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1. Minutes of the Annual Meeting of Stockholders of PHILIP MORRIS & CO. LTD., INCORPORATED, held on the 8th-day of July, 1947, at 12:00 o'clock Noon, Eastern Standard Time, at the office of the Company, 909 I4:ain Street, Richmond, Virginia. The L••teeting convened in Room 618. Yr. O.H. Chalkley, Chairman of the Board of Directors acted as Chairman of the Meeting. Mr. Chalkley called the hleeting to order and, in the absence of the Secretary of the Company, Mr. L. G. Hanson was appointed Secretary of the Meeting. For lack of accouanodations, the I4eeting adjourned to Room 604 Yutual Building, and those who assembled in Room 618 proceeded to Room 604.where the follawing were present: Mr. 0. H. Chalkley, Chairman of the Board Mr. A. E. Lyon, President Mr. 0. P. McComas, Vice-President Mr. L. G. Hanson, Vice-President Yr. trirt H. Hatcher Mr. G. P. Brauburger Mr. Fred A. Lfoss Mr. W. S. Hargrove Pl'.r. John B. Lindsey, Virginia Trust Company Yr. Robert S. Jeffress Mr. Otto biarkham Mr. tiY. W. Crump Adr. R. Grayson Dashiell Mr. G. Thomas Taylor W 0 4b Mr. James H. Scott of Scott & Stringfellow [o 0 -43 Mr. r'Yalter S. Robertson of Scott & Stringfellow tr c~

2. Mr. James T. Parkinson, Jr. Miss Caroline L. Sparrow 1.42. =1SON: I wish to present to the meeting the Notice of Meeting, Yanagement Proxy, Proxy Statement and Annual Report, including financial statements for fiscal year ended March 31, 1947, together with affidavits of mailing of the Notice of Meeting, Management Proxy, Proxy Statement and Annual Report, including financial statements to holders of Common Stock, $5 par value, and of the mailing of the Notice of Meeting, Proxy Statement and Annual Report, including financial statements, to all holders of the Cumulative Preferred Stoc k, 4o Series, the Cumulative Preferred Stock, 3.60o Series, the Common Stock, $10 Par Value, the Fractions of Common $5 Par Value stock in form of 1,000ths, and the Fractions of Comnon 010 Par Value stock in form of 1,000ths. These were all mailed at least ten days prior to this meeting. DdR. CH.ALKLLEY: Will the Secretary file with the minutes of the meeting copies of the Notice of Pueeting, the Management Proxy, Proxy State- ment and Annual Report, including Financial Statements, and,the affidavit of mailing. The Board of Directors fixed June 9, 1947, as the record date for the determination of holders of Comnon Stock, $5 Par Value, entitled to notice of this meeting, and only holders of such stock of record at the close of business on that date shall be entitled to vote. MR. BRAtTBURGER: I move the appointment of Mr. R. Grayson Dashiell and Mr. G. Thomas Taylor as Inspectors of Election. MR. CITAIXT :Y: I appoint those gentlemen Inspectors of Election. They will come up and sign the oath.

3. MR. IiANSON: Are there any holders of Common Stock, $5 Par Value, appearing in person? 12. BRAUBZJRGER: We have a list of those in attendance at the meeting. MR. CIIALKLEY: I announce that a majority of the Common Stock, $5 Par Value, outstanding is represented at the meeting either in person or by proxy. NR. BRABBURGER: I move that the reading of the Minutes of the Annual Meeting of the Stockholders of the Company, held on July 9, 1946, be dispensed z,rith. M. LINIDSEY: I second the motion. (The motion was unanimously adopted by viva voce vote) MR. CHALKL,EY: 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 9, 1947? MR. HANSON: I present herewith copies of the Financial Statements as of March 31, 1947, of the Company (unconsolidated), the originals of vihich financial statements were certified to by Messrs. Lybrand, Ross Bros. & .b;ontgomery, independent certified public accountants. The statements reflect only the operations of the parent company and the inclusion of the accounts of the English subsidiary, Philip Morris & Company, Ltd., would make no significant change in the net results showm. NR. CHALKLu1'Y: The next business of the meeting is the election of ten directors in accordance with the by-laws. MR. BRAtTBURGER: I nominate Messrs. 0. H. Chalkley, A. E. Lyon, 0. P. McComas, J. J. Switzer, L. G. Hanson, W. B. Ryan, Jr., G. P. Brauburger,

