1.7% over histor- ical costs. The significant upward revaluation ofprop- e~, plant and equipment arising from replacing historical cosls with tho~e measured by specific prices incl~.~d historical depreciation and amortization by $45,174,000. Under current cost, net income would have been $254,444,000, or $4.25 per Common share. 43

In accordance with the requirements, the provision for taxes on income was not adjusted to reflect any effects ofinflatlon. Since t a.xes are based on historical income rather than economic gain, the tax burden is often greater than statutory rates indicate. Conse- quently, the effective income tax rate for 1982 of 43% unfler historical co~t would have increased to 53.1% under the current cost method. This shows that under exisdng tax laws the high level of inflation makes it increasingly difficult for after tmx earnings to he suf- ficient to replace axsets, provide a f~Jr return to share- holders, and generate cash required for growth. In determining gain or loss from holding monetary items during an inflationary period, inventories are treated as nonmonetary assets, and redeemable pre- ferred stock is considered a monetary liability. There- fore, the $62,136,000 gain from decline in purchasing power of net amounts owed results frora an exee~ of monetary liabilities over mor~etary assets. When prices are rlsing, monetary assets lc6e purchasing power since a given amount of dollars buys less at the end of a period than at the beginning of a period. Conversely, monetary liabilities gain purchasing power since dollars of lesser value are used to satisfy obligations. The increase in the values of the Company's inven- tories and property, plant and equipment adjusted for general ilaflation as compared to the specific price~, at which the Company estimates it could replace these ~¢~ets indicates that general inflation exceeded current costs by $29,765,000. The comparative information shown in the five- year summary is stated in dollars af approxlmatoly equal purchasing power as measured by the CPI-U. Average 1982 dollars were used as the b~e year and, accordingly, amounts of prior years have been increased to reflect the lass of general purchasing powe~ Sales as reported in historical dollars increased from 1970 to 1982 at an annual compound growth rate of 5.9%, whereas, under the constant dollar c~ncept, sales would have decreased 4%. The market price per Common shexe increased over the period, in terms of average 1982 constant dollars, at the rate of 6% com- pared to 16.2% in ~ctual dollars. Common stock dividends paid on a historical basis increased at a ~! compound annual rote of 17.9% since 1978; after removlng the effects of general inflation, dividends still . showed real growth by bacreasing at an average corn- .: pound annual ra!e of 6~9%. 44

