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March 27, 1963 1963 Report of the Conflict of Interest Committee To the Directors of Philip Morris Incorporated: In accordance with the procedure established by the Board of Directors of Philip Morris Incorporated on December 27, 1961, the Conflict of Interest Committee, in January, 1963, prepared a letter to be issued by the President of the Company to all directors, officers and employees of the Company, its divisions and subsidiaries deemed by management to occupy positions sufficiently important or sensitive to warrant the execution of a certificate with respect to the possibility of a conflict of interest between their personal activities and their responsibilities to the Company. The Committee directed its Secretary to obtain from management a list of such employees and upon receipt thereof, the letter, attached Exhibit A, was sent to all directors, officers and employees so designated. The Committee has received and placed in its files a certi- ficate of two senior officers of Philip Morris Incorporated certifying to the mailing of such letter to each of the persons set forth on the aforementioned list.

Certificates have now been received from every director, officer and each such employee, with the excep- tion of one director of Philip Morris Incorporated, Dr. Robert N. DuPuis, who had advised the Board of Directors of the Company that he would, in all probability, be un- available to stand for re-election as a director at the annual meeting of stockholders and who was therefore omitted from the management slate of nominees for directors. The Committee has reviewed such certificates and is of the opinion that no conflict of interest was disclosed by any of such certificates which would warrant action by either the management of Philip Morris Incorporated, its divisions or subsidiaries or the Board of Directors of Philip Morris Incorporated. In addition, it should be pointed out that during the past year, in accordance with the undertaking contained in the certificates signed by such directors, officers and employees, various inquiries concerning matters of possible conflict of interest have been received by the Secretary of the Committee and referred to the Chairman for his recommen- dations and guidance. Each of these matters was resolved successfully without the necessity of action by the Committee, the management of Philip Morris Incorporated, its divisions or subsidiaries or the Board of Directors of Philip Morris Incorporated. In the opinion of the Committee, the Board of Directors

of the Company has established a practical and expeditious procedure for the handling of these sometimes delicate prob- lems which, in its administration, seems to be working out most satisfactorily. Respectfully submitted, / ~ Jess H. Dav s Chairman.