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1 Financial Highlights 2 Review of the Year . 8 World Map-Philip Morris Incorporated 22 Philip Morris U.S.A. 26 Philip Morris International 30 Miller Brewing Company 34 Philip Morris Industrial 36 Mission Viejo, Company 38 Financiai Review 52 Directors and Officers Philip Morris Incorporated, 100 Park Avenue, New York, N.Y 10017. Transfer Agents: Morgan Guaranty Trust Company of New York, 30 West Broadway, New York, N,Y. 10015; United Virginia Bank, Box 6E, Richmond, Va. 23214. Annual Meeting: Apri124, 1974, 2:00 EM. 4001 Commerce Road, Richmond, Va. Design: Chermayeff & Geismar Associates Cover Photograph: Ezra Stoller

Philip Morris Incorporated Annua! Report 1973 Financial Highlights 1973 1972 1971 Operating Revenues ................................................... .. $2,602,498,000 $2,131,224,000 . - $1,852,495,000 Net Earnings .................................................................... . 148,632,000 124,466,000 101,498,000 Per Share of Common Stock: Net Earnings: Primary ..... ......... ............... ....................................... . $5.42 $4.67 $4.02 Fully Diluted ............................................................ 5.21 4.37 3.64 Dividends Declared ................. ................. ---- .......... . 1.348 1.262 1.21 Percent Increase Over Prior Year: Operating Revenues ....................................................... . . 22.1% 15.0% 22.7% Net Earnings .......... ........ ..... ....................... ............... ..: 19.4% 22.6% 31.0% Net Earnings Per Common Share: Primary ...............................::................................... 16.1% 16.2% 19.6% Fully Diluted ........................... .................. ......... :...... 19.2% 20.1 % 27.7% Operating Companies Revenues: Philip Morris U.S.A ........... ............ .................... ........:..: -- $1,303,629,000 $1,164,550,000 $1,035,178,000 Philip Morris International ........ ................................ .. 822,907,000 623,699,000 517,670,000 Philip Morris Industrial ................................................ 132,126,000 113,136,000 95,513,000 Miller Brewing Company ............. ................ :.............. 275,860,000 211,262,000 204,134,000 Mission Viejo Company (1) ......................................... -- - 67,976,000 18,577,000 Consolidated Operating Revenues ........................ $2,602,498,000 $2,131,224,000 $1,852,495,000 Operating Companies Income: Philip Morris U.S.A ................................... ....... ..,...,.... $ 227,282,000 $ 194,072,000 $ 166,734,000 Philip Morris International ............ ............................ 92,150,000 84,095,000 66,968,000 Philip Morris Industrial ............................. .................. 8,300,000 7,735,000 6,135,000 Miller Brewing Company .... . ......................... .. ~ ............ .- (2,371,000) 228,000 1,300,000 Mission Viejo Company (1) .........................................- -- 4,122,000 1,331,000 Consolidated Operating Income (2) ...................... - $ 329,483,000 $ 287,461,000 $ 241,137,000 (1) Operating revenues and operating income from September 30, 1972. (2) Corporate expense, interest, other items and income taxes, which are not directly attributable to the operating companies, are not allocated since any allocation thereof would be arbitrary. The notes to consolidated finaiicTal statements should be read in conjunction with the above data. 1

Review of the Year Nineteen seventy-three marked the 20th consecutive year in which your company reported new zecords for operating revenues, profits, and earnings per share. Consolidated operating revenues reached $2.6 billion, an increase of 22.1 %, and net income rose to $149 million, a gain of 19.4% above 1972. Fully diluted earnings per share were $5.21 and primary per share earnings were $5.42, representing annual increases of 19.2% and 16.1 %, respectively. We are pleased with the 1973 results, achieved in a most difficult year marked by price controls, materials shortages, major currency realignments, and the energy crisis. Philip Morris further increased its share of the world cigarette market and strengthened its position as the second largest publicly-held cigarette producer in the world. In 1973, world-wide cigarette industry sales increased 4% to over 3.6 trillion units, and Philip Morris, including both United States and international sales, had a 6.7% share of the world cigarette market. On a world-wide basis, Marlboro continued to be the largest selling cigarette brand- a position it gained in 1972. Within the United States, Marlboro, the number two brand, moved very close to the top position. For the fourth consecutive year, total U.S. cigarette industry unit sales increased. Total industry unit sales were 577 billion, up 4.1 % over the previous year. At the same time, Philip Morris unit sales increased 11.1 %. Your company's share of the U.S. market reached a new high of more than 21 % at year end. In 1973, Miller Brewing sales increased substantially-with revenues up 31 % and barrel sales up 28.8%. The dramatic jump in Miller's barrel sales represented the largest percentage gain among major U.S. brewers. The total brewing industry increased its barrel sales 4.7% in 1973. Miller moved from seventh to fifth place among U.S. brewing companies. Capital expenditures in 1973 came to $175 million, contrasted with the $120 million spent in 1972. Philip Morris is in the midst of a major capital expansion program to meet the growing demand for our cigarettes both in the United States and overseas and for our brewing and other products. During 1973, we announced an increase in planned capital expenditures from $500 million to approximately $750 million, to be spent over the next five years. The major portion of this total will provide for the expansion and modernization of United States and international tobacco operations, and Miller Brewing, and to a lesser extent for Philip Morris Industrial and Mission Viejo. Over the past five years-1968 to 1973-Philip Morris's consolidated operating revenues increased at an average annual compounded rate of 20.6%. During the same period, net income rose at a compounded rate of 24.9% and fully diluted earnings per share were up 19.5% per annum. For the 46th consecutive year, your company paid dividends on its common stock, and dividends were increased for the sixth consecutive year. The current annual dividend rate is $1.40 per common share. Philip Morris U.S.A. The outstanding momentum of your company's major U.S. cigarette brands-Marlboro, Benson & Hedges 100's, Virginia Slims, and Parliament-led to record unit sales in Philip Morris U.S.A. of 123 billion, a gain of 11 %. Operating revenues and operating income increased 12% and 17%, respectively, for the year. Philip Morris U.S.A., our largest operating company in terms of revenues and profits, retained its position as the fastest-growing cigarette company in the United States. Marlboro, our leading brand, attained a market share of 14 % by the end of 1973, with the gap between it and the most popular brand narrowing again. Only five years ago, Marlboro's share of the U.S. market was less than 8 %. The company also continued as the sales leader in the growing 100mm segment; Benson & Hedges 100's sales were up 1-2-0% and it remains the leading 100mm brand, while sales of Philip Morris's other 100mm brands-Virginia Slims, Parliament 100's, and Marlboro 100's- also increased significantly during the year. Ten years ago there was no 100mm market, and five years ago 100mm brands accounted for approximately 13% of total cigarette sales. By the end of 1973, however, 100mm brand sales represented more than 22% of total industry sales. The largest single share of the 100mm market is held by Philip Morris-with a 29% share of this category. The demographic picture also provides evidence of Philip Morris strength. Your company's brands have gained a high level of acceptance among smokers within the faster-growing segments of the U.S. population, among women smokers, and among those smokers with a higher education. One of the company's major challenges last year was to continue the production of cigarettes in increasing volume, while maintaining our traditional high quality. Because cigarette manufacturing is entering a new era of technology during a period when sales of our brands continue to increase rapidly, our new $200 million complex in Richmond, Virginia-the largest single component of our capital expansion program-is proving to be a timely and rewarding investment. Although full capacity in the new plant will not be attained until 1977, by the end of last "Philip Morris further increased its share of the world cigarette market and strengthened its position as the second largest publicly-held cigarette producer in the world. In 1973... PhilipMorris, including both United States and international sales, had a 6.7% share of the world cigarette market. On a world-wide basis, Marlboro continued to be the largest selling cigarette brand...."

23 December this facility was producing approximately 100 million cigarettes per day-20% of its ultimate capacity. Projected completion of the physical structure is on target for early 1974. During 1973, your company also began construction of a tobacco blending and handling facility near Richmond. This plant, which will cost approximately $43.8 million, is needed to support the growing requirements of the new Richmond complex. Total expenditures for marketing in 1973 remained at virtually the same level as in 1972, and advertising costs were again lower than in 1970, the last year of cigarette broadcast advertising. As a result of the higher sales volume, marketing expenditures per 1,000 cigarettes decreased. The American Safety Razor Division of Philip Morris U.S.A. also contributed to corporate profits. Its principal new products-Personna Double II, a razor with four shaving edges, two on each side, and Flicker, a women's shaving instrument-received national distribution in 1973. During the year, your company disposed of two small operations-the Clark Gum and Lightfoot Soap companies. Philip Morris International. The momentum that Philip Morris International has established in recent years continued in 1973. Last year, world-wide cigarette sales of this important Philip Morris operating company totaled 124 billion units. While the world industry's unit sales outside the United States rose 4%, Philip Morris International unit sales increased 9.5%. Operating revenues and operating income increased 31.9% and 9.6%, respectively. Our brands are marketed in more than 160 countries and territories. Last year, Philip Morris brands had market shares of at least 10%-and in a number of cases substantially more than 10%-in over 20 countries, including Australia, Canada, Italy, Lebanon, Mexico, Nigeria, the Philippines, Sweden, Switzerland, and Venezuela. The increased demand for American-type blended cigarettes has led to the international success of Marlboro; however, other established taste preferences are well recognized and approximately 60% of our international unit sales are in regional and national brands. Philip Morris International currently manufactures and markets some 145 cigarette brands around the world. In late 1973, Philip Morris formed a joint venture with Brazilian interests for the construction of a cigarette factory in Curitiba, Brazil. Entry into the market in that country is scheduled for early 1975. Also during 1973, your company entered into licensing agreements with the Japan Tobacco and Salt Public Corporation and Agros of Poland for the manufacture of Marlboro cigarettes in those countries. In Mexico, in spite of expanded unit sales and market share, sharply increased costs and increased government controls resulted in our affiliate, Cigarrera Nacional, S.A., continuing in a loss position. We are currently studying a number of alternatives with respect to our Mexican business including reducing our ownership to a minority position in line with current Mexican government policy. We anticipate at this time that this matter will be resolved during the first half of 1974 and that whatever action is deemed appropriate will have no material effect upon our 1974 results. Unit sales and revenues were up in all four regions-Europe/Middle East/Africa; Latin America/Iberia; Asia/Pacific; and Canada. Philip Morris Europe, the largest region in terms of revenues and profits, added Africa and the Middle East to its area of responsibility. In 1973, profits in Europe were adversely affected by dislocations in our business caused by the numerous currency realignments. This was offset, however, by gains in other regions. Around the world, Philip Morris International continues its on-going program of facilities expansion and improvement. In Australia, cigarette and Lindeman wine production facilities were enlarged. Construction of one of the largest tobacco warehouse complexes in Europe, close to our Swiss affiliate's factory in Neuchatel, is nearing completion. Like most American companies with international operations, Philip Morris again made a positive contribution to the U.S. balance of payments in 1973. At the same time, the presence of Philip Morris in many countries is possible only because it demonstrably contributes to the economies of those countries. Abetted by continuing company expansion, our policy of training, recognizing performance, and promoting personnel from within the organizations in host countries has been basic to Philip Morris International's success. This international growth record in 1973-in face of mounting inflation and economic nationalism-positions your company well for continued growth in the international market. Miller Brewing Company. In 1973, Miller's barrel sales increased 28.8% over sales of the previous year, compared with the brewing industry's overall gain in barrel sales of 4.7%. Miller's gain was the largest, in percentage terms, among major U.S. brewers. Miller's market share rose dramatically from 4.0% to 5.0%, and Miller moved up from seventh place to fifth place among the leading U.S. brewers. Operating revenues reached $276 million, up 31 % from 1972. "The outstanding momentum of your company's major U.S. cigarette brands-Marlboro,Benson&Hedges 100's, Virginia Slims, and Parliament-led to record unit sales in Philip Morris U.S.A. of 123 billion, a gain of 11%. ... Philip Morris U.S.A., our largest operating company in terms of revenues and profits, retained its position as the fastest-growing cigarette company in the United States."

We believe that Miller High Life was the fastest growing national brand in the U.S. in 1973. Sales of Miller High Life in both bottles and aluminum cans were up substantially, and consumer acceptance of the 7 oz. 8-bottle "pony pack" was excellent. Miller Ale was also well received in the Northeast, the major U.S. market for ale, and sales of Meister Brau in the Chicago area also contributed to Miller's record barrel sales. Increased consumer demand for Miller's quality beer products pushed 1973 production to peak capacity. In fact, at times during the year Miller lacked the capacity to meet demand. Miller reported an operating loss of $2.4 million which resulted from increased costs of packaging and raw materials, continuance of price competition in the brewing industry, and relatively high manufacturing costs resulting from the lack of modem efficient brewing facilities at Miller. In the industry, cans and bottles account for an important part of total costs, and the cost of these packages was up almost 7% during 1973. The costs of malt, corn, and barley increased dramatically. Price competition, prevalent in the brewing industry for many years, remained intensive. The resultant cost-price squeeze was reflected in lower margins throughout the industry. In order to increase production and to effect efficiencies, while maintaining superior product quality, Miller has embarked on a major expansion and modernization program. Nearly $200 million has been appropriated for this program over the next five years. The most modern brewing and packaging equipment is being installed in the Miller breweries in Milwaukee and Fort Worth. In addition, production capacity is being expanded in the Milwaukee and Fort Worth breweries. At midyear, construction began on a new warehouse and shipping facility at the Milwaukee location where Frederic Miller started brewing in 1855. Miller also has broken ground for a $16 million recyclable aluminum can manufacturing plant in Milwaukee. In January, 1974, we announced plans to build a $70 million brewery within 200 miles of metropolitan New York. This new Miller facility will begin operations in 1976 with an initial capacity of two million barrels; ultimate capacity will be six million barrels per year. A number of factors, especially the availability of the highest-quality water, will be considered in selecting the exact location of the new brewery. Your company's long-term plan is to build sales volume and market share, and to increase Miller's brewing capacity while making operations competitive and efficient. Although Miller had an operating loss in 1973, there was much substantial evidence that our long-range plan is sound. Our confidence in the lonb term profit potential of Miller Brewing is evidenced by our substantial appropriation for capital expansion. Philip Morris Industrial. Industrial's revenues reached $132 million in 1973, an increase of 17% above the results of the previous year. The gain in operating income was 7.3% despite sharp increases in materials costs that could not be passed on to customers, and actual shortages of some materials such as wax, solvents, aluminum, and pulp. As an example, pulp prices rose more than 39% during the year, and the impact of this particular cost increase was especially significant on many of Philip Morris Industrial's operations. Toward the end of the year, the Cost of Living Council allowed small price increases on Philip Morris Industrial products. However, costs continued to rise sharply in November and December, after Industrial's price increases were granted. Each of Industrial's operations-in chemicals, paper, and packaging-recorded increased sales in 1973, and higher profits were recorded in both chemicals and paper. There was a slight reduction in the earnings leve4 for packaging. Through increased sales of a number of high technology, higher margin products in all operations, Industrial was able to partially offset the cost-price squeeze. Continued development of new products and new product applications was instrumental in implementing this strategy. Nicolet Paper Company has completed construction of one of the world's largest coaters of papers and packaging films. The project, located in Nicholasville, Kentucky, cost approximately $5 million. Polymer Industries, Inc. enlarged its Greenville, South Carolina, facility with the addition of a new warehouse and a fifth polymer reactor. Wikolin-Werk, Willi E. Kohlmeyer G.m.b.H. is expanding its manufacturing facilities in Bremen, West Germany. Mission Viejo Company. In 1973, Mission Viejo Company-recognized as a leader in master-planned home and community development-completed its first full year of operation under Philip Morris ownership. Mission Viejo's 1973 revenues rose 12% over the previouss year's results to $68.0 million. Operating income came to $4.1 million. . The homebuilding industry encountered numerous problems in 1973. The first half of the year was marked by adverse weather conditions in Southern California and Colorado, and rapid escalation in the cost of materials-especially lumber and plywood-as well as critical material shortages. Although Mission Viejo is a leader in environmental planning, new environmental regulations caused delays in processing building permits. During the second half of the year, "One of the company's major challenges last year was to continue the production of cigarettes in increasing volume, while maintaining our traditional high quality. Because cigarette manufacturing is entering a new era of technology during a period when sales of our brands continue to increase rapidly, our new $200 million complex in Richmond, Virginia... is proving to be a timely and rewarding investment."

5 mortgage rates reached unprecedented highs, and the availability of mortgage money tightened "Our brands are marketed in more than 160 countries and territories. severely. Last year, Philip Morris brands had Despite such negative factors, Mission Viejo was profitable for the year and sold a total of market shares of at least 10%-and 1,650 houses in its three major locations-Orange County, California; Denver, and Phoenix. in a number of cases substantially In addition, a small project was opened in Fresno, California, late in the year. more thanl0%-in over 20 countries, including Australia, Canada, The housing industry is cyclical, but we believe that Mission Viejo has suffered less severe Italy, Lebanon, Mexico, disruptions in its operations than did many homebuilders around the country. It appears that Nigeria, the Philippines, Sweden, many of the adverse factors which affected the homebuilding industry in 1973 will continue Switzerland, and Venezuela." to impact on the industry in 1974. However, the outlook for housing over the next decade is good, and we expect that Mission Viejo will participate in the projected growth. Smoking and Health. In the area of smoking and health, we together with other companies in the tobacco industry continued our support of medical research through the Council for Tobacco Research-U.S.A. and by sponsorship of major research programs at the Washington University School of Medicine in St. Louis and the Harvard Medical School. Over the past 20 years, the industry has committed more than $48 million to scientific research related to tobacco and health. The annual report of the Council for Tobacco Research, with details of studies underwritten by the industry in 1973, may be obtained without charge from your company. In August, the chairman of a newly-established federal agency, the Consumer Product Safety Commission, announced that his agency was considering imposing a ban on cigarettes which exceed a level of "tar" and nicotine that the Commission would determine to be "safe." No action has been taken by the Commission as of this writing. We are advised that neither the legislation establishing the agency, nor any of the statutes it administers, gives it authority to regulate cigarettes, and we intend to oppose any attempt it may make to do so. In the United States, several states enacted legislation prohibiting cigarette smoking in certain public places. Several foreign countries in which we do business adopted laws and regulations limiting cigarette advertising and requiring warning notices on packages. A recent medical article reporting on a study conducted by the Karolinska Institute in Sweden ineticates that among pairs of identical twins there is no significant difference either in length of life or tendency to develop heart disease as between the smokers and nonsmokers. The authors say their results suggest that genetic and personality differences are more important than smoking in determining lifespan and the likelihood of heart disease. Since this is the only population study which has compared smokers and nonsmokers who are genetically identical, we believe the results deserve careful attention. Ten years have now passed since the Surgeon General's Advisory Committee on Smoking and Health issued its first report-in January, 1964. In the ensuing decade, scientific research on the conditions said to be related to cigarette smokinb as claimed in the original report- has brought to light no valid experimental evidence connecting cigarette smoking with disease. Rather, research has uncovered a broad spectrum of other suspected risk factors. Additional intensive research on the chemistry of tobacco smoke during this period has failed to identify any component of smoke which, in the amount present, can be considered a causal factor in any human disease. There has not been one successful effort to produce in animals-through the inhalation of tobacco smoke-those conditions that some have attributed to smoking in humans. In short, it is our opinion that the claim that cigarette smoking bears a causal relationship to disease is more open to question today than it was ten years ago. Impact of the Energy Crisis. Numerous uncertainties have evolved from the "energy crisis," making it extremely difficult to assess the exact impact on Philip Morris's operations. It is recognized, of course, that severe fuel shortages could cause some disruptions, but production processes involved in our businesses require less energy than most industries, and, therefore, we believe that the "energy crisis" will have less effect on Philip Morris than on most industries. Actually, the cost of fuel represents a minor portion of the total costs of our cigarette and beer manufacturing and the physical distribution of our products. It is possible that temporary ~~ dislocations in methods of product distribution in the United States could evolve, but we believe ° 0 that the flexibility of our distribution network would allow us to overcome such problems. a ~ Early in 1973, extensive analysis was given to our energy needs, and throughout the year we ~ have taken such steps as seemed practical to assure an uninterrupted supply of our ~ energy requirements. An extensive internal program for energy conservation is in effect at all ~ locations as well as in the field. This program has already yielded tangible results as evidenced by substantial reductions in our energy usage. Price Controls. On-going U.S. government price control regulations under Phase IV restricted our ability to fully offset increased costs through higher prices. Early in 1973, under Phase III, small increases were allowed for cigarettes. Later in the year, beer and industrial

products obtained some price relief under Phase IV. However, even where price increases have been, or will be, authorized, the net effect of the Phase IV price controls is a reduction of margins since price increases are limited to a dollar for dollar pass-through of cost increases. Cost increases in tobacco and sharp increases in the cost of the grains used in brewing were experienced due to the exempt status of these agricultural commodities. Sizable increases in pulp and paper prices were also allowed by the Cost of Living Council. On January 11, 1974, the Cost of Living Council approved a price increase of 1.6% for Philip Morris U.S.A. which offsets cost increases somewhat. This increase has been applied to all cigarette brands, and your company's wholesale prices are now at the level of most other U.S. cigarette companies. Philip Morris International also experienced price control problems in 1973. In many countries in which your company sells cigarettes, general inflation, without the ability to institute cigarette price increases, restrained earnings growth. Leaf. World-wide demand for tobacco increased in 1973. Tobacco harvests in certain exporting markets were lower than anticipated, thus reducing the supply of quality tobacco and resulting in higher world-wide tobacco prices. The international demand for quality cigarettes, coupled with monetary realignments, led to a high level of U.S. leaf exports. It is expected that on a world-wide basis tobacco will continue to be in tight supply, and, concurrently, leaf prices will continue to rise. Your company has been able to maintain inventories of aged tobacco in the quantity and quality needed. Cigarette Taxes. In the U.S. during 1973, legislation for a cigarette excise tax increase was passed in only one state, Colorado, and this bill actually eliminated municipal taxes and increased the state tax. However, 41 cigarette excise tax increase bills were introduced in 20 states during the year. Responsible legislators, realizing that not only are excise taxes a regressive form of taxation-disproportionately affecting consumers with lower incomes-but also the fact that they encourage bootlegging, either defeated or failed to enact tax increases in 19 states. In fact, bills for the reduction of cigarette taxes are pending in four states. On January 10, 1974, Governor Wilson of New York recommended that New York City's taxes on cigarettes be repealed. He stated that "One major incentive to organized crime is the high New York City cigarette taxes, piled on top of the state tax, which have made the city the promised land for bootleggers." Directly related to this situation is the harmful effect which different levels of state excise taxes have on the traditional, legal distribution of cigarettes through established and reputable wholesalers and retailers. Total U.S. cigarette excise tax revenues in 1973 amounted to $5.5 billion, of which $2.2 billion was federal, $3.2 billion state, and $0.1 billion in municipal excise.taxes. This amounts to $26.00 for every man, woman, and child in the U.S. This is clearly inequitable. The Public Interest. Philip Morris Incorporated is one of a number of major corporations which have established a committee of Board members concerned specifically with the company's involvements with social needs and problems. Called the Public Affairs Committee, this group not only is authorized to review our current social performance as a corporate citizen but is also responsible for anticipating and assessing changes in value standards, needs, and priorities. A second committee of the Board, the Environmental Committee, has related responsibilities in the environmental area. 'In the interest of conservation and the environment, Miller Brewing Company has virtually completed its conversion to recyclable all-aluminum cans and refillable-recyclable bottles. Under a Miller-designed program, many of our distributors have been setting up reclamation centers around the country. In addition to the distributors, customers and retailers are able to participate in this national effort to conserve our resources. Other Philip Morris packages are being studied from the point of view of resource conservation. It is also our policy to be innovative in our public-interest activities, and if possible to lead others into areas of need. As one notable example, last year our scholarship program for employees' children was expanded to include vocational training as well as college education. Believed to be the first of its kind, the vocational plan has -drawn the favorable attention of government, education, and business leaders, and several other companies are initiating similar programs. Similarly, last year Philip Morris pioneered an adult-scholarship program for part-time studies by women occupied with jobs or household responsibilities. It is anticipated that this program will also become a prototype for other companies to follow. Philip Morris's annual Study of Social Responsibility keeps your Board updated on our corporate progress in terms of public interest. The latest study, for example, shows increases in the proportions of minorities, women, and Vietnam war veterans among our employees as well as progress in promoting them to more responsible positions. Philip Morris International and its affiliates carried out numerous projects in the area of corporate social responsibility, including aid to flood victims in Pakistan and the Philippines, "... Miller's barrel sales increased 28.8% over sales of the previous year, compared with the brewing industry's overall gain in barrel sales of 4.7%. Miller's gain was the largest, in percentage terms, among major U.S. brewers. Miller's market share rose dramatically... and Miller moved up from seventh place to fifth place among the leading U.S. brewers. Operating revenues reached $276 million, up 31%from 1972.11 7

uDiversity scholarships in Mexico, a broad program of assistance to medical, social, and educational institutions in Venezuela, and sponsorship of community cultural projects in Australia and Canada. philip Morris employees around the world are encouraged to participate in civic affairs, and the list of their personal involvements is impressive. In the area of public disclosure, the New York Stock Exchange recently suggested that annual reports include common-stock price ranges, price-earnings ratios, dividends, and book value, which has been Philip Morris practice for several years. Last year's annual report was selected as the "best of all industry" in the annual Financial World awards. +.. 7 Your Board was saddened last year by the death of Wirt H. Hatcher, retired Senior Vice President and Director Emeritus of Philip Morris Incorporated. Mr. Hatcher, who began working with Philip Morris in 1918, was a well-known figure throughout the tobacco industry. He was especially recognized for his knowledge and many writings on the growth of the industry and the development of its scientific processes. Mr. Hatcher played an important role in the growth of your company. The astute counsel of T. Justin Moore, Jr., President and Chief Operating and Financial Officer of the Virginia Electric and Power Company, was gained with his election to our Board in April. Since our last executive realignment in 1967, sales have more than tripled and profits more than quadrupled. In addition, two major operating companies-Miller Brewing and Mission Viejo-have been acquired. In a move dictated by our expansion, the senior-management structure of the corporation was broadened and strengthened last October when the Board of Directors promoted several key executives. In three of the major changes, George Weissman, President of Philip Morris Incorporated, became Vice Chairman of the Board; Ross R. Millhiser, President of Philip Morris U.S.A., was elected President of Philip Morris Incorporated; and Clifford H. Goldsmith moved from Executive Vice President to President of Philip Morris U.S.A. and Executive Vice President of Philip Morris Incorporated. Again we pay tribute to all our 37,000 employees around the world for their excellent performance throughout the year. Their work has been fundamental to the success of your company, and we thank them for their dedication. Respectfully submitted on behalf of the Board of Directors, ,1L A~,..,.e WA.A..&,... Joseph E Cullman 3rd George Weissman Chairman of the Board Vice Chairman of the Board President and Chief Executive Officer Ross R. Millhiser

-~ Major Locations PhilipMorrisIncorporated,OperatingCompanies,Afiliates,andLicensees ~ Phllip Morris U.S,A. ® Phillp Morris Internatlonal Affiliates and Licensees ~ Miller Brewing Company ® Philip Morris Industrial Mission Viejo Company San Francisco, California Azusa, California Mission Vieio, California Phoenix, Ariz i hilio Morris (New Zealand) Ltd. ~ Stamford, Connecticut Philip Morris Incorporated, New York, N.Y. Downingtown, Pennsylvania chmond, Virginia / Staunton, Virginia r- E. Le6n Jimenes, C. porA. / Dominican Repvl ' Cigarrera Nacional, S.A. / M`1' = Licensee / aiti AM , Philio Morrls de Puerto Rico Tahacalera Cantroamaricana. SA. / Guatemala Wicensee / Netherlands Antilles Licensee / Trinidad T.--i- --- c A / ce~~~,~~~e~setiacalera Nacional / Venezuela Philip Morris Brasileira Licensee Massalin y Celasco, SA

® Philip Moin I{o Philip Morris & Co. Ltd. Y€'nglauQ; Godfrey Phillips Ltd. / Engl Philip Morris Fran j ~ Philip Morris Europ¢ S.A. / Swi we- F ' abriques de Tabac RAunies S.A. / SwitE® Philip Morris Asia-'acific Inc. / Aus Philip Morris (Australia) Ltd Philip Morris Ltd. Godfrey Phillips Ltd.

