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a ANNUAL REPORT THE AMERICAN TOBACCO COMPANY FOR THE YFAJ~. ENDED DLCEMBFI~, 31, 1947 © COx,~OLTF)ATED B~.LAN(:E ~HrET5 ANF~ CONSOIHIVIED STA~J£MLN'IS Ol [Nr-OMI~ AND ~,ARNED SURPLUS Eaecutize O~ce 111 FIFTH AVENUE, ,NExV YORK 3, N. Y.

PRESIDENT'S REPORT 0~ March l, 1948. To T]EIE STOCKHOLDERS: The accompanying financial statements submitted by the Treasurer present the results of the Compal~y's operations ~n 1947. They include Consolidated State- ments of Income and Earned Surplus for the years 1947 and 1946, Consolidated Balance Sheets as of December 31, 1947 and 1946, respectively, and the report of Lyhrand, Ross Bros. & Montgomery, Certified Public Accountants. Consolidated Net Income for 1947 was $33,845,021, an increase of $3,958,464 over I946. Sales volume, both in dollars and units, was higher than the previous peak attained in t94~ Consolidated Net Sales totaled $819,63~,122, an increase o£ $5~,463,5~2 over the previo~s~earr • This great and expanding volume of business in cigarettes and other tobacco prodtlcts requires the maintenance of an adequate inven~.ory of leaf tobacc~s~ properly aged and matured. Prevailing economic condieions, accompanied by con- sistently high costs, particularly of leaf tobacco, bare pointed to the wisdom of continuing to build up a substantial Surplus from earnings. During 1947 our Consolidated Surplus was increased by $12,979,060 from earnings, as compared with $12,158,035 added to Surplus from earnings during 1946. In January of this year, your Directors voted the regular first quarter divi- dend of 75!! per share, and in addition an extra dividend of 75¢ per share to be made available out of 1947 earnings. This will make a total for the first quarter of $I.50 per share, payable March 1, on the C~mmon and Common B Stock, to stockholders of record February 10, 1948. Prior to the last Annual Meeting, stockholders were advised o£ the proposed offering of 896,404 shares of Common Stock B to obtain additional working capital. It is a pleasure to report that, of the 896,404 shares offered to stock holders at $57.50 per share, 854,150 shares (or 95.3 per cent) were subscribed for through the exercise of rights. The remaining 42,254 shares were purchased by the underwriters, in accordance with the underwriting agreement. 0)

TI-I~ ,~)I]~RIC~X'¢ TOI~ACCO Co~ip~.2wy INCOR~ ~ATE D NOTICE OF MEETING Flemi21gtan, N. J., ~i[areh I, 1948 NOzlCI~ Is fIERY:By G:VEN that ~e Annual Efeeting of file Preferred and Common StockhoMers of T}{I: A~E~IC.~ TOBACCO CO~P~ will be held at No. 43 Park Avenue, nemington, New Jersey, at two e'cthck in the afternoon (East- ern Standard Time) on Wedneeday, April 7, 1948, for the io~)owi.g purposcs: (i) to elect Directors; (2) to consider and vote upon a proposal (designated Proposal A and ~et forth in the attached Proxy Statement) to amend t~e Agree- merit and Act of Merger and Co~olldation under which the Company was organized, as heretofore amended, whi0h has been decthred advlsab)e by the Board o~ D~ec~ols; i3) to vote upo~ two proposes ~desi~paatcd Proposes B ~d C and set forth in the attached Proxy Slatement) made by three stockholders; and (4) to ~ransact such other hns~ness as may properly come before said meeting. The Pre/erTed and Common Stock transfer books willnot b~ closed, but holders uf Preferred ~oek and Common Stock to ba entitled to vote must be holders of reeord at the clo~e of bus~ness on Mareh 3, 194~. JOHN ~. HANLDN~e~a~" PROXY BTATEMENT The enclosed Proxy is solicited by and on behalf of the l'¢Ian age.meat and is revocabIe. The ~a~ta~d~ng Bumb~'r M each class of "~tlng ~eeu~e~ ol the C~mpa~ :s: PTe~e~:ed ~26,997 ~h~res; Co~- men 1,515,983 shares. The Preferred Stock i~ entitled to fear votes per chore. "~he Common StoeE is entliled to o~e vote per ~aare. ELECTION OF DIRECTORS 'lbe Board o1 Direetor~ consists of ~evente~n member~ who ar~ elected to tlOM a~ie~ nntll the next ~A~nl]ual 1%!eet- lag or until their successors are duly elected and qualified, k i~ the intention of ¢he Proxy Committee to vote at this A~nual Meeting for the following nolnhlccs, who together constitute the prezcnt ~oard, and wbo have served as dlree- tars of tile Company for the periods eomm~nelng "Mth the dates stated afIer their re~pectlv~ names: ~alm~ Orith~ D, P~x~Iy~ Richard J. Boylaa Thomtts P. Collrtoza James R. Coo~ John A. Crowe John $, Dowd Preston L. Fowler PauI M. Hahn Hiram R. Hanmer Edmund A. Harvey G~rgt W. Hill It. Harry L. Hilyard James E. Lipscomb, Jr. William H. Og~my Fred B. Reuter Vinceat Riggia ]am~ E. Strict)and Year Firat pri~Npal Occupation ElecteJ Director Viec Pre~sMcnt, The American Tobacco Company of tk~ Orient, Iuc. 1940 Vice Presidmak The American Tobacco Company 1929 Director of TraiRe, The A~erlean Tobacco Company 1916 Vice President, The American Tobacco Company !936 Assistant Chief of Manufacture, The American Tobacco Company 1931 Vice President, A~nerican Sup21iers, Incorporated 1946 Vice President, The American Tnbacco Company 1941 Vice President, The American Tobacco Company 193I Director ~f ~eseareh, The American Tobacco Company 1938 Treasurer, The American Tobacco Company 1932 Vice President, The American Tobacco Company 1936 Assistant Trea~uzer, Thn American Tobacco Co~upaay 19,1.4 President, American Supplier*, Incorporated 1918 Assistant Chief of Manufacture, The American Tobacco Company 1930 Auditor, Th~ American Tobacco Company 1931 President, The American Tobacco Company 1927 Vice Presidem, American Suppliers, Incorporated 1946 1