Report of Independent Certified Report of Management Public A untants To the Board of Directors and Stackheiders of American Brands~ Inc.: We have cxamlned the consolidated helanee sheet of American Brands, Inc. and Subsidiaries as of December 31,1982 and 1981, and the related consdi- dated statements oflncorae and retained earnings and changes in financial posinon for the years ended December 31,1982,1981 and 1980. Our examinations ,~ere made in accordance with generally acccpted audhing standards and, accordingly, iDciuded such tests of the accounting record.~ and such other auditing proeedu~s as we considemJ necessary in the In our opinion) the aforementioned financial state* merits presem fairly the consolidated financial position vfAmerican Brauds, Inc.'and Subsidiaries at December 31,1982 and 1981, and the consolidated results of their operations and changes in their finan- cial pesitfon for the years ended December 31,1982, 1981 and 1980, in conformity with generally accepted accounting principles applied on a consistem basis. i251 Avenue of the Americas - New York, New York 10020 February 1, 1983 To the Stockholders of American Brands, Inc.: We have prepared the consolidated balance sheet of American Brands, Inc, and Su bsidiarie~ as 0f December 31, 1982 and 1981, and the related comdi- dated statements of income and retained earnings and changes in financiaJ position for the years ended December 31,1982,1981 and 1980. The financi~fl statements have been prep~d in accordance with generally accepted accounting principles. Finanei~al informafioJ~ elsewhere in the Annual Report is consis- tent with that in the financial statements. The system of internal controls of the Company and i:s subsidiaries Js d esig~ncd to provide reasorm hie assur- ances that the financial records arc adequate and can ha relied upott to provide information for the prepara- (urn of financial statements and that established p~J. des and procedures are carefully followed. Independent public accountants are ¢leot~l annually by the stadd~ders of the Company to examine the financial statements. Coopers & Lybrand, independent certified public accountants, are currendy engaged to perform such examination. Their examination is in accordance with generally accepted auditing standards that ivazlude tests of transactions and sek-c five tests of internal accounting controls. The Audit Committee of the Board of Dieectors, consisting so!ely of outside directors, meets per~ic~liy with the independent public accountants, internal auditors and management to review accounting, auditing, and financlal reporting matters. The audi- tots have direct acce~ m the Audit Committee, 45