Retr®spec#ave de !'annee En 1973, pour la vingtieme annee consecutive, votre societe a enregtstre a nouveau des resultats sans precddent pour ce qui est du chiffre d'affaires, des bdnefices et du revenu par action. Le chiffre d'affaires consolid-e a atteint 2,6 milliards de dollars, soit une augumentation de 22,1%o, et le benefice net s'est zleve a 149 millions de dollars, soit une progression de 19,4% par rapport a 1972. Le rendement par action (en tenant compte des titres convertibles) s'etablit a 5,21 dollars et le rendement effectif par action a 5,42 dollars, soit un accrotssement annuel de 19,2% et de 16,1% respectivement. Nous sommes satisfaits des rdsultats obtenus en 1973, une annee rendue extremement difficile par suite du controle des prix, des penuries d'approvisionnement, de realignements importants des parites monetaires et de la crise de 1'energie. Philip Morris a encore accru sa part du marchd mon- dial des cigarettes et a renforce sa position en tant que deuxieme producteur de cigarettes du monde dont les actions sont cotees en bourse. En 1973, les ventes mon- diales de l'industrie de la cigarette ont augmente de 4% pour atteindre plus de 3600 milliards de cigarettes, et Philip Morris (en tenant compte des ventes aux Etats-Unis et a 1'etranger) obtenait 6,7% du marche mondial de Ia cigarette, Marlboro demeurait la marque de cigarette la plus vendue dans le monde-position qu'elle avait acquise en 1972. Aux Etats-Unis, Marlboro, qui occupe le deuxieme rang, s'est rap- prochee tres pres de Ia premiere place. Pour la quatrieme annee consecutive, les ventes totales de l'industrie americaine de la cigarette ont augmente, atteignant 577 milliards d'unitds, soit une progression de 4,1% par rapport a 1'annee precedente. En meme temps, les ventes unitaires de Philip Morris ont aug- mente de 11,1%. La part du marche americain detenue par votre societe atteignait en fin d'annee un niveau record de plus de 21%. En 1973, les ventes de Miller Brewing se sont con- siderablement accrues-le chiffre d'affaires augmentant de 31% et le volume des ventes en barils de 28,8%. L'essor remarquable des ventes de Miller represente la plus forte progression en pourcentage enregistr6e parmi les principaux brasseurs des Etats-Unis, En 1973, les ventes totales, en barils, de l'industrie de la biere ont augmente de 4,7%. La Societe Miller est passee de la septii:me a la cinquieme place de 1'industrie de Ia bi8re a6x Etats-Unis. En 1973, les investissements ont atteint $175 millions, compare a$120 millions investis en 1972. Philip Morris realise un programme d'expansion important afin de satisfaire la demande•croissante pour nos cigarettes, aussi bien aux Etats-Unis qu'a 1'etranger, et la demande pour nos bi~res et autres produits. En 1973, nous avons annonce que le montant prevu de nos investisse- ments passerait de $500 millions a environ $750 mil- lions se rdpartissant sur les cinq prochaines annees. Ce montant servira en grande partie a financer 1'expansion et la modernisation de nos centres de production de cigarettes aux Etats-Unis, a 1'@tranger et de Miller Brewing et en de moins grandes proportions Philip Morris Industrial et Mission Viejo. Au cours des cinq dernieres ann8es-de 1968 a 1973-1e chiffre d'affaires consolidB de Philip Morris augmen- tait en moyenne au taux annuel compose de 20,6%. Pendant la meme periode, le b@nefice net a progressd a un taux compose de 24,9% et le rendement par ac- tion (en tenant compte des titres convertibles) a augmente de 19,5% par an. Pour la 46me annee cons@cutive, votre societe a distribud des dividendes sur ses actions ordinaires, et pour la sixieme annee con- secutive ces dividendes etaient en progression par rap- port a 1'annee precedente. Le dividende annuel se monte actuellement a 1,40 dollars par action ordinaire. Philip Morris U.S.A. Grace au dynamisme exceptionnel des principales mar- ques de cigarettes de votre societe aux Etats-Unis- Marlboro, Benson & Hedges 100's, Virginia Slims et Parliament-les ventes unitaires de Philip Morris U.S.A. ont atteint le chiffre record de 123 milliards, soit un accroissement de 11%. Pendant I'exercice, le chiffre d'affaires et le b€nBfice d'exploitation ont aug- mente respectivement de 12% et 17%. Philip Morris U.S.A., notre prtnctpale societe d'exploitation, pour ce qui est du chiffre d'affaire et des benefices, demeure la societe de l'industrie de la cigarette connaissant la croissance la plus rapide sur le march€ americain. Marlboro, notre marque principale, detenait, a la fin de I'annee 1973, 14% du marche et 1'ecart qui la separe de la marque la plus vendue s'amenuise encore. Il y a seulement cinq ans la part du march6 am8ricain detenue par Marlboro etait inferieure a 8%. La societe a maintenu sa position dominante dans le segment des cigarettes de 100mm: les ventes de Benson & Hedges 100's ont augment6 de 12,0% et cette marque est toujours la premiere dans ce secteur en pleine expansion. Les autres marques 100mm de Philip Morris-Virginia Slims, Parliament 100's et Marlboro 100's-ont elles aussi nettement progresse pendant 1'annee. Il y a dix ans, le marche des 100mm n'existait pas; cinq ans plus tard,les ventes de cette cat8gorie de cigarettes representaient environ 13% du march8 total. Cependant, vers la fin de 1973, les ventes des marques de 100mm representait plus de 22% des ventes totales de 1'industrie. La part principale de ce marche est detenue par Philip Morris qui comptait 29% de ce segment. La repartition des ventes par secteur de population refiete egalement la position predominante oceupee par Philip Morris. Les marques de votre societe sont par- ticutierement bien acceptees dans les secteurs de la population americaine en forte croissance, ainsi que par les femmes et les consommateurs ayant un niveau d'instruction superieur. L'annee derniere la societe a du" resoudre un pro- bleme important: accroitre le volume de production tout en maintenant notre haute qualite traditionnelle. Au moment ou les techniques de fabrication des ciga- rettes entrent dans une ere nouvelle et alors que nos ventes continuent a progresser rapidement, notre nou- veau complexe de $200 millions en construction a Richmond-1'element le plus important de notre pro- gramme d'investissement-reprzsente un investissement opportun et rentable. Le nouveau centre de production n'atteindra sa pleine capacit€ qu'en 1977, cependant, en decembre dernier, ii produisait environ 100 millions de cigarettes par jour -soit le 20% de sa capacite prevue. Les travaux de construction proprement dits seront termines au debut de 1974. En 1973, votre societe a egalement entrepris la construction d'une usine pour le melange et la pre- paration des tabacs pr'es de Richmond, Virginie. La construction de cette installation, qui coutera environ $43,8 millions, a ete rendue necessaire par 1'accrois- sement des besoins de notre nouveau centre de Richmond. En 1973, les depenses de marketing sont demeurees pratiquement au meme niveau qu'en 1972 et les frais de pubiicite ont ete a nouveau inferieurs a ceux de 1970, derniere annee ou la publicite radiophonique et televisee etait autorisee. L'accroissement du volume des ventes a entraine une diminution des frais de marketing par mille cigarettes. La division American Safety Razor de Philip Morris U.S.A. a contribue elle aussi aux benefices de Ia societe. Ses principaux nouveaux produits-Personna Double II, rasoir a quatre lames, deux de chaque cote, et Flicker, rasoir pour femmes-ont 8te commercialises en 1973 sur tout le territoire des Etats-L'nis. En cours d'annde, deux petites societEs, Clark Gum et Lightfoot Soap ont ete cedees, car, ces societes ne s'integraient pas dans notre plan general de croissance. Philip Morris International L'essor que Philip Morris International a connu ces derni8res annees s'est poursuivi en 1973. L'annee der- niere, les ventes mondiales de cette importante so- ciete d'exploitation ont atteint un total de 124 milliards de cigarettes. Alors que les ventes mondiales de 1'in- dustrie de la cigarette hors des Etats-Unis augmentaient de 4%, celles de Phillip Morris International progres- saient de 9,5%. Le chiffre d'affaires et le b@nefice d'explioitation de Philip Morris International se sont accrus respectivement de 31,9% et 9,6%. Nos marques sont en vente dans plus de 160 pays et territoires. L'an dernier, Philip Morris International, ses filiales et ses licenci@s d8tenaient une part du marche d'au moins 10%-et dans plusieurs cas un pour- centage superieur a 10%-dans plus de 20 pays, parmi lesquels 1'Australie, le Canada, 1'Italie, le Liban, le Mexique, Ie Nigeria, les Philippines, la Suede, la Suisse et le Venezuela. L'augmentation de la demande pour les cigarettes de type americain est a I'origine du succes mondial de Marlboro; cependant, nous tenons compte des preferences pour d'autres catBgories de gotlt, ainsi, 60% environ de nos ventes unitaires inter- nationales sont realisees avec des marques regionales et nationales. Actuellement, Philip Morris International fabrique et distribue quelque 145 marques de cigarettes dans le monde. A la fin de 1973, Philip Morris formait une association comprenant une participation d'interets bresiliens pour la construction d'un centre de production a Curtiba, Bresil. Notre entree sur le marche de ce pays est pr8vue pour le debut de 1975. Toujours en 1973, votre societe a conclu des accords au Japon avec la "Japan Tobacco and Salt Public Cor- poration" et en Pologne avec Agros, pour la fabrication sous licence des cigarettes Marlboro dans ces pays. Au Mexique, malgre 1'accroissement de ses ventes uni- taires et de sa part du march8, notre filiale Cigarrera Nacional, S.A. a continue d'enregistrer des pertes resultant de la brusque augmentation des coGts et de I'augmentation des contr8les gouvernementaux. Nous 8tudions actuellement plusieurs alternatives, entre autre, la reduction de notre participation qui nous don- nerait une position minoritaire, conform€ment a la politique actuelle du gouvernement Mexicain. Nous prevoyons que cette question sera resolue dans la pre- miere moiti6 de 1974 et que, quelque soit 1'issue, elle n'aura aucun effet marquant sur les resultats de 1974. Les ventes ont augmente en volume et en valeur dans les quatre regions-Europe/Moyen Orient/Afrique; Amerique latine/P€ninsule iberique; Asie/Pacifique et Canada. Philip Morris Europe, la plus importante region du point de vue du chiffre d'affaires et des bene- fices, a etendu sa responsabilit8 et comprend main- tenant I'Afrique et le Moyen Orient. En Europe, pen- dant 1'annee 1973, les nombreux realignements des parites monetaires ont perturb8 nos acttvites, cc quii a entraine des repercussions defarovables surles bene- fices, compenses cependant par les progres realises dans d'autres regions. Dans le monde entier, Philip Morris International poursuit son programme d'expansion et de modemisa- tion de ses installations. En Australie, nos centres de production de cigarettes et nos installations pour 1a vinification ont ete agrandis. La construction d'un des plus grands entrepots de tabac d'Europe, a proximit8 du centre de production de notre filliale suisse a Neuchatel, est en voie d'achevement. Comme la plupart des societes americaines exergant une activite internationale, Philip Morris a de nouveau contribue positivement en 1973 a 1'equilibre de la balance commerciale des Etats-Unis. Par ailleurs, dans plusieurs pays, Philip Morris peut poursuivre ses activttes grace a 1'apport evident qu'elle fournit a leur economie. Notre programme de forma- tion prend de plus en plus d'ampleur par suite de 1'expansion constante de la societe. II assure le perfec- tionnement et la promotion interne des employes des pays h8tes en fonction de leurs qualites professionnelles et des resultats obtenus. II constitue un dl6ment fon- damental du succes de Philip Morris International. Les resultats obtenus a 1'etranger en 1973, malgre l'inflation galopante et le nationalisme economique, d€- montrent que votre societ8 est bien placee pour pour- suivre sa croissance sur le marche international. Miller Brewing Company En 1973, les ventes de Miller en barils ont augmente de 28,8% par rapport a 1'exercice precedent, contre 4,7% pour 1'industrie de la biere dans son ensemble. Proportionnellement, la progression enregistree par Miller a ete superieure a celle des autres grandes bras- series americaines. La part du marche de Miller a progresse de facon spectaculaire, de 4% a 5%, Miller passant de la septieme a Ia cinquicme place de 1'in- dustrie. Le chiffre d'affaires a atteint 276 millions de dollars, soit une augmentation de 31% par rapport a 1972. Selon nos estimations, Miller High Life est la marque nationale qui a progresse le plus rapidement sur le marche americain en 1973. Les ventes de Miller High Life, aussi bien en bouteilles qu'en boites d'aluminium, ont considerablement augmente et 1es consommateurs ont reserve un accueil tr8s favorable au "pony pack" de 8 bouteilles de 7 oz. La marque Miller Ale a ete tres bien aceueillie dans Ie nord-est, principal marche des Etats-Unis pour ce genre de boisson, et le succes de la marque Meister Brau dans la region de Chicago a egalement contribue 1'annee derniere a porter a un niveau record les ventes de bi8re Miller. En 1973, la demande croissante des consommateurs pour les bieres de qualite produites par Miller, a en- traine une utilisation maximum de la capacite de brassage. En fait, a certaines periodes de 1'annee, Miller n'a pu satisfaire entierement la demande. Le deficit d'exploitation de Miller, $2,4 millions, est imputable a la hausse des cotits des matieres premieres et du conditionnement, a la concurrence des prix dans 1'industrie de la biere, et aux cotits de fabrication relativement eleves d"u au fait que Miller ne dispose pas d'installations de brassage modernes et efficaces. Pour 1'industrie,les boites etles bouteilles representent une part importante du prix de revient et leur coOt a augmente de pr8s de 7% en 1973. Les prix du malt, du mais et de l'orge sont montes en fleche. La guerre des prix, qui sevit depuis de nom- breuses annees dans cette industrie, s'est poursuivie in- tensivement. La contraction du rapport co0t-prix s'est traduite par une reduction des marges benefici- aires pour tous les brasseurs. Pour accroitre sa production et son rendement, tout en maintenant la qualite superieure de ses produits, Miller a entrepris un vaste programme d'expansion et de modernisation. Pres de $200 millions seront affectes a ce programme au cours des cinq prochaines annees. Des installation de brassages et de condition- nement les plus modernes sont actuellement mises en service dans les brasseries Miller de Milwaukee, Fort Worth et Azusa, Callfornie. D'autre part, la capacite de production des brasseries de Milwaukee et de Fort Worth a ete augmentee. Au milieu de 1'annee, la con- struction d'un nouvel entrep8t et d'un centre d'expedi- tion etait mise en chantier a Milwaukee, la ou Frederic Miller avait ouvert sa brasserie en 1855. Dans Ia m@me ville, Miller construit une fabrique de $16 millions pour Ia production de boites d'aluminium recyclables. En janvier 1974, nous annoncions le projet de con- struire une brasserie de $70 millions situee a environ 350 km. de la ville de New York. Le nouveau centre de production de Miller entrera en operation en 1976 avec une capacite initiale de deux millions de barils; la capacite totale sera de six millions de barils par annee. Certains facteurs, specialement la disponibilite d'une eau de haute qualite, seront pris en consideration lorsqu'il s'agira de choisir 1'emplacement de la nouvelle brasserie. L'objectif du plan a long terme de votre societe est d'accroitre le volume des ventes et la part du marche detenue par Miller, ainsi que d'augmenter sa capacite de production tout en rendant ses operations concur- rentielles et efficaces. Bien que Miller ait enregistre une perte en 1973, il existe de bonnes raisons de penser que notre plan a long terme est rationnel.' Nous sommes confiants qu'un profit potentiel existe pour Miller Brewing; cette confiance est concretisee par 1'importance de nos investissements. Philip Morris Industrial Philip Morris Industrial a realise un chiffre d'affaires de 132 millions de dollars en 1973, soit une progression de 17% par rapport a I'annee precedente. Le benefice d'exploitation a augmente de 7,3% malgre la forte hausse des prix des matieres premi8res qu'il etait im- 250o011150 10

possible de reporter sur la client8le et malgre de reelles difficultes d'approvisionnement, notamment en ce qui concerne la cire, les solvants,la pate a papier et t'atumuuum. Le prix de la pate ~ papier, par exemple, a augmente de plus de 39% au cours de 1'annee, ce qui a eu de profondes repercussions sur de nombreuses activites de Philip Morris Industrial. Vers la fin de 1'annee, le "Cost of Living Council" (conseil charge de Ia surveillance du cout de la vie) a autorise Philip Morris Industrial a majorer legere- ment ses prix. Mais 1es couts ont continue d'augmenter sensiblement en novembre et en decembre, apres que la demande de majoration des prix de la societe ait ete approuvee. En 1973, dans chacun de ses secteurs d'activite (pro- duits chimiques, papier et emballages), Philip Morris Industrial a enregistre un accroissement de ses ventes. Les benefices ont egalement augmente pour les produits chimiques et le papier, mais ont accuse un l6ger flechissement pour ce qui est des produits d'emballage. Dans tous les secteurs, grace a 1'accroissement des ventes d'un certain nombre de produits complexes dont les marges beneficiaires sont plus dlevees, Philip Morris Industrial est parvenu a compenser en partie la con- traction du rapport coOt-prix. La mise au point de nouveaux produits et les nouvelles applications de ces produits ont favoris8 la realisation de cette strategie. Nicolet Paper Company a termine la construction d'un des plus grands centres de production du monde pour le traitement du papier couche et de pellicules pour emballages. Cette fabrique, situee a Nicholasville, Kentucky, a co0te environ $5 millions. Polymer Indus- tries, Inc., a agrandi 1'usine de Greenville, Caroline du Sud et s'est enrichie d'un nouvel entrep8t et d'un cinquieme reacteur de polymerisation. Wikolin-Werk, Willi E. Kohlmeyer G.m.b.H., a Breme, RBpublique FedBrale Allemande, soctete recemment creee, est en train d'agrandir ses installations. Mission Viejo En 1973, Mission Viejo Company-une des principales societBs specialisees dans 1'urbanisation planifi€e et la construction d'ensembles r8sidentiels-a acheve sa premi8re ann8e d'activite sous le contr8le de Philip Morris. Son chiffre d'affaires, en 1973, a progresse de 12% par rapport a 1'annee precedente et a atteint $68 millions. Son benefice d'exploitation a diminue de 28%, pour tomber a 4,1 millions de dollars. Le secteur de la construction d'habitations privBes a connu de nombreuses difficultes en 1973. Le premier semestre a dt€ marque par des conditions met8orologi- ques defavorables en Californie meridionale et au Colorado, ainsi que par une hausse rapide du coOt des materiaux, notamment le bois d'oeuvre et le contrepla- que, et par une grave penurie de materiaux de cons- truction. Bien que Mission Viejo occupe une position de premier plan pour ce qui est de la planification de 1'environnement, l'instauration de nouveaux ri'glements sur I'environnement a retard'e la d6livrance des permis de construire. Pendant Ie deuxieme semestre, Ie taux des prets hypothecaires a atteint un niveau sans prdcedent et Ies facilit8s de credit ont €t6 restreintes. Malprd ces difficult€s, Mission Viejo a Et6 une source de benefices pendant 1'exercice Ecou18, avec un total de 1650 maisons vendues pour ses trois places princi- pales d'activite: Orange County, Californie, Denver et Phoenix. En outre, vers la fin de 1'annee, un projet d'importance secondaire a dt8 mis en chantier a Fresno, Californie. L'industrie de Ia construction est sensible aux fluctua- tions de la conjoncture, mais nous estimons que les activitBs de Mission Viejo ont €t8 moins gravement perturbBes que celles de nombreuses entreprises simi- laires aux Etats-Unis. II semble que la plupart des fac- teurs ddfavorables qui ont affect€ ce secteur en 1973 continueront a se faire sentir en 1974. Neanmoins, pour les dix prochaines anndes, les perspectives dans le sec- teur de la construction sont prometteuses et nous comptons que Mission Viejo participera a l.'expansion prdvue. Le tabac et la sant@ Dans le domaine "tabac-sant6", nous avons continu8, avec d'autres societds de l'industrie du tabac, d'appor- ter notre aide en faveur des recherches a caractPre medical en appuyant le "Council for Tobacco Research -U.S.A." (Conseil am8ricain pour la recherche sur le tabac), et de soutenir d'importants-p'rogrammes de recherche entrepris par la Facult6 de medecine de 1'Universite Washington a St. Louis et par la Facult6 de m@decine de 1'Universite Harvard. Depuis vingt ans, l'industrie a consacre plus de $48 millions aux recher- ches scientifiques concernant le tabac et la sante. Sur simple demande, votre societd vous fournira gratuite- ment le rapport annuel du Conseil pour la recherche sur le tabac; ce document contient une description detaillee des etudes entreprises pour le compte de l'industrie en 1973. Au mois d'aotit, le president d'un organisme fedBral nouvellement cr86, la "Consumer Product Safety Com- mission" (Commission pour 1e controle des produits'de consommation) a annoncd qu'elle envisageait d'in- terdire la vente de cigarettes contenant un pourcentage de "goudron" et de nicotine superieur a celui qu'elle considdrerait comme 8tant "sans danger". A ce jour, la Commission n'a encore pris aucune d@cision. Nous avons appris que ni la l6gislation portant creation de cet organisme,, ni Ies r8glements qu'il est charge de faire respecter, ne Pautorisent a exercer un controle sur les cigarettes, et nous avons 1'intention de nous opposer a toute tentative qu'il pourrait entreprendre dans ce sens. Aux Etats-Unis, plusieurs etats ont adopte6 des lois in- terdisant de fumer dans certains lieux publics. Plusieurs pays oit nous exerpons notre activite ont passe des lois et des r8glements limitant la publiciti; pour les cigarettes et obligeant les fabricants a faire figurer une mise en garde sur 1'emballage de leurs produits. Selon un article paru r@cemment dans une publication medicale, il ressort, d'une etude effectuee en Suede par le Karolinska Institut, que, parmi des paires de vrais jumeaux ayant des habitudes de consommation de tabac differentes, aucune difference significative n'a ete notee entre les fumeurs et les non-fumeurs, que ce soit du point de vue de la longevit6 ou de Ia tendance aux mala- dies du coeur. Sur la base des resultats de leur @tude, les auteurs declarent que les diffErences genetiques et les differences de la personnalite ont plus d'importance sur la longdvite et les risques de maladies cardiaques que le fait de fumer. Comme ces travaux constituent, jusqu'a present, la seule €tude demographique com- parant des fumeurs et des non-fumeurs genetiquement identiques, nous pensons que leurs resultats meritent une attention particuliere. Dix ans se sont ecoules depuis la publication, en 1964, du premier rapport du "Surgeon General's Advisory Committee on Smoking and Health" ("commission consultative du m8decin general en matiere de tabac- sante"). Durant ces dix annees, la recherche scientifi- que sur les incidences dites attribuables a la fum8e- comme Ie pretendait 1e rapport original-n'a apportd aucune preuve experimentale valable permettant d'at- tribuer la maladie au fait de furner. Plut8t que cette evidence, la recherche a decouvert une l arge gamme d'au- tres facteurs, suspectes comme pouvant presenter un risque. Durant cette p@riode, les recherches intensives sur la composition chimique de la fum€e du tabac n'ont pu identifier aucun composant, qui, dans les quantites contenues, pouvait etre considere comme un facteur de causalite d'une maladie humaine. Les tentatives entre- prises pour produire chez les animaux-par inhalation de la fumee du tabac-les affections humaines que cer- tains avaient attribu8es a Ia fumee n'ont donnd aucun rBsultat. En r8sume, notre opinion est que la these selon laquelle il existerait une relation de causalit8 entre la fumee de la cigarette et la maladie est plus sujette a caution au- jourd'hui qu'elle ne 1'dtait dix ans auparavant. Les incidences de la crise de 1'gnergie La "crise de 1'energie" est a 1'origine de nombreuses incertitudes, aussi, il est triss difficile d'en evaluer exacte- ment ses effets sur les activites de Philip Morris. Il faut evidemment reconnaitre qu'une grave penurie de com- bustible pourrait entraver certaines activit8s, mais les methodes de production que nous utilisons necessitent moins d'8nergie que celles de la plupart des industries. Aussi, nous estimons que la "crise de 1'energie" aura pour Philip Morris moins d'effets que pour la majorite des industries. En fait, le cotit des combustibles ne represente qu'une faible partie des cotits totaux engages pour fabriquer nos cigarettes et notre bi8re et pour dis- tribuer nos produits. II est possible que les methodes de distribution des produits aux Etats-Unis soient tempo- rairement perturbdes par la crise actuelle, mais nous sommes convaincus que la souplesse de notre reseau de distribution nous permettra de resoudre ces probl8mes. Au d€but de 1973, nous avons dtudie en d8tail nos be- soins en energie et avons pris, dans le courant de I'ann€e, toutes les mesures pratiques qui nous parais- saient necessaires pour que notre approvisionnement en energie soit assure sans interruption. Nous appliquons, sur le plan int6rieur, un programme tri's strict visant a economiser i'8nergie dans toutes nos installations. Ce programme a ddja donne des resultats tangibles et nous a permis de reduire sensiblement notre consommatioa d'energie. Nous sotnmes convaincus que la demande de nos produits ne sera pas ralentie et que nous pourrons continuer a fournir aux consommateurs des produits de haute qualite et en quantites suffisantes. Controles des prix Les reglements sur le controle des prix actuellement ap- pliques par le gouvernement am@ricain dans le cadre de la phase IV de sa politique economique ne nous ont pas permis de compenser entierement 1'accroissement de nos depenses par un reliivement des prix. Au debut de 1973, de ldg8res augmentations ont etd autorisees pour les cigarettes, conform6ment aux dispositions de la phase III. En fin d'annde, dans le cadre de 1a phase IV, les prix de la bi8re et des produits industriels ont pu 'etre legerement majores. Toutefois, meme lorsque des augmentations de prix sont autorisees, le contr8le des prix, tel qu'il est conqu par les dispositions de la phase IV, a pour effet de reduire les marges bendficiaires etant donn8 que toute augmentation du prix de vente doit correspondre exactement au montant de 1'ac- croissement des couu de production. Le cout du tabac et des cereales utilisees pour la fabrication de la bi8re a accus8 une forte augmentation d"u au fait qua ces pro- duits agricoles ne sont pas soumis au contr8le des prix. Le "Cost of Living Council" a egalement autorise un relevement sensible du prix du papier et de la pate a papier. Le 11 janvier 1974, le "Cost of Living Council" a ap- prouv8 une majoration de 1,6% des prix de Philip Morris U.S.A.r ce qui a quelque peu compense 1'accrois- sement des couts. Cette augmentation a 8te appliquee a toutes les marques de cigarettes, aussi, les prix de gros de notre societe sont maintenant alignes au ntveau de ceux de la plupart des societes americaines de I'indus- trie de la cigarette. Nous esperons que lorsque la phase IV se terminera en avril 1974, elle sera remplacde par un programme plus equitable. En 1973, Philip Morris International a egalement d"u faire face aux probl'emes inherents au controle des prix. Dans de nombreux pays oir Philip Morris vend des cmenterigarettesle,prix1'infiationcigazettes desgeneraleaet 1limite'impossibilite]a d'aug- croissance des benefices. Tabac brut La demande mondiale de tabac s'est accrue en 1973. Sur certains marches d'exportation, Ia recolte a ete moins abondante qu'on ne 1'envisageait. La quantite disponi- ble de tabac de qualite a donc ete reduite et Ie cours mondial du tabac a augmente. Sur le plan international, la demande de cigarettes de qualite at le remaniement des parites monBtaires ont entraine un accroissement des exportations de tabac brut des Etats-Unis. Il est prevu que i'offre de tabac sur Ie marche mondial restera limi- tee et, par voie de consequence, que le prix du tabac brut continuera d'augmenter. Philip Morris a ete a meme de maintenir des reserves de tabac des recoltes precedentes en quantit8s et en qualitd requises. Les taxes sur les cigarettes Aux Etats-Unis, en 1973, un seul etat, le Colorado, a adoptd des dispositions legislatives augmentant Ie mon- tant de 1'impot sur les cigarettes. En fait, cette loi sup- primait les taxes municipales et relevait la taxe d'@tat. Neanmoins, en cours d'annee, 41 projets de loi visant a augmenter 1'impot sur les cigarettes ont ete deposes dans 20 etats. Dans 19 etats, des legislateurs conscients de leurs responsabilites, estimant que les droits sur les cigarettes constituent non seulement une forme regres- sive d'imposition affectant d'une maniere disproportion- nee les consommateurs a faible revenu, mais aussi encouragent la contrebande, ont rejete ou refuse d'ap- prouver les projets pr8voyant un rel'evement des droits sur les cigarettes. Qui plus est, des projets de loi visant a reduire les droits sur Ies cigarettes sont sur le point d'etre presentes dans quatre etats. Le 10 janvier 1974, le Gouverneur Wilson, de 1'etat de New York, a recommande 1'abolition des droits imposes par la ville de New York sur les cigarettes. 11 a declare: "Les droits eleves qui frappent les cigarettes dans Ia ville de New York et qui s'ajoutent a la taxe d'etat encouragent les organisations criminelles et ont fait de cette ville Ia terre promise des contrebandiers". A cet egard, il faut noter qua la difference qui existe entre les droits pergus par les divers etats a egalement un effet prejudiciable sur le systeme traditionnel et legal de dis- tribution des cigarettes par des grossistes et des detail- lants bien connus et dignes de confiance. En 1973, le montant des recettes provenant des droits de consommation sur les cigarettes aux Etats-Unis a ete de 5,5 milliards de dollars, dont 2,2 milliards pergus par le gouvernement federal, 3,2 milliards par les etats et 0,1 milliards par les municipalites. Or, cela equivaut a 26 dollars par personne residant aux Etats-Unis, en- fants compris. Cette situation est manifestement injuste. Activites d'interet public Philip Morris Incorporated est 1'une des quelques grandes societes qui ont cree un comite d'administra- teurs expressement chargB de s'occuper des activites de leur societe en ce qui concerne les besoins et les pro- bl8mes sociaux. Ce "Comit@ charge des affaires publi- ques", est non seulement habilite a evaluer nos activites actuelles sur le plan social en tant que societd ayant des obligations civiques, mais i1 doit aussi pre- voir l'evolution des besoins du public et deterntiner les priorites qui en decoulent. Un autre comite du Conseil d'adtninistration, le "Comitd de 1'environnement", s'est vu attribuer des responsabilites du m@me ordre dans Ie domaine de 1'environnement. Par s'ouci de pr8server les ressources du pays at de pro- teger 1'environnement, Miller Brewing Company a vir- tuellement acheve sa conversion en vue de produire des emballages recyclables, c'est-a-dire, des boites entiere- ment en aluminium et des bouteilles reutilisables. Dans le cadre d'un programme con,u par Miller, nombre de nos distributeurs ont mis sur pied, un peu partout aux Etats-Unis, des centres de recuperation de boites et de bouteilles. Les clients et les d@taillants peuvent, tout comme les distributeurs, participer a cet effort national de conservation des ressources. Philip Morris etudie ses autres types d'emballages en fonction des imp€ratifs imposes par la conservation des ressources. Dans le cadre de nos activites d'interet public, nous nous employons a innover et a inciter, si possible, d'autres societes a nous imiter en s'engageant dans des domaines d'utilite publique. Un bon exemple est 1'elargissement de notre programme de bourses pour les enfants de nos employes, qui comprend maintenant la formation professionnelle et I'enseignement superieur. Considere comme unique en son genre, ce programme de formation professionnelle a attire 1'attention des pouvoirs publics, des enseignants, et des chefs d'entre- prise, ce qui a incite plusieurs autres societes a entre- prendre des programmes analogues, ti) ~ O a ~ 1-Y t-+ ~ U1 t-4 11