a, K. H. Rockey, H. E. Riddell and J. E. Archbell as directors. 12. CHAhir,LLr'Y: You have heard the motion that has been made. Do vre have a second to that motion? MR. HATC=IR: I second it. 12. CHALI=,Y: The minutes of the meetings of the Board of Directors since the last meeting of stockholders are available for inspection of any stockholders who v7ish to see them. We have a report made by Lybrand, Ros s Bros. &' Montgomery, Certified Public Accountants, outlining the scope of their examination of the inventories of the Company. If anyone would like to see that, here it is. MR. LINDSEY: I would like to ask tivhether the income statements reflect the operations of Axton-Fisher Company that you took over? MR. HANSON: Yes. The Axton-Fisher Company now is a dormant company. MR. BRAtJBURGER: I might say at that time -,,Te purchased the assets of the Axton-Fisher Company so that plant is being operated by Philip Iiorris. MR. LINDSEY: And operations are reflected in the income state- ment ? MR. HANSON: Yes. MR. CHALKLEY: Gentlemen, Mr. Lyon, our president, has a few remarks to make. MR. LYON: Madam and Gentlen3en: 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. i

5, Beginning in 1943, and each year since, in the An.nual Report to the stockholders, the managenent has reported that a minority stockholders ~ action had been brought against certain present and former officers and directors of the company. These minority stockholders are owners of record of an aggregate of 196 shares of Common Stock and 4 shares o f Preferr ed Stock. The claims made in that suit, allegedly on behalf of the company, were summarized in the January 1946 prospectus, a copy of which was smt to each stockholder. The plaintiffs have made a proposal for the settlement of this suit, by changing the practice of computing any bonuses which may be earned in the future as follows: There shall be excluded from bonusable income any dividends received by the Company or its subsidiaries and any profits from the sale of marketable securities. :~xpenses on issues of capital stock shall be amortized at 10% per annum ani deducted from bonusable income. In determining the difference between the interest on. funded debt at the rate of 7 a per annum and the interest actually accrued thereon there shall be included in funded debt an amaunt equal to the average of the balances at the opening and closing of the fiscal year of bank loans maturirg within one year. The aggregate bonus amount so computed is to be reduced by 010,000.00. Any rights of the parties to demand payment of their expenses and counsel fees by the Company are preserved. The Company therea~on asked the advice of counsel who stated that in their opinion the law-suit was not justified on the facts;

6. that the extent to vhich the settlement would benefit the Company, if at all, 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 Company affairs an enormous amount of time and effort vLich othertivise would have to be diverted to defending the suit; that a settlement at this time would probably save the Company addit ional expense; that the officers and d irectors, defendants in the suit, should 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 been submitted to the Suprean Court of the State of New York where the suit is pending and has been referred to a Referee whose report is expected at an early date. However, before the Court approves the settlement, full information concerning the suit and the settlement 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 who wishes may come to Court and present his vievis. 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 Company. I am not going to talk about the tremendous growth that your company had over the p ast t en years. You ar e wel l acquaint ed rrit h that f act, but I went to give you a short history. In our fiscal year ending March 31, 1943, our domestic sales of Philip Morris were 21.3 billion cigarettes. Our exports that year were 2.7 billion. In our fiscal year ending March, 1944, our domestic sales increased at an even greater rate than they had in the g eceding year ®nd we delivered

7. to our customers in the Unit ed States 26-1/2 billion cigarettes. The demands of the armed forces also were beginning to be felt that overseas 4.1 billion Philip Tyllorris cigarettes. year and we sent During the next year, our t45 fiscal year, ~-rith millions of men already far from their homes and millions more ready to go, we were facedd with a problem. Our capacity was about 32 billion cigarettes. We knew that if we 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 wrong, but we felt that fighting men far from home, wanting American 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 f45 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 oreater amount than the demand reported to us by our distributors, but this enabled us to send overseas for the armed forces nearly 10 billion Philip Morris, that is, more than our total sales of Philip Morris cigarettes, both domestic and export, in 1939, only six years before. The war ended during our 1946 fiscal year and s:ith it ended the purchases of the armed forces, so during that year we were able to supply a larger quantity of Philip Morris to our domestic consumers, the amount totaling 24.2 billion cigarettes. For export that year we delivered 3.8 billion. Our action in cutting dotiirn on domestic deliveries in the fiscal year ended in 1945, in order to supply our fighting forces, resulted in a temporary drop in our domestic business, end we sold in the United States last year 23.2 billion Philip Morris. To help in the development of our export market, I travelled abroad and we were successful in selling in the post-war export market 4.2 billion ci,garettes. Since that time difficulties of exchange and other problems in

