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SE VIg~,~CE liff/~EF/T$ A~ employee will be ellg~ble for saveranee b~nefits who is at least 50 years of ~ga but hss not pa~ed his normal ret~emeat ~te ant] vtho h~s ba~ 9A3 y~ar~ ~rvi~ wish th~ Compa~ ~l~te[y prle~ t~ *~.~c t~m~ ,~h~ ]~m ~m~hiy- merit ~a termthated for ~ay reason exoept conduct eonsfitutlt~ h~ ~e judgl~lcl~t of the Board dishonesty or ~dlfu] m~seondnct lil the perfolrmanee nf hiJ duties, Paymcat of severance bene£ts will start ¢liher at the employee's normal retirement date, or, with the consent of the Board. at any date within 5 years prior thtucefo whleh 1]1~ empI~yee may ~elect but th sucll latter event the benellks Vdll be reduced on an actuarlal basis to $llread die payments over the fender ~c~ed, llevez'ance 5~nefits ate a pertains {or llfe payah|e monthly, at an a~n~al xate detezralned ~s th~ same mannm" as herelnshove stated with respeet to relirement bertefit~, except that the 25-year period thai[ be corn- puled to the date of zeverance instead of to normal reffrtmaent date or aet~lal refirezaent~ mad shall include ooJy years of service aB~r age 30. D~qABILITY ~;FIT$ An ~mpleyee is ell~ble for disability benefits who has had 12 years of ~crvSee immediately prior to disability and who at sud~ time iz n~t on an absence seffimut pay (other ~an sick leave) which has lasted 6ver six months. E~gthle emt~thyces xsho a~e found by ",b,e g~a~1 t~ be, b~fore n~rmal reff~,~mezt date, permsae~li'¢ th~bl~d f~¢~a continuing erapleyaaent will commence receding disabilJty bezeffts, Disability benefits are a pension for life payable monthly at an annual rate determlneA by aggregating the sums t~rnputed m; specified ia ~e following paragraphs (1) to (5): (I) Pa~ Service. 2% of that porti~ of the employce'~ mmuaI rate of c~mpensatfon on the effective date of the Pla~ not in excess of $5~00 thn~ all ~ar~ of past ~erviee wliidn 25 years of disablllty; ~s (2) Yuture Service. 2% of that portion of the e~ployee's actual earnings not in exce~s of $5,000 du~mg each year of ~tor~ service willfin 25 years of dlsah~ty; p/~s (3) P~st Servlc~. I~/~% of that portion, if aay, of tho employee's a~tmal rate of ¢omllenr, ation on the eEe~iw date ~ ~e t~an ~ ~xe~s ~ $5,(39~ tlm~ ~ y~T~ ~ past ~e~!e wlihi~ ~5 ~r~ ~f di~ab~ty; p~s (4) furore Serve. l~/z% of the portion, if any, of the emllloy~e'~ ~ual earnings i~ excess of $5,000 during eash y~ar of ~utm'~ service w~thi~ 35 years of disability; mlm~, a]t~ age 65, SOCIJ~* SECL~ITy DEDUCTION (5) 50% of the primary Social llec=rlt7 henefit. ~Im foregoing formula is modified with respect to past service creffli~ (to wit, those aecrathg prior to the effeeffve dat~) as to employees with an ~nnual rate o~ compensation of more th0,n $10,t)00 on the effective date; as to sash employees past sexvlee credits for the amount o~ compensation are cnmptlted o~ the avsrage rate of their oom- penseffoa ~or the 5-year perlocI 1944 m 1948, inclusive, or such portion thereof as they m~y have been employed (using a minimum rate o~ $10,00ll per year) instead of the annual rate of compensation o~ the effective da~, ~n determining the perled of pa~t or f~mre service eredi~ for dleability benell~, there will be excluded all years in which the employee w~s reoelvlag benefits trader the Plan or any other ~brm of disability benefits granted by die lioard,