Eleven-year Consolidated Selective Financlal Data~L~ [n t housands except per share arn~anl~) 1982 Net sales $6,504,961 Gro~s profit 1,572,407 Operating income 761,842 Interest and related charge~121,235 Income before taxes(~) 668,794 Taxes on income 287,554 Net income0) 381,240 Per Common share(s) Without dilution 6.55 Fully diluted 6.38 Dividends paid per Common share 3.50 Average Common shares outst andlng dudng year 55,111 Dividends declared Common $192,797 Preferred 20,477 Added to retained earnings 167,966 Inventories Current assets Working capital Property, plant and equipment--net Totai as~ts Short-term debt Long-term debt Redeemable Preferred stock Convertible Preferred stocks Common stc~khdders' equity Book value per Cornmon share Capital expenditures Number of Common smckholdersl41 $1 fl00~730 2,048,634 787,104 661,457 4,040,332 378,939 334,557 153~492 63,917 1,924,89I 34.89 147,036 110 1981 $6,538,161 1,502,146 783,540 135,519 604,997 218,870 386,127 6.68 6.46 3.212~ 54,446 $174,953 22,676 188,498 $1,451,341 2,159,972 766,880 669,387 4,133,024 477,544 573,562 167:980 73,767 1,825,962 33.32 161,183 114 1980 $6,801,456 1,498,634 761,026 113,242 628,509 250,616 377,893 6.50 6.20 2.95 54,274 $123,998 17,999 235,896 $1,438,583 2,155,495 816,993 639,046 4,024,170 435,545 536,102 167,980 98,520 1,753,485 32.31 187,744 114 1979 $5,845,985 1,303,168 ,669,812 99,944 556,799 223,441 333,358 5.74 5.40 2.312! 53,418 $160,356 32,601 140flOl $1~60,415 1~66,133 728,0~5 535,933 3,716,759 435,942 533,484 167,9~0 167,227 1,480,032 27.82 122221 117 , 4¢ (1) See pagrs 25 xhrough 30 for Financlal Revlew and Analysis. (2) A/so b~[om minonly interest from 1972 through 1974. (3) 1975 includes cxtraoixtinary galn of $8~01,000 or 17 venu per Common ~a~ wither dilut~n a~ 15 ccnt~ per Commcn share ful~ diluted (4) On Febraary 3,1983, there were 109,675 Common ~oekho!ders of record¸ 46

Amerlean Br~ ncLs, Inc al~d Subsidiaries 1978 $5.176,706 1,128,821 501,177 71,907 419,193 211,294 207,899 3.90 3.76 1.812~ 52,424 $95,214 3,675 109,010 $1,260,613 1,766,032 739,889 479,680 2,918,928 425,333 396,477 32,832 1,323,598 24.94 100,623 121 1977 $4,616,390 1,022,457 437,662 66,599 358,200 184,016 174,184 3.25 3.13 1.49 52;119 $77,661 4,720 91,803 $1,279,644 1,73o554 798,925 439,930 2,837,254 424,785 549,680 62,706 1,176,348 22.60 74,209 123 1976 $4,125,837 956,825 405,758 67,033 321,601 165,309 156,292 2.94 2.80 1.40 51,269 $71,668 5,511 79,113 $1,160,097 1,520,034 827,151 403,519 2,405,180 258,770 520,067 69,489 1,049,469 20.12 61,380 126 1975 $4,655,313 89~,077 388,641 78,943 309,430 162,425 155,506 2.95 2.~ 51,224 $68,623 4,424 82,459 $4,116,367 1,478,279 800,685 404,700 2,375,531 30~,662 564,016 73,388 989,946 19.36 ' 65,509 128 1974 $3,570,426 783,778 365,989 73,302 268,676 136,622 123,242 2.32 2.23 1.28 51,237 $65,586 4,497 53,159 $1,123,804 1,504,980 724,487 417,673 2,453,418 380,861 532,048 74,600 956,343 18.69 68,670 129 1973 $3,096,369 607,221 337,802 48,636 264,287 128,706 123,597 2.30 2.22 1.189 51,730 $61,598 4,500 57,499 $ 927,505 1,249,556 665,498 383,437 2,169,281 214,939 524,198 73,000 9O0,5OO 17.57 68,455 129 1972 $2,998,869 664,385 318,116 41,143 272,290 132,629 124,092 2.28 2.20 1.144 52,537 $60,127 4,500 59,465 $ 842,091 1,137,658 683,227 372,012 1,987,363 177,411 478,146 75,000 864,907 16.55 62,808 130