Of the outstanding se~urilies of the Company st the close of business on Fchruary 2, 1948~ the Company i~ in- formed that these nominees were dlreedy or indire~y the benefmlal ~trners of securities a, lellows: Name Common Common B Preferred Orpheus D. Baxalys 540 264 g2 Hichar d ). Began 346 171 Thomas P. Currants i01 44 Jaraas IL Coon ~ 460 92 50 John A. Cro~¢~ ~ 280 S John S. Dowd H 200 40 Preston L. Fowler 300 60 Paul M. HCh~ 1,405 281 Ht~am R. H~ 10O 20 ]~dmund A. Harvey 200 40 George W. Hill, Jr. 2,050 200 Harry L Hilyzr d 100 20 James E. Lipseomb, )r. 1,200 600 100 William H. Ogsbmy 120 50 Fred B. R~ut~r2I 204 Vincent Pdgg/o 4,245 797 Jam~ F. Strishla.d 320 Information regarding the remunera*ion of directors is hereina£ter set forth under the caption "Remuneration." ] Pro2~osal A • ~ EROPDSED AMENDMENT OF AGREEM~AtND ACT OF M~RGI~R AW~ CONSD~II)ATIEflq 7 L,2 ?~: i :~. The only distinction between each share of Common Stock and each share uf Common Stock B provided hy the Agreement and Act of Merger and Consolidation which constitutes the CLatter of die Company is with respect to voting right*, the Charter providing that the holders of the Common Stork are eutitled to one vote for each share held by diem but that the holder0 of Common Stock B shall he emifled m no voting ri~j~ts, The proposal which is explained in greater cin~sil below, will, if adopted, chang~ each share of die presentIy authorized Common Stock B (including that now out~tandthg) into one share of Common Stock, and thus, in effect, give vot/.g rights to each share of Common Stock B identical wlth those of each share of Common Stock. It ]m~ for sums years been the policy of the lgew York Stock E~change to refuse to llst non-voting Commozt Stock; the Com- mon Stock B of thh Compmay is one of the very few nun-votthg Common Shares that are now listed, and the Stock Exchange has requested tha~ stockholders he asked to authorize thls change to a slng]e class of Common Stock with voting power at the earli~t opportunity. The groposed change will simplify the eaplt~ structur~ ot the Compa~*y; a/so it is now grnerally steeped corporate practice that a ¢orporatlon haw ore class of Common Stosh, nil the shares which have equal voting fights. The Managtm~t z~tommemds the adoption ot such amen~ent. A resolution has hema adopted by the Board o~ Directors of the Company deeinri~g it to be ad*~sahle thin ~aeh of th0 pr~utly gatharlzed four million (4,000,000) cha~es of Common Stock B of the Company of the par vaine of $25 per cha~e, of which S,86~,4~1 chare~ are now outstanding, he changed into one sha~ of Common Stuck, also of the par value of ~25, mad that to e~ect such change Article IV of the Agreement a~cl Act of Merger and Con- solidation, he amended so that after such amendment the Common Stock of the Company will consist of six milIion (6.000,800) authorized share~ of the par vaine of $25 each. The~e edll he made up of th~ presently authorized 2,0~0,000 shares of Common ,~och and the additional 4,000,000 *bares of Common Stocg resuhthg from the change of th~ 4,000,~ ~hax~ uf C~mm~u Stork B into C~mm~u St~k. As th~e m~ n~'a outstmading L515,98S shar~s of Common Stoch (exclusive of 9~,7I~ shares ~eaeqdired and held in the treasury), ther~ wig, on the hasis of the p~esentiy oatstand~g shar~, b~ outstanding a/te~ the changr eff~led by the amendment 5,~78,42g shares (e~elu- sire of the 93,Y13 sharea aboce referred to held in the tz~asary) of the 6,000,000 autha~ed shgreo o~ Common Stock.

No eha~ge ~a tha Company's aggr~at¢ authazke~ Dr autual capital or eapltal s~c*k, or in the ziSbts el e.~y preheat holder of ~h~r~ of the Eoml~ny's stock el any class to dividen~ or to the assets of the C~mpany on any llqaldatlon o~ the Company would result from the propase~l amenthnent The Pre~r,'ed Stock (par v~lu~ $~00 per sha~) and Gomraon Sto~k (par veins $25 per share) eatlde the hald~s thereol to the same vofiag powers for eqLu~ par value, thus enfi~I/~ th~ holdar of each share of Preferred Stock to four ro~ and ~e holder of each sha~e o~ C~Qn Stock t~ on~ ~m. No ~hange i~ eu~k v~ti~g p~o~idon$ w~uld h~ eff~d ~ ~e pro~e~ ~cndm~ but, as e~phh~e~ aha~, th~ hdda~ ~f C~r~o~ Stock B ~ould bc~ome hokhrs of Co~o~ Stock and therefore ~fiti~ ~ the voting rlg~t~ ao0~dad t~ the holSers of Common Stock. A~ o~ December 31, 1947, out of 3,623,971 possible votes, ~e Preferred Sto~ had 2,107,9~, or S~.1679% thereof, the Common Stock had 1,515,983, or 4L~21% thereof, and the Common Stock B bad no vote. When and II the proposed ~aea~ent is adopted and ~ ~e~fiw, ~ the ~ of the pre~fiy o~taud~ng sh~e~, oat ~ 7,486,412 probable vo~ ~ B~fiarred Stock wo~d have 2,107,~, or ~.1575~ro th~ol, the pae~t Co~mon Stash would have L515,9~, or ~.2~95% thereM, and the present Common Stock B (which woul~ the~ be sh~n~ed into Con~non Stock) wo~Id Rare 3.P~2#41, or ~1.5927~S thereof. In view el ~e nature o~ ~o mo~cafio~ of the Compa~s ~urlties ~ich wo~d he e~cte~ hy the adoption of the propo~cd amendment, the Ma~ag~tae~t is of the op~alon that finanehl stat~cn~ would d~sc/o~ nath~8 material ~ the exeud~ ~f pr~dant judgment u to the plan, not ruby shown herci~ In order to authorize the proposed amendmen~ the a~rm~tive vote of two.thlrds of the out~tand~ Pr*forred S~ush, at w~fi a~ she agirm~ive ~ote of twr. thirds of the ~t~ta~din~ Common Stock, is Tequixe~. Th* proposed res0~ution ¢onstltail~g Pro~osd X is am renews: ...... ~=~.~.e,a~a~, ~-{ou~ ~'~o'~n~,O0~) ~ha~e.a of thit pz~D~y atRhoxis~t Er~aoI~ Sto~k B of ~e Company of the par value o~ $25 each, including cash share ztow outstanlllng, be cka~g*d i~to one share of Common Stock of the par value of $25 and that to affect the foregolog ehan~e~ Article ]V of the Agreem0nt and Act o~ Merger and CoasoIidation betwe~m The Amerlom~ Tc~ba0co Company, Consolidated Tobacco Company and Continental Tobacco Company, as hezetofore er~eadad, bc a~end~l to read a~ follo~: "A~t~tCLg IV.-- Th~ ¢~pits[ sto~k of tire said merged e~ri~rarion ie $204~10,60fl. Fiv~ Huadrcd Fo~o/ The~ O~e HwadrM mad SIX {~10,1~) sha~s shall he P~efe~ed Sto~k of ~e pa~ veiue o| $1~) each, Six Million (5,000,0~0) shgre~ sha~ be Common Stock ot the par vslue el ~5 each. The rights of the holders ~ the ssld Preferre~ Stock and Common Stock, respectively, shall be as rollaway. ~ff h01deas of the Prefe.rred Sthck ~h~dl be entitled to fo~r vot~ for each share of the par "caMe of $10O hem by them, and the holdcrl of t~ Common Stock shall be entitled to ~n~ v~e for gash ~h~ ,~f the ~ar vei~ of $25 keld by them. The koldexs of the P~of~red Stock shall be e~t~m:~ to recd~ out of ~e s~ffrp|uz Ur out of the ~t petofiis, a~d the merge5 corporation shaB be barred to pay th~eon ~s mad whoa declared hy the Board of D~rector~, a dlvL dend st the rate of, but never exceeding, sit per e~tum per mmur~ cumulative from and ~fter the first day of October, 1904, payabIe yearly, h~ pearly, or quaricrly, before any divide.ud ~eil he ~t apart or paid o~ the Commoa Stock; ~ravldad, lmwc~er, that %-hea ali a~crwed dlvldergla un the P~r~ Stock have born pa~d, the Diraet~xs ~all, ~{ in their judgment the sur~Im oz the net profits, a~er dedaciing the amount of thv|de~ds to accrue on th~ Preierred Stock d~ring the cttrr¢l~, y~i', shall fie ~fl~e~t for lt~o~ purpose, ~aare power in their discretion to declare a~d pay a dlvlde~td, or dividend~ on the Conlmon Stock. In case of liquidation, or dlssolutlon~ or distribution of esteto of the said merged corporation, tlm holders of Preferred Stock shall be paid she par ¢motmt of tl~r Preferred share~ a~d the amouat of d[vidaads accumulated aad ~mpald befot~ a~y amo"~at ~heil be payable ox paid to the halder~ t~f th~ C~ram~ Stock; th~ hai~a~ of the asse~ of said m~rge~ corporation shall be ~vlde~l ratably among the ho|d~rs of the Common Stock, sha~ and ~haro aL~.~