De meme, Philip Morris a inaugure 1'an dernier le pre- mier programme de bourses pour adultes a l'intention des employees et des menageres desireuses d'effectuer des etudes 3 temps partieL 11 faut esperer que ce pro- gramme servira aussi d'exemple a d'autres societes. Grace a 1'etude effectuee chaque annee sur les respon- sabilites de la soci6t6 dans ie domaine social, le Conseil d'administration est inform@ des progres accomplis par Philip Morris dans 1'interet public. A titre d'exemple, il ressort de la derniere de ces etudes que nous employons un nombre accru de membres de minorites ethniques, de femmes et d'anciens combattants du Vietnam, et qu'ils sont promus a des postes comportant davantage de responsabilites. Philip Morris International et ses filiales ont rBalises de nombreux projets de caractere social: aide aux victimes des inondations au Pakistan et aux Philippines, octroi de bourses d'etudes sup@rieures au Mexique, assistance a un grand nombre de services medicaux et sociaux et a des etablissements d'enseignement au Venezuela, et parrainage de projets culturels entrepris par diverses collectivites australiennes et canadiennes. Philip Morris encourage ses employes, ou qu'ils soient dans le monde, a participer aux activttes de leur collec- tivite, et il est pratiquement impossible d'enum8rer toutes les contributions personnelles qu'ils ont apportees dans cc domaine. En ce qui concerne les renseignements d'ordre financier fournis au public, la Bourse des valeurs de New York a propose recemment que les societes indiquent dans leurs rapports annuels la fourchette des cours, le P/E ratio (rapport cours-benefice), les dividendes et Ia valeur comptable de leurs actions ordinaires. C'est d'ailleurs ce que Philip Morris fait deja depuis plusieurs ann8es et, 1'annee derniere, notre rapport annuel s'est vu decerner par I'hebdomadaire Financial World le titre de "meilleur rapport de 1'annee" de l'industrie americaine. Le Conseil d'administration a eu a deplorer 1'an dernier le deces de M. Wirt H. Hatcher, vice-president en retraite et administrateur honoraire de Philip Morris incorporated. M. Hatcher, qui etait entre chez Philip Morris en 1918, etait bien connu dans I'industrie du tabac. Ses connaissances et ses nombreux ouvrages sur le developpement de 1'industrie et la mise au point des techniques qu'elle utilise lui avaient valu une reputatioh justifiee. M. Hatcher a largement contribue a 1'expan- sion de notre societe. Nous beneficions maintenant des conseils eclaires de M. T. Justin Moore, Jr., pr8sident-directeur general et directeur financier de la Virginia Electric and Power Company, qui a ete elu membre du Conseil d'adminis- tration en avril. Depuis notre derniere restructuration, en janvier 1967, nos ventes ont plus que triple et nos benefices ont plus que quadruple. En outre, nous avons acquis deux im- portantes soctetes d'exploitation, Miller Brewing et Mission Viejo. Par suite de notre expansion, nous avons ete amenes en octobre dernier a elargir et a renforcer la structure de la direction de Ia societe, aussi, le Conseil d'administra- tion a decide de promouvoir plusieurs de nos princi- paux directeurs. Trois des principales modifications concernaient: M. George Weissman, president de Philip Morris Incorporated, nomme vice-prBsident du Conseil d'administration, M. Ross R. Millhiser, president de Philip Morris U.S.A., nomme president de Philip Morris Incorporated, et M. Clifford H. Goldsmith, vice- president executif de Philip Morris U.S.A., nomme president de cette meme soci6t6 et vice-president executif de Philip Morris Incorporated. Nous rendons a nouveau hommage a nos 37.000 em- ployes dans le monde entier pour les brillants resultats qu'ils nous ont permis d'obtenir pendant I'annee. Leur travail a contribue dans une large mesure au succes de notre soci6t6 et nous les remercions de leur devouement. Rapport soumis au nom du Conseil d'administration, Joseph F. Cullman 3rd President du Conseil d'administration et Administrateur en chef George Weissman Vice-president du Conseil d'administration L Fkc~ ~G~cY Ross R. Millhiser President Informe del aaio En este ejercicio de 1973 conmemoramos los veinte aiios Diez aiios atras no existia un mercado para cigarrillos de consecutivos durante los cuales vuestra Compania 100 milimetros y hace cinco anos las marcas de 100 ha venido reportando nuevos records de ingreso bruto mIlimetros sumaban aproximadamente el 13 o del total operacional, de ganancias y de utilidades por acci6n. de las ventas de cigarrilios. A fnes de 1973, sin embargo, El ingreso bruto operacional consolidado se elev6 a las ventas de las marcas de 100 milimetros representa- U.S.$2.600 millones, un aumento de122,1%o, y las ganan- ban mas de 22% del total de las ventas de la industria: cias netas ascendieron a U.S.$149 millones, un incre- La mayor participaci6n individual en el mercado de los mento del 19,4% sobre 1972. Las utilidades por acci6n, 100 milimetros es la de Philip Morris- con una partici- incluyendo bonos convertibles, fueron de U.S.$5,21 y paci6n del 29% en esa categoria. las utilidades efectivas por acci6n fueron de U.S.$5,42, Desde el punto de vista demografico tambien es facil lo que representa aumen[os sobre el aiio anterior del cons[atar la fortaleza de Philip Morris. Las marcas de 19,2 io y 16,1%, respectivamente. vuestra Compania han recibido una magnifica acogida Nos sentimos complacidos de los resultados obtenidos por parte de los fumadores comprendidos en los sectores en 1973, sobre todo porque se lograron en un ano suma- de la poblacion estadounidense de mas rapido creci- mente dificil caracterizado por los controles de precios, miento, el sector femenino y los fumadores con una la escasez de materiales, el reajuste de las paridades de educaci6n superior. las principales divisas y 1a crisis energetica. Una de las mayores dificultades que la Compaiiia logr6 Philip Morris amplj6 en mayor grado su participaci6n salvar el ano pasado fue la de continuar la elaboraci6n en el mercado mundial de cigarrillos y reforz6 el segundo de cigarrillos en un volumen ascendente, manteniendo puesto que ocupa entre las mayores empresas cigarri- siempre nuestra tradicionai alta calidad. lleras del mundo cuyas acciones se cotizan en la bolsa. Asi, nuestro nuevo complejo en Richmond, Virginia, En 1973, las ventas mundiales de Ia industria del cigarri- principal componente de nuestro ambicioso programa de lio aumentaron 4% hasta sobrepasar los 3.600 billones expanston de capital ha demostrado ser una acertada y de unidades; la participaci6n de Philip Morris en el beneficiosa inversi6n, ya que la elaboraci6n de cigarrillos mercado cigarrillero mundial, que abarca las ventas en ha entrado en una nueva era de cambios tecnol6gicos, Estados Unidos y en el extranjero, fue del 6,7%. precisamente en el periodo en que nuestras marcas con- A escala mundial, los cigarrillos Marlboro siguen siendo los de mayor venta -un puesto que ostentan desde untian consumiendose a un ritmo cada vez mas rapido. 1972. En Estados Unidos, la marca Marlboro ocupa el Aunque no sera posible aicanzar la plena capacidad de segundo lugar pero redujo considerablemente la dis- las nuevas instalaciones hasta 1977, a fines del pasado tancia que la separa de la primera. mes de diciembre esta planta estaba produciendo aproxi- Por cuarto afio consecutivo, se registr6 un incremento madamente 100 millones de cigarrillos diariamente en el total de ventas por unidad de la industria cigarri- -un 20% de su capacidad maxima. Los trabajos de edi- 1lera en Estados Unidos. El total de unidades vendidas ficaci6n marchan de acuerdo a lo planificado y estaran por industria fue de 577.000 millones, lo que representa terminados a principios de 1974. Durante 1973 vuestra un aumento del 4,1% frente al ejercicio anterior; Compaiiia tambien inici6 la construcci6n de una planta paralelamente, las ventas por unidad de Philip Morris de procesamiento de tabaco cerca de Richmond. Esta aumentaron en un La participaci6n de vuestra planta, a un costo aproximado de U.S.$43,8 millones, es Compania en el mercado estadounidense alcanz6 un indispensable para atender las crecientes necesidades nuevo tope de mas del 21% al cierre del ejercicio. del nuevo complejo industrial de Richmond. En 1973, las ventas de Miller Brewing aumentazon consi- El total de gastos por concepto de mercadeo en 1973 se derablemente -con incrementos del 31% en el ingreso mantuvo casi al mismo nivel que en 1972, y los gastos de bruto operacional y del 28,8% en las ventas por barril. publicidad fueron de nuevo menores que los de 1970, La espectacular subida de las ventas por barril de Miller el tiltimo aiio en que se permiti6 hacer propaganda a los represento el mayor aumento porcentual registrado en cigarrillos por radio y televisi6n. Como resultado del la industria cervecera de Estados Unidos,la cual elev6 el crecido volumen de ventas, los gastos de mercadeo por total de sus ventas por barril en un 4,7% en 1973. Miller 1.000 cigarrlllos disminuyeron. pas6 del septjmo al quinto puesto entre las compafii:as La American Safety Razor, una divisi6n de Philip cerveceras estadounidenses. Morris U.S.A., tambiBn contribuyd a los beneficios de Las erogaciones capitalizables en 1973 ascendieron a la Compaiiia. Sus principales nuevos productos- U.S.$175 millones, una cifra muy superior a la de Personna Double II, una hoja con cuatro filos para e1 U.S.$120 millones para 1972. Philip Morris esta imple- ~eitado, dos por cada lado y Flicker, una afeitadora mentando un ambicioso programa de expansion de Para damas-fueron distribuidos a escala nacional en capital para satisfacer la creciente demanda de nuestros 1973. Asimismo, durante el ejercicio se vendieron dos cigarrillos, en Estados Unidos y en el extranjero, y de de nuestras empresas de menor envergadura; Clark nuestros productos del ramo cervecero y demas. Durante Gum y Lightfoot Soap Company. 1973 anunciamos un aumento de U.S.$500 millones a Philip Morris International aproximadamente U.S.$750 millones en erogaciones El dinamismo con que Philip Morris International capitalizables presupuestadas para los pr6ximos cinco desarro116 sus operaciones en aiios recientes continu6 en afios. La mayor parte de esta suma se destinaza a la 1973. El ano pasado, las ventas a nivel mundial de esta expansi6n y modernizaci6n de las operaciones tabacale- importante empresa operativa de Philip Morris totaliz6 ras internacionales, a Miller Brewing y, en una propor- 124 billones de unidades, mientras que las ventas de la ci6n mucho menor, a Philip Morris Industrial y Mission industria cigarrillera mundial, excluyendo Estados Viejo. Unidos creci6 4%, el volumen de ventas de Philip En los tiltimos cinco aiios -de 1968 a 1973-el ingreso Morris International aumento 9,5%. Los ingresos y las bruto operacional consolidado de Philip Morris aument6 ganancias operacionales aumentaron 31,9%, y 9,6%, de acuerdo a una tasa promedio compuesta del 20,6% respectivamente. anual. En este periodo, las ganancias netas subieron de Nuestras marcas se distribuyen en mas de 160 paises y 24,9% y las utilidades por acci6n, considerando bonos territorios. En el ejercicio anterior, Philip Morris convertibles, aumentaron un 19,5% por ano. Este es el International y sus compafiias afiliadas y concesiona- cuadragesimo-sexto ejercicio consecuuvo en que vuestra rios, tenian por lo menos una participaci6n del 10% Compaiiia pag6 dividendos sobre sus acciones comu- en el mercado -y en algunos casos, un porcentaje con- nes, y el sexto en que, tambien consecutivamente, aumen- siderablemente mayor- en mas de 20 paises, entre taron los dividendos. El actual dividendo por acciones ellos: Australia, Canad'a, Filipinas, Italia, Libano, comunes es de U.S.$1,40. Mexico, Nigeria, Suecia, Suiza y Venezuela. La cre- Philip Morris U.S.A. ciente demanda de cigarrillos de tipo americano ha con- EI notable impetu de las prjncjpales marcas de cigarrjllos ducido al exito internacional de Marlboro; sin embargo, de Estados Unidos de vuestra Compaiiia-Marlboro, donde existen preferencias por otros sabores estable- Benson & Hedges 100's, Virginia Slims y Parliament- cidos, estamos debidamente representados y aproxima- hizo que las ventas por unidad de Philip Morris U.S.A. damente el 60% de nuestras ventas internacionales alcanzaran un nuevo tope de 123 billones, un aumento por unidad consisten en marcas regjonales y naciona- del 11%. El ingreso bruto operacional y las ganancias les. Actualmente Philip Morris International elabora y operacionales registraron aumentos del 12% y 17%, res- vende unas 145 marcas de ctgarrillos en el mundo pectivamente, durante el ejercicjo. Philip Morris U.S.A., enteroa nuestra mayor Compafiia de operaciones en terminos A finales de 1973 se anunci6 que Philip Morris pro- de ingresos y ganancias, retuvo el sitio que ocupa como yecta Ia construcci6n de una planta en Curitiba, Brasil, la compania de ctgazrillos con la tasa de crecimlento a traves de una compaiiia afiliada cuya propiedad mas alta en Estados Unidos. comparte con intereses brasileiios. Nuestra introduc- Marlboro, nuestra mazca principal, obtuvo una paztici- ci6n en el mercado de ese pais esta programada para paci6n en el mercado del 14% a finales de 1973, cerrando prtncipios de 1975. atin mas la brecha que la separa de la marca mas popu- Tambien durante 1973, vuestra Compaiiia firm6 dos lar. Hace s61o cinco aiios, la participaci6n de Marlboro acuerdos de concesi6n; en Jap6n con Japan Tobacco en el mercado estadounidense era de menos del 8%. & Salt Public Corporation y en Polonia con Agros La Compaiiia tambien se mantuvo a la cabeza en cuanto Paza la elaboraci6n de cigazrillos Marlboro en esos a ventas en el creciente segmento del mercado de los pazses. cigarrillos de 100 milimetros; las ventas de Benson En Mexico, a pesar de que las ventas por unidad han & Hedges 100's aumentaron e 12,0% y es la marca que subido y que nuestro segmento del mercado se ha ocupa ell primer lugar en ese sector, mientras que las expandido, nuestra filial, Cigarrera Nacional, S.A. con- 1 ventas de las otras marcas de 100 milimetros de Philip tinua incurriendo perdidas debido al alza violenta de Morris -Virginia Slims, Parliament 100's y Marlboro los costos y el aumento de controles gubernamentales. 100's- tambien aumentaron considerablemente durante Estamos estudiando una serie de alternati.vas al respecto, el ejercicio. entre las cuales se encuentra, la reducci6n de nuestra participaci6n en la empresa para convertirla en minorita- N) rua, ajustandonos asi a la actual politica del Gobierno ~ Mexicano. Esperamos tener una soluci6n en e1 transcurso ~ del primer semestre de 1974 y cualquiera que esta sea, ~ no tendra gran repercusi6n sobre los resultados de 1974. ~ . t-~ ~ 12