Information on Business Segments o ( In millions) Amcrkan Brands. Inc. a~ Subsidiaries Net~de~l Tobacco produces Distilled bcvemgos Food products l-Ia~wam Office pmduct~ Other Tobacco products Distilled b~verages Food preduos Hardware Office pr~lucts Other Financial ~r~ccs Tobacco products Distilled beverages Food preducts Hardware Office products Other 1~4 anise United Sta~ Europe Other Opera~ United States Europe Other Financial ~ervlces (United StateJ) United States Europe Other 1982 1981 1980 $4,188A: $4,183.1 $4,298.5 227.3 210.7 189.3 469.9 560.8 535.9 173.5 194,1 1B3.~ 312.8 255.5 226.4 1,125.1 1,134.0 1,567.8 $6,505.0 $6,538.2 $6,801.5 $46~.0 $4379 $439.1 32.6 30.6 26.6 32. I 35.0 28.1 26.7 38.2 36.9 25.4 38.8 37.2 71.3 68.8 75.0 652.1 649.3 642.9 129,7 134.2 118.I $781.8 $783.5 $761.0 $1,633.1 $1,663.6 81,748.8 244.6 231.7 210.1 158.7 242.0 236.9 179,7 204A 197.9 411.3 409.3 286.5 566.5 611.9 608.0 s8,288.2 1982 $2,525.2 3,82&1 151.7 $6,505.0 $4860 158.1 8.0 1981 $2,562.2 3,844.6 131.4 $473.8 163~ 11.7 1980 $2,442.1 4,235.8 123.6 $447.8 183.6 11,5 1979 $3,614.0 176.7 490.4 178.[ 218.1 1,174.7 $386.1 24.0 25.5 3&3 37.4 60.7 1978 $3,253.4 169.7 456.8 t~0~ 200.1 936.7 $5,176.7 $327.6 21.3 21.2 28.7 32.9 48.3 1977 $2,933.7 150.6 447.8 150.2 177.6 756.5 $4,616.4 $294.5 16.9 19.4 29.4 27.0 47.I 572.0 480.0 434.3 97.8 21.2 3.4 $669.8 $501.2 $437.7 $1,531.6 $1,375.5 $1,388.3 A97,6 184.9 171.9 221.6 '~6.1 1955 207.2 198,7 189.9 • 251.8 230.7 228.0 573.0 523.3 462.9 $2,982.8 $2,719.2 $~2 639.5 1979 1978 1977 $2,188.9 $2,075.8 2,903.1 2,438.5 104.7 102.1 $5,176.7 $370.0 103.8 62 $2,322.4 3,416.9 106.7 $429.0 134.9 8.1 $4,616.4 $342.9 83.6 7.8 (2) ~3-ma for year~s l:~rlor to 1982 have beer, re~a,~fied for ~rmaparattv© pat'i~u~-x 48 ( 1 ) See page 40 for furlhcr in formatlon on busioess segmems. 652. I 649.3 642.9 572.0 488.0 434.3 129.7 134.2 118.1 97.8 21.2 3.4 $781.8 $783.5 $761.0 $669.8 $501.2 $437.7 $1,821.5 $1,876.2 $1,824.7 $1,691.6 $I,619.1 $1,625.2 1,279.1 1 ,~04.0 1,594.2 1,230.8 1,043.5 956.9 93.3 82.4 69.3 88.4 56.6 57.4