The resolution adopted by the Board of Directors with respect to the amendment to be voted on by the stosh- holders is set forth in Exhibil A hereto (see page 8). Proposal B. The Company is informed that Lewis D. Gilbert, whose addr~s is 1165 Park Avenue, New York 28, New York, John J. Gilbert, whose addrcs~ is 1165 Park Avenue, New York 2li. New York, and John Campbalt Henry, whose address is 5 East 93rd Street, New york 28, New York, steekhnldcrs, intend to introduce at the forthcoming Annual Meeting the fofio.*iag resolution (dealgaated herein as Propu~al B): "Resolved that the sen- tence de~erlb~ng the amount to be paid to ~be~President and Vice Presidents as provided in Article XII, fieetion One of the Bythaws shall be amemded so as to r~Ka] "" ~ *~ ~ " to the President and the $~zmoR ~CE-PRESmENTS who shag not exceed five in numbe~" The proposers of the resolution have furnished the fallowing statemen~ setting forth the reasons advanced by them in support o1 their proposal: "Reasons There may be g~od reasons why young Mn Georg* W. Hill, J~ should be a Vice-Pres~dent o1 the Corporation hut in our opiuloa the amount of $230,500.92 paid ~ in 1946 was excessive in view of the short time he has been in the actfee employ of the shareholders. He has been with the corporation tor only fi years excluding years ~pent in the Armed Services. Making a distinction between Vice- Presidents and Senior Vice-Prealdent13 we believe to be a I~ng needed reform. More discretion is also granted the Board in dctermirdag the number of Vice-Presidents pastie~pating in profits." Proposal C. T~e Company is informed that the same proposers, Messrs. GEbert and Henry, also intend to introduce at the ~ortbeoming Annual Me~ting the fogowiall resolution, (designated herein as Proposal C): "Re- solved that the following clause thall he added to the prezent provia]ons of Article XlI--That notwithstanding the above provislons for incentive compensation, tile anaeunt to he paid to the President of the Corporation shall in no event exceed sn aggregate total amount o1 $200,000 and that of the Viee-Prca]dents shall not he in ectcem of ~" $150,000, each.~ ~ 'I~ne propusers of this resolution have thrnlshed the following statement setting forth the reas~r~ udvan~d by them in Support o~ thulr~propbsaI: "We hsheve Iavds of haceutive compensation are far too high even after allow. ..... ~rrenr-taxatton leval*7 Iv is ~a'esVrrrg'~'~dg~p'~L'7~e~R~ia'3~y~r~tT'on- of6~r ~~ off'ears with American Tobacco. American Tohacco--$2,071l,l122.76 (rise of $L16li,392.51 over prior year) Liggett end Myers $65li,47li.02. President "Vin'~nt 13Jllgin (American Tobacco) received $2115~669.65 while President 1. W. Andrews (Liggett anfi Myers) reeelved $116,117li.67/l! And el/ thls when Amerlean Tobacco had to prepare to issue more s~oek to provide money for additional working capita]." Mr. Leeds D. GiLbert. co-sponsor o1 Proposals I3 and C, has on three separate ooeaa]ong, at /he Almuul Meet- ings of 1940, 1941 and 194~, in~odneed proposals to c]mnge Article XH of *lie Company's By-Laws by- limiting the incentive eompensatinn payable thereunder. Each of these proposals has been rejected by the stocldaoiders by over wheLmlng vote. The Management does not believe that Proposal B serves any useful purpose, or that Proposal C is in the interest o1 the Company and its stoek~ulders. Proposal ~ neither gr~mts new powers t% nor limits the existing powers of~ the Directors in the election o1 ¥1ee Presidents. Proposal C~ by proposing to set mt arbitrary eating on incentive eoml~ensation payable under Article XII, would defeat the very purpose for which the stockholders adopted Article XlI,--to stimulate Management to work toward ii~ereasing the Company's profits by the incentive off participation in such increased profits. The establishment of a ea]/ing beyond which there is no such ineemlve is wholly ineon- ,~ slstent with the theory of incentive compensation and would ~og in the Management's opinion, be advomtalleotm to the Company and its stockholders. The Management reeommcuds that you vote against Proposals 13 and C. Article XII of the By-Laws of the Company was adopted by the stockholders on March 13, 1912, reeulving in its favor the vote of 6111,047 shares of stock, with 85 shares voting against it. It provides as follows: "Section 1. As soon as practicable after the end of the year 1912 and of each year of the Company's operations thereofter~ the Treasurer of the Company shall ascertain the net profits, as hereinafter defined, earned by the Core- d