foreign countries with ti~hich you are all familiar have largely cut off this export market end this year our export sales are about 32% of what they were last year. However, what is of paramount importance is that our domestic deliveries of Philip Morris are holding steady in the total and the t rend has been turned upward. We have, since the start of the present fiscal year, sold more Philip ~brris cigarettes each month than the month before. Your Corapanyts financial strength today is greater than at any time in its past. Our vqorking capital at the end of May was $95,339,546, more than 15 times our current liabilities and we are able to meet the increases in our business which we hope to achieve without any additional permanent financing. At the present time our bank loans are nil and our inventory position is such that we can take advantage of any favorable situation in the tobacco markets. In order to restore in these highly competitive times our position in the industry,, we are spending more money on sales promotion than we did last year. The results to date are very encouraging and I hope that by the end of the current fiscal year to be able to report to you that the trend to larger sales of Philip Morris has been maintained and reestablished. MR. C3ALKLh'Y: Do you have any questions? . MR. PARKINSON: Do you have the earnings for the three months of this fiscal year? MR. LYON: They are not ready yet. MR. LINDSEY: I would like to know how much your advertising expenses were in the fiscal year ending in 1947 as compared with the preceding fiscal year? MR. LY01T: The first part of the fiscal year? f 8. ~=--_-

9. MR. LII,TDS=: I notice the operating earnings :rent up very nicely, about 25 per cent. iM. LYOIT: is your questi on the first quarter of the fiscal year as agai.nst the first quarter of the last fiscal year? Ia. LINDSEY: Pv:y question was ho,;,r rluch larger were they in the fiscal year ending March 31, 1947, than in the preceding year? P,R. 7 AP,SO'•d: A.dvert is ing exp ens e fo r t he ye ar e ndino March 31, 1947, v"'6,988,000. For the same period, 1946, it was u6,328,593. MR. LINDSEY: About $'650,000 more. Do you expect the prices of leaf tobacco to decline? I notice your Annual Beoort says that the prices last year were higher than in any of the preceding years. MR. LYON: Mr. Lindsey, we are hoping that they won't increase. We believe that they won't increase. Hotiv much lower they will go is difficult to tell because there is a Government floor under tobacco. bdR. LINDSEY: But isn't that floor very much lower than the current market? 12. LYQll: I would say not. MR. ziATCHSR: The floor that is estimated for the next crop is around forty cents. The floor last year was about thirty-three or thirty-four cents, but the bright crop last year sold for 47 cents against a floor of 33. So no one knows how much above the floor this current crop will sell. MR. LYON: It is a little early to tell. MR. HATCHER : The size of the crop and English buying will have effect on it. MR. LYON: The Englis hWill cut do ru their buying this year and a good crop will make more of the bright available for the American market which may have some effect on the price. u

MR. LI1tDSRY: I notice in the Annual Report you say that the tobacco prices are higher than pre-war and labor costs are t;tice as much and that raised a question in my mind whether your increase in sales price had been enough to some:^rhat o ffset those. ER. LYON: Not entirely sufficient but there have been economies effected which have helped the situation--economies in manufacture. 12. LI-NDSBy: I made some rough figures ~,,rhich showed prior to the war you were mahino about 61 to 67 cents per 1,000 cigarettes, taking your net income and dividing by the number of million cigarettes, but last year it runs about 17 ceits, not taking into account some non-recurring deductions and credits but it looks like your profit is only about one-third on the produ ct ion that it was. M. LYON: It certainly has diminished. MR. LINDSEY: And I was wondering whether it wasn't feasible for that selling price to be further raised. MR. LYON: I don't think that is feasible at the present time but I am hoping that increased volume might help that situation. MR. CHALSLEY: Lre there any further questions? MR. BRAUBURGER: Are the Inspectors ready with their report? 1lR. JEFFRESS: I,,would 1 ike to move that a favor able expression of the stockholders be made to the management for the very important advance made in the Annual Report to the stockh.olders. MR. CI{[712: I second the motion. (The motion was adopted by viva voce vote) DSB. CHALKL..,F'Y: The motion is carried. ER. DASHIELL: Mr. Chairman, Mr. G. Thomas Taylor and I report for the Inspectors of Election that the following directors were elected with the votes that I call: 1Q,