Disability benefits may terminate in any of the following el,enter (1) if, without the eo~sent of the Board, the employee accepts folbfime or part-time work; (2) upon the faiinre of the ~ployoe to undergo an examination at least once a year by a pbysinlan designated by file Company; 15) upon notice from fine Company that, in its opinlor, and on the afivise of the e~nmthlng phy~c~an: the en~ploye~ is ~u~cienlly reeoverefi to return to work, accompanied (a) by a request to retttrn to such work, nr (b) by a notice to the effe¢~ that no work is available. GENE1//d5 Upon approval and adoption of the Hun by the r eqdislle vote of common m~d preferred stockhalders, the Plan become operative, zubjeet, in the case of any employee represented by a recognised eofiecfive bargaining rep~entafive, to the negotiated eoxtsent of the Company ~ld such rel:Ceaentati'~e. No eontvibations under tile Plan a~e to be made by empinyees. 'fhere ~qJI be no fiea~b hemefits under tha Plan. Employees ~dll he per~ti~d, smbjecL to such rules and regulatinne as the Board may from tlm¢ to time provide, by exe~alr6ng a ~ght sf ein~he~ pl~ t~ ~tinement t~ tch~ retiu~ benefits ~.o b~ paiti 1;o the ~mpfuye~ an6 a sarvhfng named benefielary. An employee may eject to retire at any time after his 60th birthday, if he has bad 15 years continuous foreign sorvine ~omcdlately prior ~:o making such deetinn, with the same benchts as if be had xemalned in servin¢ until age 65 at his annual ra~ sf compensation in o~eet at the date sf hll rchrememt: eonameneing immediately anfi without any aemnrinl redaet~n. All henefits may be terminated with respect to any beneficiary wbo~ without the approval of the Company, accepts employment with any ~o*npetit~r of the Company or enge~ in any activity in competition with the Company. If any employee who has bee~ retired returns to service ~ith the Company, his p~nsinn shail be suspended fez the renewed period of service. Upon the termination of sueb renewed service be win receive the grea~er of (1) retlremc,t benefits a~ the rate previously payshle, or (2) retlr~iLent benefits reeomputed under the formula herein- before sol forth under the beading "Refirememt Benefits". The Company amy engage on a rein;net or foe basis or as a director (but not as an o~eer) an)- persan reeeivlng benefits trader the Plan and snob engagemettt v~ll not ~erminate or eu~penfi such behests. Beaehts under the Plan will be n~n-asslgnchle by the bened~!inry in any manner whatsoever, including transfer by oI~atinu ~f law, If ~7 ¢mpl%-¢e or henefieiaty fs in the optttinu of the Board in~spabin ~f haudl2~fl hfs affairs or mahee or suffers any attempted tran~t~r~ xch~thcr volantary or involuntary: of the benefits tmde~" the Pinn~ benefits under the Plan shall in the di~¢refian of the Board cease and payments thereof may be made or applied to or for the benefit of suzh employee or beneficiary or his spouse, ek~dren or other dependents or any af tham in such manner and proportion as the B~ard shall from time to thee deem proper. The Beard mad its eolnmlttees and agent~ shall be the exclusive authorities to admbtister, interpret, construe and apply the Plar~ and ~ts anfi their acts ch.ll b~ eonejusine and bin~g upon all p~rsons. The Company reserves the rlghL~ fi~rougb action of the Board, to amend, modify or terminate the Plan in wbola or in parr at any fime or from t~ae to time, provided that no antendment chall he made which materially inorease~ the cost of the Plan to the Comply or nit,re in favor of ~ffiecrs and ddieetors the allooatinn of the benefit~ as between (I) nfliv~rs and dlreetors and (2) ether employees, without the approval of the stoekholders of The Ameriean Tohaceo Company. All elalms |~ benefila by ~mploye~ or bene~inriss, wbet~er or not payracnt of benefits has begun, are schiect to such ~esar~ed right of ar~cndment or modification or termination. The Plau ¢¢ttfera ao right ~tpou ~x3~ oraplayee to be retained in the sardee of the Company. The Plan shall ~ot be construed ~ preventing the Company from paying additional disability, severance or retlten~ent allowances or death be~aellts or from making other provisinna in any ease where in the opinion of the Board speeiai eineurastanees exist. "fbe Compem~¢ is ranking no p~o~isinu for the funding ~r fn~,~r~g o~ the Plan or an), ben~li~ herwrade~, but it may at its npiinn under the reserved power above referred to m~;~ such arrangements in the intare. 10