party during euc~ year, and if such net prohts exceed the stun of $8,222,245.82, which is the esthnated amomat of such net profits earned during the year 1910 by the businesses that now belong to the Company, the Treasurer shall pay an amount equal in the aggregate to ten per ccnL of such excess to the Pre~ident and fee ¥1ce-Predidmats .~ of the Company in the following proportlons~ to wit: One.thurth ther~o|~ or 2~ per cent. of such amount, to the ~' President; one-fifth ul th~ remainder thereof, or 1~/~ per eeaat, of such amot~nt~ to each of the five Vice-Presldents as salary inr the yea~, ia addition to the fixed salary of each of said officers. "Section 2. If any such ofl~ce be vacant for ~tlme amounting in the aggregate to one month in any year, so much of the amount provided by this resolution to~the paid to the incumbent of such o~oe as is proportionate to the time of such vacancy shall be returned into the general profit a0count of the Company. If there ~hall he a change during th~ year in the incumbent of any o~gee, the amount hereinbefore provided to he paid shall he divld~d among the different inoumbeJats of such o~ee in the proportion of their re~pectlue periods of incumbency during the year, subject to the above provisio:a in rdofion to vaeanele~. "Section 3. For the purpose of thh B~.Law the net profits earned by the Company in any year shall cone|st of the net earnlng~ made by the Company in its husidess as a manufaeturer and se]b.r of tobacco and its products after dadueting all expenses and |usses, such p~ovisions a~ shall he determined by the Bosrd of Directors of the Company for depreciafoa and for s]I outstanding trade obligations, and an additional amount ~q~al to 6 per cent. di~dands on $52,459,400 of its 6 per cent. preferred stock, to which profits ehnf he added, o~ from which profits shaf he deducted, as the case may be, fit~ Company's proportion lhased on its stock holdings) of the net profits or I~sses for the year of its 5ub~idlary eom~panles engaged in the zaanufaekure and sale of smoking tohneoo, chewing tobacco, olg~ret~s, or lihie cigars, except ear~ings on pref~renoe shares o£ Br~llsh-Ameriran Tobacco Company, Limited, and shares of luaperial Tobacco Company (of Great Britain and Irdaad), Limited. "Section 4. The deulaTation of the Treasurer as to the amount of net profits far the year and the sum due anyon~ hereunder ~hail be binding and conclusive on a~ parties, and no one dalming hnr~under shall have a right 1o question th~ ~uld dec3~affo~, or to an~ examinat~ed o| th~ ~ooEs Or accounts of the Company, and nothing • except ~s herein spedficaUy expressed. "faction 5. Tiffs By-Law may he madised or repeaied only by the action of the stockholders of the Company sad not hy the dlre~tors." On July 12, 1933, the Board of Directors adopted resolutions declarthg its policy that thereafter no Presidtmt or Vice President should he elected to o~ice unhn~ hn shoald in advance, a~ part of his terms of componsatlun for his employmenh agree in wrlting ~o waive any payments to him under Article XI| in execs of an amount compuLed in a~eordan~e with a formula set forth in said r~solutio~z. As to the year 1935 and each year thereafter, the for~ala provlde~ that the amounlz to be paid to such o~cers thereunder shall he based upon an amoun~ equal in the aggregate to 10% of the excess of the net profits ~f the Company for the partioular year in question abeve and beyond $15,500,000, which $15,500,000 inch|sea the amount equal to 6% dividends¸ on rite outstanding 6~5 Preferred Stock of the Company referrad to in Article XII. Th~ formula further provides that should the net profits of the Com- pany, calculated according to the provishias of Section 3 of Arllch X£I, exceed in any one year $32,500,000, then, as to any amount exceeding $82,500,000 and less than $85,C00,000, instead ~f the percentage of 10% provided in Article X[I, the percentage shnll be 9%; a~ t~ any amount cxccedidg $85,000,000 and less them $~7,500,500, instead of the percentage of 10% provided in Art|de XII, the percentage shall he 8% ; as to any amount exc~ding $37,500,000 and less thnu $40,000,0C~, instead of the percentage of 10% provided hi Astiolo XII, the ]percentage shall be 7~; as to may amount exceeding $40,000,000 and les~ than $42,500,000, insteed of the percentage of 10% provided in Arficlu XII~ the pereenznge thidl be 6% ; as to any amount exceedin~ $42,500,000, instead of the perctmtage of 10% prov~dad iu Article XII, the percentage shall be 5%, By agreements dated July 12, I933, March 21, 1~34s June 2P, 1938, No- vember 1. 1945, September 17, 1946 and /%vembe~ 19, 19~6, the Pzcslden~ of the Company~ ~rincent Rigglo, and its Vi¢~ Pre~iserts, Richard J. Boylan, James R. Coon, Preston L. Fowler, paul M. Hahn and George W. Hill, Jr., have agreed to waive any payments to them under Azllele )HI in excess of amounts compnted in conformity with said formula. 5

REMUNERATION Remgne~,o~ of Directors and O~csrs. The aggregate amotmt of remuneration received from the Company mad its subsidiaries, directly or indirectly, on an accrual basis, by each person who has acted as a director of the Company during the past fiscal year, each person nominated for election as a director of the Company~ and each person ,,vho "~ has acted as an o~cer of the Company but not as a direeto~ and who has retelved paymenLs cf remuneration ~otaI- " ing more than $20,000 dazing such fiscal ye~, is Bet fort]l in the following tabdiation: Nine i~ Orpheus D. B~lys I~ub~rd J. ~yl~ Jme~ 11. Coon John A. fJrowe Joha S. Dowd prest~a L. Fowler padi M. Italm Hiram R. H~ Edmund A. Harvey George W. Itill~ Jr. H~a'ry L. H[ly~d ~ames g. Lipseomb, Jr, Willinra H. 0gthury ................ .Ftgd. lkR~ .......... Vincent Riggio James F. Stl~ckland Ftem~mer at ion Ancnled f~r 1947 $ 44,583.34 268,521.43 22,000.00 268,521.43 50,000.00 30,583.30 268,521.43 268,521.43 29,583.33 00,000.00 268,521.43 34,583.37 120,000,00 40,583.37 45,000.00 484,202.36 39,583.30 The aggregate re~tmerafion for the year 1947 atf¢ forth in the above tabulation for each of the following ~adl- vlduals includes in~ntive compen~sioa acc~ed under Article XII of the Bylaws, in the amo~mls stated: Vincent I~ggin, Pr~ident, $364~202.06; Richard J. Boyl~a. James R. C.o~, Proton L. Fowler, Paul M. Hahn and George W. Hill, J~, Vice Pre~idea~ $218,521.43 each. No amoun~ '~e~e paid or set aside f0~ the he~afit of any of sa~ individuah ~der ~ny other bon~ profit-sha~ing~ p~inn o~ ~etireme~ plan o~ the Company o~ its s~bsldia~ie~. The aggre~at~ rem~me~tlon for the yea~ 1947 set ~orth in the above ~b~da~ioa for each of the follow~g in~i- vid~ah was in excess of their r~unerat~on ~or I946, in the amounts stated: Vincent R~g~o, President, $190,532.91 (due partly to h~s paz~oipasion un~r Artic~ XII in increased Company profits, hut prindpal~y to the fact that ha w~ Fre~ide~t ~or only 0~ months in 1946 but for a~ ed ~9~7); Richard J. Bo~hn, Vice P~siden~ $212,273.6I (due pax~y ~o h~, parfinipa~on under Article XII in increased Company profits, but prin~pally to the fact that he was a Vice presider for o~ly 1 month i~ 1946 but for all of 1947) ~ James R" Coon, Preston L Fowle~, Paul M. Hahn and George ~ Hill, JL, Vice pr~d~t~, $3~,020.51 each (due to th~ par6c~patlon u~d~r Article XII in increased Company pro£t~); orpheus D. BaxalyB, $I4,250.02; Thomas P. Conners, ~,5~3.32; Jeha A. Crowe, $5,000.00; John S. Dowd, $4~533.30; H~ram R. Ha~m~r, ~L583.30; Edmund A. Har~, $10,000.~0; Har~y L H~yard, $~,5~.37; Wi~am H. Og~ur~, $4,580.37; Fred B. Reu~r, $10,000.00; Jme~ F. Stri~kl~d, $4,583.30. A group life inau~m~ poli~y ia in effe~, covering all ~effahr ~ll-ti~e employe~ of ~o Company or of its ¢on- sdi~dated ~absidi~.rle~ m~d c~ain ~p~yee~ of oth~ subsldinrlee, the maxina~m~ amount of insuranc~ the~u~tI~r to any one ~aploy~ bring limited to $10,00~ The cost of the insurance is payable ratably by the Company and such subsldiarie~. Each of the ubov~n~m~l indirldua~ was inmred for th~ maximum amo~t ~der such policy. The net pre:~im paid therean~er i~ respect of each ~u~h individaal was ~77.7~ ~or the year 1947. 6