El ingreso bruto operacional y las ventas per unidad aumentaron en las cuatro regiones -Europa/Oriente Vfedio/Africa; America Latina/Iberia; Asia/Pacifico; y Canada. Philip Morris Europe, 1a regi6n mas extensa en terminos de ingreso bruto operacional y ganancias, anadi6 Africa y el Oriente Medio al sector de su responsabilidad. En 1973, las ganancias logradas en Europa se vieron afectadas desfavorablemente per los trastornos experi- mentados per los numerosos reajustes de las paridades monetarias. Esto fue compensado, sin embargo, per ganancias registradas en otras regiones. Alrededor del mundo, el programa de Philip Morris International de expansi6n y mejora de sus instalaciones prosigue su ininterrumpida marcha. En Australia, las instalaciones para la elaboraci6n de cigarrillos y de vinos Lindeman fueron ampliadas. Uno de los complejos para el almacenamiento de tabaco mas grandes de Europa, situado cerca del centro de operaciones de nuestra filial Suiza en Neuchatel, esta ya casi terminado. Al igual que la mayoria de las compaiiias norteamerica- nas con operaciones internacionales, Philip Morris contribuy6 una vez mas a la balanza de comercio de Estados Unidos en 1973. Al mismo tiempo, la presencia de Philip Morris en muchos paises es posible solamente porque se puede demostrar que contribuye a sus economias. Estimulada por la continua expansi6n de is Compaiiia, nuestra pohtlca de capacitar, reconocer el rendimiento y promo- ver al personal de las empresas en los paises donde somos huespedes, ha sido un factor preponderante en el exito de Philip Morris International. El nivel de crecimiento alcanzado en el campo interna- cional en 1973 -a pesar de is inflacidn y del creciente nacionalismo econ6mico- coloca a vuestra Compaiiia en una ventajosa situaci6n para continuar su crecimiento en ei mercado internacional. Miller Brewing Company En 1973 las ventas per barril de Miller aumentaron un 28,8% sobre las ventas del ejercicio anterior, en compa- raci6n con un incremento de14,7% en las ventas por barril de is industria cervecera en general. El aumento de Miller fue el mayor, en terminos porcentuales, entre las cervecerias mas importantes de los Estados Unidos. La participaci6n de Miller en el mercado aument6 de modo sensacional de14,0% al 5,0%, pasando del septimo al quinto lugar entre las principales compaiiias cerve- ceras de Estados Unidos. El ingreso bruto operacional alcanz6 los U.S.$276 millones, lo que representa un 31% sobre 1972. De acuerdo a nuestros estimados, Miller High Life fue la marca nacional de mas rapido creci- miento en Estados Unidos en 1973. Las ventas de Miller High Life, tanto en botella como en las novisimas latas de aluminio transformable, aumentaron considerable- mente; is acogida brindada por e1 ptiblico consumidor a1 estuche de ocho botellas de 7 onzas cada una, llamado "Pony Pack", fue excelente. Miller Ale tambi6n fue muy bien recibida en la regi6n del noroeste de los Estados Unidos donde predomina la preferencia per la cerveza inglesa (ale), y las ventas de Meister Brau en la zona de Chicago tambien contribuyeron a que las ventas por barril de Miller alcanzaran niveles sin precedentes. La creciente demanda por parte de los consumidores de productos cerveceros Miller de calidad, hicieron aumen- tar la produccion en 1973 a su capacidad maxima. Es mas, en algunas oportunidades durante el ejercicio, las instalaciones de Miller no fueron suficientes para satisfacer is demanda. Las perdidas operacionales de U.S.$2,4 millones infor- madas per Miller fueron el resultado del crecido costo de los envases y materias primas, is incesante batalla de precios en is industria cervecera y los costos de fabri- caci6n relativamente altos debido a que Miller no cuenta con instalaciones modernas y eficientes. En este aspecto, las latas y las botellas contribuyen considerabiemente a aumentar los costos totales, los cuales aumentaron casi un 7% durante 1973. Hace afios que en is industria cervecera predomina una intensa lucha de precios. El costo de is malta, el maiz y Is cebada aumentaron en forma excepcional durante este ejercicio. La esttechez del diferencial entre costos y precios se refiej6 en margenes de rentabilidad mucho mas pequenos en todo el ramo cervecero. Con el fin de aumentar la produccidn e implantar meto- dos mas eficaces, manteniendo siempre-la calidad superior del producto, Miller ha lanzado un ambi- cioso programa de expansi6n y modernizaci6n. Casi U.S.$200 millones han sido presupuestados a este fin durante los pr6ximos cinco aiios. Los mas modernos equipos para In fabricaci6n de cerveza y envase estan siendo instalados en las cervecerias de Miller en Milwaukee y Fort Worth. Ademas la capacidad de pro- ducci6n fue ampliada en as cervecerias de Milwaukee y Fort Worth. A mediados del ejercicio se inici6 is cons- trucci6n de una nueva instalaci6n para almacena- miento y embarque en el mismo sitio donde Frederic Miller fund6 su cerveceria en Milwaukee, en 1855. Miller tambiBn ha puesto is primera piedra para is construc= citin, en Milwaukee, de una fabrica de latas de aluminio transformable a un costo de U.S.$16 millones. En enero de 1974, anunciamos los planes para construir una cerveceria, a un costo de U.S.$70 millones a 200 millas de distancia del area metropolitana de New York. Esta nueva planta comenzara sus operaciones en 1976 con una capacidad inicial de dos millones de barriles; siendo la capacidad total planificada, seis millones de barriles anuales. Ciertos factores, especialmente is dis- pottibilidad de agua de purisima calidad, determinaran is ubicaci6n exacta de esta nueva planta. El objetivo a largo plazo que persigue vuestra Compania consiste en fomentar ]as ventas y Ia participacibn en el mercado, asi como incrementar la capacidad de produc- ci6n de cerveza de la Miller introduciendo a is vez procedimientos mas eficaces que nos permitan competir en una posici6n mas ventajosa. A pesar de que Miller incurrib una perdida operacional en 1973, nuestro plan a largo plazo se mantiene sobre bases concretas. Nuestra fe en el potencial de Miller Brewing para producir ganancias a largo plazo qued6 demostrada per el monto de las sumas destinadas a la expansi6n de capital. Philip Morris Industrial El ingreso bruto operacional de Philip Morris Industrial se elevo a U.S.$132 millones en 1973, lo que representa un aumento del 17% sobre los resultados del ejercicio anterior. El incremento de los ingresos operacionales fue de 7,3% a pesar de drasticos aumentos en los costos de materiales que no fue posible transferir al con- sumidor, asi como una verdadera escasez de algunos materiales como cera, disolventes, aluminio y pulpa. Per ejemplo, el precio de is pulpa aument6 en mas de un 39% durante el aiio y el impacto de este aumento en el costo tuvo un efecto significativo sobre varias de las operaciones de Philip Morris Industrial. Hacia el cierre del ejercicio, el "Cost of Living Council" (Comisi6n Reguladora del Costo de is Vida) permiti6 pequenos incrementos en los precios de los productos de Philip Morris Industrial. Sin embargo, los costos con- tinuaron subiendo extraordinariamente en noviembre y en diciembre, luego de haber recibido Philip Morris Industrial autorizaci6n para dicho aumento. Cada una de las operaciones de esta Compaiiia -productos quimicos, papel y envases-registr6 aumen- tos de ventas en 1973, y en los sectores de productos quimicos y papel se registraron ganancias mayores. El nivel de utllidades disminuy6 ligeramente en el sector de envases. A traves de incrementos de ventas en todos los sectores de un ntimero de productos de alta tecnologia y mayor rentabilidad, le fue posible a is Industrial compensar parcialmente el cefiido diferen- cial entre costo y precio. El incesante desarrollo de nuevos productos y de nuevas aplicaciones para estos, fue de vital importancia en is implementacidn de esta estrategia. Nicolet Paper Company ha terminado is construcci6n de una de las mayores instalaciones del mundo para el recubrimiento de papel y peliculas para empaquetados. Esta obra, ubicada en Nicholasville, Kentucky, cost6 aproximadamente U.S.$5 millones. Polymer Industries, Inc. ampli6 su planta de Greenville, Carolina del Sur, al afiadir un nuevo almacen y el quinto reactor para Is producci6n de polimero. Wikolin- Werk, Willi E. Kohlmeyer G.m.b.H., esta ampliando sus instalaciones de manufactura en Bremen, Alemania Occidental. Mission Viejo Company En 1973, la Mission Viejo Company -considerada como lider entre las compaiiias dedicadas a1 fomento de viviendas y urbanizaciones planificadas, termin6 su primer ejercicio completo de operaciones como parte de Philip Morris. En 1973 el. ingreso bruto de Mission Viejo sobrepas6 en un 12% al del ejercicio precedente, elevandose a U.S.$68,0 millones. Los ingresos opera- cionales sufrieron un descenso del 28%, hasta el nivel de U.S.$4,1 millones. El sector de la construcci6n de viviendas experiment6 numerosas dificultades en 1973. Los primeros seis meses del ano estuvieron caracterizados per condiciones meteorol6gicas adversas en el sur de California y en Colorado y per Is vertiginosa subida del costo de los materiales -en particular madera y contraencha- pado; asi como una marcada escasez de materia prima. Aunque Mission Viejo esta a is vanguardia en at campo de is planificaci6n ambiental, las nuevas regulaciones introducidas en ese sector, ocasionaron demoras en Is tramitaci6n de los permisos de construcci6n. Durante la segunda mitad del ano, Ias tasas de interes hipote- cario alcanzaron niveles sin precedentes, reduciendose severamente is disponibilidad de fondos para ese tipo de prestamos. A pesar de factores tan negativos, Mission Viejo registr6 ganancias en el ejercicio y vendi6 un total de 1.650 viviendas en sus tres ubicaciones principales el Condado de Orange en California, y las ciudades de Denver, Colorado y Phoenix, Arizona. Ademas, a fines del ejer- cicio se inaugur6 una pequeiia urbanizaci6n en Fresno, California. La industria de la construcci6n de viviendas as extre- madamente ciclica, pero creemos que is proporci6n en que este factor ha perjudicado las operaciones de Mission Viejo, as menor que a muchas otras compaiiias del ramo en el pais. Al parecer, el efecto de los ele- mentos negativos que han afectado al sector de is cons- truccion de viviendas en 1973 se extendera sobre 1974. Sin embargo, el prondstico de Ia vivienda para is proxima decada se presenta favorable y confiamos en que Mission Viejo parttciparra en el crecimiento que se anticipa. El fumar y la salud En uni6n de otras Companias del ramo, continuamos prestando nuestro apoyo a has investigaciones medicas a traves del "Council for Tobacco Research" (Comisi6n Investigadora del Tabaco) de EE.UU.; tambien patro- cinamos importantes programas de investigaci6n en las Facultades de Medicina de las Universidades de Wash- ington en St. Louis, Missouri, y Harvard en Cambridge, Massachusetts. Durante los tiltimos veinte aiios, is industria tabacalera ha destinado mas de U.S.$48 millo- nes a la investigacion cientifica del tabaco y su impacto sobre is salud. La memoria anual de is Co- misidn Investigadora del Tabaco enumera los estudios, auspiciados per Ia industria tabacalera, efectuados durante 1973 y puede obtenerse gratis de vuestra Compania. En el mes de agosto el Presidente del "Consumer Product Safety Commission" (Comisidn de Seguridad de Bienes de Consumo), una agencia federal de re- ciente creaci6n, anuncid que este organismo tenia en estudio Is prohibici6n de aquellos cigarrillos cuyo con- tenido de alquitran y nicotina excediese lo que is Comisi6n determinase como "saludable". Hasta Is fecha 1a Comisi6n no ha tomado ninguna decisi6n. Se nos ha informado que ni la legislaci6n que establece dicha agencia ni ninguno de sus estatutos, le confiere jurisdiccion sobre los cigarrillos, y es nuestra intenci6n oponernos a cualquier tentativa en ese sentido. En Estados Unidos, varios estados han aprobado leyes que prohiben fumar en determinados lugares publicos. Varios paises extranjeros con los que comerciamos han adoptado leyes y regulaciones que limitan la propaganda del cigarrillo y requieren is impresi6n de avisos preventivos en las cajetillas. Un reciente articulo medico informa sobre un estudio realizado per el Karolinska Institut de Suecia que indica que entre parejas de gemelos identicos, uno de los cuales as fumador, no hay diferencia importante in en el termino de vida ni en is tendencia al desarrollo de enfermedades del coraz6n, per raz6n de la des- igualdad de sus habitos. Los autores dicen que los re- sultados obtenidos sugieren que las diferencias genBticas y en Is personalidad son mas importantes que el habito de fumar para determinar el termino de vida y las probabilidades de sufrir enfermedades del coraz6n. Per ser este el tinico estudio demografico en que se han comparado fumadores y no fumadores genetica- mente identicos, creemos que los resultados merecen cuidadosa atencion. Una decada ha transcurrido desde que el "Surgeon General's Advisory Committee on Smoking & Health" (Comite Asesor al Cirujano General, sobre at Fumar y is Salud) emiti6 su primer reporte en enero de 1964. Las investigaciones cientificas Ilevadas a cabo durante dicha decada, sobre las condiciones supuestamente relacionadas con at fumar cigarrillos, segun se argu- mentaba en at antes mencionado reporte, no ha hecho relucir ninguna evidencia experimental valida, que relacione el fumar con las enfermedades. Mas bien, dichas investigaciones han descubierto una amplia gama de otros posibles factores. Intensivas investigaciones adicionales sobre la composici6n quimica del humo, realizadas durante este periodo, han fracasado en identificar ningtin componente del humo que, en Is proporci6n presente, pueda ser considerado como factor causante de ninguna enfermedad humana. No ha habido ningun intento fructifero que haya logrado producir en antmales, -a traves de is inhalaci6n del humo-aquellas condiciones que algunos han atribuido al fumar en personas. En pocas palabras, as nuestra opinion que el argumento de que el fumar conlleva una relaci6n causal a en- fermedades, esta hoy mas sujeto a dudas que hace diez aiios. Areas de conflicto La "crisis energetica" ha producido numerosas incerti- dumbres que hacen muy dificil determinar con exactitud el impacto que esta tendra sobre las operaciones de Philip Morris. Desde luego, no se puede dejar de reco- nocer que una fuerte escasez de combustible podria causar cierto desconcierto, pero las tecnicas de fabrica- cion de nuestros productos requieren menos energia que Is generalidad y, per lo tanto, opinamos que la "crisis energetica" afectara a Philip Morris en menor grado que a Is mayoria de las demas industrias. En realidad, el costo del combustible representa una porci6n minima de nuestros costos totales de elabora- ci6n de cigarrilios y cervezas y de is distribuci6n fisica de nuestros productos. Es posible quelos metodos de distribuci6n de productos en Estados Unidos experimenten trastornos pasajeros, pero confiamos en que la fiexibilidad de nuestra red de distribuci6n nos permitira superar tales problemas. A principios de 1973, se llev6 a cabo un intenso analisis de nuestras necesidades energeticas que nos permitid tomar an el transcurso del ejercicio las medidas que esti- mamos oportunas para asegurar e1 abastecimiento ininterrumpido de nuestras exigencias de energia. Un amplio programa interno para la conservaci6n de energia esta an vigor an todos nuestros establecimientos. Este plan ya ha producido resultados palpables segtin lo demuestran las sustanciales reducciones en nuestro consumo energetico. Controles de precios Las regulaciones sobre los aumentos de precios, en vigor de acuerdo con Is "Phase IV" (cuarta etapa) de las regulaciones de precios del gobierno estadounidense, restringen nuestra habilidad para compensar los mayores costos mediante aumentos de precios. A prin- cipios de 1973, segitn "Phase III" (tercera etapa) se autorizaron algunos pequeiios aumentos de precios para los cigarrillos. Ya entrado at aiio, Is cerveza y otros 2500011 153 13

productos industriales experimentaron algun aIlvio bajo la °Phase IV". Sin embargo, auII en aquellos casos en que se ha autotizado el incremento de precios, o se espera tal autorizaci6n, el efecto definitivo de estas medidas segun Ia "Phase IV" es una reducci6n de los margenes de rentabilidad ya que los aumentos de precios estan limitados a cubrir dolar por dolar el alza de los costos. Los granos empleados en la fabrica- ci6n de cerveza y e1 tabaco, experimentaron agudos aumentos en los costos ya que estos productos agricolas estan exentos de regulacion de precios. Aumentos considerables en los precios de la pulpa y del papel tambi6n fueron autorizados por el "Cost of Living Council" (Comisi6n Reguladora del Costo de la Vida). Con fecha 11 de enero de 1974, la antes mencionada comisi6n aprob6 un aumento de precios del 1,6% para Philip Morris U.S.A. que compensa en algo el alza de ]os costos. Todas las marcas de cigarrillos han recibido este aumento de precio, y los precios al por mayor de vuestra Compania estan ahora al nivel de los de la mayoria de las otras compaiiias cigarrilleras de Estados Unidos. Philip Morris International tambi6n experiment6 dificultades en 1973 a causa del control de precios. En numerosos paises en los que vuestra Compaiiia vende cigarrillos, las utilidades se vieron frenadas por la inflaci6n generall unida a la imposibilidad de aumentar los precios de los cigarrillos. Hoja La demanda mundial de tabaco aument6 en 1973. Las cosechas de tabaco en ciertos paises exportadores fueron menores de lo que se esperaba lo cual tuvo el efecto de reducir el abastecimiento de tabaco de calidad y producir un encarecimiento mundial de Ia hoja. La demanda internacional de cigarrillos de calidad, con- juntamente con las nuevas paridades monetarias, produjeron un alto nivel de exportaciones de tabaco en rama por parte de Estados Unidos. Se espera que el abastecimiento de tabaco continuara bastante escaso en todo el mundo y, a la vez, los precios del tabaco en rama continuardn en alza. Vuestra Compania ha logrado conservar existencias de tabaco curado en las cantidades y calidades necesarias. Impuestos sobre cigarrillos Solo uno de los estados de la uni6'n norteamericana, Colorado, aprob6 durante 1973 una legislacidn que fija un impuesto de consumo sobre los cigarrillos y esta ley en realidad elimino los impuestos municipales y aumentd el impuesto estatal. Sin embargo, en el trans- curso del aiio se presentaron 41 proyectos de ley relativos al aumento del impuesto de consumo sobre los cigarrillos en 20 estados. Legisladores responsables, comprendiendo no solo el caracter regresivo de esos impuestos-que afectan desproporcionadamente al consumidor de renta reducida-sino tambi6n ei hecho de que estimulan el contrabando, revocaron el aumento de los impuestos, o no lo adoptaron, en 19 estados. Es mas, cuatro estados tienen pendiente de aprobaci6n, proyectos de ley para la reducci6n de los impuestos sobre los cigarrillos. El 10 de enero de 1974, el Gobernador Wilson de Nueva York recomend6 la abolici6n del impuesto sobre los cigarrillos vigente en Ia ciudad de Nueva York. En su declaraci6n dijo que "Uno de los mayores incentivos para el crimen organizado lo constituye ei alto impuesto sobre los cigarrillos en la ciudad de Nueva York, que sumado al estatal, ha convertido a la ciudad en la tierra prometida para los contrabandistas". En relaci6n directa con esta situaci6n esta el efecto nocivo que los diferentes niveles de los impuestos estatales de consumo ejercen sobre la distribuci6n licita de cigarrillos, tra- dicionalmente en manos de mayoristas y detallistas de s6lida reputacion. La recaudaci6n por concepto del impuesto de consumo de cigarrillos en 1973 alcanz6 un total de U.S.$5.500 millones desglosados en U.S.52.200 millones para el gobierno federal, U.S.$3.200 millones,paralos estados y U.S.$100 millones para los municipios. Esto repre- senta U.S.$26.00 por cada hombre, mujer y niiio en Estados Unidos. Esto es claramente injusto. Responsabilidad social Philip Morris Incorporated, al igual que un pequeno grupo de compaiiias importantes, ha establecido un comite integrado por miembros de la Junta Directiva cuyas preocupaciones especificas son aqnrJlas necesi- dades y problemas sociales con los cuales se encuentra compenetrada la Compaiifa. Este Conlite de Asuntos Pdblicos-que asi se llama-no solo esta autorizado para examinar el desempeiio de nuestra labor social en nuestra condic.i6n de ciudadano juridico, sino que es responsable tambi6n de anticipar y evaluar los cambios en los valores humanos, las necesidades y las priori- dades. El Comite del Medio Ambiente, tambien formado por miembros de la Junta Directiva tiene a su cargo todo lo relativo al sector ambiental. En atenci6n a la conservaci6n y el ambiente, Miller Brewing Company casi ha terminado la conversi6n al uso de latas de aluminio y de botellas rellenables, envases ambos de material transformable. SegOn un programa formulado por Miller, muchos de nuestros distribuidores han establecido centros de dep6sito de estos envases en todo el pals. Ademas de los distribui- dores, los clientes y los detallistas pueden participar en este esfuerzo nacional para conservar nuestros recursos. Otros envases de Philip Morris estan en estudio desde el ptinto de vista de la conservaci6n de recursos. - Nuestra politica tambi6n contempla la introducci6n de innovaciones en nuestrgs actividades de responsabilidad social; y de ser posibte dar la pauta para que otras empresas tambi6n intervengan en estos sectores que requieren ayuda. Un ejemplo notable que podemos citar es la ampliacion Ilevada a cabo el ejercicio pasado, en nuestro plan de becas para los hijos de los empleados, para que incluyese capacitaci6n en artes y oficios asi como educacion a nivel universitario. Considerado el primero de su tipo, este plan de capacitaci6n ha atraido la atenci6n favorable del gobierno, de educa- dores y de figuras destacadas en el mundo de los negocios, y varias otras compaiiias estan iniciando planes similares. Asimismo, el aiio pasado Philip Morris fue el precursor de un plan de becas para adultos que ofrece cursos abreviados para las mujeres que trabajan o atienden su hogar. Se espera que este plan tambi6n se convierta en un ejemplo a seguir para otras companfas. Anualmente, Philip Morris circula un Informe sobre la Responsabilidad Social que mantiene a vuestra Junta Directiva al dfa sobre el progreso de Ia Compaiiia en el aspecto de la responsabilidad social. El informe mas reciente, por ejemplo, seiiala un aumento en la pro- porcion de los grupos minoritarios, mujeres y veteranos de la guerra det Viet-Nam en nuestro personal, asi como un progreso en su ascenso a cargos de mayores responsabilidades. Philip Morris International y sus compafuas afiliadas Ilevaron a cabo numerosos proyectos en el sector de la responsabilidad social de la empresa, entre ellos, Ia ayuda a victimas de inundaciones en Pakistan y en las Filipinas, becas universitarias en Mexico, un amplio programa asistencial dirigido a instituciones medicas, sociales y educacionales en Venezuela y el patrocinio de proyectos culturales en comunidades del Canad"a y Australia. Los empleados de Philip Morris en el mundo entero son estimulados para que participen en actividades civicas y ta lista de sus contribuciones personales a este campo es impresionante. En el sector de la divulgaci6n al ptiblico, la Bolsa de Valores de Nueva York sugiri6 recientemente que los informes anuales debieran incluir listados de la escala de precios de acciones comunes, la relaci6n de precio a utilidad por acci6n, los dividendos y el valor en libros, todo lo cual, Philip Morris viene informando desde hace varios aiios. Casualmente, nuestro Reporte Anual del aiio pasado fue seleccionado por la revista Financial World como "el mejor de toda la industria" en su adjudicaci6n anual de pretnios. Vuestra Junta Directiva recibi6 con pena, el afio pasado, la noticia de la muerte de Wirt H. Hatcher, antiguo Vice- presidente Superior y Director Emerito de Philip Morris Incorporated. El Sr. Hatcher, quien empez6 a trabajar en Philip Morris en 1918, era una figura bien conocida en el ramo del tabaco. Gan6 especial renombre por su erudici6n y sus numerosos escritos sobre el crecimiento de la industria y el desarrollo de sus procesos cientificos. El Sr. Hatcher desempeii6 un importante papel en el crecimiento de vuestra Compafifa. El valioso asesoramiento del Sr. T. Justin Moore, Jr., Presidente y Ejecutivo Superior a cargo de Operaciones y Finanzas de 1a Virginia Electric and Power Company vino a reforzar nuestro cuadro ejecutivo al ser electo miembro de nuestra Junta Directiva en el mes de abril. Desde nuestra ultima reestructuraci6n ejecutiva en enero de 1967, las ventas han excedido del triple y los beneficios se han mas que cuadruplicado. Ademas, dos importantes companias operativas-Miller Brewing y Mission Viejo-fueron adquiridas. Como resultado de nuestra expansidn, Ia estructura ejecutiva superior de la Compaida fue ampliada y reforzada en octubre, cuando la Junta Directiva ascendi6 a varios ejecutivos claves. Entre los cambios principales se cuentan los de George Weissman, Presidente de Philip Morris Incorporated, quien se convirti6 en Vicepresidente de la Junta Directiva; Ross R. Millhiser, Presidente de Philip Morris U.S.A., quien fue electo Presidente de Philip Morris Incorporated; y Clifford H. Goldsmith, quien pas6 de Vicepresidente Ejecutivo a Presidente de Philip Morris U. S. A. y Vicepresidente Ejecutivo de Philip Morris Incorporated. Una vez mas queremos expresar nuestro reconocimiento a los 37.000 empleados que tenemos en todo el mundo, por su eficaz colaboraci6n durante el ejercicio. Su labor ha sido fundamental para el exito de vuestra Compania y les agradecemos su dedicaci6n. Respetuosamente, a nombre de la Junta Directiva t i Joseph F. Cullman 3rd Presidente de la Junta D'uectiva Primer Oficial Ejecutivo George QWeissman Vicepresidente de Ia Junta Directiva Ross R. Millhiser Presidente de Philip Morris Inc. Geschaftsererlauf und Aus9alick Auch im GeschSftsjahr 1973 konnte Philip Morris Inc.- zum 20. Mal in ununterbrochener Folee-die Umsatz- erC6se, den Jahresuberschuss und den Gewinn je Aktie gegendber dem Vorjahr erhohen. Die konsolidierten Umsatzerlose erreichten $ 2,6 Mrd. und lagen damit urn 22,1 % iiber dem Vorjahrswert. Der Jahresiiberschuss stieg im Berichtsjahr um 19,4 % auf $ 149 Mio. Der Gewinn je Stammaktie betrug $ 5,42, was einer Zunahme von 16.1 % gegenuber dem Vor- jahr entspricht. Unter voller Berucksichtigung aller Umtauschrechte ergibt sich ein Gewinn je Stammaktie von $ 5,21, was eine Verbesserung von 19,2 % gegeniiber dem Vorjahr bedeutet. Diese Zahlen sind um so erfreulicher, wenn man bedenkt, dass das Geschaftsjahr 1973 durch Preiskon- trollen, Rohmaterialienverknappung, betrachtliche Verschiebungen der internationalen Wahrungsrela- tionen sowie die Energiekrise gekennzeichnet war. Philip Morris konnte seinen Anteil am Welt-Zigaretten- markt weiter steigern und unsere Position als zweit- grosste notierte Aktiengesellschaft unter allen Zigaret- tenherstellern der Welt festtgen. Der weltwette Absatz der gesamten Zigarettenindustrie erhbhte sich 1973 um 4% auf uber 3,6 Btlltonen Zigaretten. Unser Absatz in den Vereinigten Staaten und auf den Auslands- markten sicherte uns einen AnteIl von 6,7 % am Welt- Zigarettenmarkt. Unsere Marke Marlboro nimmt weiterhin den im Jahre 1972 erreichten ersten Platz auf dem weltweiten Zigarettenma,rkt ein. In den Vereinigten Staaten kam diese Marke-derzeit auf dem zweiten Platz-der Spitzenposition sehr nahe. Wie in den drei vorausgegangenen Jahren nahm der Absatz der amerikanischen Zigarettenindustrie auch 1973 wefter zu und erreichte insgesamt 577 Milliarden Stuck-eine Steigerung urn 4,1 %. Unser Absatz erhohte sich im gleichen Zeitraurn urn 11,1 %, und unser Anteil am amerikanischen Zigarettenmarkt erreichte zum Jahresende einen neuen Hiichststand von uber 21 %. Unser Brauereiunternehmen Miller Brewing Company konnte im Geschaftsjahr 1973 einen erheblich hbheren Ausstoss erzielen. Die Umsatzerlose stiegen um 31 %, . der Ausstoss um 28,8 %. Mit dieser dynamischen Entwicklung seines Bier-Absatzes erzielte Miller von allen grosseren amerikanischen Brauereien die hochste Steigerungsrate. Die gesamte Brauereibranche konnte ihren Bier- Absatz 1973 urn 4,7 % steigern. Miller ruckte vom siebten auf den funften Platz unter den amerikanischen Brauereiunternehmen auf. Die Investitionen in Sachanlagen beliefen sich im Ge- schaftsjahr 1973 auf $ 175 Mio. im Vergleich zu $ 120 Mio. im Vorjahr: Philip Morris befindet sich im Anfangsstadium eines umfangreichen Investitionspro- . gramms, um der steigenden Nachfrage gerecht werden zu konnen, derer sich sowohl unsere Zigarettenmarken in den USA und in anderen Landern als auch unsere Brauereierzeugnisse und anderen Produkte erfreuen. 1973 beschlossen wir, die fur die nachsten funf Jahre geplanten Sachinvestitionen von $ 500 Mio. auf $ 750 Mio. zu erhohen. In den letzten funf Jahren-1968 bis 1973-nahmen die konsolidierten Umsatzerlose von Philip Morris jahr- lich um durchschnittlich 20,6 % zu. Der Jahresiiber- schuss stieg in der gleichen Zeit um 24,9 %, und der Gewinn je Aktie unter voller Berucksichtigung aller Umtauschrechte erhohte sich um 19,5 %. 1973 war das 46. Geschaftsjahr in ununterbrochener Folge, in dem eine Dividende auf die Stammaktien des Unternehmens ausgeschiittet wurde. Ausserdem wurde 1973 die Divi- dende zum sechsten Mal in ununterbrochener Folge erh8ht. Die derzeitige jahrliche Dividendenaus- schiittung belduft sich auf $ 1,40 je Stammaktie. Philip Morris U.S.A. Dank der ausserordentlichen Dynamik unserer wich- tigsten Zigarettenmarken auf dem US-Markt-Marlboro, Benson & Hedges 100's, Virginia Slims und Parliament -konnte Philip Morris U.S.A. einen Rekordabsatz von 123 Milliarden Zigaretten erzielen, was einer Zunahme von 11 % gegenuber dem Vorjahr entspricht. Umsatzer- 16se und Jahresuberschuss erhohten sich im Berichts- jahr urn 12 % bzw. 17 %. Philip Morris U.S.A., unser umsatz-und ertragsstarkstes Konzernunternehmen, erzielte wieder die hochste Zuwachsrate unter allen amerikanischen Zigarettenherstellern. Unsere Spitzenmarke Marlboro erreichte Ende 1973 efnen Marktanteil von 14 %. Der Abstand zur derzeit noch popularsten Marke verringerte sich weiter. Vor fiinf Jahren lag der Marktanteil von Marlboro in den U.S.A. noch unter 8 %. Die Gesellschaft spielte auch weiterhin die dominie- rende Rolle auf dem wachsenden Markt der 100 mm Zigaretten. Unsere Benson & Hedges 100's erzielten eine Umsatzsteigerung von 12,0 % und sind nach wie vor die fuhrende Marke unter den 100 mm Zigaretten. Auch die anderen Marken unter den 100 mm Zigaretten von Philip Morris U.S.A.-Virginia Slims, Parliament 100's und Marlboro I00's-konnten im Berichtsjahr betrachtliche Absatzsteigerungen verzeichnen. Vor 10 Jahren waren die 100 mm Zigaretten noch gar- nicht auf dem Markt. Vor 5 Jahren betrug ihr Markt- anteil ca. 13 % des gesamten Zigarettenabsatzes. Ende 1973 jedoch entfielen mehr als 22 % des gesamten Zigarettenabsatzes auf die 100 mm Zigaretten, bei denen Philip Morris U.S.A.-mit einem Marktanteil von 29 % am Berichtsjahresende-die Fiihrungsposition halt. 14