COST OF THE pLAN The Company has beea advised hy independenl aetaaales that the es~maated benefits payabIe reader tho proposed Plan over hhe period of 80 ycars bcghning January I~ 1949, divided into pealeds of 5 years eaab~ (a~saming the conl~nnance of the Plan for that pealed wilhout amendment, and that file rim.bet of employees and their over-all payroll rea~ains subalanllally tho same in the future), wl]l he appraxbaataly as shown by the following tabie: TAllLE A F~T~q~TE o~ COST (Projected Amount al Redroment and Disabilit7 Payments) Avsra~ P.ymcnt Fiv~Ye~ porlod ~er Year 1940-1953 $ 80L,000 1954-1958 888fl00 1959-1963 1~356.000 1964-1968 1,818,000 1969-1978 2,286,000 197~1978 2,560,000 L11theate: 2,618~000 On the bash of a ruling 15~ued hy the Commis~oner of Iuternal l~venue wDh re~:t to the plan, it is believed that payments made pursuant to the Han by the Company '~ilI be 8eduedble by it for Federal income tax purposes in the year in which made, and that the amountB of the benefits paid there~mder to partlalpauts wm co.sthute taxable fa~rae t~ th~ untI~ Federal t~¢me tax la',~ ~nl~ in the yeaY in ~h~ ~ue~ p~meut~ tL~ aetu~l~3~ ~ehwed. The amounts of benefits ~e~ fo~ih in Table A are exclusive of benefits ~leeady being paid and whleh edll continue to he paid ~ disabled ~mployees under ~he pteaent disaloflity plan berein~bove referred to. Such benefits under the preset pinn ~¢fiI, hi the course of ~dme and as the himeftala~e~ under that plan pass away, grathmlly deer~e anc~ ultfeaately cease entirely. It is estimated by the actusrfes that of the total amcmn~ of h~effta which they eeffma~e will be paid under the Phn in 19~ (~1,171,000), the be.edts to employees other than o~icers a.~ directors of The American Tabao¢o Com- pany ~ he approxlmateiy 89~ and to ~uab o~i~ers a~d tilre~ors 11%, ~Leff that for the y~ar 1979 and erich year thorcafte~ such percentages will he app~ohimataly 95% and d~ rerpe~tively~ This estbaam is on tile asstmapt~on that in each of the yeaz,s refer~d to, the Plan will lo¢ th effe~ and will nat in the m~ntlme have bee~ smended, and that tho compensation paid to (i) ofdcers an~ dise~tors and (ii) other cmpinyea~ edll ¢ontlnu~ t~ he in ~ubstan~eily the same relative prc~p~rtiens as in I948. The ~lle~ing Table B set~ forth the m~m~ aud pnsi~u with the C~a~uy ~f. auti the e~tlm~t~ ~uuu~ ~mou=~ of retirement henefi~ payable uuder the pr~poscd Plan t~, each par~on who ,faring the year ended Deoemher ~l, 19~8 received an aggregato remu.eratlon in exces* ~f $25,000 from the Company ~ed i~s strb~idlarle~ and who was a dinealo~ nominee foz director or one of the three h~ghe~t paid ~cers diglbie to participate in the Pleu; the table being based on the assumptions that: (a) eaoh of the persons named in the tchl~ shall continue to be an employee until his normal retirement data; (b) he shall continue to he in receipt of e~h compenseffon to his normal rellrem~nt dam a~ a rate equal ~o the rate of hls compensation a~ of Fchnm~ 1, 1949; (o) he shall retire at no~aal rallre~nent date (whiab he may be required to do uuder the provisions of the p/ca), and (d) the Plan shall oo0atlnue ~ be in effect and not amended. TABLE B Estimated A~ausl ~et~-~m~nt Be.efit at N~'~sl Orpheus D. BaxaIys Richard J. Boylan Douglas W. llrashezr Th~aa~ P. Connors dam~ g Coou John A. Crowe Pod~on Re~emo~z Date ¥ise-Rieeident, The Amerfean Tabaoco Company ot the O~auh ]ne, $16,778 Vice-Preeiaent. The Araeriean Tobacco Company 17,000 Vfee-Feecidonh Amorieaa Suppliars, Incorporated 14,000 Director of Traf~c, The Amealoan Tobacco Company 11,000 Vfe~Prealde~t. The Ameriean Tobacco Company ~7,000 Asst. Chie~ of Nlanufact~re, The American Tabavco Comlx, my 17,000 11