Major Divisions and Subsidiary Companies i Feli[~e Si]~ a Pr~jdent and The An~er~can T~=~.~c¢~ Comp~ny Dtvlsicn 19~2 Sal~ ~I,[99~4~ I~J \ ir~ir~ius [I LE~Uge~ [[J* William • Bcn~lt i~erl~ and (:t:[c~ E ~ec~lli,~e O filter ?'he An~lew Jerkins Company i,i ~!~ ~!d ~v~lil~F ~ ~~ Ja~ L. Pghls C hi~- f E ×~u ti~ e ~ )lii~r Maste*" L~J{ Compa,~ ¥ l]~ ~orld'~ lar ee~t ~ldl(x-k r~la~u f~ lur~ I1~ i~du( ~s indud¢ key.~ l~" ~nd cdt~b~afiE~n padk~, bulk in blcvcle~ a~d motorc ~1~ Euguz:,- C I,ey Pr,xide~ snd Sunshi~£ BIs~'u~ls, I~, ~s~l ~3c[[ Brands¸'N~t u eat Siv]~¸¸ ~d,~ard.I Je~mi~J~J ~~ ~iden~ emd Chief Ex~,Hiv~ O~r Maker of ~he b~.~n ~tapler~ a.d ~na n u fac[tm~, mare,Ill ~nd ele~u ~ ftap]e game, ~lue gan~ n011 dn~ ~nd ~oters ,~d in hardware ~nd h~Zle prc~tucl r~nt~r~ John P Gt~~ Chairman ~nd Ch ;~ I~ xe~u~ive O ~h~er Mauu faeE~ r~ a b~¢l line o f of I%c ~CMpr~,~,s~. -- rind occs [~l~]udin~ colu rn ~a~ pad~¸ ~ lea f b~nder~ ac¢ou nEin~ for m ~ OPe~a[io.s indude C~" ~u tier'¸ di~r j~s. pa per sh ~d ders corn pute~ r~a~er ~ 1Limb q u~it~ [X~ ket ]/u ~L~ing p~.n t,~Ut h~nde~ ~nd a eomple~ cr~rn and h~,,~hold ku[~ es ~i~]r, and pmer and ~ff~e I~ ~E ~l.all p~d u Ct s a nd ~'~ n ~];~c o~ C~uxad~ Ltd Rr~b~r~A Mcl111~re.J~ (:hid E~ u[[~Ofli~.r

Board of Directors The Exet~l#ive Commltfee of~h~ ~pre,~d compn~ the- E×~I~i.~ Corn mit tee ~ A~e, ic,m B~ nd~, I nc Th~ are appolm~d by and are ~p~ibie ta th~ B~J ~ Di~ and mee[ at l~ld y [at~3]s bet Wtlea monthly me.in ~ ~fthe Board Edward t~ Wh~l~nm C haim~n and Chief Exccu~i~- I~r ofAme6~ ~ra n~ slnc¢ l~l ~[~ Ch~u]~n an (,[the Exo~ut;ve Committee. He was ~esident a.d Chte f Execut L~ O~cex o~ Swm g[L~ lnc ~rLd ~ Exc~ut~ Vi~ F[~tdcnt o/W[J~a Jones Compan~ ~hich he j~ned ~n I~ He ~ elected l~recto:~fAme~can Br~d~ [~ 1977¸ Vice Prevalent Subsidiary Admlni~tratJo. in 1978 and Ex~-ufivc %~ce Prefidet~l Ope~lio~s in 1979 VIrgdtflus B. Lougee, m pE~IdC.t ~mci ( :h]~l f ~pcr,l~Jl~g (~tkcr aIId £~hlcf Exc~udve ()lTi~r o;[}~• [981 H~ b~'c~uzc Ex~u Ci~C \'t~" ~idenl r~Amen~n TO b w-~x ) ~xnd a Direct o r of A nleri,:~n I~ ra nd~ i. 1077 Chark~ A. Mehms E x~cl]tlx~ ~,[ee president ant; Chief Fir t a~-i~l Offitrr since Iq79 Hc jah~:d th~ C~p,x~]~ 19~A), was elected .'~[~tan C Treasurer in L96~ Director and Trea~llre~ i~ 1967 x,~e P,~r~dent an0 Trc~urcr in I~ and V~ce P]x~d~[ic-- Fi[~[tcc i[z 1973¸ £ugene R. Anderscn Electod an,mltsld~ Director in 1~3 Heis C:h~ rma[~ ofth~ Stock Optic~ Corn mi~¢ee~and ~ a n~el~l b~ ,~l ~1~ Audit C~/~niLtve H~ t~ a par~z~r [rt th~ la,~ firm of A.derso. ~ sseLJ Fall & OL]ck, [qC R~ k Ausl/n Elccwd a Dim-w,r and Vi~e P~estdent -~u b~;di~t ty ~,d mln[~tr a(~on ofAmeri~n I1~4~ i t~ ]98/¸ He ie~n~ TI~ Andrew Jer gem Corn party in [951 and h~ ~lso held ~xe~uti~ I~Sltior~ ~ Su~shil~e ~cuils, ]n~ a.d ~-r~d ~ Pr~sid~nl ~nd Chic'[ ~[i~ O~eer ~fAt~hnet Cor~lp~ An outrode Dire~t or, he J~ Cha~ r m~ ~" t he Caflit al Approprmtion~ and the Cot porate Rezpot~s~bih~y a[~d pub[[c AR"m m Commit i~ ~nd a member of t he Audlt, Gont r t bu [ion% Eq~t al Emp[oymem Oppoctur~ty and Stock Option Cocnm~t tt:e~ In 1977 he retired ~ Chairman and Chtef Exe~uti're O~firer of S~g]h~e [w" He h~ also ~rced ~ Executive V~ce