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TRANSCRIPT PHILIP MORRIS & CO., LI?D., INCORPORATED Annual Meeting of Stockholdere Richmond, Virginia July 8, 1947. F. C. TILGHMAN SHORTHAND REPORTER MUTUAL BUILDING RICHMOND. VIRGINIA I I

F. C. TILOHMAN tHO11TMANO Rl1O/1TfO /IIOMM.OMO, VIQOIMIA ; . 7 0 ,. i: m 1. ,s 11] 17 m ,s m m 22 m m m PHILIP hIQRRIS & C0. , LTD., INCORPOUTED Annual Meeting of Stockholders Richmond, Virginia, July 8, 1947. MR. CHALKLEYs The meeting will come to order and will be adjourned to room 604 A-iutual Building. NOTE: Those who had assembled in Room 618 :Jutual Bldg. proceeded to Room 604 where the following aQre present: Mr. 0. H. Chalkley, Chairman of the Board, :ar. A. E. Lyon, President, Mr. &. P. McComas, Vice President, Mr. L. G. Hanson, Vice President, Mr. Wirt H. Hatcher, h4r. G. P. nrauburgor, Mr. Fred~ A. I;Ioss, Mr. W. S. Hargrove, Y.r. John D'. Lindsey, Virginia Trust Company, Mr. Robert S. Jeffress, Mr. Otto Markham, 1,Ir. ti'J. 'd. Crumpy I "k- f k n

, '. C. TILOHMAN •HORTHAHp RIIRpNiill ./OMYOND, VIIIOINI. / iC. , I t S . 0 0 0 m ,4 1: m ,4 m m 17 m Mr. James H. Scott of Scott & Stringfellow, Mr. 1.7alter S. Robertson of Scott & Stringfellow, rdr. James T. Parkinsont Jr., Miss Caroline L. Sparrow. Yh. HANS0N: I wish to present to the meeting the ,notice of meeting, manage-Tent proxy, proxy statement and Annua Report) including financial statements for fiscal year ended~ March~31, 191+7, together with affidavit~of mailing of the ~~ notice of ineeting, management proxy, proxy statement and'Annua] Report, including financial statements to holders of Common1 Stock, $j par value, and of the mailing of the notice of meet- ing, proxy statement and Annual Report, including financial statements, to all holders of the Cumulative Preforred Stock, 4% Series, the Currulative Preferred Stocks 3.60% Series, and- the Common :01tock, 310 Par Value. These were all mailed at least ten days prior to this meeting. MR. CHALKLEY: Wi11 the Secretary file with the minute of the meeting copies of the Notice of Meeting, the Management P 1t; e ,$ m m Proxy, Proxy Statement and Arinual Report, including Financial Statements, and the affidavit of mailing.. ~ m n !.. ® The Board of Directors fixed June 9, 1947, as the record' clate for the determination of holders of Common rtock, ;5 PL,r Value, entitled to notice of this meeting, and only holders of such stock of recor:l at the close of business on that date shull be entitled to vote.

i ', 0, T1L0NMAN 8NONTHANO REtORT[R. RIONNONO, VIROiNIN. 3 ; ,j , I: ! 3 . . I 0 IA 11 m 17 to so al 22 m ® ® MR. BRAUBURGER: I move the apnointment of 1,Tr, R. Grayson Dashiell and Mr, G, Thomas Taylor as Inspectors of Election. LiR. CHALKLEY: I appoint those gentlemen Inspectors of Election. They will come up and sign the oath. MR. HANSON: Are there any holders of Common Stock, $5 Par Value, appearing in person? MR. BRpUBURGER: We have a list of those in attendance at the meeting. M. CHALKLEY: I announce that a majority of the Commo 5tock, $5 Par Value, outstanding is represented at the meeting either in person or by proxy. YR. BRAUBURGER: I move that the reading of the huinute of tho Annual Meeting of the 3tockholders of the Company, held on July 99 1946, be dispensed with, MR. LINDSEY: I second the motion. (The motion was unanimously adopted by viva voce vote) YR. CHALKLEY: The motion is carried. Mr. Secretary, will you present to the Inspectors of Election the list of holders of Common Stock, $5 Par Value, at the close of business on June 91 19'+7? IJR, HANSON; I present herewith copies of the Financia Statements as of March 31, 1947, of the Company (unconsolidate the originalsof which~ financial statements were certified to by Messrs. Lybrand, ~loss Bros. & L'ontgomery, independent n s , r 0