Name John S. Dowd Preston L. Fvwier Padi M. Hahn Hiram R. Hammer E~lund A. Harvey Harry L. Hflyaed A. LoRry ~'ansoa James E. Lfp~omb, Jr. WilIiam H. Ogabm:y Vincent Riggio J~e~ F, Std~kland Estimated Amaual Rclir~mont B~nefiz at Nor~ai pO $ilio~ I~et ir cmeat Data Vice-President, American Suppliers, Incorporated $17,000 Visc-Presidenr~ The American Tobacco Company 15,043 Vice President, The American Tobacco Company 1%000 Director of Rc-~earab, The American Tobacco Compaay 1I~000 Trezastxrer, The American Tobacco Company 17,000 A*.~I. Treasurer, Tbe American Toin~cco Co0aapany 11,132 Auditor, The Amer~eari Tobacco Company 12,6¢7 pre~,idenb American Suppliers, Ineorporatecl 25,00~) Asst. Chief ~f Manufacture, The Amsrlean Tabaoao Company 17,000 President, The Amerisa~ Tobacco Company 25,000 Vice-president, ~rleau Suppliers, Ineozporated 15,53~ The foregoing Table B includes ths names of the officers who received respeclively in the year 1948 the five l~ghest aggregate amounts of remuneration paid by the Comparly and its subsi~0ales~ namely, Vincent I~ggla, President of The Amcr~ean Tobacco Compmay~ Richard J. li~ylan, Vice.President of The American Tobacco Company. James R. Coo=~ Vise.P~esldent of The American Tabac~o Company, Preston L. Fowler, Vice-Presldent of The Amerlama Tobacco Company, and Paul M. tinlm, Vice~Presideat o~ The American Tobacco Company, the amount of such remuneration in each ease being as s~ forth on pages I4 aad 15 rff this Proxy Statement. Five persons are named instead o~ three because the four Vice-Presldents r eceivs the same amount of remtmeratlon. The ~unts paid or set aside for the benefit of (a) employees (or former employees) and (b) officerB and d~ree~ors (or former officers and directors) of the Company and its ~ubsidimSes during the year 1948 uuder any oth~ bontt~ prolit~abaxthg, pension or retirement plan were as tolinws: (a) Employees: (other thsn directors or oi~eers). Payments to forme~ empinyee~ of approximately $412,000 under the present disab~lliy pLan hereinbefore reinrced to. (b) Directors and Offlc~rs: A. To fixes former etheer~ or diseetors (o~e of whom ~¢as formerly an of~cer and director of the Company, a~d the. other two, officers or dlre~rs ~ a subsidiary) an aggregate of $14,000 under the pr~st~at dischnity plan hereincheve relezaed to. B. The amomats of incentive e~mpeasatlon sccrued tlurlng 1948 under ~rr~cle XII ~i the By-Laws te the President and Vice-Prezi~n~, as rertae~d by the agreement ~ Novcro.~er 3, 1948, desaribed on page 4, in the amounts and to the individuals as set forth on page~ 14 ~nd I5 of this Proxy Statement. Tha proposed preamide~ and xesolufion conzthuting Proposal B are as follows: WEEa~S the Board o~ Directors of The American Tohacoo Corn]puny has ~ormulatsc[ a reth'ement plan, to be known as Th~ American Tobacco Company Retirement Plan~ providing for retlreanea~t, dlsab~llty and severance benefits, a copy of .shlch Plan has be~n presemted ~o this meetin~ by the Secretary of this me~liag~ and a copy oi which, initialled by the Sseretary~ has be~t oedered to be attached to the minutes of this meetlng~ and W]~urz.s the B~artl of Disinters has pa~secl a resolution declaring that in its opinion the adoption eI ~ald Plan .is advisable, Now~ T~zl~rO~, P~SOLVga, That said Plan is haraby approved ancl adopted. Th~ Management recommends thttt you vote IN. FAVOR OF PzopasaI B. Proposal C. The Company is informed that Le~is D. Gilbezt~ whose address is 1165 Park Avenue, New York 28, Ne~ York, ~abn J. Gilbert, who~e eddre~s is 1165 Park Avenue, N~w York 28, N~ York, and J~hn Campbell Henry, wko~e eddre~ is 5 East 93rd Street, New York 28, b~ew York, stockhal~ers, intend tc~ introduce at the forthcoming Annual Meeting the/alio~bng r~aluti~n (desigaat~d herein as Proposal C) : "Resolved that the following cla~e shah 12