Auch die demographische Struktur der Konsumenten macht die starke Position von Philip Morris U.S.A. deuclich. Unsere Marken erfreuen sich besonders guter Aufnahme beim schneller wachsenden Teil der US- Rauchern, uBnd den Rauche nlg hobener Bildung. Eines der Hauptprobleme bestand im Berichtsjahr fiir uns darin, das Produktionsvolumen unserer Zigaretten weiter zu steigern, ohne unseren traditionell hohen Qualitatsstandard aufzugeben. Da sich die Zigaretten- herstellung am Anfang emer neuen technologischen Ara beftndet, unsere Marken sich gleichzeitig aber auch eines standigen, rapiden Umsatzwachstums erfreuen, wird~sich der neue mit einem Aufwand von 200 Mi1- lionen Dollar errichtete Betriebskomplex in Richmond, Virginia-das umfangreichste Einzelprojekt unseres Investitionsprogramms-als eine zum richtigen Zeit- punkt erfolgte und lohnende Investition erweisen. Obwohl die neue Anlage ihre volle Produktions- kapazitat nicht vor 1977 erreichen wird, betrug die Tagesproduktion in dem neuen Werk Ende Dezember 1973 bereits annahernd 100 Millionen Zigaretten, d.h. 20 % der angestrebten Gesamtkapazitat. Mit der Fer- tigstellung der Baulichkeiten ist fiir Anfang 1974 zu rechnen.Im Laufe des Geschaftsjahres 1973 begann das Unternehmen auch mit dem Bau einer Betriebsanlage zur Tabakaufbereitung in der Nahe von Richmond, Virginia. Die Errichtung dieses Werkes, dessen Kosten sich auf ca. $ 43,8 Millionen belaufen werden, ist auf- grund des wachsenden Bedarfs des neuen Betriebs- komplexes in Richmond erforderlich. Die Gesamtaufwendungen fiir Marketing blieben gegen- iiber dem Vorjahr praktisch unverdndert. Die Aufwen- dungen fUr Werbung waren wiederum niedriger als 1970, dem letzten Geschaftsjahr vor der Einstellung der Zigarettenwerbung in Rundfunk und Fernsehen. Infolge des gestetgerten Umsatzvolumens hat sich der Marketing-Aufwand je 1 000 Zigaretten vermindert. Auch American Safety Razor, eme Division der Philip Morris, trug zum Konzernergebnis bei. Die wichtigsten neuen Produkte dieser Unternehmenssparte-der Rasie- rer "Personna Double II" mit vier Schneiden, d.h. einer Doppelschneide auf jeder Seite, und der Damen- rasierer "Flicker"-wurden 1973 iiberall in den Vereinigten Staaten vertrieben. Wahrend des Berichtjahres wurden zwei kleinere Beteiligungsgesellschaften, Clark Gum und Lightfoot Soap, veraussert. Philip Morris International Das dynamische Wachstum von Philip Morris International in den letzten Jahren hielt auch 1973 an. Im Berichtsjahr erreichte der Absatz dieses wichtigen Unternehmens der Philip Morris-Gruppe insgesamt 124 Milliarden Ztgaretten. Wahrend die Welt-Zigaretten- industrie ihren Gesamtabsatz ausserhalb der Vereinigten Staaten um 4 % erhohen konnte, gelang es der Philip Morris International, ihren Absatz um 9,5 % zu stei- gern. Umsatz und Ergebnis erhdhten sich im Geschgfts- jahr 1973 um 31,9% bzw. 9,6 %. Unsere Marken werden in mehr als 160 Landern und Territorien vertrieben. Im Berichtsjahr hielten die Philip Morris International, ihre Beteiligungsgesellschaften und Lizenznehmer Marktanteile von mindestens 10 % in uber 20 Landern, einschliesslich Australien, Italien, Kanada, Libanon, Mexiko, Nigerien, Philippinen, Schweden, Schweiz und Venezuela. ln einer Anzahl von Landern waren die Marktanteile erheblich hoher. Die gestiegene Nachfrage nach Zigaretten amerikanischer Geschmacksrichtung hat zu dem internationalen Erfolg unserer Marke Marlboro gefiihrt. Dennoch tragen wir auch anderen Geschmacksrtchtungen Rechnung. Etwa 60 % unseres Absatzes ausserhalb der USA entfallen auf regionale bzw. nationale Marken. Philip Morris International produziert und vertreibt zur Zeit etwa 145 Zigaretten- marken auf der ganzen Welt. Gegen Ende 1973 wurde bekanntgegeben, dass Philip Morris-uber eine Tochtergesselischaft, an der auch brasilianische Gesellschafter beteiligt sind-mit dem Bau einer Zigarettenfabrik in Curitiba, Brasilien, beginnen wird. Die Aufnahme der Geschaftstatigkeit auf dem brasilianischen Markt ist fiir Anfang 1975 vorgesehen. Weiterhin schlossen wir im Berichtsjahr mit der Japan Tobacco and Salt Public Corporation und dem pol- nischen Unternehmen Agros Lizenzabkommen iiber die Herstellung von Marlboro-Zigaretten in den betref- fenden Landern ab. _ - In Mexiko blieb unsere Beteiligungsgesellschaft Cigarrera Nacional, S.A. trotz steigendern Absatz und wachsendem Marktanteil aufgrund starker Kosten- steigerungen und verscharfter staatlicher Kontrollen in der Verlustzone. Wir priifen deshalb zur Zeit eine Reihe von Alternativen fur unser mexikanisches Engagement, darunter im Einklang mit der derzeitigen mexikanischen Politik auch eine Verminderung unserer Beteiligung auf eine Minderheit. Wir rechnen damit, dass diese Angelegenheit in der ersten Halfte des Jahres 1974 geklart werden wird, und dass, wie immer die Entscheidung ausfallen wird, wir daraus fiir 1974 keine materiellen Nachteile zu erwarten haben werden. Alle vier Marktregionen-Europa/Mittlerer Osten/ Afrika; Lateinamerika/Iberische Halbinsel; Asien/ Pazifik sowie Kanada-konnten Absatz und Umsatzer- lose steigern..Philip Morris Europa, der nach Umsatz und Ertrag wichtigsten Region, wurde auch die Verant- wortung fUr Afrika und den Mittleren Osten iiber- t,Sagen. Die Ertragslage in Europa wurde durch die Anderungen zahlreicher Wahrungsparitaten im Berichtsjahr nachteilig beeinflusst. Ertragsverbesse- rungen in anderen Regionen brachten jedoch einen Ausgleich. In allen Teilen der Welt setzt Philip Morris Interna- tional ihr bereits voll in Gang befindliches Programm der Expansion und Modernisierung ihrer Betriebsan- lagen fort. In Australien wurden die Anlagen zur Zigarettenherstellung sowie zur ZVeinproduktion von Lindeman erweitert. In der Nachbarschaft des Werks Neuchatel, unserer Schweizer Tochtergesellschaft, nahert sich der Bau eines der grdssten Tabaklager Europas seiner Vollendung. Wie die meisten international tatigen US-Unternehmen ieistece auch Philip Morris im Berichtsjahr wiederum einen Beitrag zur Verbesserung der amerikanischen Handelsbilanz. Andererseits ist die Tdtigkeit von Philip Morris in vielen Landern nur moglich, weil das Unternehmen nachweisbar auch zum wirtschaftlichen Gedeihen dieser Lander beitragt. Unsere, von der stetigen Expansion unseres Unternehmens begunstigte Personalpolitik, die darauf abzielt, in den Gastlandern einheimische Krafte auszubilden, ihre Leistungen gebiihrend anzuerkennen und Mitarbeitern den Aufstieg im eigenen Haus zu ermbglichen, ist eme der Grundvoraussetzungen des Geschaftserfolgs der Philip Morris International. Das im Geschaftsjahr 1973 auf den Auslandsmarkten trotz zunehmender Inflation und wirtschaftlichem Nationalismus erzielte Wachstum versetzt unser Unternehmen durchaus in die Lage, seine weltweite Expansion auch kunftig fortzusetzen. Miller Brewing Company Im Geschaftsjahr 1973 verzeichnete die Miller Brewing Company einen um 28,8 % hoheren Bier-Absatz als im Vorjahr, wahrend die Branche insgesamt nur eine Zuwachsrate von 4,7 % erzielte. Mi.llers Zuwachsrate war die hochste unter den grosseren amerikanischen Brauereien. Der Marktanteil der Miller Brewing Company erhohte sich dementsprechend sprunghaft von 4,0 % auf 5,0 %, und Miller riickte vom siebten auf den fiinften Platz unter den fiihrenden US-Braue- reiunternehmen. Die Umsatzerlose erreichten $ 276 Mio., was einer Zunahme von 31 % gegenuber dem Vorjahr entspricht. Nach unserer Schatzung war die Marke Miller High Life im Berichtsjahr auf dem US-Markt von allen ein- heimischen Biermarken die am schnellsten wachsende Marke. Der Absatz von Miller High Life, sowohl in Flaschen als auch in Aluminiumdosen, stieg erheblich. Auch unsere Flaschen-Achterpackung "pony pack" (7'oz. 8) fand beim Verbraucher ausgezeichnete Aufnahme. Das neue Miller Ale wurde im Nordosten der U.S.A.-dem bedeutendsten Markt fUr Ale-Bier- ebenfalls sehr gut aufgenommen. Auch der Absatz unserer Biermarke Meister Brku in der Gegend von Chicago trug zum Rekordausstoss der Miller Brewing Company bei. Die Qualitatsbiere von Miller erfreuten sich 1973 einer so grossen Nachfrage, dass alle Brauereianlagen bis zur Grenze ihrer Kapazitat ausgelastet waren. Zeitweilig reichte im Berichtsjahr sogar die vorhandene Kapazi- tat nicht aus, um die Nachfrage zu decken. Miller verzeichnete einen Betriebsverlust von 52,4 Mio., der auf die gestiegenen Kosten fiir Verpackungsma- tertalien und Rohstoffe, die fortwahrende scharfe Preiskonkurrenz in der Brauereibranche sowie auf ein -mangels rationeller und Ieistungsfahiger Brauereian- lagen-relativ hohes Kostenniveau zuriickzufiihren ist. Die Kosten von Flaschen und Dosen, die in der Brauindustrie einen erheblichen Teil der Gesamtkosten ausmachen, sind 1973 um fast 7 % gestiegen. Die Kosten fiir Malz, Mais und Gerste haven sich sprunghafterhoht. Die in der Brauereibranche schon seit Jahren herrschende scharfe Preiskonkurrenz hat keinesfalls nachgelassen. Diese Preis-Kosten- Konstellation hatte in der gesamten Branche niedrigere Gewinnmargen zur Folge. Um die Produktion unter Beibehaltung des gewohnten hohen Qualitatsstandards zu'steigern und zu ratio- nalisieren, hat Miller ein umfangreiches Expansions-und Modernisierungsprogramm eingeleitet. Nahezu $ 200 Mio. sind fur dieses Programm wahrend der nachsten fiinf Jahre vorgesehen. In den Brauereibetrieben von Miller in Milwaukee und Fort Worth werden modernste Brau- und Abfullanlagen installiert. Dariiber hinaus wird die Produktionskapazitat der Brauereien in Milwaukee und Forth Worth erweitert. Mitte des Jahres wurde in Milwaukee, an der Stelle, wo Frederic Miller 1855 seine ursprungliche Brauerei in Betrieb nahm, mit den Bauarbeiten fUr einen neuen Lager- und Versandkomplex begonnen. Ausserdem wurde in Milwaukee der Grundstein fur ein 16-Millionen-Dollar- Werk zur Herstellung wieder verwertbarer Aluminium- dosen gelegt. Im Januar 1974 haben wir Plane angekiindigt, fiir $ 70 Millionen eine Brauerei im 200-Meilen-Einzugsbereich von New York zu bauen. Diese neue Miller-Anlage wird 1976 mit einer Anfangskapazitat von zwei Millionen Fass den Betrieb aufnehmen. Die Endkap azitat wird sechs Millionen Fass jahrlich betragen. FUr die Wahl des Standorts wird eine Reihe von Faktoren aus- schlaggebend sein, besonders die Verfiigbarkeit von Wasser bester Qualitat. Unser langfristiges Ziel ist, Umsatz und MarktanteIl der Miller Brewing Company auszuweiten, die Brauka- pazitat zu erhohen und durch Rationalisierung fiir etne bessere Rentabilitat zu sorgen. Obwohl Miller im Berichtsjahr einen Verlust hinnehmen musste, gab es viele konkrete Anzeichen dafur, dass unsere langfristige Planung durchaus realistisch ist. Die Bereitstellung so umfangreicher Mittel fiir die Modernisierung und Erweiterung der Betriebsanlagen ist Ausdruck unseres Optimismus fiir die langfristigen Ertragsaussichten der Miller Brewing Company. - Philip Morris Industrial Dieses Unternehmen konnce seinen Umsatz 1973 um 17 % auf 132 Mio. steigern. Trotz scharfer Material- kostenerhohungen, die nicht durch hiihere Verkaufs- preise weitergegeben werden konnten sowie effektiver Beschaffungsschwierigkeiten bei Materialien wie Wachs, Losemitteln, Aluminium und Zellstofr konnte das Betriebsergebnis um 7,3 % verbessert werden. Dies ist ein bemerkenswerter Erfolg, denn die Preise fUr Zellstoff stiegen im Laufe des Berichtsjahres urn mehr als 39 %, und die Auswirkungen speziell dieser Kostensteigerung waren in vielen Produktionsbereichen der Philip Morris Industrial besonders stark spurbar. Gegen Ende des Berichtsjahres stimmte der Cost of Living Council (die fUr die Wiederherstellung der Geldwertstabilitatin den U.S.A.geschaffene Behorde) geringen Preiserhohungen fiir die Produkte der Philip Morris Industrial zu. Der scharfe Kostenanstieg hielt jedoch im November und Dezember, nachdem die Erlaubnis fUr die besagten Preiserh6hungen erteilt worden war, weiterhin an. Alle Produktbereiche der Philip Morris Industrial- Chemie, Papier und Verpackungsmaterialien-konnten 1973 ihre Umsatze steigern. Die Sparten Chemie und Papier verzeichneten auch hohere Ertrage. Dagegen hat sich die Ertragslage der Sparte Verpackungsma- terialien etwas verschlechtert. Die Tatsache, dass alle Bereiche in der Lage waren,in grosserem Masse Produkte abzusetzen, die auf komplexen Technologien aufbauen und deshalb hShere Margen erlauben, ermdglichte es Philip Morris Industrial jedoch, dem Preis-Kosten-Druck teilweise auszuweichen. Die standige Entwicklung neuer Produkte und neuer Pro- duktanwendungen war eine wesentliche Voraussetzung fUr diese Strategie. Die Nicolet Paper Company hat die Errichtung einer der grSssten Beschichtungsanlagen der Welt fiir Papier und Verpackungsfolien abgeschlossen. Die in Nicholas- ville (Kentucky) befindliche Anlage hat ca. $ 5 Iv1io. gekostet. Die Polymer Industries, lnc. erweiterte ihre Betriebsanlagen in Greenville dutch ein neues Lager- haus und einen fiinften Polymerisationsreaktor. Die Wilkolin-Werk Willi E. Kohlmeyer GmbH ist dabei, ihre Fertigungsanlagen in Bremen auszubauen. Mission Viejo Company Fur die Mission Viejo Company-einer der fuhrenden Bautrager fiir vorgeplante Eigenheimsiedlungen-war 1973 das erste volle Geschaftsjahr als Konzerngesell- ' schaft der Philip-Morris-Gruppe. Mission Viejo konnte die Umsatzerlbse dem Vorjahr gegeniiber um 12 % auf $ 68 Mio. steigern. Das Ergebnis fiel um 28 % auf $ 4,1 Mio. Das Jahr 1973 brachte fiir die Wohnungs- und Sied- lungsbauindustrie zahlreiche Probleme. Die erste Halfte des Berichtsjahres stand im Zeichen ungunstiger Witterungsbedingungen in Siidkalifornien und in Colorado, rapider Kostensteigerungen auf dem Mate- rialsektor-besonders bei Bau-und Furnierholz-sowie empfindlicher Engpasse bei der Materialbeschaffung. Obwohl Mission Viejo in der umweltfreundlichen Planung und Gestaltung von Wohn- und Siedlungs- projekten anderen Unternehmen weit voraus ist, verursachte der Erlass neuer Umweltschutzbestim- mungen Verzogerungen bei der Bearbeituna von Baugenehmigungsantragen. In der zweiten Berichts- jahreshalfte stiegen die Hypothekenzinsen auf bisher unerreichte Hbhen, und die Hypothekenbeschaffung erfuhrstarke Einschrankungen. Trotz dieser negativen Faktoren konnte die Mission Viejo Company im Berichtsjahr ein positives Ergebnis erwirtschaften und in ihren drei wichtigsten Regional- bereichen, namlich Orange County (Kalifornien), Denver (Colorado) und Phoenix (Arizona) insgesamt 1 650 Eigenheime verkaufen. Ausserdem wurde gegen Ende des Berichtsjahres ejn kleineres Siedlungsprojekt in Fresno (Kalifornien) bezugsfertig. Das Geschaft mit Eigenheimen und Eigentumswoh- nungen unterliegt Konjunkturschwankungen. Wir glauben jedoch, dass Mission Viejo von der Flaute 1973 weniger stark betroffen wurde als viele andere Unternehmen der Branche in den U.S.A. Es scheint, dass viele der Faktoren, die sich 1973 nachteilig auf die Branche auswirkten, auch die Geschaftsentwicklung im Jahre 1974 beeintrachtigen werden. Die Geschafts- aussichten fUr die Wohnungsindustrie im nachsten Jahrzehnt sind jedoch durchaus giinstig. Wir erwarten, dass Mission Viejo an dem zu erwartenden Wachstum voli beteiligt sein wird. Rauchen und Gesundheit Im Zusammenhang mit dem Thema Rauchen und Gesundheit unterstiltzen wir weiterhin-gemeinsam mit anderen Unternehmen der Tabakwarenindustrie- die vom U.S. Council for Tobacco Research, der School of Medicine an der Washington University in St. Louis und der Medical School an der Harvard University betriebenen Forschungen. In den letzten 20 Jahren hat die Tabakwarenindustrie mehr als $ 48 Mio. fiir die wissenschaftliche Erforschung der Zusammenhange zwischen Rauchen und Gesundheit aufgebracht. Der Jahresbericht des Council for Tobacco Research, der Einzelheiten iiber die von der Branche im Jahr 1973 finanzierten Studien enthalt, ist kostenlos von uns erhaltlich. ~~ Cf'I O O ~ f-~- ~ ~ CF1 LI1 15