. f ! I 2 . I T 0 10 ,1 I: m . 14 LE I. ,o ,1 u ® u m F. C. TIl4NMAN SMORTMAMO R[RORTiKR R'CwroMe, v1qo4NILA r+ certified public accountants. The statements reflect only the operations of the parent company and the inclusion of the accounts of the Englishisubsidiary, Philip 11orris & Company, I Ltd., would make no significant change in the net results sho.l~,. ?1R. CHALKLEY: The next business of the meeting is the electionlof ten directors in accordance with the by-laws. MR. BRAUBURGER: I nominate Yc,ssrs. 0. Fi. Chalkloy, A. E. Lyon, 0. P. !ScComas, J. J. Switzer, L. G. Hanson, W. B. Ryan, Jr., G. P. Brauburger, K. H. Rockey, H. E. Riddell and J. E. Archbell as directors. MR. CHALKLEY: You have heard the motion that has been made. Do we have a second to that motion? 1IR. HATCH~:R: I second it. MR. CHALKLEY: The minutes of the meetings of the Board of Directors since the last meeting of stockholders are available for inspection of any stockholders who wish to see them. We have a report made by Lybrand, Ross Pros. & Mont- gomery, Certified Public Accountants, outlining the scope of their examination of the inventories of the Company. If any- one would like to see that, here it is. r.:R. LINDSEY: I would like to ask whether the income statements reflect the opprations of Axton-Fisher Company that l~ou too* over? l,'R. HANSON: Yes. The Axton-Fisher Company now is a , E

l . F;, i , 7 11 0 7 0 0 ,0 i1 i: I, . m m 17 m m m m m m t. m R. C. TILOMMAN SMONTMANO R[OONT.q /II.NMONO. VIIIOINIA dormant company. 1:R. BRAUDURGBR: I might say at that time we purchased the assets of the Axton-Fisher Company so that plant is being operated~ by Philip ::Zorris. MR. LINDSEY: And operations are reflected inthe income statement? MR. HANSON: Yes. L".F1. CHALKLEY: Gentlemen, Mr. Lyon, our president, has a few remarks to make. MR. LYON: Madam and Gentlemen: You have received your copy of the Annual Report which gives a complete picture of your Company's operation'but there are a few remarks that I would like to make at this time. Beginning in 19431 and each year since, in the Annual Report to the stockholders, the management has reported that a minority stockholders' action had been brought against cer- tain present and former officers and directors of the company. These minority stockholders are owners of record of an aggre- gate of 196 shares of comu.on stock and 4 shares of preferred stock. The claims made in that suit, allegedly on behalf of the comprny, were summari zed in the January 1946 prosPectus, a copy of which was sent to each stocktiolder. The plaintiffs have made a proposal for the settlement of this suitq by changing the nractice of computing any bonuse which -nay oe earned in the future as follows: I x ~ 1 ~

I s I C, , 0 0 m If m Is 14 m Is IT Is m ;r..: .. E zo . m n m :. :. F. C. TIL4H',MAN SNOQTNAMD RfPO/1T9R. "ICNM.ONO, VIIIOINIA 6 There shall be excluded from,bonusable income any dividends received by the Comc:a.ny or its subsidiar, ies and any profits from the sale of marketable securi ties. ExpensQs on issues of capital sto,~k shall be amortized at 10% per annu:rn and deducted from bonusable income. In determining the difference between the inter- est on funded debt at the rate of 7;b per annum and the interest actually accrued thereon there shall*be in- cluded in funded debt an amount equal to the average of the balances at the opening and closing of the fiscal year of bank loans maturing within one year. The aggregate bonus amount so computed is to be reducedby $10,000.00. Any rights of the parties to demand payment of their expenses and counsel fees by the Company are preserved. The Company thereupon asked the advice of counsel who stated that in tneir opinion the law-suit was not justified on the facts; that the extent to~vrhich the settlement would benefit the Companyq if at a119 was wholly speculative in amount; that prolongation of the suit would of necessity run up costs; that termination of the suit by settlement would permit executives to devote to Co:,ipttny affairs an enor.mous amount of time andeffort which otherwise would have to be 0 rv; ~ CJ tJ ~ G1 I