be atded to the presertt provlalol~ of Arlie|e XII--That notwiibstand~ng th~ above provisinns for incentlvo ¢ompensa- tlon, the amount to he paid to the Pr~ald~nt ef the Corporation shall in no event ~xee~d an aggregate total amount of 8200,000 and that of th~ Vice.Presklen~ shall not he in exeess of $150,000, each," The propoher~ of this resolution have fa:nizhed the followh~g statement setting forth the ree~ons advanoed by them in support of their proposal: "Aggregate payrnent~ to pre_*ident Vincent Rigg[o reae~aed the sum of $484,202,36 according to the Iast proxy statement, an amount wlfich we helleve ~ar too high, even with current taxation levels. The five Viee-PreMdents were paid $268,521.43 each. That many st~ek~olders support the sextse of this amondzaent io the compensation by-Law has been thown hy the £aet that 180,36I vote~ were cast in support o~ our poaltion on this miter last year. Contras~ the Riggio payment to the aggre.gaM of alallar c~mpe~sation to Presldent Andrews at Liggett and Myer~$108,379.02!" Mr. Lewis D. Gilbert. co-sponsor of Proposal C, has on four ~eparate (~ccaMons* at the Annual Meefng~ of 1940, 1941, 1942 end 194e. i~trodueed proposals to change Artieln XII of the Cr~mpany~s By-Laws by limiting the incentive compensation payable thereunder. The 1948 proposal, which was identical with Proposal C, was introduced by him and the saree co-sponsors, Messrs. GilLert and Henry. Each af these prop~sMs }]as hsen rejected by the stoel~ulders by overwhelmlng vote. At the 1948 A~nu~ Meetlng. 2,~2,798 votes were east opposed to this identical proposaL 'l~e Management does not believe that Proposal C ia in the interest oE the Company and its sLoe'alders. The attention of the sleck~olders is calle~ again to tI~e Mmaagement proposal (Proposul A) wMeh is described ~ad discussed on page~ 2 to 6 of this Proxy Statement. In Proposal A the Management, on its own irdtLative, ha~ proposed a suh~tantlul reduction in incentive compensation, and by the vulm~tary a~reeme~t de*e~thed on page 4, the President and Vice.Presidents now in o~ee have made ihls redaction applicable to their compensation for the year 1948. Th~ Management helieve* lbat its proposal, whne ~eduulng hxeendve eolx~pezl~ation very substanib~ly, lores~ves the stimulant of a~ ineentlve to increased effort and aeeompliahment for stockholders. The e~t.thlishment o~" an arbi- trary calling beyond which there is ~o such incentive is wholly ineonsisteztt with the theory of incentive eo~apensa. tion and would not, in the Management's opiulon~ be advantageous to the Company and its stoekl~nlders. The Managemerd re*on~nends tha~ yo~ vote OPPOSED TO Proposul C. Proposul D. The Company i~ informed that the name proposers~ ~essrs. Gilbert and Henry, also intend to introduce at the fortheomlng Annual Meeting thu fallowing resolution (dealbmated hereha as Proposal D) : "Resolved, that the stockholders hereby requ~t the Board of Directors to take appropriate steps to submit ~ stoekliuldexs an amendment to the Certificate of Incorporation provilJmg for eumulatlve vol:thg, that is to say that at all elections o~ directors, the stoelthoIders shall have the fight of ommulafive voting, that L~ to say. each ~ockholder shall be entitled to as mmay votes as alm]l equal the number of votes w~eh he wouM be entitled to east for the dectibn of directors with respect to his thares of stock muhiplled by the number ul dlreetars to he alerted, and he may oa~{ a~ of such votes lbr a sibgl~ director or may distribute them among the ntumher to he roved for, or any two or more of them as he may fle~ fit.