President o[ ~Aq[~n Ju[~,, wh~t:h 1]e itXD:~J in l~. He "~ a~ elected ~ Dir~zt~r m 197~ S~ut~rt G, ~rn~ro~n Chairrr an o f Gal]al ~ L]n/iled Amefican'~ su bsidi~rv [~ Ihc Unilcd and ,~-,~ e]~c(ed ~ Gallaherk B~ard oF Dir~ulu~ iri 19~7 He L, om [[]~ Managhlg Dit~ecmr Tobacco in 1976 and Deputy Chairman in ]978 He ~ e e~ted C~ha[naaan ~Ga/laher ~lnd ,i I~ reclor o~A medical n ]~ m nd ~ in ]9~0 Elected an o~uxde Dh~e~or in Janua~. I983 A $pecla~ Cem~ltant to the '¢.~it e House, she had l~en a ~i×. ~e~ Member oflhe US 14~u~e o~ Ilepr~n ia t i~s ~r~i a former Ch~rr~a~ oflhe U S In~rna~nel Tr,~te ~mmi~aon ~ ke Pc~sidc~lL ~S u b~Jdiar~ ~min~]at~n ul Am~rl¢.*l~ Bra~ld~ ~il~e ]979,Clla~ru]~[i az~ Chit[ Execu6~e ©t~fi cer o f Swi,~ ~li,~e Inc Cha]rrrLan and ChicFExecuIKre Offtcer ofAcme Vi [b]e R~cord~ ine He joined Wil~n J,~t~es hi 1958 and ~, e]e~wd ExeculJve Vice Pr~idcn l in 1972 and i~rl~ nl md Chief £x~u cite Oll]cer in 1976 Hewas elecl~l a D]rt X:lOr -~f Arneric m ~mnrl~ in [978

Serfi,,r k'i~ ]~iderl[ and ( k,~r,d I~nmd~ slnve I!~ll He h~ hat~dR,d Iv~a[ al~ir~ l~w th~ ~,mpmlv ~mt~ 1959 aod ~[v~xl ~ Ihe C*ml~ny~ Chu I (!~url~l sl~in~in t977 Chairman and Pc~,ide*. ~1 Fhe Fran kliz~ Life Insu ran,e C'~mpat~v He j~i[~ed Franklln I iFe in 19~7 Ix, came 8enlor Woe Presidenl in 196'), Executive Vice P~e~ident in 1974¸ President in 1276 and ¢~h~u:nlat~ irt 197, Hc ~ ¢~¢ctcd a Direclo~ of Paoerican Bra~dsin 1972¸ Llected x:iee Pr~-,ident and Con (taller and a Dir~¢tur ~l A[f~rit~r~ Brand~ in 1981¸ Hej~fi.~ fl~ C~npan!¸[t~ 19~3~ ~as a ppo~tlled ~i~tant Tax Director in 196~ Tax Director in t971 and dected C~rm~er m [978 A~I ~mt~]de [3ar~mr ~i~m~ 1964, [~ is a retired M~agement C~nsu[~aat, a r~,m bvr ~ t I~- A.dit and Sty& Option Commi(te~ and a [~rec~or of e[m,en ~bfidia~e~ E~¢~tive Vic~ p[~ident ~e ~a~ ~ncan To b~co Company ~inee I~1. l~r m being named Vice Pr~ident - Mar k~fi n g of t hal c~ml~aay in ]9~0. he,s~ Pre~dent a[~l Chle f E ,:ecutive Of~cer of The Anar~,~er gens C~ra pan~ which l,e ~ned in [9f~4 I~e was elet;led a INfect or o f Ame~ear~ B rand~ in igRI W~ $w~d Elemled atl oat side Direct nr in 197fi and ~s (2h~irman of the At~dit C~m mlt ~ec l-le is Manas1 ng D~ e~lor ~fWm Sword & ~. I~rl~te~, international in,~raem ~ankees O~her dlmc ~r~hil~ iad~de Ma t hemali~, It~e, K~pner-rregoe. Inc and Roadway Expl~, l~ Fr~iden t ~.nd Chie f Executlx~ Officer ors u mhir,e Biscuirs In,', finer Io76 Prior to being ek~ed P~ident and GhlefOperatia~ O~r i. 1973, he ~.~ Vice P~ident ~ P~ fly N[ot t ('~m pa n.~, Tnc, ~ nd Director o f Ma rkofir,g He ~, a~ clect~l a D~t o/ in 197~ Ru~en R T~ Vice Pr~ident -To baozo ol Am,'rican Bla~Jds~rtte I~1 and Execative Vice President The Ame6ca,i T~ba~v~ Cumpany, since t97Z He joined that companyin 1957 and ~s named Vice Pr~idenl M~nufac~ure and Le~fin 1975 He w~ elect ed a D~reetor in 1974¸ Chairman and Chief Exe~ati~e O/Iicea ,of Jame, B Beam D,stilling Co sinceJa nuat~ 1983¸He~olned Beam in 1961 became a ~cc P~iden~ in 1971 ~-a~ elected Pres~d~n t and Chic f Oper mlng O f%e~ in 1977 and Pre.~idet~t and Chief Executive Catlcer m 192a He,,as e]ec t ed a Dimztor <~(Amefiean Brand~ in 1981