Der„Leiter einer neugeschaffenen US-Bundesbehorde zur Uberwachung der Sicherheit von Konsumartikeln (Coruurner Product Safety Commission) gab ver- gangenen August beXanntl dass seine Behorde ein Verbot fur Zigaretten erwagt, deren Gehalt an Teer- stoffen und Nikotin ein von dieser Behbrde als "ungefahrlich" erachtetes Mass iiberschreitet. Bis zur Abfassung dieses Berichtes hat die BehSrde noch keine weiteren Schritte in dieser Richtung unter- nommen. Nach Ansicht von Experten gibt weder das Gesetz, dutch das die Behorde geschaffen wurde, noch irgendein von ihr in der Ausiibung ihrer Tatigkeit angewandtes Gesetz der Behdrde das Recht, solche Vorschriften uber Zigaretten zu erlassen. Deshalb werden wir uns gegenjeglichen Versuch in dieser Richtung zur Wehr setzen. In den U.S.A. haben mehrere Einzelstaaten Gesetze erlassen, durch die das Rauchen in bestimmten dffent- lichen Bereichen untersagt wird. Verschiedene andere L'ander, in denen wir geschaftlich tdtig sind, haben dutch den Erlass entsprechender Gesetze und Bestim- mungen die Werbung fUr Zigaretten eingeschrankt und warnende Hinweise auf den Zigarettenpackungen zur Aufiage gemacht. Ein Artikel iiber eine vom Karolinska Institut in Schweden durchgefUhrte medizinische Untersuchung, der vor kurzem verdffentlicht wurde, deutet darauf hin, dass bei eineiigen Zwillingen, die sich-was Rauchen anbetrifft-unterschiedlich verhalten, keine wesentlichen Unterschiede in der Lebensdauer und Anfalligkeit fiir Herzkrankheiten zwischen Rauchern und Nichtrauchern festzustellen sind. Den Autoren zufolge deuten ihre Forschungsergebnisse darauf hin, dass genetische und Personlichkeitsunterschiede eine wichtigere Rolle in bezug auf Lebensdauer und Anfalligkeitfiir Herzkrank- heiten spielen als das Rauchen. Da es sich hierbei um die bisher einzige Studie handelt, die genetisch identische Raucher und Nichtraucher miteinander vergleicht, sind wir der Ansicht, dass deren Resultate grosste Beachtung verdienen. Seit die Beratungskommission fUr Rauchen und Gesundheit des Surgeon General im Januar 1964 ihren ersten Bericht verdffentlichte, sind jetzt 10 Jahre vergangen. In diesem Jahrzehnt haben weitere wissen- schaftliche Untersuchungen keinerlei zuverl5ssige experimentelle Beweise fiir irgendwelche Zusammen- hange zwischen Zigarettenrauchen und gesundheitlichen Schaden'erbracht, wie sie in dem ersten Bericht behauptet worden waren. Die weiteren Forschungen haben vielmehr ein breites Spektrum von Risikofak- toren aufgedeckt. In intensiven chemischen Analysen des Tabakrauchs ist kein Bestandteil des Rauches ermittelt worden, der in der vorhandenen Dosierung als Ursache fur gesundheitliche Schaden angesehen werden konnte. Auch durch Tierversuche mit Inhalieren von Tabakrauch konnten nicht in einem einzigen Fall solche Zusammenhange nachgewiesen werden. Wir sind deshalb der Meinung, dass die Behauptung, zwischen Rauchen und Krankheit bestiinden ursachliche Zusam- menhange, heute noch fraglicher als vor zehn Jahren ist. Austvirkungen der Energiekrise Die vielen Ungewissheiten, mit denen die'Bnergie- krise" noch behaftet ist, machen es sehr schwierig, ihre Auswirkungen auf die Geschaftsentwicklung unseres Unternehmens prazise vorherzusagen. Ernste Lieferungsengpdsse bei der Beschaffung von Heiz- und Kraftstoffen wurden zweifellos Produktionsstorungen verursachen. Doch die Produktionsprozesse in unseren Betrieben benbtigen, anders als die der meisten anderen Industrien, relativ wenig Energie. Deshaib glauben wir, dass die "Energiekrise" fur Philip Morris weniger nachteillge Folgen haben wird, als fiir die meisten anderen industrieunternehmen. Tatsachlich machen die Aufwendungen fur Heiz- und Kraftstoffe nur einen geringen Tell der Produktions- und Distributionskosten unserer Zigaretten und Biere aus. Es ist moglich, dass sich im Verteilungssystem unserer Produkte in den Vereinigten Staaten zeitweilige Verschiebungen ergeben werden. Wir sind jedoch zuversichtlich, dass wir dank der Flexibilitat unseres Vertellungsnetzesin der Lage sein werden, derartige Probleme zu meistern, Schon Anfang 1973 unterzogen wir unseren Energie- bedarf einer griindlichen Analyse. Wahrend des ganzen Jahres wurden geeignete Schritte unternommen, um eine kontinuierliche Deckung unseres Energiebedarfs sicherzustellen. Daruber hinaus wurden umfassende Vorkehrungen zur Einsparung von Energfe nicht nur in allen Betrieben, sondern auch im Aussendienst getroffen. Eine erhebliche Reduzierung unseres Energie- verbrauchs beweist, dass diese Massnahmen schon jetzt greifbare Resultate erbracht haben. Preiskontrollen Die auch im Rahmen der Phase IV des amerikanischen Stabilitatsprogramms weiterhin bestehenden Preis- kontrollen hinderten uns daran, Kostensteigerungen voll durch entsprechende Preissteigerungen zu kompen- sieren. Anfang 1973 wurden noch im Rahmen der Phase III geringe ErhBhungen der Zigare.4tenpreise genehmigt. Spdter im Berichtsjahr, nach dem Ubergang auf Phase IV, wurde ein gewtsser Spielraum fur Erhd- hungen der Preise fUr Bier und industrielle Erzeugnisse gewahrt. Doch selbst in den Fallen, in denen Preiser- hohungen genehmigt wurden oder werden, haben die Preisvorschriften der Phase IV im Endeffekt stets ei.ne Verminderung der Gewinnmargen zur Folge, da Preiserhohungen nur im Rahmen der Kostensteige- rungen zulassig sind. Starke Kostensteigerungen waren bei Tabak und bei Braugetreiden zu verzeichnen, die als landwirtschaftliche Erzeugnisse nicht der Preiskon- trolle unterliegen. Auch die Preise fiir Zellstoff und Papier sind mit Zustimmung des Cost of Living Council betrachtlich gestiegen. Am 11. Januar 1974 genehmigte der Cost of Living Council eine Preiserhohung urn 1,6 % fiir die Produkte der Philip Morris U.S.A., wodurch die eingetretenen Kostensielgerungen wenjgstens zum Teil kompensiert werden konnten. Diese Erhbhung gilt fur a11e unsere Zigaretten-Marken, deren Grosshandelspreise jetzt dem Preisniveau der meisten anderen amerikanischen Zigarettenhersteller angeglichen worden sind. Preiskontrollen warfen im Berichtsjahr auch fUr die Philip Morris International Probleme auf. In vielen L'andern,in denen unsere Zigaretten vertrieben werden, wurde das Wachstum der Ertrage dadurch gebremst, dass einerseits inflationare Kostensteigerungen hinge- nommen werden mussten, andererseits jedoch eine entsprechende Erhohung der Zigarettenpreise nicht moglich war. Tabakmarkt Die weltweite Nachfrage nach Rohtabak nahm 1973 zu, die Tabakernten in einigen Exportlandern fielen jedoch niedriger aus als erwartet, so dass bei verringer- tem Angebot von Qualitatstabak die Rohtabakpreise in der ganzen Welt stiegen. Die hohe Nachfrage nach Qualitatszigaretten im Ausland und die Verbilligung des Dollars dutch Wechselkursanderungen bewirkten, dass der amerikanische Rohtabak-Export stark zunahm. Es ist damit zu rechnen, dass das Tabakange- bot auf dem Weltmarkt auch kiinftig relativ knapp bleiben wird, und dass dementsprechend die Rohta- bakpreise weiterhin steigen werden. Unserem Unterneh- men gelang es, sich mit ausreichenden Vorraten an abgelagertem Tabak in der von uns benotigten Menge und Qualitat einzudecken. Zigarettensteuer In den USA wurde im Berichtsjahr nur in einem einzigen Staat, namllch in Colorado, em Gesetz zur Erhohung der Verbrauchsteuer auf Zigaretten erlassen. In diesem Fail wurde die dem Staat zufliessende Steuer erhbht, gleichzeitig wurden abet die von den Gemeinden bisher erhobenen Steuern abgeschafft. Im Laufe des Berichtsjahres wurden in den USA in 20 Bundesstaaten nicht weniger als 41 Gesetzentwurfe eingebracht, die auf eine Erhohung der Verbrauchsteuern auf Zigaretten abzielen. Andererseits sind in 19 Staaten derartige Steuererhohungen entweder abgelehnt oder entspre- chende Gesetzinitiativen verhindert worden, well verantwortungsbewusste Gesetzgeber eingesehen haben, dass Verbrauchsteuern nicht nur eine regressive Form der Besteuerung darstellen, die Verbraucher mit niedrigem Einkommen relativ starker belasten, sondern auch zum Zigarettenschmuggel verlocken. In vier Einzelstaaten liegen der Legislative sogar Gesetzvor- lagen vor, die eine Senkung der Zigarettensteuer zum Ziele haben. Am 10. Januar 1974 empfahl Malcolm Wilson, der Gouverneur des Staates New York, die Abschaffung der von der Stadt New York erhobenen Zigarettensteuer. Er erklarte in diesem Zusammenhang: "Die hohe Zigarettensteuer in New York City, die zusatzlich zu der Zigarettensteuer des Staates New York erhoben wird, ist eine grosse Verlockung fur das organisierte Verbrechertum. Sie macht diese Stadt zum gelobten Land fUr Schmuggler." In direktem Zusammenhang mit dieser Situation stehen die nachtei- ligen Auswirkungen, die die unterschiedliche Hohe der von den Einzelstaaten erhobenen Verbrauchsteuern auf den normalen, rechtmassigen Vertrieb von Zigaretten dutch den etablierten und achtbaren Gross- und Einzelhandel hat. Die Einnahmen aus Zigarettensteuem beliefen sich in den USA auf insgesamt $ 5,5 Milliarden, wovon $ 2,2 Milliarden auf vom Bund, $ 3,2 Milliarden auf von den Einzelstaaten und $ 0,1 Milliarde auf von Gemeinden erhobene Steuern entfielen. Dies entspricht $ 26,00 fiir jeden Mann, jede Frau und jedes Kind in den Vereinig- ten Staaten. Die Unbilligkeit dieser Art von Besteue- rung ist unverkennbar. Unser Beftrag zum Wohl der Allgemeinheit Die Philip Morris Incorporated ist eines der wenigen Grossuntemehmen, die innerhalb des Verwaltungsrats einen Ausschuss gebildet haben, der sich speziell mit den Belangen und Problemen der Allgemeinheit befasst. Dieser Ausschuss, Public Af}airs Committee genannt, hat nicht nur die Aufgabe, die Stellung unseres Unter- nehmens innerhalb der Gesellschaft und seine Beitrage zur Lbsung sozialpolitischer Fragen laufend zu iiber- Veranderungen sondern es obliegtihm auch prufen , , von Wertvorstellungen, Bed'tirfnisstrukturen und Morris Incorporated. Clifford H. Goldsmtth, btsher Prioritaten der Gemeinschaft im voraus zu erkennen Executive Vice President der Philip Morris U.S.A., und ihre Bedeutung zu beurteilen. Ein zweiter Aus- wurde zum Prasidenten dieser Gesellschaft und schuss innerhalb des Verwaltungsrats, das Environmental gleichzeitig zum Executive Vice President der Mutter- Committee, versieht ahnliche Aufgaben im Bereich gesellschaft emannt. des Umweltschutzes, Im Namen des Verwaltungsrats Fur Einsparung von Rohstoffen und zum Schutz der Umwelt hat die Miller Brewing Company die Umstel- lung auf wieder verwertbare, aus Aluminium bestehende Dosen sowie auf Nachfiillflaschen, die ebenfalls wieder verarbeitet werden konnen,praktisch abgeschlossen. Im Rahmen eines von Miller entworfenen Programms haben viele unserer Grossverteileriiberall in den Vereinigten Staaten Ruckgabezentren eingerichtet. Grosshandler, Einzelhandler und Kunden konnen Joseph F. Cullman 3rd sich an dieser gemeinsamen Anstrengung beteiligen, Vorsitzender des Verwaltungsrats sparsamer mit unseren Rohstoffen umzugehen und und des Konzernvorstands gleichzeitig die Belastung der Umwelt durch Abfall- stofYe zu mindern. Andere von den Untemehmen der Philip-Morris-Gruppe verwendete Verpackungen werden derzeit unter dem Gesichtspunkt der Roh- stoffeinsparung iiberpriift. Im Rahmen unserer Aktivitaten fur das Gemeinwohl bemiihen wir uns, neue Wege zu gehen und-wie wir hoffen-auch die Aufinerksamkeit Anderer auf Gebiete zu lenken, die der Hilfe bediirfen. Ein Beispiel dafur ist unser Stipendienprogramm fiir die Kinder unserer Mitarbeiter, das im Berichtsjahr auch auf die Aus- bildung an Berufsfachschulen und Universitaten ausgedehnt wurde. Das Stipendienprogramm fUr den Besuch von Berufsfachschulen-unseres Wissens das erste seiner Art-hat den Beifall fiihrender Vertreter aus Regierung, Erziehungswesen und Wirtschaft gefunden und eme Reihe von Unternehmen veranlasst, ahnliche Programme einzufuhren. Als erstes Unternehmen hat Philip Morris im Berichts- jahr auch ein Stipendienprogramm fUr Erwachsene eingefuhrt, das Frauen, die beruflich oder im Haushalt tatig sind, in die Lage versetzen soil, sich halbtags weiterzubilden. Wir erwarten, dass auch in diesem Fall andere Unternehmen unserem Beispielfolgen werden. Eine von der Philip-Morris-Gruppe jahrlich abgefasste Studieiiber unsere sozialen Verpfitchtungen ("Study of Social Responsibility") informiert den Verwal- tungsrat laufend iiber die von unserem Unternebmen zurn Wohl der Allgemeinheit geleisteten Beitrage. Aus der jiingsten Studie geht hervor, dass der Anteil der Minoritatengruppen, der weiblichen Mitarbeiter und der Vietnanilcriegs-Heimkehrer an unserer Gesamt- belegschaft gewachsen ist, und dass auch bei der Beforderung dieser Mitarbeiter in verantwortungsvollere Positionen Fortschritte erzielt worden sind. Die Philip Morris International und ihre Beteiligungs- gesellschaften nahmen sich ebenfalls zahlreicher, dem Wohl der Allgemeinheit dienender Projekte an. AIs Beispiele seien erwahnt: Hilfe fur die Opfer von Hochwasserkatastrophen in Pakistan und auf den Philippinen, Gewahrung von Stipendien fur Univer- sitatsstudien in Mexiko, ein breitgefachertes Unter- stiitzungsprogramm fiir medizinische, soziale und erzieherische Instttutionen in Venezuela, sowie die finanzielle Fdrderung von Volksbildungseinrichtungen in Australien und Kanada. Unsere Mitarbeiter auf der ganzen Welt werden dazu ermutigt, sich an Projekten, die dem Wohl der Allge- meinheit dienen, zu beteiligen. Die Liste ihrer person- lichen Engagements dieser Art ist eindrucksvoll. Zur Publizitatspflicht hat die New York Stock Exchange kurzlich vorgeschlagen, dass kunftig die Geschaftsbe- richte auch die Kursschwankungen der Stammaktien, Kurs/Gewinn-Relationen sowie Dividenden und Buchwert enthalten sollen. Fiir Philip Morris Inc. war dies schon seit mehreren Jahren eine Selbstverstandlich- keit. Unser Geschaftsbericht 1972 wurde bei der jahr- lichen Preisverteilung der Zeitschrift "Financial World" als der beste Geschaftsbericht aller amerikanischen Industrieunternehmen ausgezeichnet. In aufrichtiger Trauer gedenkt der Verwaltungsrat der 1973 verstorbenen Herren Wirt H. Hatcher, ehemaliger Senior Vice President und Director Emeritus der Philip Morris Incorporated, und Richard Thurston, Vorsit- zender des Verwaltungsrats der Fa. Polymer Industries. Herr Hatcher, der seine Tatrgkeit bei Philip Morris im Jahre 1918 begann, war eine bekannte Personlichkeit der Tabakindustrie. Er genoss besonderes Ansehen wegen seiner umfassenden Kenntnisse und seiner zahlreichen Schriften uber das Wachstum der Branche und die Entwicklung der von ihr angewandten wissenschaftlichen Verfahren. Herr Hatcher hat wesentlich zum Wachstum unseres Unternehmens beigetragen. Herr Justin T. Moore Jr., Prasident sowie Vorsitzender der Geschaftsfiihrung und Leiter der Finanzen der Virginia Electric and Power Company, wurde im April 1973 in den Verwaltungsrat gewahlt. Wrr gewannen in ihm einen klugen Ratgeber. Seit dem letzten Revirement unserer Konzernleitung 1967 haben sich unsere Umsatze mehr als verdreifacht, und die Ertrage sind auf mehr als das Vierfache des damals ausgewiesenen Betrages gestiegen. Daruber hinaus haben wit zwei bedeutende Unternehmen-die Miller Brewing Company und Mission Viejo-erworben. In Anbetracht der raschen Expansion des Untemehmens wurde die Fiihrungsspitze der Gesellschaft im Oktober 1973 verbreitert und verstarkt. Mehrere Fiihrungskrafte wurden vom Board of Directors in neue Schliissel- positionen berufen. Zu erwahnen ist besonders die Berufung von George Weissman, Prasident der Philip Morris, Inc., zum stellvertretenden Vorsitzenden des Board of Directors und von Ross R. Millhiser, Prasident der Philip Morris U.S.A., zum Prasidenten der Philip _11_Q W s.~ George Weissman Stellvertretender Vorsitzender des Verwaltungsrats Ross R. Millhiser Prasident 16

Rassegna deil'anno Anche per 1'esercizio teste conclusosi, ta Vostra Societa h2 incrementato iJ fatturato, gli uuli e il reddito per azione; it 1973 rappresenta cosi il ventesimo anno di costante ascesa del livello di tali fondamentali dati finanziari. Rispetto a1 1972, il fatturato consolidato e 1'utile netto hanno registrato un incremento del 22,1% e del 19,4%, raggiungendo, rispettivamente, la cifra di 52,6 miliardi e di $149 milioni. II reddito per aztone (tenendo conto dei titoli convertibili) e dunque stato di $5,21, ed it reddito effettivo per azione e stato di $5,42, it che rappresenta un aumento rispettivamente del 19,2% e del 16,1%, per rapporto al 1972. I risultati ottenuti net 1973 sono tanto piti soddisfacenti in quanto conseguiti in un anno particolarmente difficile, caratterizzato da controlli del tiveito del prezzi, da difficolta nell'approvvigionamento di materie prime, nonche da fondamentati variazioni delle parita mone- tarie e dalta crisi energetica. La Philip Morris ha ulteriormente esteso la propria quota del mercato mondiale delle sigarette e rafforzato ia propria posizione al secondo posto nella graduatoria mondiale delle societa produttrici di sigarette quotate in borsa. It fatturato totale net mondo delle aziende del settore ha registrato net 1973, un aumento del 4%, totalizzando la cifra globale di 3.600 miliardi di pezzi; la Philip Morris, tra it fatturato per gli Stati Uniti e quello estero, si 8 assicurata it 6,7% del mercato mon- diale. Le Marlboro continuano ad essere la marca di sigarette piu venduta net mondo, mantenendo cosi la posizione raggiunta net 1972; sul mercato interno degli Stati Uniti, esse sono at secondo posto, ormai molto vicine alla posizione di testa. Negli Stati Uniti, le vendite in termini reali dell'intero settore della produzione di sigarette sono aumentate per it quarto anno consecutivo, raggiungendo i 577 miliardi di pezzi, con un aumento del 4,1% rispetto all'anno precedente. Nello stesso anno, la Philip Morris ha aumentato le proprie vendite unitarie dell'11,1%, assicu- randosi una quota del mercato statunitense mai raggiunta prima, e pari, alla fine dell'esercizio, at 21% del mercato. Net 1973 it fatturato delta Miller Brewing ha registrato una notevole espansione, con incrementi del 31% nei ricavi e del 28,8% negli ettolitri venduti. Tale percentuale rappresenta 1'aumento pi6 elevato che si sia registrato negli Stati Uniti fra Ie principali aziende del settore, il quale, preso net suo insieme, ha riscontrato un aumento totale del volumi di vendite pari at 4,7%. La Miller e cosi passata dal settimo at quinto posto nella graduatoria delle aziende americane del settore. Net 1973, gli investimenti sono stati portati a $175 milioni, contro i $120 milioni stanziati net 1972. La Philip Morris e attualmente impegnata in un vasto programma di espansione degli investimenti onde far fronte negli Stati Uniti ed all'estero alla crescente domanda del mercato per quanto riguarda Ie nostre sigarette, i prodotti net settore delta birra ed altri prodotti. Come e gia stato annunciato nel corso dell'anno, 1'ammontare stanziato per 1'espansione degli investimenti net prossimo quinquennio e stato portato da $500 milioni a circa $750 milioni; la maggior parte di tale importo servira a finanziare 1'ampliamento e la modernizzazione del nostri impianti statunitensi ed esteri net settore del tabacco, mentre la rimanenza verra destinata alla Miller Brewing, alla Philip Morris Industrial ed alla Mission Viejo. Nell'arco del quinquennio 1968-1973 il fatturato con- solidato dellaPhilip Morris e aumentato ad un tasso annuo medio composto del 20,6%. Nello stesso periodo 1'utile netto e aumentato ad un tasso annuo medio composto del 24,9%, mentre it reddito per azione (tenendo conto del titoli convertibili) ha registrato un aumento annuo del 19,5%. Per it quarantaseiesimo anno consecutivo la Vostra Societa ha remunerato it capitale ordinario, ed it dividendo 8 stato aumentato per it sesto anno consecu- tivo. Attualmente it dividendo suite azioni ordinarie viene corrisposto ad un tasso annuo di $1,40 per azione. Philip Morris U.S.A. Grazie at notevole dinamismo delle principali marche di sigarette prodotte negli Stati Uniti dalla Vostra Societa -Marlboro, Benson & Hedges 100's, Virginia Slims e Parliament-, la Philip Morris U.S.A. ha fatturato 123 miliardi di pezzi, it che rappresenta un incremento dello 11%, e stabilisce cosi un nuovo primato. It fatturato e 1'utile di gestione per 1'esercizio sono aumentati rispetti- vamente del 12% e del 17%. La Philip Morris U. S. A., fa maggiore delle nostre societa op~rative per fatturato ed utile, ha ancora una volta dimostrato di essere la societa di piit rapida espansione tra le aziende statuni- tensi operanti net settore delle sigarette. La nostra marca di maggior successo, Ia Marlboro, che non piud di cinque anni fa deteneva una quota del mer- cato statunitense inferiore all' 8%, alla fine del 1973 ha raggiunto un livello equivalente al 14%, ed ha accorciato ancora la distanza che le separa dalla marca piit venduta. La Vostra Societa rimane in testa alle vendite anche nel promettente settore delle sigarette da 100 mm.: infatti, non soltanto le vendite delle Benson & Hedges 100s, che rimangono Ia marca piu richiesta tra le sigarette di questa lunghezza, hanno avuto un incremento del 12%, ma anche le vendite delle altre sigarette da 100mm prodotte dalla Philip Morris-Virginia Slims, Parliament 100's e Marlboro 100's-hanno registrato un notevole aumento net corso dell'esercizio. Dieci anni fa, it mercato delle sigarette da 100 mm non esisteva; cinque anni dopo, esso rappresentava gia 13% circa del totale delle vendite di sigarette, e a11a fine del 1973 tale percentuale era salita a 22% del fatturato totale delle aziende del settore. La Philip Morris detiene la quota piti elevata del mercato delle sigarette da 100 mm, avendo raggiunto it 29% di tale categoria. La favorevole-posizione della Philip Morris risulta ancor piu evidente se si specifica la suddivisione delle vendite totall fra i vari settori delta popolazione: le marche pro- dotte dalla Vostra Societa trovano infatti sempre migliore accoglienza nei gruppi di popotazione in piti rapido sviluppo, tra it pubblico femminile e net gruppi sociali con livello d'istruzione superiore. Uno del piu ardui problemi che la Vostra Societa ha dovuto affrontare durante 1'esercizio ora concluso, e stato quello di aumentare considerevolmente it volume di produzione, pur senza modificare it tradizionale tivello di qualita superiore del prodotto. Dato che la tecnologia della produzione di sigarette sta entrando in una fase completamente nuova, e cib in coincidenza con un periodo di vivace espansione delle vendite delle nostre marche, il nuovo comptesso produttivo di Richmond, Virginia che ha richiesto un investimento di $200 milioni e che rappresenta it piu vasto complesso unitario del nostro programma di espansione, si e rivelato un investimento tempestivo e remunerativo. Anche se it nuovo centro di produzione non potra sfrut- tare appieno la prevista capacita produttiva fino at 1977, gia alla fine del dicembre scorso si e realizzata una produzione di 100 milioni di sigarette at giorno, equiva- lente a120% della capacita produttiva finale: it completa- mento delle opere murarie e previsto per i primi mesi del 1974. Nel 1973, 1a Societa ha inoltre dato 1'avvio alla realizzazione di un nuovo centro per la miscelazione e la preparazione del tabacco net pressi di Richmond, Virginia, ,mpianto reso necessario dal crescente fabbi- sogno del nuovo complesso di Richmond; 1'investimento relativo 8 di $43,8 milioni. Le spese totali di "marketing" nel 1973 sono rimaste sostanztalmente immutate rispetto al 1972; i costi pubbli- citari anche quest'anno sono stati al di sotto dei livelli del 1970, ultimo anno in cui fu consentita la pubblicita radiofonica e televisiva. Tenendo conto dell'accresciuto livello di fatturato, le spese di "marketing" sono proporzionalmente diminuite. Anche 1'American Safety Razor, divisione delta Philip Morris U.S.A., ha efficacemente contribuito all'utile delta Societa: i suoi piu importanti nuovi prodotti-il "Personna Double II", rasoio a quattro lame, due per ogni lato, ed it "Flicker", rasoio per signora-sono statt distribuiti net 1973 su tutto Il territorio statuni- tense. Nel corso dello stesso esercizio, infine, sono state vendute due piccole societa: la Clark Gum e Ia Lightfoot Soap. Philip Morris International II dinamismo di cui ha dato prova negli scorsi anni la Philip Morris International si e mantenuto anche per il 1973; in tale anno il volume totale di vendite a livello mondiale di quest'importante societa delta Philip Morris ha raggiunto la cifra di 124 miliardi di pezzi. Inoltre, mentre il volume di vendite unitarie conseguito dal settore a livello mondiale (esclusil gli Stati Uniti) ha avuto un incremento de14%, la Philip Morris Inter- national ha registrato una variazione positiva del 9,5%. II fatturato e 1'utile di gestione della Societa sono anch'essi aumentati rispettivamente de131,9% e de19,6%. Le nostre marche vengono distribuite in oltre 160 paesi e territori. In aimeno 20 di essi, tra cui Australia, Canada, Italia, Libano, Messico, Nigeria, Filippine, Svezia, Svizzera e Venezuela, le marche di sigarette della Philip Morris International hanno detenuto lo scorso anno una quota di mercato equivalente almeno al 10%, ed in molti cast una quota notevolmente superiore a tale cifra. Malgrado la crescente domanda di sigarette di tipo "americano", che e alla base del successo internazionale delle Marlboro, la Societa non ha trascurato altri tipi di sigarette che soddisfano gusti e preferenze diverse del fumatori, e circa il 60% delle sigarette vendute all'estero e rappresentato da marche regionali e nazionali; la Philip Morris International produce e distribuisce attual- mente circa 145 marche di sigarette in tutto il mondo. Negli ultimi mesi del 1973, la Philip Morris, in partecipazione con interessi brasiliani, ha formato un'associazione per la costruzione di un impianto per la manifattura di sigarette a Curitiba, in Brasile; i1 nostro ingresso sul mercato brasiliano e previsto per i primi mesi del 1975. Nel corso del 1973, la Vostra Societa ha inoltre stipulato due accordi, uno in Giappone, con la "Japan Tobacco and Salt Public Corporation" e 1'altro in Polonia con la Agros per la concessione delta licenza di fabbricazione delle sigarette Marlboro in tali paesi. Nel Messico, nonostante 1'espansione del volume di vendite unitarie e 1'accrescimento della quota di mer- cato detenuta dalla filiale Cigarrera Nacional S.A., it marcato aumento dei costi e 1'accresciuta partecipa- zione statale hanno determinato un andamento riflessivo della societa in questione. Sono attualmente allo studio possibili alternative retative alla nostra attivita messicana, compresa la riduzione della nostra partecipa- zione ad una quota di minoranza, in conformita con quanto attualmente richiesto dal governo messicano. Oggi appare prevedible che la questione sara risolta entro ii primo semestre del 1974, e che, quale che sia 1'azione deliberata, essa non avra alcun effetto di rilievo sui risultati del 1974. II volume di vendite unitarie e 1e entrate sono aumentati in tutte e quattro le regioni: Europa- Medio Oriente-Africa, America Latina-Iberia, Asia-Pacifico, ed infine Canad'a. La Philip Morris Europe, che gia era responsabile per 1'area piti importante come fatturato ed utile, ha esteso la propria giurisdizione ad includere anche l'Africa ed it Medio Oriente. In Europa, le molteplici variazioni delle parita monetarie hanno creato serie difficolta che hanno finito per rifiettersi nega- tivemente sugli utilid'esercizio, i quali tuttavia si presentano ancora positivi grazie at profitti realizzati in altre regioni. La Philip Morris International continua a portare avanti in tutto it mondo it suo programma di potenzia- mento e modernizzazione degli impianti produttivi: in Australia, mediante 1'ampliamento degli impianti destinati alla produzione di sigarette e di quelli della Lindeman, un produttore di vino, ed in Europa prose- guendo la costruzione, ora quasi ultimata, di uno deil piit grandi complessi del continente per to stoccaggio del tabacco, net pressi della fabbrica delta nostra filiale svizzera, a Neuchatel. Come la maggior parte delle societa americane che svolgono un'attivita internazionale, anche la Philip Morris ha apportato un contributo positivo alla bilancia dei pagamenti statunitense. Non e per contro da sottovalutare it fatto che la presenza della Philip Morris in moltid paesi e resa possibtle unicamente grazie at fatto che essa offre un contributo patente allo sviluppo economico dei medesimi: stimolata dalla costante espansione della Societa, la nostra politica di addestrare it per- sonale delle imprese net paesi ospiti, di riconoscere il contributo apportato dal, singolo dipendente, e di avanzarlo nella carriera e stato un fattore prepon- derante del successo della Philip Morris International. Gli eccezionali incrementi ottenuti nei 1973 in tutto il mondo, malgrado it manifestarsi di tendenze naziona- listiche nell'economia mondiale, pongono la Vostra Societa in una posizione favorevole ad assicurarle un costante sviluppo sui mercati internazionali. Miller Brewing Company Gli ettolitri fatturati dalla Miller nel 1973 hanno registrato un incremento del 28,8% rispetto al 1972, contro i14,7% che rappresenta 1'aumento com- plessivo dell'intero settore birrario; 1'incremento della Miller e stato il piu alto fra quelli registrati dalle principalii aziende statunitensi produttrici di birra. La quota di mercato delta Miller e aumentata in misura eccezionale, passando dat 4,0% at 5,0% e la Societa, precedentemente in settima posizione, e ora la quinta azienda degli Stati Uniti net settore delta birra. 11 fatturato, infatti, ha raggiunto la cifra di $276 milioni, con una variaziorie positiva del 31% rispetto all'esercizio precedente. Secondo le nostre valutazioni, Ia Miller High Life e stata, net 1973, it prodotto interno in piu rapida ascesa sul mercato statunitense, e le vendite sia in bottiglia, sia in barattoli d'alluminio, sono notevolmente aumentate. La nuova confezione "pony pack", di otto bottiglie da un quinto, ha trovato largo consenso tra i consuma- tori; la Miller Ale ha incontrato favorevole accoglienza anche nella parte nordorientale degli Stati Uniti, che rappresenta it mercato piu importante per la birra di tipo inglese ("ale"). Le vendite della Meister Brau nell'area di Chicago hanno anch'esse contribuito a realizzare 11 quantitativo record di ettolitri fatturati dalla Miller. La crescente richiesta da parte del consumatori di birra Miller di qualita superiore ha spesso spinto i centri di produzione at limiti della capacita produttiva, e vi sono stati periodidurante 1'anno in cut 1'azienda non e stata in grado di soddisfare tutte Ie richieste della clientela. La Miller ha registrato una perdita d'esercizio di $2,4 milioni che va addebitata all'aumento del costi degli imballaggi e materie prime, alla incessante con- correnza del prezzi esistente net settore, ed ai costi di produzione relativamente elevati, imputabili ad una carenza di impianti produttivi moderni ed efficienti. Net settore birrario, bottiglie e barattoli pesano notevolmente sui costi totali; e nel 1973 ii costo di tali contenitori ha subito un incremento del 7%o, circa. Si sono verificati sensibili aumenti net costo del malto; del granturco e dell'orzo, e Ia concorrenza dei prezzi, che ormai da anni caratterizza it settore birrario, e prose- guita in tutta ta sua intensita. La classica tenaglia tra prezzi e costi, che ne 8 conseguita, ha determinato una riduzione degli utili presso tutte le imprese del settore. Onde incrementare la produzione e realizzare un maggior grado di efHcenza pur mantenendo invariato 1'alto livello qualitativo del prodotti, Ia Miller ha varato un vasto programma di ampliamenti e'moderniz- zazioni, che prevede per it prossimo quinquennio un investimento di circa $200 thilioni. Le attrezzature piu moderne nel campo della produzione e dell'imbottiglia- mento della birra sono attualmente in corso di instal- lazione presso i centri di produzione Miller di Milwau- kee, Wisconsin, e di Fort Worth, Texas, per ii qualii e previsto, inoitre, un aumento delta capacita produttiva, A Milwaukee, inoltre, sullo stesso terreno dove Frederick Miller nel 1855 iniziava a produrre la pro- pria birra, e stata avviata, a meta anno, Ia costruzione di un nuovo magazzino e banchina di spedizione. Sempre a Milwaukee, la Miller ha gettato ]e fondamentaa di un nuovo impianto destinato alla produzione di barattoli di alluminio recuperabili, del costo di $16 milioni. 17