Group Remuneration. The aggregate amounts paid or set aside, directly or indirectly, by the Company and its sabeidlaries to or for the benefit of all persons, as a group, who were directors or o~eers of the Cnmpany at aRy thine dueing or for the l~t gseal year, werB as follows: (1) No directors' fees w~re paid. Salaries of all o~e~r8 and directors of die Company, as a group, totalled $909,500.01. (2) Iuee~ative compematlon accrued to directors and o~eers of the Company, as a group, totalled $1,456,809.51, (eoneisting of payments under Arfele XII of the By-Laws reported earlier in this Proxy Statement), which wa~ ~2ll7,~.65 in excess of the e~rre~ponding amount for die pro- vines fiseol year. (3) There were n~ pension, rctiremenl or other limilar payments for the benefit of directors and o~ieers of the Company. The aggregate amount of remuneration for such fiseol year, received from the Company and its subsidiaries, directly or indireeRy, on an accrual basis, hy all the direetors and omeer5 of the Company ~s a group, was le~s tha~ 3j10 of 1% uf the Company's ooasolidated net sales. MISCELLANEOUS The Management is not aware of any other roarer which is intended to be presenLed for action at the meeting. Messrs. Lyhrand, Ross Bros. & Montgomery have for many years h~n the independent auditors for the Corn- -- - .~ pany, and are appointed liy reediutlon of the Board of Dise~tors. In aeeordanee with the Company's oustomary prae- ~.e rice. a member of the firm of auditors will attend the Annual Meeting and respond to questions which may be asked by stockholders. Comments or suggestion by stockholders with regard to the audit are welcomed, as they are ~¢ith regard to all other matters affecting the Company's interests. Any stockholder maTclng written request therefor to the Secretary of the Company will be furnished a stmmmary of IZh-~r~hTinhl l~Feefing that wlI h~ pre'p~ri~T~atT~r ~'ffn~he/d. = ~" t~emington, N. J., is reached by die Leliigh Valley Railroad. The present train schedule, whlab is subject change and should be confirmed, is as follows: Leave Pennsylvania Pratfon (33rd P~eet and Seventh Avenue, New York, N. Y.) I0:55 A.M. Arrive Flemlngton 12:13 P.M. Leave F/emington 5:06 P.M. Arrive Penusyiva~eia Station 6:35 P.M. The Company will pr~ure railroad transportation, from New York to Flemlngton and return, at Company expense for any stockholder o£ record desirous of attending die meeting, on his notifying the Secretary in writing, prior to March 3l, 1948, that he wishes snell transporla~ion obtained. If you do not plan to attend, yen are urgently requested to execute the enelased Proxy and mall it to the Company promptly. Expense oj Solicitation. The expense of the soBeitatlon o~ Proxle~ for this meeting, including the cost of mall- ing~ will he borne by the Company. In addition to mailing copies of this material to stochholders, die Compmty ~ll request persons who hold creek in their name or e~stody or in th~ name of nominees for others, to forward eopiss of such material ~ those persons for whom they. hold stock of the Company and to request authority for the execu- tion of the Predict. The Company may rehaburse suth persons for their oat-of-peeker e~tpenses and elerleal charges ; "~ in connection ther~wRk, which expenses are estimated to be about $1000. To the extent n~essary in order to assure . .~ su~eie~t repr~seJatalinn at the meeting, og~eers and some reguI~r employees of the Company and approximately Ii employees of Cameron, Shanley & Well~ Inn. will r~/uest die return of Proxies by telephone, telegram or in person, at an ~tlmated cost of about $12,500. The ~aotmt of the expense to be harn~ by the Company will doped up~a the volume of shares represented by she Proxies received promptly in response to this NoBee of Meeting. L{ Proxies are not received promptly, it raay he necessary for the Company to send telegraphie solicitation to those ~eek- homers who have ~t responded, The expense o~ such tolegraplfie solleitation would he about $2500. As the afiqrmative vote of two.thirde of the outstanding Preferred Stock, as well a~ the a~rmative vote of two- thied~ of the outstanding Common Stock. is required in order to autharlzo the proposed amendme~at of the Agre~ meat and Act of Merger and Consolidation (Proposal A). the Stockholdea~ are urged to ~end in their Proxies with. nut delay. Prompt response is beipfdi, and your eooperatinn will he appreciated. 7