~ The proposers of thL~ resolution have fturfished the fo]|ow~ st~teraea~ setting :[orth the reasons advmaced by them in support of their proposal: "TMs is partleularly irapor~ant at American Tobaoeo, with differences of opinion in regard to topics such as adverfslng prohIems and inventory (which reached a new high r~cord o£ $483,133,078 in 1947). That such differene¢~ exls~ is obvious from the ~any floor di~eusalons on thes~ matters a~ our annual meeibags. Yet under the present set up all the ~ireeters are employee*, with the public shareholders completely no- replicated, a zituation we feel ~hould he corrected. Cumulative voting has been made mandatory as a proteetlon to stockholders in 19 states and optional in I7 more including New Jersey." The ~anagemen~ doe~ not believe that Proposal D ser~e~ any usald purpose. The advertising ~peaditures of the Company have~ for year% been smaller than the amounts reported to have hee~ expended for advertiMng hy its prlbeipul c ompetit ors. The Compan)Zs inventories, which are requlred by it~ ibrg¢ vulpine of hmibess, hea~ ~ab~La~tially the same proportibn to sales as the inventozi~ of iM palnulpal uompetltors. The z~oekholdera have each year, from )-ear to year~ elected hy overwhelming majorities the M~aagement's norulnees ~ Dire~to~ and have thus, in e~eeh approved the puliey that the Board ~hould eonal&~ entirely o~ ot~eem and employees of the Compm~y glvthg their entire time and efforts to hs service. The long.coat'ned record o.f m~eces~ful operation of the Company's huslne~s under thls policy indleatez, in rite opirfion of the ~/lanagemenh that it would not be in the interest of the Company to initiate the amendment to the Certificate o~ Incorporation maggested hy Messrs. G'xlber t and Ilenry. Tl~e Management r~:ommends tha~ yo~ vote OPPOSED TO Proposal D, Th~ Manageraent is ~aot aware of any arguer matte~r intended to he presented :~or a~ion at the me~t~ng. 13

i~£ MUNERATION Remgneratiott o.( Dbectors and Officers. 'lhere Js set forth ha the following tabulation the aggregate remuneration directly or indlreetly paid or set aside, on ma accrual baals, by the Corapany a~d he subsldlar}es to, or for the benefit of, the following persons for 8erffices in all capacities whl]e aclhag as directors or o~]eers of the Company during its last fiscal year: each person who w~ a director of the Company a~ any time du~mg such fiscal year and whose aggregate ~mua~'allon, e.xalnsive of pension, retiremollt and similar pa)qments, exceed0d 825,000; each person who was one of the three hlghest.pald offieer~ di" the Company doxing such fi~oa[ year and whose ~gregate temu~eralSon, ex~usiro of penshan, xetlr emeut and similar payments~ exceeded 825,000; and all pe~sozta, as a group~ who were dlrecZor~ or 0ffiee~'$ of th~ Company at ~my time dusi~g such fiscal yeax. ~er~ the total rcr~unerafion exceeds by more titan ten per cent. the total remtmerathan for the preceding fiaeal year, the excess is stated in Column (6); whe~. the total remuneration is l¢~s than tha~ for the preceding fiscal year, the d~creass is stated ~n Gel=ran (7). ID Name of individna] ,~z idmat ky Q[ gxoup Orpheu~ D. Baxalys Riohard J. B~yIan Douglas W. BraJhear Thoma~ P, Conners James R. Coon~ John A. Crowez John S. Dowd preston L. p~wl~rX Paul ~. H~hnt Dirmu R, Hammer Edmtmd A, Harvey George W. Dill, Jr.z (2} Cal~dti~m in vehleh (3) remlmer~ion w~s rcoe~ed S ~lmie~ Vice-Yrozident and Managing 8 50,00~.00 DHeetor, ~le American Tobacco Company of the Orienl, In~.~ Vioe.Presidcnt and Director of Purchaae~, The Amerloan To- hn0co Company Vice-President, Ar~eriean Sup- pliers, Ineorporoled~; Gen- era~ Manager of Stemmeries Director of Traffic, The Amer- Tobacco Company Vice-President and Comptrol- ler, The Amerlentt Tobacco Company Assistant Chief of Manufacture, Th~ Ameal~an Tobacco Com- pany Vice.Presidenb American Sup- plthr.