Nel gennaio del 1974 ~ stato da noi annunciato il progetto di realizzare un centro di produzione di birra del costo di 570 milioni, in una localita da definirsi, entro un raggio di 200 miglia dall'area metropolitana di New York; it nuovo centro Miller dovrebbe entrare in funzione net 1976, con una capacita iniziale di due milioni di barili, da aumentarsi gradualmente fino a raggiungere una capacita di 6 milioni di barili all'anno. Nella scelta della localita ove costruire il nuovo impianto, si fara luogo ad un'attenta valutazione di vari fattori, primo fra i quali Ia disponibilita della migliore qualita di acqua. Il programma a lungo termine che la Vostra Societa si propone tende ad aumentare it volume del fatturato ed a conquistare una maggior quota di mercato, potenziando al tempo stesso la capacita produttiva della Miller e rendendo l'organizzazione piit competi- tiva ed efficiente. Anche se le Miller ha riportato una perdita di gestione per it 1973, la fondamentale validita di tale programma rimane immutata, con- fortata com'e da numerose prove concrete. La fiducia che continuiamo a nutrire nella Miller e nella sua capacita di raggiungere, a lungo termine, livelli di redditivita soddisfacenti e sottolineata dalle notevoli somme stanziate per ulteriori investimenti produttivi. Philip tLforris Industrial Il fatturato della Philip Morris Industrial ha raggiunto nel 1973 la cifra di $132 milioni con un aumento del 17% rispetto all'esercizio precedente. L'utile di gestione ha fatto registrare una variazione positiva del 7,3%, malgrado il sensibile aumento nei costi delle materie prime, aumento che non e stato possibile riflettere in prezzi di vendita piu elevati. Va inoltre tenuto presente che per determinate materie prime, quall cera, solventi, alluminio e pasta di cellulosa, vi sono state serie difflcolta di approvvigionamento: basti ricordare, a titolo d'esempio, che il prezzo della pasta di cellulosa e aumentato di oltre il 39% nel corso dell'anno, in- fluendo in misura determinante sui costi di molte delle attivita della Philip Morris Industrial. Verso Ia fine dell'anno, II"Cost of Living Council" (Comitato di Conirollo sul Costo della Vita) ha autorizzato la Philip Morris Industrial ad apportare modesti aumenti al prezzo di vendita dei prodotti; tuttavia la tendenza all'aumento dei costi non si e modificata successivemente a tale autorizzazione, ma si e anzi andata sensibilmente intensificando nei mesi di novembre e dicembre. Tutte le varie aziende della Philip Morris Industrial nei settori della chimica, della carta e degli imballaggi 'hanno registrato, nel 1973, uno sviluppo del fattu- rato; i settori chimico e cartario hanno riportato un incremento dell'utile, mentre, per quanto concerne gli imballaggi si e registrata una leggera contrazione del livello di redditivita. La Philip Morris Industrial e riuscita ad attenuare parzialmente le conseguenze nega- tive della pressione derivante da una situazione di costi crescenti e prezzi di vendita praticamente stazio- nari, grazie all'espansione delle vendite di prodotti di superiore livello tecnologico e maggior margine di profitto, da parte di tutte le aziende in questione; la costante attenzione dell'Azienda allo sviluppo di nuovi prodotti e di nuove appllcazloni e stata essenziale per 1'applicazione di tale strategia. La Nicolet Paper Company ha completato la costruzione di uno dei pi.ti grandi impianti del mondo per la patinazione della carta e della plastica per imballaggi; l'impianto, del costo di circa $5 milioni, e ubicato a Nicholasville, Kentucky. La Polymer Industries, Inc., ha ampliato il centro di produzione di Greenville, Carolina del Sud, mediante la costruzione di un nuovo magazzino e di un quinto reattore di polimerizzazione. Anche la Wikolin- Werk, Willi E. Kohlmeyer G.m.b.H., societa di recente costituzione, sta ampliando i propri impianti produt- tivi di Brema, nella Repubblica Federale Tedesca. Mission Viejo Company Nel 1973 la Mission Viejo Company, che e oggi ricono- sciuta come una delle aziende di punta nel settore dei complessi edilizi residenziali e della valorizzazione di comunita urbane, ha compiuto il primo anno di eserci- zio in proprieta de11a Philip Morris. II fatturato della Mission Viejo per it 1973 ha raggiunto la cifra di $68,0 milioni con un incremento del 12% rispetto all'esercizio precedente, mentre l'utile di gestione ha subito una flessione del 28%, ammontando a$4,1 milioni. Nel settore dell'edilizia residenziale, il 19~3-e stato un anno difficile: alle avverse condizioni atmosferiche, che hanno caratterizzato ta prima meta dell'anno nella California del Sud e nel Colorado, si 8 assommato ll rapido aumento nei costi delle materie prime (specie legname e legno compensato) accompagnato a volte da grave scarsita delle medesime. Sebbene la Mission Viejo sia considerata all'avanguardia nella realizzazione di pro- getti in armonia con I'ambiente, tuttavia la legislazione sugli aspetti ecologici, di recente introdotta, ha deter- minato notevoli ritardi nei tempi necessari al rilascio dei permessi di costruzione. Oltre a cib, la seconda parte dell'anno ha visto i tassi di interesse ipotecario e1e- varsi a livelli mai prima raggiunti, mentre si manife- stava una estrema scarsezza di capitali destintati a fmanziare i mutui edilizi ipotecari. Malgrado tali avversi fattori, la Mission Viejoha egualmente chiuso 1'esercizio in attjvo, con un totale di 1.650 abitazioni vendute nelle tre principali localita in cui opera (Orange County in California, Denver nel Colorado e Phoenix in Arizona). Verso Ia fine dell'eser- cizio, inoltre, 1'azienda ha varato il progetto di un complesso residenziaie di piccole dimensioni a Fresno, California. Pur tenendo presente la particolare sensibilita del settore edilizio agli andamenti ciclici, riteniamo che 1a Mis- sion Viejo abbia risentito della situazione in misura di gran lunga inferiore a molte altre imprese del settore. Si prevede ora che parecchi tra i fattori negativi che hanno pesato negativamente sull'industria dell'edilizia residenziale net 1973 continueranno a far sentire it loro effetto anche nel 1974; ma, dato che le previsioni per it prossimo decennio offrono alle imprese del settore prospettive fondamentalmente positive, ci sembra legit- timo ritenere che anche la Mission Viejo partecipera allo sviluppo previsto. 11 Fumo e la Salute Nel settore del fumo e della salute, Ia Vostra Societa, assieme ad altre societa dello stesso settore, ha con- tinuato a sostenere Ia ricerca medica, tramite il "Council for Tobacco Research-U.S.A." (Comitato Ricerche sul Tabacco), nonch8 altri estesi programmi di ricerche perseguiti presso la Facolta di Medicina dell' Uni- versita Washington di St. Louis e la Facolta di Medi- cina dell' Universita di Harvard. Nel corso degli ultimi vent'anni, 1'industria del tabacco ha devoluto oltre $48 milioni alla ricerca scientifica sul tabacco e la sua rilevanza per la salute. La Vostra Societa sara lieta di inviare gratuitamente, a chi lo richieda, it rapporto annuale del "Council for Tobacco Research", che con- tiene una dettagliata descrizlone del vari programmi di ricerca finanziati dall'industria del tabacco nel 1973. Nel mese d'agosto, it Presidente della "Consumer Product Safety Commission" (Commissione di Vigilanza sui Beni di Consumo), ente federale di recente istitu- zione, ha annunciato 1'intenzione della Commissione stessa di proibire la vendita di sigarette che contengano un tenore di "catrame" e nicotina superiori ad un determinato livello "di guardia", fissato dalla Com- missione stessa. Fino a1 momento della stesura del pre- sente rapporto, la Commissione non ha ancora intra- preso alcuna azione concreta; dato che un parere legale conforta 1'opinione che ne la legge istitutiva della Commissione, ne la normativa di sua competenza le con- feriscano alcuna autorita pei• quanto riguarda la pro- duzione e la distribuzione di sigarette, qualsiasi provve- dimento venga preso in tal senso incontrera la nostra ferma opposizione. - In parecchi stati americani sono stati varati provve- dimenti legislativi che contemplano il divieto di fumare in determinati luoghi pubblici; anche in parecchi paesi in cui operiamo all'estero si 8 andata estendendo la legislazione restrittiva della publicita sulle sigarette, con 1'obbligo di stampare sulla confezione un avverti- mento cautelativo. Una recente rassegna medica su di uno studio condotto in Svezia dal Karolinska Institut su coppie di gemelli identici-uno solo dei quali fumatore-sembra con- fermare che non e riscontrabile alcuna differenza tra i due individui, per quanto riguarda la longevit'a e la propensione all'insorgere di affezioni cardiache, mentre sembra invece che tali sviluppi si possano piuttosto imputare alle differenze genetiche e di personalita. Poiche questo studio e l'unico del suo genere che raffronti fumatori e non-fumatorj con caratteristiche genetiche identiche, i risultati a cui esso approda sembrano degni di un'attenta considerazione. E' passato un decennio da quando fu pubblicato il primo rapporto del "Surgeon General's Advisory Com- mittee on Smoking and Health" (Comitato Consultivo della Sanita sul Fumo e la Salute), nel gennaio 1964. Nei dieci anni che seguirono, la ricerca scientifica sulle affezioni umane che-a quanto sosteneva quel primo rapporto-si sarebbero dovute imputare al fumo, non ha prodotto alcuna prova superimentale valida a sostegno di tale ipotesi; anzi, essa ha rivelato 1'esi- stenza di un vasta gamma di possibili e diversi fattori di rischio. Anche le ulteriori e intensificate ricerche sulla composizione chimica del fumo di tabacco, che sono state effettuate nello stesso arco di tempo, non sono riuscite a identificare alcuna componente del fumo che-nella quantita in cui vi e presente-possa ritenersi fattore causale di alcun processo patologico dell'uomo. Anche i tentativi di produrre su animali-mediante inalazione di fumo di tabacco-le affezioni che, secondo alcuni, insorgerebbero nell'uomo per effetto del fumo, non hanno ottenuto alcun risultato. La tesi che I'abitudine di fumare sigarette abbia una diretta rilevanza causale con gli stati morbosi del- I'individuo, quindi, ci sembra ancor meno accettabile oggi di quanto non fosse dieci anni or sono. Conseguenze della Crisi Energetica La crisi energetica ha detertninato 1'evolversi di numerosi altri fattori d'incertezza, che rendono estre- mamente arduo valutare Peventuale effetto che essa pua avere sulle attivita della Philip Morris. E ammesso che una diffusa carenza di carburante potrebbe cau- sare alcune difficolta; tuttavia la natura dei processi produttivi tipici del nostri settori d'attivita e tale da richiedere un quantitativo di risorse energetiche inferiore a quello della maggior parte degli altri settori produttivi, e cib ci induce a ritenere che la crisi energetica avra minori ripercussioni sulla Philip Morris che su molti altri settori dell'economia. Il costo del carburante costituisce infatti una compo- nente minore dei costi totali di produzione delle sigarette e della birra, e non incide in misura rilevante sui costi di distribuzione del prodotti. E possibile, ovviamente, che si renda necessaria qualche temporanea modifica negli attuali metodi di distribuzione dei prodotti sul mercato statunitense, ma siamo certi che in tale evenienza la flessibilita della nostra rete distributiva ci consentirebbe di far fronte alla situazione. AIl'inizio del 1973 si e proceduto ad un'analisi detta- gliata del fabbisogno d'energia, adottando, durante tutto 1'esercizio, i provvedimenti piu efficaci per garantire la continuita dei rifornimenti. In tutti i centri di produzione, come pure sul campo, e stato adottato un vasto programma interno volto a risparmiare energia, e Ia sensibile riduzione del consumo di energia che e stata gia realizzata e una tangibile testimonianza del- 1'efficacia del programma. Controllo def Prezzi Le disposizioni sul controllo del prezzi applicate dal Governo americano nel quadro della Fase IV hanno ridotto la possibilita di trasferire per intero sui prezzi di vendita gli aumenti dei costi di produzione. Nei primi mesi del 1973, net quadro della Fase III, erano ancora consentiti modesti aumenti nel prezzo delle sigarette;' in seguito, nell'ambito della Fase IV, siamo stati auto- rizzati ad effettuare contenuti incrementi di prezzo anche per la birra e per i prodotti industriali. Tuttavia, anche nei casiin cut tale autorizzazione e stata o verra concessa, il controllo del prezzi previsto dalla Fase IV finira, in ultima analisi, per causare una riduzione dei margini di profitto, poiche gli incrementi con- sentiti del prezzi di vendita non possono essere superiori all'aumento dei costi di produzione. 11 tabacco ed j cereali impiegati nella produzione della birra hanno subito aumenti molto accentuati, essendo queste derrate esenti da controlli sui prezzi. Inoltre, it "Cost of Liv- ing Council" (Comitato di Controllo sul Costo della Vita) ha autorizzato sostanziali aumenti di prezzo per la pasta di cellulosa e per la carta. L']I gennaio 1974, il "Cost of Living Council" ha autorizzato la Philip Morris U.S.A. a praticare un aumento del prezzi dell'I, 6%, che ha consentito di assorbire in parte gli incrementi dei costi di produzione. Questo aumento e stato praticato per tutte le marche di sigarette, ed i prezzi all'ingrosso della Vostra Societa sono ora ailineati con quelli della maggior parte degli altri produttori di sigarette statunitensi. Nel 1973, anche la Philip Morris International ha sperimentato le difficolta inerenti ad una situazione di controllo dei prezzi: in molti paesi in cui quest'azienda vende le proprie marche di sigarette, infatti, 1'impos- sibilita di aumentare I prezzi del prodotto, pur in pre- senza di un'inflazione generalizzata, ha determinato una compressione del livelli di redditivita. Tabacco in Foglia Nel 1973, il fabbisogno mondiale di tabacco ha subito un i.ncremento, mentre it raccolto in alcuni paesi esportatori e stato inferiore alle previsioni. La conse- guente contrazione di forniture di tabacco di buona qualita ha causato in tutto il mondo una lievitazione del prezzo del tabacco. La domanda di,sigarette di qualita superiore sui mercati internazionali, accoppiata alle variazioni delle parita monetarie, ha prodotto un elevato livello di esportazioni del tabacco statuni- tense in foglia. Sebbene si preveda il persistere di una carenza sui mercati mondiali e, conseguentemente, ulteriori aumenti di prezzo per it tabacco in foglia, Ia Vostra Societa 8 riuscita a mantenere sufficienti stock di tabacco stagionato della qualita richiesta. Gravami Fiscali sulle Sigarette Nel 1973, solo uno stato americano, it Colorado, ha approvato una legge volta ad aumentare 1'imposta di consumo sulle sigarette, legge che in definitiva eliminava l'imposta comunale ed aumentava quella statale. Nello stesso anno, tuttavia, in 20 altri stati sono stati ' presentati 41 disegni di legge tesi ad aumentare le imposte di consumo sulle sigarette. In 19 di tali stati il legislatore illuminato, conscio del fatto che non solo le imposte di consumo sono una forma di prelievo fiscale regressiva, che colpisce sproporzionatamente i con- sumatori delle fasce di reddito piti basse, ma anche del fatto che in pratica finiscono per incoraggiare it contrabbando, ha respinto tali disegni di legge o non 1i ha resi esecutivi. In quattro stati, per contro, sono all'esame disegni di legge volti a ridurre 1'imposta. 11 10 gennaio 1974, M. Wilson, governatore dello stato di New York, ha raccomandato 1'abolizione della tassa sulle sigarette imposta dalla cjtta di New York, di- chiarando che "le onerose tasse che la citta di New York impone sulle sigarette, in aggiunta a quelle statali, sono un incentivo alla criminalita organizzata, ed hanno trasformato Ia citta in una terra promessa per I con- trabbandieri." A questo proposito non e da trascurare it fatto che i differenti livelli d'imposta esistenti nei vari stati finiscono per colpire anche I canali di distri- buzione tradizionali e legali, tramite grossisti e detta- glianti moralmente e cornmercialmente integri. Nel 1973, le imposte di consumo sulle sigarette hanno prodotto, in tutti gli Stati Uniti, un gettito di $5,5 . miliardi, di cui $2,2 miliardi sono andati al governo federale, $3,2 miliardi ai vari stati e$0,1 miliardil alle autorita locali. In totale, quest'importo equivale ad un prelievo di $26,00 pro capite su tutta la popolazione statunitense, comprese donne e bambini, ed d manifestamente iniquo. 18