F~X~:[I BIT A "P~soLw~, that the Board of Dizeetors of The Amerisan TCh~ Company hereby declares it to he nd~i~able th~ each share of the four m~lioa (4,000,0~C)) share~ o| Lh~ pr~ent]y authorised Common St~ch B of the Com- pany of the par ~ue of $25 each, ot which three million, eight hundred and slxty.two thousand, four hundred and forty-one (3,862,441) share~ are now oulstandlug, he chansed into one share of Common Stock of the par value ef ~25 sad that, to eff~t th~ forrgoinS ch~ge, Article IV of the Agreeracnt and A~t of Merger and Con$cllde- tshn between The Ameaiean Tobacco Company, Cor~oIideted Tobacco Company and Continental To]~acco Company, a~ heretofore amended, he amended to read ~ fol~ws: 'AnTICnE IV.--The eapilal stosh o£ the~aid m~rged eorporatlun is sgg4,gl0,g00. Five Hundred ~orty Thousand On~ Hundred and Six (540,105) Ih~res shall he Preferred S~Ch o~ the psr value o~ $100 each, ~x Mi[lion (6,000,000) sh~es shall he CommoD Stock of the par value ~ $25 each. The riShte of the h~lderB o~ the Jald Pre[erred Stock and Common S~o~k, respeetLvaly, shall he as fdluws: The holders of th~ Preferred Stock shall he enthled to ~ux votes ior each share ~£ the par ~d~ of $1~9 bald by them, and ~ helde~s o~ the Common ~oe~ shull b~ entitled to one vote for each share of the par vaiu~ of $25 hdd by the~. The holders of the Pre~rred Stoch shall be e~tliled to reeelve out of the surplus or ou~ ~f the ~eL profits~ a~d the merged corporation shall be bound to pa7 thereon a~ and when declared hy the Board of Directors, It dividend at the rate o~ but never e~xeerdJng~ six par ee~tum per annmx~ eumaiative from ~nd after the first day o~ etcher, lg04, paychle yearly, half yearly, or quarterly, he£~re any dlvlde~d shall he ~et apart o~ paid on the Common S~och; provided, however, that when all accrued ¢llvl- dende on the Pre/er~ed Sock have bee~ paid, the l~ir~to~ chall, i£ ia their judgment the surplus ~r the net profits, aRer deducting the amoun~ of dividends to aaerue on the Preferred Stock during the current year, shal~ ~e su~cle~t for such pntp~se~ have power in their dis~rchun ~o de- ala~ and pay a dividend, or dlefdende, ~n the Common S~oek. In ~a~e of li~uideLlun, or di~sclutlon, o~ di~ilbution of asse~ of the said merged c~rporail~, the holders o£ P~eferred St~ch chal~ he paid the par mnou~t of their Preferred share~ and the s.mount of dividends accumulated and unpaid hefore any amount chcll be payable or l~aid to the hoiders of th~ Common St~ch; the halsace o~ the assets of said merged ¢~rporatloa shaI[ be d~v/dnd raiabb' a~ong she ~/der~ of the Com- ...... ~ f,t~ki share ~d share Mht~..-. ................ F~T~R P~SOLVED, that the foregoing matters, including such proposed amen(hnent to said Agreement a~d Act of Merger and Con~ofidmion, shall be submitted for aotion thereon by the Preferred and Common Slockholders of the Company at th~ next annuaI meetlug thereof to be hald on Wednesday, April 7~ 2940, at tw~ o'clock in the afternoon, or at any ndjournme~t thereof, end that notice of the time, place and purposes of such Ineetlng, includ- ing the taking of actl~ upon the foregoing matters, shall he given in accordance wish the pro'~isions of the Byila'.cs of the Compaay. Fu~x~ Rr~OL~D, that, in the event that two.thisd~ lu lutere~L o~ each class of ~oshhalder~ having voting -~ power shall ~ote in £avox~f~uck change ~ad ameDdmcat at. said annual meeting o~ at any ndjourmneat the~eoL the proper o~ce~s ~£ the Company he and they he~oby ~e ~uthorisnd end empowered t~ make, executo and acknowl- edgo or prove a certificate of s~ch change ~ed amen0hnent and to file the same in the of~ce o£ the Secretary of Sf~e of the ~ of New Jexsey, ~md ~o take all othee steps deemed ~eeeasary or ndalsaMe ~o effe~ s~sh clxa~go and amc~t~nL" tl

In addition to the equity capital thus obtained, notes payable to banks increased from $85,000,000 as of the end of 1946 to $122,500,000 as of the end of I947. The need for these additional funds was due principally to the following several factors: The increase in invent~ies, of which leaf tobacco is the principal item, amounted to $76,119,550 as of December 31, 1947. A substantial part of this increase was due to the acquisition of a larger proportion of our flue-cured purchases before December 31 than was acquired before the previous year end, and to the greater speed at which the 1947 hurley crop was marketed in December, which resulted in larger purchases and payments before the end of the year than was the case in I946. Continuation of the construction program for expansion and replacement which was begun in 1946, and additional expenditures for more eflficient and economical operation of plant and equipment, resulted in additions to fixed assets in 1947 at a cost of $12,384,486. During 1947, $6,409~000 principal amount of 35, Debentures due in 1962 and 1969 were retired through the operation of their respective sinking funds. Wages and casts of materials and supplies followed the regular busi- ness trend and were higher than last year. To strengthea~ the Con~pany's working capita! position and to provide for the increasing requirements o~ the business, the Company has since the first of the .... : _[ 0 year sold to The Equitable Life Assurance Society of the United States, for investment, $75,000,000 of the Company's Twenty Year 3~ Debentures, due January 1, 1968, at the price of I00% of the principal amount and accrued interest. The proceeds were used to reduce short-term bank loans and increase working capital. If you are a Preferred or Common stockholder and do not plan to attend the Annual Meeting personally, your cooperation in signing and returning your Proxy promptly will be appreciated. VIN GFNT ~IGGIO1 PresldeJz~.

,i 1947 OPERATIONS AT A GLANCE IIIII a few oF our 200 or more $819,631,000 RECEWED FROM DiViDENDS, INTEREST AND MISCELLANEOUS i THIS IS HOW IT $2~,ooo USED OR SET ASIDE: FOR REVENUE STAMPS AND TAXES FOR TOBACCO (including applicable expenses) O $448,008,000 $219,82S,000

t Tr~'--~" ~r~=,~--.~~ ...... " ~ ~'=' "*~ ~ ~i~"~'~ .... -- ~ .~ r~ ,~, ~" ~'~ ......... i ,O, BOND ANO i:~~ $7,3S6,000 BANK INTEREST FOR DIVIDENDS $20,866,000 TO STOCKHOLDERS FOR ADDITION TO SURPLUS TO MEET FUTURE NEEDS $12,979,000 WHICH ACCOUNTS . . . . . . . . .~'--'------~lS'~l,OT~S,uuu

J LYBRAND, Ross BROS. ] ioR rGOMERY CERTIFIED PUBLIC ACCOUNTANTS 90 BROAO STREET NEW YQRK 4 The President, the Board of Directors, and Stockholders of The American Tobacco Company, iII Fifth Avenue, New York 3, N. Y. We have examined the consolidated balance sheet of The American Tobacco Company as of December 31, 1947, and the related consolidated statement of income and earned surplus for the year then ended. The financial statements of Ameri- can Cigarette and Cigar Company. a consolidated subsidiary, were examined by other independent public accottntants. With the exception of that subsidiary, we reviewed the systems of 0 internal control and the accolulting procedures of the compa- nies and. without making a detailed audit of the transaations, examined or tested accounting records and other supporting evi~enc~/~F_~ods and %q the extent we ~eemed appropriate. Our examination was made in aacerd~2c~ with goneral!y a~£qpt~d .... auditing standards and-inc~lu~d all'proceduresw~ws~en~--- -- sidered necessary in the circumstances. We made a similar exsJnination for the year 1946. In our opinion, the accompanying balance sheets and related statements of income and earned surplus present fairly the consolidated position of ~he American TobaQco Oompany and the subsidiaries included therein at December 31, 1947 and 1946 and the consolidated results of their operations for the years then ended, in conformity with generally accepted account- ing principles applied on a consistent basis. O New York. February 6, 1948