R, C. T16pNMAN SNOPOTMANO AfPORTIQ NICNMONO, VIROIN1A 7 , C C7 ,1 LI I I 0 11 m ,1 m m 1U m 17. LE 1. m I.„ m :1 m ® m diverted to defending the suit; that a sottlon:ent at this time woul.d probably save the Company additional expense; that the officors and dir~,ctorsj defcndrmt.s in the suit, shr.,uld not accept the settlement on behalf of the Company, but could appropriately join in submitting the proposed settlement to the Court for a judicial determination of its fairness and for acceptance or rejection by the Court on behalf of the Company. The proposed settlement has beeiz subr^itted to the Supreme Court of the State of New Yor~ where the suit is pend- ing and has been referred to a Referee whose report is expecte at an early date. However, before the Court approves the settlement, full information concerning the suit and the settl ment will be made available to the stockholders of the Company and a formal notice of the time and place of the hearing will be given. Any stockholder Vrho wishes may come to Court and present his views. The management believes that in so submitting the proposed settlement to the Court it has acted in the best interests of the stockholders. I am going to say a few words about the sales of your Cor.irany, I am not going to taik about the tremendous growth that your company had over the past ten years. You are well acquainted with that fact, but I v;ant to F,ive you a Sh9rt hi~s tory. ~ .~..... ~_ _w .._ _.

F. C. TILOMMAN 8NORTNAND R[PORTIR R/ONyDNQ„ YIROINIA. 8 I _ 0 7 0 0 m ,: Is m I. „ m ® W ® u m m m In our fiscal year ending f,11arch 31, 191+3, our domestic sales of Philip °,:orris were 21.3 billion cigarettes. Our exports that year were 2.7 billion. In our fiscal year end- ing t"arch, 1944, our domestic sales increased at an even greater rate than they had in the preceding year and vre deliv- ered to our customers in the United States 26-1/2 billion ci;;arettes. The demands of the armed forces also were begin- ning to be felt that year and we sent overseas 4.l billion Philip Ylorris cigarettes. During the next year, our '45 fiscal year, with millioi of men already far from their homes and millions more ready to go, we were faced with a problem. Our capacity was about 32 billion cigarettes. V,e knew that if vie continued to fully supply the demand of our domestic market we would not be able to send so large a quantity to the men overseas. We may have been wrongt but we felt that fighting men far from home, want- ing Imerican cigarettes, should be our first concern, and we decided to meet all demands made on us by the armed forces. The consequence was that in our t1+5 fiscal year we were able to deliver to our domestic customers only 21.9 billion Philip Morris cigarettes, far less than in the year before and less by an even greater amount than the demand reported to us bv our distributors, but this enabled us to send overseas for the armed forces ne~:rly 10 billion Philip tlorris, that ist more than our total sales of Philip ':.orris cigarettes, both domesti s I s;. a

a 0 0 a 7 0 lo ,I m 17 . E eo 21 ® m ® m ` I. C. TILOMMAN LNOIITHAkG RRPORT6R aCNYOMO. Y11101MIA 9 and export, in 1939, only six years before. The war ended during our194b,fiscal year and rith~itended the purchases of the armed forces, so during that year Vre were able to supply a larger quantity of Philip 14orris to our domestic consumers, the amount totaling 24.2 billion cigar iettes. For exrort that year we delivered 3.8'billion. Our action in cutting down on domestic deliveries in the fiscal year ended in 1945, in order to supp7y our fighting forces) I i resulted in,a temporary drop in our domestic business, andwe sold in the United States last year 23.2 billion Philip ::Rorris ITo help in the development of our export marketp I travelled abroad and vie were successful in selling in the post-war expor market 4.2 billion cigarettes. 5ince that time difficulties of exchange and other i problems in foreign countries with which you are all familiar haveLargely cut off thi s;export market and this year our export sales are about 32% of what they were last year. How- ever, what is of paramount importance is that our domestic ~ dcliv'eries of Philip Morris are holding steady in the total and the trend has been,turned upward. '4e have, since the star' of the present fiscal year, sold more Philip i,"orris cigarettes each month than the month before. Your Company's financial strength today is greater than at any time in its past. Our vrorkinP capital at the end ! of :,1ay was ~9'5, 339, 54b, more than 15 times our current liabil- I ~ i- f X V ,-.. ....~ ~ ~. ~