Corporate Data Social Responsibility Corporate Omcers Edward ~ Whit temt;re ( ~b,llrman ol ~hc ~[d at~l C hlc f E',tvulive Olti~.t Vivginius B. Longee, lII and C&it'f OI ~ t i ng C~F~er Chadcs A. Mehos E~vutiw" Vice president and ChleF Financial Olticcr Arr~d Fle~sot~ ,~n[l~l¸ Vi~ Pce~ident and ~i~ral Cot~llsel Robert L. Ausdn Vice Pr~idenI-Subsidlal5 Ad m]n~t i ,ll~n John 1~ Clark Vk'~ president ~ubsidia~¸ Admi~]~tr~t km Robert L. Plancher Vice prevalent and Comml]cr RtLssell I~ Truitt Vi~e Pr~ident TobacczJ Peter lq.eed, Jr. T~,a~u r~r Louis E 1"i=mous, Jr Secretary .gathur E Wade :~,~Lst ant ~!onlroller Theresa B. Fealey Martin J. McDermott Dudley L Bauedein,J~ William H. Burke A~s[anl Tree, user E~ Offices 245 Dark Avenue Ne~x M)rk, N'Y 10167 (212)880-4200 I17 Main St rcet Fkmington, NJ 08822 Cm and AU Mo~gm G~aranty Trtat Compat~y or" New York 30 West Broadway New "li~rk, NY 10015 $2.67a~$2.7S T'ne Firsl National Bank of Chicago One First National PI,'~ a Chicago, IL 60670 Di~q~r~ R~n~tn~l Citibimk, N.A, Dividend Ralnve.xme~ Dorr~ic Corporate Securities Sor~710 New York, N~t' 10043 Amedcan Brands Common s t ¢x:k is/isled on ~he New York Stock Exchange. Its trading symbol is AVIB. .\mcll~ all ]]I~ltlds mid }In subsidimlcs Inanng~ a ~ar~ety ol pl~)t{mm~ tt) i!nha nl c i~' qua]h ? ~f l;fb in t}lc cot~- I~ul~i~ ~Ii ~'h~ ~,~ ~'l;~c a~d ~ '41~t~¸ al l~r,~.~ ~. cotnmillcc, ltppointcd l~y the B(~a[~l i/f Diret;toi~,, ml!t~- ~al~'t ', arid sl~'ial issues al~ dcalt with t~:spilnsib]~: In phllanthroplc pt~)gl~lll~ ~ plac~ g~-'al clnph~lsls oii emp]t~}~e i itvolvcn/cnt, r~'}~in enlp~asls takes the ~)rln cd¸rnalchiIlg p~)grams l~/r a wide rarlge ~fempk~}ce gi~s.~uppovt thmut~h loaued atxd retired exectltix t's and th~ cont iibutil)ta ill spao: and volu n- reefs ~br many local ol gnlaizatioI~s Sho~ n belm~ is a team of experts headed b3 ~etired \ ice Chairman George j. Schlamm and funded by zhe (;t~npa~y ~.o work in \Va~hln~on on ~he 15-c~iden'Fs Pri~ ate Sector Survcv on Ct~st Control, Ed~ard ~: D, hittemor¢, Amerit an~ C.hairman and Chief Executix e Ofl]cm~ sc~wed on t he Surve) ~s Executive Com m il Ice. l pdn~e~i~ US A 52

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245 ih. rk A~ t'nul', Ncl* ~brk, NY 111167 Pall Mall Aloe & Lanolin Gallaher Limited Kamora Coffee Liqueur Case Cutlery Roi-Tan Cheez.lt, Krispy & Hi Ho Silk Cut Cigarettes Bull's Eye Pujtter1 Tareyton Fiesta Soap Spey Royal Scotch Pinnacle Golf Balls La Corona Acme Visible Records