CONSOLIDATED STATEMENTS OF INCOME AND EARNED SURPLUS Including American Cigarette and Cigar Company and all who]ly owned domestic subsldlzr/¢* except The American Tobacco Company of the Orient, Inc. for the years 1947 and I946 1947 1966 Sales, less trade and cash discounts, returns and allowances ............................................. $819~631,122 5764167.f90 • Cost of salts, s¢lli~g, senegal and administra- tive expends .......................... 757.376,477 709,40~,297 OPERATING PROFIT ................ 62,254~645 54,764,293 Add: Dividends knd ingere~t from subsidiaries not consolidated hereii, (Note 1) 1,32~,362 70~,651 Other dividends and intcres~ .......... 184,190 180.602 Profig on sales of stcurltics, net 241,067 -- Other" ~ncome ...................................... 276.041 ~ 64,301,31H 2~g,719 $ ~5,907,265 Dedtwt: Interest, amortizaCon of discount and, in 1947, eedemptlon premium on 3~ deben:ures ................... ~,72t~,1 o0 5,567,714 Other' intrust and discount 1,~30,29I 1,243~989 Provision dor reserve against invcs~Inent in British subsldi~ry .......................... 718,926 Othe~" expenses and ]o~*es .............. ~63,497 8,¢;38,814 731,028 7,~42.731 INCOME, before state and deder~l income tgxes ............. Deduct: State Jnco~e taxe~ .............................. 1,622.000 Federal income tagei .................... 20.823.000 33,217,491 28:$27,534 DedncG Portio~ of net income of American Cigarette and Cigltt" Company applicable r.o nlinority interest 78,949 68,017 33,138,542 28,759,517 Add, Adjustment of prior years' I*deral and state taxes includ~tag interest, |¢ss related expenses .............................................................. 70~,479 1.I27.040 NET INCOME .......................................... 33.845.021 29,886,557 Deduc~, Cash dividends on preferred stock $6.00 per share .............................. 3,161,982 3.161.982 BALANCE added to earr~ed surplus account 30~683,039 26~724,~7~ EARNED SURPLUS, beglnn[ng of year 86802,821 73,098,729 Add, Proceeds from insurance policies on life of Mr. George W. HIll, deceased, less cash surrender value thereof 1,546.057 74,644.786 I17,495,860 I01,t69,361 Dedncl, Cash dividends on comn~on stock and common stock ~-$3 50 per share in 1947 and $3.25 per share in" 19,~6 17303,979 1~.566,54~ EARNED SURPLUS, end of year (Note 2) ~ 99,781.881 ~¢ 86,$02,821 Depreciation provided and charged ro costs and expenses amounted to $1,769,156 ~n 1947 and $1~598,012 i~l 1946. The notes referred to above are an integral pa~t of thlz statement 7 I 0 55 662,49I 48,564,534 I;463,000

CONSOLIDATI;[ IncIud[ng American Cigarette and Cigar Compa.) and all wholly ow~qj,• December i ¢ ASSETS ~. 1947 I946 Demand deposits in banks and cash on hand ................. $ 19.505,I59 ~ I7.g21,115 Accounts reveivable, customers .............................. 3.t.f~g.43i 26,999,451 Miscellaneous accounts receivable ...................................................... 571.091 919.963 Leaf tobacco, manufactured stock operating supplies, etc., at cost 41~LI33,02~ 407,013,¢48 Cash on deposit with sinking fund trustees for redempdon of debentures (see contra) ............. 9~8 183.5~7 *Notes and accounts receivable from unconsolidated subsidiary companies 1.578.164 524.594 Total current assets ............................ 539,346,86I 4~L462,228 Investments: Securities of subsidiaries not conso]ida~ed herein (*Note t): Whoftv ov~ned Br~tlda g~006~000 ¢,.7!82926 - Others [ ...... 8,555,864 8.564.864 Othe/" investments, ar amounts not in excess of cost .................... • i72,420 1,317.I61 To~al investments ................................. 14.928,284 16.601.3 ~1 Mortgages, note receivable, ii~surance depo~L~, etiz ................... 2.(171,928 2~291,298 ~eaI estate, ma~hlnez'y, l~xtur~s, etc.~ at cost (~ess allowance ~or depreciation. 19¢7. $25,598.117; 1946~ $24,660.057) ................ 32,$46.536 22.~g3,276 I3repald expense~ and deferred charges ............. )¸461.203 3,491,~44 Brand~. trade marks, patents, good wilh etc ........................... ~4,099,431 14.099.431 S646,714,247 $552 52g,91R The notes referred tot above at,

BALANCE SHEETS aes!r~ub~idlarlcs except The American Tobacco C~0mpany of the Orient, Inc. V 194/ and 1946 I ! LLABILITIE$ ~= I947 1946 I Notes payab[e to banks (Note 2) ........................................................... $122,500,000 $ 85d)00,0~0 Accounts payable 9,043,404 11,~32,119 Dilidend on preferred stock for quarter ended December 31 ............................. 790,49~ 790.496 Interest accrued .................................................................................................... .... 1,112,816 1,152d¢73 Provision for taxes ....... 30,317,313 27,988,59~ Advertising and other accrued expenses ............... I,J83,796 1,392,34I Debentures to be zedeemcd through sinking frond operations, estimated (see contra ) ................ 6,/I 57,1)0 f) 6,145~000 Accounts pa~able to unconsolidated subsidiary companies ........................ 1.162,3I$ 772,~57 Total current liabilities ................... 172.577,Ig3 134,773.993 Three per cent debentures, less estimated principal amounzs to be redeemed .x, lthln one 3,ear (at prices as provided by the indentures/ through linking fund operations: Twenty year, due April 15, 1962 ........ 81.139,000 $4,507,000 T~a:enty gve yeaG d~eOctobe~ 1~, 1969 ........................................ ELS3~a0a .. 9l,asL¢~ +: ++_ :: FOUr per cent bonds marurlng August I, t95i a31.250 831,250 J43,I81,43J 311,703,233 Deferred income .................................................................... -- 10I,U4 Minnrtt~ in crest ,n Amerm~n Cigarette and Ci~ar Company Z1 J~277 798,172 CAPITAL Capita] stock (Note 4) : Preferred, six per cent cumulative, par value $100 per share 52,699,700 52,699,700 t Common, par value $2~ per share 40+242,400 40¸242,400 B, par $2~ per .................................................. 96+561,~)2~ 78,3~,42I Common value share Excess of net proceeds ~rom sale of common stc~k }5 over par value (Note ~) 2D,I75,~'~1 -- 210,07~t 716 171,297,52~ Earned ~urptus (Note 2) ............ 99.78LS~1 ~16.$~2,821 309+860,597 2fR,100,346 Le~s, Treasury stock, ar cnst (93,7]3 shares of common s~ock and in 1946 165.180 sbare~ of comrrm~ stock B) .............. 7,~07~060 1~1,177,987 Total capital ~nd surplus, less treasury stock 302,S~3,537 2~9+922,359 $646,7 I4,247 $552,~28+918 an ~ntcgral ~art of this ~ateme~