% Incorporated~ Viec-President and Chief of Manufacture, Th~ American Tobacco Company Vice.Preslde~t~ The Kmerlcau TobaCco Company; Presi- dent, Amerioan Cigarette and Cigar Company Director of Resemrcb, Thn Amealean Tobacco Company Txea~rer, ~e Amesiean To. ba0co Company Vice-president and Director of AdvertMng, The Ameriean Tobacco Company (5) Applioablo (7) par'ion o~ (ffi Decr~e (6) Grou9 Exc~ over z~nder Partlclpatinn I~saranee prevlou~ pre~ogs in plofita ~remJl~m ye0g y~ar $73.53 $5,412.45 50,000.00 8196,638.8¢ 73.53 ~ 21,g86J30 35,000.00 73.53 27,000.00 73.53 4,995.73 50,000.00 196:638.84 73.53 50,000,00 73.53 40,000.00 73.53 50,000.00 196,638.84 73.53 50,ffi]0.ffil ' 196,Cq8J~ 73.53 30~000.00 73.53 50,000.00 73.53 11,025.68 76~820.74 18.83 ~1,g86.~0 ~L88~80 21,886.80 180.733.92 A]s~ offices of af~liated comply or e~m~an~es. R~si~ed M~creb ]8, 19&q. ]'~llalecl oomlla~y e~og~ ~n purchase an~t han(~ing oI 1eat tobacco. 14

(5) ApI~icable (71 porIion of (6) Decre~e {I) (2) (4) Group Execs8 ov~r t~der Name ~tlnd~[d~l Capac~tles in whlch (3) Par t~c~p~tlon lnsur~m~ proviolls ~e~u~ or idcntlty of ~ro=p :~mt~era~oD Was receded Ss]srie~ in p~s plemi~m~ year year Harry L. HilyardI Assistant T~ea~rer, The Amer- $ 55,000.00 $73.53 iema Tobacco Company A. LcRQy Jansen~ Auditor (and former AssL~nt 29,~10.24 73.53 ~8,822.66 Auditor), The Amcr ftan To- b~::o o Company James E. Lipa~m~, Jr. President, American Suppliers, 120,000.00 73.55 ]ncorpora~ed8 Wfillam H. Og~bury A~stan~ CJaiof of Manufacture. 50,000.00 73.55 The Americas Tobacco Com- ply Vincent Riggldi President, The American To- 120,000.00 $527,73h42 73.53 ~ 36,475J5 baoco Company James R S~aicldmul Vioe~Prealdent, American Sup- 40,000.00 73.53 pliers, Iuoorporateila Dioeotors or Of~cers Directors or O~oezs as a 918,245.6d 1,595,107.32 1~367.48 256,990.20 as a group group 3. AI~O o~o~r ot affiliated cordpany or companies. o AP~Iiated company ellg~ged ill purchase as~d handling of kzaf tobacco. 4 EIectsd April 27, I9~. The amounts stated in Column (4) abave ware scorned as incentive eoInpensalioa (based on pm~ielpatJon in Company profits), under Argele XTI of the By-Laws, after giving effect to the agreement entered into ~th the Company by the President, Vincent Rigglo, and the ~our Vioe-Prealdent~, RiohaM J. Boyllan, James R. Coon, Preston L. Fowler and Paul M. Hahn, de~erlhed on page 4 of this Proxy Slatemenb reducing fi~e ~'apcofivv rates of remuneration of each of them under A~tiala XII inr th~ year I948. The effect o/ ~h agreenomt was to reduce the remunerat~o~ o/ tlt~se re~peetlve o~qcers by the ~ullowi~g amounts wh~h would have been payable to ther~ e,xeep~ /or such ~gr~emem ot~ theft part: Vincent Riggio, g264,689.48; Ri~dard L Boyish, fames R. Coon, Preston L. Fowler and Petal M. Hahn, ~158,813.70 eacfi; a tota~ redur~io~ o~ ~899,94~.28. ~o fees or commissions were paid to or for the benefit oi any o~ the inllivlduals IJsted above. There wer~ no penslon~ retirement or similar payments to o~ ~or the henefi~ of directors and of~cera of the Company. Pending di~poaitinu of an ncfton brought h 1943 in the ilugreme Court, New York County, entificd "Rec~t v. Baxalys etal.," the Treasurer wlthlaeld a portion of tha remuneration accrued ditring 1943 and during 1945 mad 1944, respectively, to Paul M. Hahn mad Vincent Riggio~ In 1948, pursuant to decision of Ilia Court and after dlspasltion of the action, there was paid from the innth ~vifithdd $28,353.99 to eaoh of tho~e two o~oers. Tke aggrega~ amount of remuneration for the fiscal year 1948, received f:rom the Company and its aubaldiarle~, directly or indirectly, ¢oa an accrual has~s, by all the directors and officers of th~ Company as a group, was less than J¢~ of l~b of the Compauy'~ oor~alidated net aa|e~. ~$CELLAI~OUS Any ~tockhol~er m~klug wal~t~ request ~erefor to the Socret~ry of the Company wfil b~ furai~]~ed a sdmm~ry of the Amaual Mecfing that will be prepgred after the meeting haz ho~ held. Messrs. Lybrmad, Ross Bros. & Montgomery have for many years balm the independent auditors for the Company, and are appointed by resolution o~ the Board of Direotors. 1~ accordance with the Company's customary ~3

practice, a member of the ~m of auc~it~rs w//l attend the Ann~aI Meeting and respond to questiom which may bc ask~cl by stockhoide~. Comm~nt~ or su~g~tinns t~y stockholder~ with r~arct to the a~cI~ are ~veloomed, as thay ~re with regard to ~11 other matters a~ec~g the Company's Interests. Fl~min~on, N. J., is rc~cked by the L~dgh Vdile~ Railroad. The p~eaent ~r~fo schedul~ ~v~dch is s~bj~ct to ahang~ ancl shoukl ~e confirmed, is ~s foIlow~: L~aw Penn~ytvanla $tztinn (S3rd Sheet a~d Seventh ~kvcnue~ N~w York~ N. Y.) 10.55 A.~L Arrlve Flemlngton t~.10 P.M. Leave F]emin~ton 5.07 P.I~. A~iv~ Pe~n~yI~anis Station 6.35 P-M. The Company wi8 procure raiIroa& ~anspor~ation, ~rom Ne~v York to Flemington ~ncl rc~urn~ a~ Company expen~ f~r any stockholder of ~ecor& des~roua of altcndi~g the rattling, on hi~ noti~yln~ the Secretary in writing, prlo~ to March ~t, i949, that he ~vishcs ~uoh tra~port~tlon obtained. I/ you do no~ pla~ to attend, yo~ are urgently requeste¢l to execute the enclo~e~l l~ox7 ~nd mail ~ to th~ Company promptly.. E~p~n~e o~ S~licit~ion. Th~ expense of the solicitation of Pro~iss for rids meeti~ incIudlng th~ ~ost of m~iling, ~11 be Lorn~ by th~ Company- In addition to mailln~ copies o~ thls matcrioI to stockbrokers, th~ Co~pany will request perlons ~ho hold s~ock in their name or custody or in the name of nemin~e~ for othera, to ~orwaed eopiss ~f such ma~erioI to those persons for ~vhom they hdi& s~ol;k o~ th~ Company ~nd to r~que~ anthe~t¥ fo~ t&e e~eeutinn of the Proxies. The Company may rdmbur~e such persons ~or thdir o~-o~-pochot ~xpenses ~nd cl~r~0al charges in conn~ut~o~ ther~with~ "~dch expenses ~ ~stim~cl to b~ ab~ $1~$99. T~ ch~ e~n~ n~s~ry in o~et ~ assur~ su~ciont representation at chs mee~g, e~ce~ and som~ regular employe~ of the Company ~n& approxlmateIy 7 emplnyee~ o~ Cameron, Sitadiey & ~Telh, Ina. ~vill request the return o~ P~o~de~ by tcIephone, telegram c~r in person, a~ an estimated cost ~ about $15,000. Th~ a~a~un~ of th~ expense ~o bc borne by ~h~ Company will cIcpend upo~ the volume o~ ~harea repres~nt~ by the Proxies ~ in r~pon~e to this Notice of Me~g. If Prox/e~ arc not re~ived promptiy~ it may b~ nec~sary for the Company ~o sea& teIegr~phic sollcit~tion to thos~ s~ockhoId~rs ~cho haw not responded. The expense of s~ch t~Iegraphlc sdii~,itation ~t~uId bu s~out 82,500. $tochho]ders who do n~ ~ntend to be present at the Meetln~ are ~rged to ~en~ in their Prox~e~ wltho~t ~e]av, Prompt r~pon~e is helpful, and your ~ooperatinn ~vill b~ appreciated.

THE AMERICAN TOBACCO COMPANY FOR THE YEAR ENDED DECEMBER 31t 1948 WITH CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENT5 OF iNCOME AND EARNED SURPLUS E~ecutive Off;ce 111 FIFTH AVENUE . NEW YORK 3, H. Y.

.$ 4 lv~a Net income per common share ............. $7.58 Dividends paid per common share ............ 3.75 94~ $5.70 3.50 Net sales .................................................... $873,466,917 $819,631,122 ]We~ income .............................. " 43,912,204 33,845,021 Divldends paid (pre£erred and common) 23,331,074 20,865,961 Porl.ion of net income invested in assets *lsed in the business and to provide £or debenture sinking ~und requirements 2{),581,130 12,979,060 \, Current ~sets, IJecember 31 ......... 567,883,212 ~37,871,g65 Cu;renr liabilities, December 31 ...... 126,387,405 172,577,I83 Net working capital, December 31 441,495,807 365,294,682 Number of stocklmlde~'s at December 31 : Common ................................. 63,425 63,007 l~re~erred ....................................................... 8,848 8.878 2