Notes Accompanying Financial Statements 1. The equity in the e~raings of~uncu~solldated subfidlarha amounted to sl,920,90~ and $1~44ffi867 for 1947 and 1946 respectively. 2. In February~ 1948, ~be Company completed arrangements ~or the sale to all insur- ance company of $75.000,000 of its Twenty Year 3~ Debentures, due January 1, 1968, the proceeds of such sale to be used to reduce short-term bank loans and increase working capital• Under the provisions of the inden,ure rdat[ng to such debentures, cash dividends o~ the Common and Common B Stocks may Bot exceed by raore than $11,000,000 the difference between (a) cc~solldated net income subsequemt to December 31, 1947, and (b) the aggregate of nil sums thereafter paid as dividends and in the reacquilition Of shares of the Company. 3. Based upon cable advice, the applicable net assets of the Brlt£sh subsldia~ (trans- lated into dollars at appropriate rates of exchange) amounted to s7.7g),877 at December 31, 1947, ~, lr The net assets appllcable to the investment in other unconsolidated subsidiaries (computed as heretofore), egciudlng the net asse~s of the French subfiffiam/, the investment in which is carried at ~1, amounted to $12,245,937. including intangible assets of $5,530,447, at December 31, 1947. :: z 2 : 4• Capital stock at December 31, 1947 comprises: Sbae~$¸ In Company's Authorized Issued Treasury Preferred ................. 540,106 526,997 None Comn)on ......... 2,000,000 1,609,696 93,713 Common B 4,000,000 3.862,441 None 5. Represents SHffi/8,657 received from the sale of 896,404 shares of Common Stock B in 1947, lesl $1g,205,600, par value of 728,224 Common B shares previons/y unissued, $11,170.927, cost of IS8.1g0 Common B shares formerly carried in the treasury and $1,70~,539, expenses in connection with such sale. 6 There has been no change during 1947 in the s~atus of an action instituted in a prior year by the Office of Price Administration ~or treble damages, claiming over charges in an amoun~ of $347~607. As previously reported, rhi~ action is being contested ~tnd rio e~¢g~ i$ glv¢ll thereto in the flna~iaI statements. i' 10

QUALITY ASSURED * e The research laboratory of The American Tobacco Company in Richmond, Virginia, is the largest and finest equipped research laboratory in the world devoted to the study of tobacco ariel its manufactured products. Here, a staff of more th~n forty scientists analyzes and controls the different products that enter the Company's plants.., and the finished products that emerge. Our outstanding research facilities enable us to maintain continuous qualitT control in all ph~es of production--from tobacco leaf to finished product. i1

YEAR AFTER YEAR IT'S QUALITY THAT COUNTS! 0 O

¢ O ¢ QUALITY OF PRODUCT IS ESSENTIAL TO CONTINUING SUCCESS

iJ In the modern air-conditioned factories of The American Tobacco Company, the work of many depa:tments is cooIdinated in a steady flow of production. Science double-checks the work of experienced men and modern machines as the many basic items are manufactured into finished products. At every step, in every process, quality control is rigidly enforced• The result is uniform, high quality in every one of our finished products. Your company is proud of its reputation for quality, and prouder still of the men and women who maintain it. For all of us Qtmlity of Product is Essential to Continuing Success. 14

® AND ~IS SUmSlDIARrE~ For the LUCKY TRIKE Your Company's principa prnduc , • nd Am¢£1ca's leadln~ l'igarelte, Smokers agtee--L$/MFT PALL MALL A distinguished clgarette--"Out- standlng--and tbO, are milch" Cigarette Smoker HERBERT TAREYTON A top quality cigarette of modern size with a cork tip. "There's some. thlrlg abaal them yotdll llke," e For tko$¢ who "roll their own" ctgarettes BULL DURHAM RIZ LA CROIX America's most popular "roll )our own" cigarette blend, "~'be makings of ~ ~atlou,j~ A truly fine c garette paper, it goes hand in hand with Bull Durham. A fayorlte nalxtum of burlier and HALF ANn HALE ......... ~- ...... ~. ........... .... For the Drlgl~ttoDaccolorplpe~nuQgarette. TUXEDO A specially prepared mi ...... f bur- : Iey tobacco for pipe and cigarette. Pipe Smoker BLUE BOAR High grade tub ........ gh cut for perfect smoking, @ For the Chewer For the Cigar Smoker PIPER HEIDSIECK PENN'S NATURAL IVY, DARK (MAYO'S) Fragrant chewing tobacco with a "Champagne Flavor." Natural leaf plug chewing tobacco. Penn's spells quality. A high grade, dark plug tobacco for smoking or chewing. LACORONA ANTONIO y CLEOPATRA EL ROITAN Grown in Cuba--blended in Havana --"Supreme the z~a~ld over. " The mildest clear Havan~ cigar, A precise blend of domestic and Havanaleaf."Tbecigarthatbreathes."

ORPHEUS D. BAX~Ly$ RICIIARD J, BOYLAN THOM&$ P. CONNORS JAMES R. COON Jo~N A CROWE JoH£ s, Dow. ~Directors PAUL M HAH~ ~IRAM R. ~N~IER ~DMUND A+ HA[~V~y G~o~cEW. H,LL, J~. HA~RY L. H1LYARD JAx~ E. Lwsco~, Jg, WILLIAM H OGSBL'Ry ~RED ~ ]0~E U TER VINCENT ]~IGGIO IA}*{E$ F. ~TRICKLAND Of~¢eJ's VIINVC]E ~1T [~IGGIO .............. prelldenl PilCHARD J BOYLAIM .......... ]r)(c prclillcnI JAMES R. QOON ............ Vice P~clident PRESTON L, ~OX~LER .......... ~'iCe Pre~ideel PAUL M ~[AIIN ............ ~i~t p~e.,ide,~t ........ GpOv:~E W; iqlLL..[~ .... ; , : . . . 2 Vice pr~sid?~rf HARKy L* I~ILIP.IID ........... ~¢~i#a~f Tr~,a*u~¢¢ FRED B, P.ELrTE~ ........ Amlilor; A~xislenl Treacnret EDWARD D. FLAHERTI ......... Assi#~'nl ~,lltdi#or A. L~Ro~ JxNso2¢ .......... Assistanl Auditor JOlIN W. HA~'LO~/ ............ ~,crelary ]FREnERICK X~/. KEN~'¥ ......... Assi~/anl ~'cregar~ Executive Office lll FIFTH AVENUE, NEW YORK 3, N Y, Corporate Office I17 MAIN SII~V-ET, FLEMINC,~ON, N. J Transfer Agent Grd~.RA~TY TRUST ~tIMP&N~ O~ N]-'~ yORK N~ YO~K 15, N. Y, Ragistrar CITY ]]AIqK FAF, MKR~ TI~UST COMPA~'Iy N~W Yo~k 1~, N. Y.

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