Attivita d'interesse pubblico La Philip Morris Incorporated e una fra le poche societ3 per aziont che abbiano costituito un apposito comitato, composto di membri del Consiglio d'Ammi- nistrazione, e destinato ad occuparsi specificamente del contributo dato dall'azienda allo soluzione dei bisogni e dei problemi sociali. Tale Comitato Affari Pubblici delia Vostra Societa svolge una duplice funzione: quella di esaminare la validita delle attuali prestazioni della Societa in quanto ente gravato da obblighi di natura soctale, e quella di prevedere e valutare i mutamenti nei valori della comunita, nei suoi bisogni e nelle sue priorita. Ottre a questo, esiste tm secondo comitato del Consiglio d'Amministrazione, i1 Comitato Ecologia, che e investito di analoghe funzioni per ii settore ecologico. Per contribuire alla conservazione delle risorse del paese e alla protezione dell'ambiente, la Miller Brewing Company ha modificato i tipi d'imballaggi usati fino ad ora, ed 'e passata ormai quasi per intero ai barattoli interamente in alluminio ed alle bottiglie recuperabili. Nel quadro di un programma elaborato dalla Miller, molti fra i distributori hanno creato centri di raccolta per le bottiglie ed i barattoli vuoti in vari punti del paese, ne va dimenticato che anche i consumatori ed i dettaglianti possono participare a questo sforzo nazionale volto alla conservazione delle risorse. La Philip Morris, inoltre, ha in corso di studio altri tipi d'imballaggi concepiti espressamente in funzione dell'esigenza di conservare le risorse del paese. La Vostra Societa, nel settore delle attivita d'interesse pubblico, tende sempre ad innovare e se possibile anche a spronare altre aziende ad offrire il loro contri- buto la dove se ne senta il bisogno: basti citare il nostro programma di borse di studio per i figli dei di- pendenti, che a partire dall'anno scorso e stato esteso anche alle scuole di avviamento professionale, oltre che alle universita: considerato il primo del suo genere, tale programma di formazione professionale ha riscosso il plauso di enti governativi, insegnanti ed imprendi- tori, tanto che parecchie altre aziende stanno varando analoghi programmi. Nel medesimo spirito, Ia Philip Morris ha avviato nel 1973 un programma di borse di studio destinate agli adulti, da concedersi a lavoratrici o casalinghe che, a causa delle loro occupazioni, possono dedicare agli studi soltanto un impegno parziale. Appare fondato pre- sumere che anche questo programma servira di mo- dello ad altre aziende. Grazie allo studio sulle responsabilita sociali, effettuato dalla Philip Morris con frequenza annuale, i1 Consiglio d'Amministrazione e costantemente informato del contributo apportato dalla Societa alla soluzione dei problemi di interesse pubblico. Dallo studio piu recente, ad esempio, emerge il fatto che, sul numero totale dei dipendenti, 'e aumentata la percentuale di membri di minoranze etniche, di donne e di reduci di guerra del Vietnam, e che per tali elementi si e accresciuta la frequenza di promozione a posti di piu alta responsa- bilita. Anche la Philip Morris International e le sue filiali hanno intrapreso vari programmi coerenti con l'impegno sociale della Vostra Azienda: assistenza alle vittime della alluvioni nel Pakistan e nelle Filippine, conces- sione di borse di studio di livello universitario nel Messico, un vasto programma di sovvenzioni ad enti di assistenza medica, sociale e scolastica neI Venezuela ed infine patrocinio di attivita culturali a livello locale in Australia ed in Canada. In tutto il mondo, i dipendenti della Philip Morris vengono incoraggiati a participare alle attivita sociali e civiche delle comunita in cui vivono, tanto che sarebbe praticamente impossibile elencare i contributi personali di tutti i singoli. In merito all'obbligo di fornire al pubblico dati finanziari dettagliati, la Borsa Valori di New York ha recentemente suggerito 1'inclusione, nei rendiconti delle societa, di dati relativi alle quotazioni delle azioni ordinarie, al rapporto tra la quotazione di borsa e 1'utile per azione, ai divi- dendi ed al valore contabile delle azioni ordinarie, tutti dati che la Philip Morris fornisce da parecchi anni; val la pena ricordare che il nostro Bilancio 1972 e stato premiato dalla rivista Financial World come Ia "miglior relazione dell'anno" in tutta 1'industria degli Stati Uniti. Durante lo scorso esercizio, un ru[tb ha colpito il Vostro Consiglio d'Ammintstraztone: e venuto a mancare Wirt H. Hatcher, Direttore Generale a riposo ed Ammini- stratore Onorario della Philip Morris Incorporated. Il signor Hatcher, che era alla Philip Morris sin dal 1918, era una personalita ben nota de11'industria del tabacco, particolarmente sttmato per la sua profonda conoscenza del settore e per i suoi numerosi scritti sull'evoluzione di quest'industria e sullo sviluppo dei relativi processi scientifici. II signor Hatcher ha fornito un contributo determinante alla crescita della Vostra Societa. In Aprile T. Justin Moore, Jr., Amministratore Delegato e Direttore Generale e Finanziario della Virginia Electric and Power Company, 8 divenuto membro del Consiglio d'Amministrazione, che beneficera cosi dell'apporto del suo discernimento e della sua esperienza. Dalla data della nostra ultima ristrutturazione, avvenuta nel 1967, il fatturato sl e ptu che tnplicato e l'utile piu che quadruplicato. Abbiamo inoltre, acquisito due societa operative di notevole importanza: la Miller Brewing e la Mission Viejo. Per far fronte alle nuove esigenze che it potenziamento comporta, si e provveduto ad ampliare ed a rafibrzare 1'organico dei dirigenti di grado superiore de11a Societa e, nello scorso ottobre, il Consiglio d'Amministrazione ha promosso numerosi dirigenti con responsabilita di primo piano. Tra i mutamenti di maggior importanza, segna- liamo i seguenti: George Weissman, Amministratore Delegato della Philip Morris Incorporated, e divenuto Vice Presidente del Consiglio d'Amministrazione; Ross R. Millhiser, Amministratore Delegato della Philip Morris U.S.A., e stato nominato Amministratore Dete- gato della Philip Morris Incorporated, mentre Clifford H. Goldsmith, gia Direttore Generale di Divisione della Philip Morris U.S.A., e divenuto Amministratore Delegato della stessa societa e Direttore Generale di Divisione della Philip Morris Incorporated. Ci e gradito ancora una volta rendere atto a tutti i 37.000 dipendenti delta Philip Morris net mondo per 1'eccellente prestazione fornita in quest'esercizio. II loro lavoro e componente fondamentale del successo dell'Azienda, e li ringraziamo vivamente per la loro dedizione. Rispettosamente presentato a nome del Consiglio d'Amministrazione. Joseph F. Cullman 3rd Presidente del Consiglio d'Amministrazione e Direttore Generale `_-~q2 ~l.~s:.-o..a...w George Weissman Vice Presidente del Consiglio d'Amministrazione Ross R. Millhiser Amministratore Delegato Terugblik op het jaar Negentien-drie-en-zeventig was het 20ste achtereenvol- gende jaar waarin uw bedrijf nieuwe rekords boekte in o,mzet, winst en winst per aandeel. De gekonsolideerde omzet steeg tot $2,6 miljard, een toename van 22,1% en de nettowinst steeg tot $149 miljoen, een toename van 19,4% vergeleken met 1972. De winst per aandeel (rekening houdend met konverteerbare obligaties) bedroeg $5,21 en de winst per aandeel voor konversie bedroeg $5,42, hetgeen neerkomt op een stijging van respektievelijk 19,2% en 16,1% in vergelijking met 1972. Wij zijn verheugd met de resultaten van 1973, die werden behaald in een uiterst moeilijk jaar, dat werd gekenmerkt door prijskontroles, tekorten aan grond- stoffen, belangrijke valutaherwaarderingen en de energiekrisis. Philip Morris vergrootte voorts zijn aandeel in de internationale sigarettenmarkt en verstevigde zijn positie als de op een na grootste sigarettenproducent ter wereld die op de beurs staat genoteerd. In 1973 steeg de verkoop van de sigarettenindustrie over de gehele wereld met 4%a tot ruim 3,6 biljoen eenbeden. Philip Morris bereikte op de internationale sigaretten- markt een marktaandeel van 6,7%. Marlboro bleef het meest verkochte sigarettenmerk ter wereld. Deze positie werd in 1972 bereikt. Binnen de Verenigde Staten schoof Marlboro, het op een na meest verkochte merk, heel dicht op naar de eerste plaats. Voor het vierde achtereenvolgende jaar nam binnen de Amerikaanse sigarettenindustrie de totale verkoop in eenheden toe. De totale verkoop in eenheden-bedroeg 577 miljard, hetgeen neerkomt op een stijging van 4,1% vergeleken met het voorafgaande jaar. Tegelij- kertijd steeg de verkoop in eenheden van Philip Morris met 11,1%. Het marktaandeel van uw bedrijf in de Verenigde Staten bereikte aan het einde van hetjaar een nieuw hoogtepunt van ruim 21%. In 1973 nam de verkoop van Miller Brewing aanzienlijk toe. De omzet vertoonde een stijging van 31%, terwijl de verkoop in vaten steeg met 28,8%. Deze drastische stijging wat betreft de verkoop in vaten van Miller vertegenwoordigde de grootste stijging in procenten ten opzichte van de belangrijkste bierbrouwers in de Verenigde Staten. De totale bierindustrie zag zijn verkoop in vaten in 1973 met 4,7% toenemen. Qua rangorde van bierbrouwerijen in de Verenigde Staten schoof Miller op van de zevende naar de vijfde plaats. De kapitaalinvesteringen bedroegen in 1973 $175 miljoen, in tegenstelling tot de $120 miljoen die in 1972 werden besteed. Philip Morris bevindt zich middenin een belangrijk investeringsprogramma, teneinde te voldoen aan de toenemende vraag naar onze sigaretten in zowel de Verenigde Staten als daar- buiten en naar onze biersoorten en andere produkten. In 1973 maakten wij bekend dat de geplande invester- ingen die over de komende vijf jaar zouden worden besteed, van $500 miljoen werden verhoogd tot ongeveer $750 miljoen. Het grootste deel van dit bedrag zal zijn voor de uitbreiding en modernisering van tabaks- faciliteiten in de VS. en daarbuiten, Miller Brewing en voor een aanzienlijk kleiner gedeelte voor Philip Morris Industrial en Mission Viejo. Gedurende de afgelopen vijf jaar-1968/1973-is de gekonsolideerde omzet van Philip Morris gestegen met een jaarlijks gemiddelde dat neerkomt op 20,6%. In dezelfde periode steeg de nettowinst met een gemiddelde van 24,9% en de winst per aandeel (rekening houdend met konverteerbare obligaties) steeg met 19,5% per jaar. Voor her 46ste achtereenvolgende jaar keerde uw firma een dividend uit op de gewone aandelen, terwijl de dividenden voor hetzesde achtereenvolgendejaar werden verhoogd. Het huidige jaarlijkse dividend bedraagt 51,40 per gewoon aandeel. Philip Morris D.S.ft. De dynamische groei van de belangrijkste sigaretten- merken van uw firma in de Verenigde Staten-Marlboro, Benson & Hedges 100's, Virginia Slims, en Parliament -leidde voor Philip Morris U.S.A. tot een rekordomzet in eenheden van 123 miljard, een stijging van 11%. De omzet en bedrijfsresultaten stegen gedurende het afgelopen jaar met respektievelijk 12% en 17%. Philip Morris U.S.A., onze grootste werkmaatschappij wat betreft omzet en winst, behield zijn positie als de snelst groeiende sigarettenfabrikant in de Verenigde Staten. Marlboro, ons toonaangevende merk, verwierf tegen eind 1973 een marktaandeel van 14%, waarmee zij het meest verkochte merk nog dichter benaderde. Slechts vijf jaar geieden lag het marktaandeel van Marlboro op de Amerikaanse markt beneden de 8%. Het bedrijf handhaafde eveneens zijn leidende positie in de verkoop van de groeiende 100mm klasse; de verkoop van Benson & Hedges 100's steeg met 12,0% en blijft daarmee het meest verkochte 100mm merk, terwijl ook de verkoop van de andere 100mm merken van Philip Morris-Virginia Slims, Parliament 100's, en Marlboro 100's-gedurende het jaar aanzienlijk toenam. • Tien jaar geleden bestond er nog geen 100mm markt, en vilf jaar geleden vertegenwoordtgde de 100mm merken ongeveer 13% van de totale sigarettenverkoop. Tegen eind 1973 maakte de verkoop van 100mm merken echter ruim 22',"o deel uit van de totale verkoop van de industrie. Het grootste aandeel van de 100mm markt is in handen van Philip Morris-deze kategorie vertegenwoordigde 29%. Het demografische beeld in de Verenigde Staten geeft eveneens blijk van de sterke positie van Philip Morris. De merken van uw bedrijf hebben een hoge graad van penetratie bereikt bij het snelst groeiende deel van de Amerikaanse bevolkjng, onder vrouwelijke rokers en onder rokers die hoger onderwijs hebben genoten. Een van de grootste uitdagingen voor het bedrijf in het afgelopen jaar was het in opgaande lijn voortzetten van de sigarettenproduktie, terwiji onze per traditie hoge kwaliteit gehandhaafd diende te blijven. Aangezien de sigarettenproduktie een nieuw technologisch tijdperk ingaat, gedurende cen tijd dat de verkoop van onze merken snel blijft stijgen, blijkt ons nieuwe $200 miljoen vergende complex in Richmond, Virginia-het grootste op zichzelf staande project op ons investerings- programma-een tijdige een veelbelovende investering te zijn. Alhoewel het nieuwe bedrijf niet eerder dan tegen 1977 op volle kapaciteit zal draaien, produceerde deze fabriek eind december 1973 ongeveer 100 miljoen sigaretten per dag-20% van de uiteindelijke kapaciteit. Het Iigt in de bedoeling dat de gebouwen begin 1974 zullen worden opgeleverd. In 1973 begon uw firma ook met de bouw van een complex voor de vermenging en verwerking van tabak in de buuYt van Richmond, Virginia. Deze installatie, die ongeveer $43,8 miljoen zal kosten, is nodig om aan de toenemende eisen van het nieuwe complex in Richmond tegemoet te komen. De totale uitgaven voor marketing bleven in 1973 vrijwel op hetzelfde niveau als in 1972, terwijl de rekla- mekosten opnieuw lager lagen dan in 1970, het laatste jaar dat men via radio en televisie reklame voor siga- retten kon maken. Als gevolg van de hogere verkoop- cijfers, liepen de marketing-kosten per 1.000 sigaretten terug. American Safety Razor, een divisie van Philip Morris U.S.A., droeg eveneens bij tot de bedrijfswinst. De voornaamste nieuwe produkten-Personna Double II, een scheerapparaat met 4 scheerviakken, twee aan elke zijde en Flicker, een lady-shave-werden in 1973 lan- delijk gedistribueerd. Gedurende het jaar werden ook twee kteinere bedrijven-Clark Gum en Lightfoot Soap afgestoten. Philip Morris International De dynamische groei die Philip Morris in de afgelopen jaren heeft bewerkstelligd, zette zich in 1973 voort. De sigarettenverkoop over de gehele wereld van deze belangrijke werkmaatschappij van Philip Morris bedroeg in totaal 124 miljard eenheden. Terwijl de verkoop in eenheden van de gehele industrie buiten de Verenigde Staten met 4% steeg, nam de verkoop in eenheden van Philip Morris International met 9,5% toe. Omzet en bedrijfsresultaten stegen iti 1973 met respektievelijk 31,9% en 9,6%. Onze merken worden in meer dan 160 landen en ge- bieden verkocht. Het afgelopen jaar had Philip Morris marktaandelen van tenminste 10%-en in een aantal gevallen aanzienlijk meer dan 10%-in ruim 20 landen, waaronder Austalie, Canada, Italie, Libanon, Mexico, Nigerie, de Philippijnen, Venezuela, Zweden en Zwitserland, De oorzaak van Marlboro's sukses over de gehele wereld lag in de gestegen vraag naar Ameri- kaanse sigaretten. De andere voorkeuren voor smaken die men bewerkstelligde, worden echter terdege onder- kend en ongeveer 60% van onze internationale verkoop in eenheden ligt in regionale en lokale merken. Philip Morris International produceert en verkoopt op her ogenbiik rond 145 verschiilende sigarettenmerken over de gehele wereld. 2500011159 19

Eind 1973 kwam Philip Morris tot een joint venture voor de konstruktie van een sigarettenfabriek in Curitiba, Brazilie, die deels in Braziliaanse handen is. Het plan is begin 1975 een begin te maken met de voorziening van deze markt. In 1973 sloot uw firma ook licentie-overeenkomsten af voor de produktie van Marlboro-sigaretten in Japan met Japan Tobacco & Salt Public Corporation en in Polen met Agros. In Mexico veroorzaakten-ondanks de toename in verkoop in eenheden en de vergroting van het markt- aandeel-de sterk gestegen kosten en toegenomen overheidsbemoeienissen met onze geaffilieerde maat- schappij, Cigarrera Nacional, S.A., dat het bedrijf nog meer terrein verloor. Wij bestuderen momenteel een aantal alternatieven betreffende onze Mexicaanse be- langen, waarbij wij eveneens overwegen onze interes- sen terug te brengen tot een minderheidsbelang overeenkomstig het huidige Mexicaanse regeringsbeleid. Wij voorzien op dit moment dat deze zaak gedurende de eerste helft van 1974 zal zijn opgelost en onafhan- kelijk welke maatregelen men uiteindelijk zal treffen, zullen zij geen materieel effekt hebben op de resultaten van 1974. De verkoop in eenheden en de omzet stegen in alle vier gebieden: Europa/Midden-Oosten/Afrika; Latijns- Amerika/Iberie; Azie/Pacific, en Canada. Philip Morris Europe, het grootste gebied wat betreft omzet en winst, voegde Afrika en het Midden-Oosten toe aan zijn verantwoordelijkheidsgebied. In 1973 werden de winsten in Europa nadelig beinvloed door ont- wrichtingen in onze industrie die veroorzaakt werden door de veelvuldige valutaherwaarderingen. Dit werd echter tenietgedaan door winsten in andere gebieden. Philip Morris International zet zijn programma van uitbreiding en verbetering van faciliteiten rond de gehele wereld voort. In Australie werden produktiefa- ciliteiten voor Lindeman wijn en sigaretten uitgebreid. De bouw van een van de grootste tabaksopsiagcom- plexen in Europa, dichtbij de fabriek van onze Zwitserse geaffiheerde maatschappij in Neuchatel, nadert zijn voltooiing. Zoals de meeste Amerikaanse bedrijven die hun be- langen over de hele wereld hebben verspreid, droeg ook Philip Morris in 1973 positief bij tot de handelsbalans van de Verenigde Staten. Tegelijkertijd is de aanwezigheid van Philip Morris in vele landen slechts mogelijk, doordat deze aantoonbaar bijdraagt tot de ekonomie van deze landen. Aange- spoord door voortdurende uitbreiding van onze bedrij- ven, is ons beleid om eigen personeel in landen waar onze bedrijven gevestigd zijn op te leiden, gelijke kansen te geven en te bevorderen, een basis voor het sukses van Philip Morris International. Dit rekord qua internationale groei in 1973, in het aanzien van stijgende infiatie en ekonomisch nationa- lisme, brengt uw bedrijf in een goede positie om de groei in de internationale markt voort te zetten. Miller Brewing Company Vergeleken met vorig jaar steeg in 1973 de afzet in vaten van Miller met 28,8%, dit vergeleken met een omzetstijging van 4,7% in de totale bierindustrie. De stijging bij Miller was in procenten de grootste in vergelijking met de belangrijkste bierbrouwers in de Verenigde Staten. Miller's marktaandeel steeg drastisch van 4,0% tot 5,0%, en Miller schoof op van de zevende tot de vijfde plaats qua rangorde van de grootste brouwers in de Verenigde Staten. De omzet bereikte $276 miljoen, een stijging van 31%o ten opzichte van 1972. Volgens onze ramingen is Miller High Life het sneist groeiende merk dat in 1973 in de Verenigde Staten werd verkocht. De verkoop van Miller High Life zowel in fiessen als in aluminiumblikjes steeg aanzlenlijk. Het "pony pack" (een verpakking met 8 fiessen van elk 20c1) werd door het publiek zeer goed ontvangen. Miller Ale (een Engelse biersoort) werd ook goed ontvangen in het Noordoosten, de grootste markt voor "ale", en de afzet van Meister Brau in het gebied rond Chicago droeg eveneens bij tot Miller's rekordafzet in vaten. De gestegen konsumentenvraag naar de kwaliteitsbieren van Miller bracht de produktie in 1973 tot topkapaci- teit. Er waren gedurende het afgelopen jaar momenten dat Miller in feite niet voldoende produkiielCapaciteit had om aan alle vraag te voldoen. Miller meldde een verlies van $2,4 miljoen hetgeen het gevolg is van gestegen kosten van verpakkingen en grondstoffen, een voortzetting van de prijskonkurrentie in de bierindustrie, en de relatief hoge produktiekosten als gevolg van Miller's gebrek aan moderne, efficiente brouwinstallaties. In deze industrie vormen blikjes en fiessen een belangrijk deel van de totale kosten. De kosten voor deze verpakkingen stegen in 1973 bijna 7%. De kosten van mout,'maYs en gerst stegen drastisch. De prijskonkurrentie die reeds vele jaren in de bierindustrie heerst, bleef zeer intensief. De resulterende vernauwing tussen kosten en prijzen werd weerspiegeld in lagere marges in de gehele industrie. Om de produktie op te voeren en de efficii3ntie te ver- hogen, en toch de superieure kwaliteit van het produkt te handaven, startte Miller een grootscheeps uitbrei- dings-en vernieuwingsprogramma. Voor dit 5-jarig programma is bijna $200 miljoen uitgetrokken. De modernste brouwinstallaties en verpakkingsmachines worden geTnstalleerd in de Miller-brouwerijen in Milwaukee en Fort Worth. Bovendien wordt de produktiekapaciteit van de Milwaukee-en Fort Worth- brouwerijen uitgebreid. Medio vorig jaar werd in Milwaukee begonnen met de bouw van een nieuwe opslagplaats en een expeditiecomplex op de plaats waar Frederic Miller in 1855 begon met brouwen. Miller heeft ook de voorbereidingen beeindigd voor een fa- briek van $16 miljoen voor de produktie van opnieuw bruikbare aluminiumblikjes in Milwaukee. In januari 1974 maakten wij plannen bekend dat wij binnen 200 mijl rond New York een ongeveer $70 miljoen vergende brouwerij willen gaan bouwen. Dit nieuwe produktiecentrum van Miller wordt begin 1976 in gebruik genomen en zal dan een kapaciteit hebben van 2 miljoen vaten; de uiteindelijke kapaciteit zal 6 miljoen vaten per jaar bedragen. Een aantal faktoren, waartoe in het bijzonder de beschikbaarheid over water van hoge kwaliteit wordt gerekend, zullen bepalend zijn voor de juiste piaats van deze nieuwe brouwerij. Uw fii%ma heeft op lange termijn het plan om afzet en marktaandeel uit te breiden en de brouwkapaciteit van Miller te verhogen, terwijl de produktiefaciliteiten efficient-en konkurrerend-zullen worden gemaakt. Alhoewel Miller in 1973 een bedrijfsverlies leed, waren er wel duidelijk aanwijzingen dat ons plan op langere termijn gezond is. Ons vertrouwen in het winstpoten- tieel op langere termijn van Miller Brewing wordt aangetoond door onze aanzienlijke reserveringen voor kapitaalinvesteringen. Philip Morris Industrial De omzet van Industrial bereikte in 1973 een hoogte van $132 miljoen, een stijging van 17% ten opzichte van de resultaten van vorig jaar. De stijging in bedrijfsre- sultaten bedroeg 7,3%. Dit ondanks scherpe verho- gingen van grondstofprijzen die niet doorberekend konden worden aan de afnemers, plus recente tekorten aan sommige stoffen; zoals was, oplossingsmiddelen, aluminium en pulp. De prijzen voor pulp stegen bij- voorbeeld met meer dan 39% gedurende het afgelopen jaar, en het gevoig van deze prijsstijging in het bijzonder was vooral van invloed op vele produktiecentra van Philip Morris Industrial. Tegen het einde van het jaar, stond de "Cost of Living Council" (Raad voor het Beheer van Lonen en Prijzen) in de Verenigde Staten kleine prijsstijgingen toe voor produkten van Philip Morris Industrial. De kosten bleven echter snel stijgen in november en december, nadat de prijsstijgingen aan Industrial werden toegestaan. Elk van Industrial's produktiecentra-chemicalien, papier en verpakkingen-boekte in 1973 verhoogde omzetten en er werden hogere winsten behaald in chemicalien en papier. Er was een kleine teruggang in het winstniveau van verpakkingen. Door de verhoogde omzet van alle produktiecentra in een aantal geavanceerde technische produkten met grotere winstmarges, kon Industrial de vernauwing tussen kosten en prijzen gedeeltelijk tenietdoen. Voortdurende ontwikkeling van nieuwe produkten en toepassingen daarvan waren bevorderlijk voor de uitvoering van deze strategie. Nicolet Paper Company voltooide de bouw van een van de grootste "coaters" van papier en verpakkingsfolies in de wereld. Dit projekt dat in Nicholasville, Kentucky, staat, heeft ongeveer $5 miljoen gekost. Polymer Indus- tries, Inc. breidde zijn produktiefacrlttetten uit in Greenville, South Carolina, door de toevoeging van een nieuwe opsiagruimte en een vijfde polymer-reactor. Wikolin-Werk, Wilii E. Kohlmeyer G.m.b.H. is zijn produktiefaciliteiten in Bremen, West-Duitsland, aan het uitbreiden. Mission Viejo Company Mission Viejo Company-die op het gebied van projektontwikkeling de toon aangeeft-beeindigde 1973 als het eerste volledige jaar onder beheer van Philip Morris. Mission Viejo's omzet over 1973 steeg met 12%, hetgeen ten opzichte van vorig jaar neerkomt op $68,0 miljoen. De winst zakte met 28%o tot 54,1 miljoen. De huizenbouwindustrie stuitte in 1973 op talloze problemen. De eerste helft van het jaar werd geken- merkt door slechte weersomstandigheden in Zuid- Californie en Colorado, snelle prijsstijgingen van grondstoffen-vooral massief en gelamineerd hout-en grote schaarste aan grondstoffen. Hoewel Mission Viejo een toonaangever is in ruimtelijke ordening, veroor- zaakten nieuwe milieuwetgevingen vertragingen in het afhandelen van bouwvergunningen. In de tweede helft van hetjaar, bereikten de hypotheekrenten een on- gedvenaarde hoogte en werd hypotheekgeld zeer schaars. Ondanks dergelijke negatieve faktoren was Mission Viejo dit jaar winstgevend en verkocht in totaal 1.650 huizen in zijn drie belangrijkste werkgebieden: Orange County, Californie; Denver, Colorado, en Phoenix, Arizona. Bovendien werd aan het einde van het jaar een begin gemaakt met een klein projekt in Fresno, Californie. De huizenbouw is een cyclische industrie, maar wij menen dat Mission Viejo minder storingen in zijn akti- viteiten heeft gehad dan vele andere bouwers in het land. Het ziet er naar uit dat vele negatieve faktoren die de bouwindustrie in 1973 beinvloedden, ook in 1974 hun invloed zullen hebben. De vooruitzichten voor de huizenbouw voor de komende tien jaar zijn echter goed en we verwachten dat Mission Viejo in de geplande groei zal participeren. Roken en Gezondheid Wat roken en gezondheid betreft, zetten wij samen met andere bedrijven in de tabaksindustrie onze steun voort aan medisch onderzoek door de "Council for Tobacco Research-U.S.A." (Raad voor Tabaksonder- zoek in de Verenigde Staten) en door de subsidiering van belangrijke research-programma's van de Medische Faculteit van de Washington University in St. Louis en de Medische Faculteit van Harvard. Over de afge- lopen 20 jaar heeft onze industrie meer dan $48 miljoen besteed aan wetenschappelijk onderzoek met betrekking tot tabak en gezondheid. Het jaarverslag van de "Council for Tobacco Research" dat details bevat uit studies die in 1973 zijn gedaan door de induscrie, kan kosteloos bij uw firma worden verkregen. In augustus kondigde de voorzitter van een pas op- gericht federaal bureau, de "Consumer Product Safety Commission" (Commissie voor de Veiligheid van Consumentenartikelen) aan, dat zijn bureau overwoog om een verbod uit te vaardigen voor sigaretten, die een door de Commissie als "veilig" bepaald teer en nicotine gehalte ove:schrijden. Tot op dit ogenblik heeft de Commissie nog geen aktie ondernomen. Wij zijn op de hoogte gesteld van het felt dat noch de wet- telijke regeling die de commissie heeft opgericht, noch de verordeningen die zij hanteert, haar de bevoegdheid geeft de sigarettenverkoop te reguleren, en het is onze bedoeltng om aan elke pogmg dit te doen, weer- stand te bieden. In de Verenigde Staten hebben een aantal staten wetten aangenomen om het roken in bepaalde openbare gelegenheden te verbieden. Verschillende andere landen waar wij zaken doen, namen wetten en verordeningen aan die het adverteren voor sigaretten beperken en waarschuwingen op sigarettenpakjes vereisen. Een recent medisch artikel dat verslag uitbracht over een studie door het "Karolinska Institut" in Zweden, toont aan dat er tussen identieke tweelingen met ver- schillende rookgewoonten geen duidelijk verschil is in levensduur of de neiging om hartziekten te krijgen, tussen rokers en niet-rokers. De schrijvers stellen dat hun bevindingen er op wijzen dat in het bepalen van de levensduur en de kans op een hartziekte, genetische en persoonlijkheidsverschillen belangrijker zijn dan roken. Aangezien dit het enige bevolkingsonderzoek is, dat genetisch gelijk zijnde rokers en niet-rokers heeft vergeleken, menen wij dat de resultaten de nodige aandacht verdienen. Het is nu tien jaar geleden dat de "Surgeon General" (te vergelijken met onze Direkteur-Generaal) van het "Advisory Committee on Smoking and Health" (Adviescommissie voor de Volksgezondheid, speciaal belast met roken en gezondheid) zijn eerst rapport in januari 1964 publiceerde. In de daarop volgende tien jaar heeft wetenschappelijk onderzoek naar de symp- tomen, waarvan in het oorspronkelijke rapport werd beweerd dat zij verband houden met het roken van sigaretten, geen proefondervindelijk bewijs aan het licht gebracht inzake de relatie tussen het roken van sigaretten en ziekten. Integendeel, het onderzoek heeft een breed spectrum van andere verdachte risiko- faktoren opgeleverd. Aanvullend intensief onderzoek gedurende deze periode naar de chemische samenstel- ling van tabaksrook is er niet in geslaagd enig be- standdeel van rook te identificeren, dat-althans in de aanwezige hoeveelheid-als een causale faktor in enigerlei ziekte die bij mensen voorkomt, kan worden beschouwd. Er is geen suksesvolle poging geweest bij dieren-door het inhaleren van tabaksrook-die symptomen op te wekken die sommigen toeschrijven aan mensen die roken. Kortom, naar onze mening is de bewering dat er een causaal verband bestaat tussen het roken van sigaretten en zlekten heden ten dage meer een open vraag dan het dat tien jaar geleden was. Effekt van de energiekrisis Door de "energiekrisis" zijn talloze onzekerheden ontstaan, die het buitengewoon moeilijk maken om de juiste gevolgen voor Philip Morris te beoordelen. Men onderkent natuurli7k, dat ernstige brandstoftekorten tot enige ontwrichtingen kunnen leiden, maar het pro- duktieproces in onze industrie vereist minder energie dan de meeste andere industrieen. Dientengevolge menen wij dat de "energiekrisis" minder weerslag zal hebben op Philip Morris dan op de meeste andere industrieen. De brandstoffen maken in feite slechts een klein gedeelte uit van de totale kosten voor onze sigaretten- en bierproduktie en de distributie van onze produkten. Het is mogelijk dat tijdelijke ontwrichtingen in de wijze van distributie van deze produkten in de Verenigde Staten zouden kunnen onstaan, maar we menen dat het aanpassingsvermogen van ons distributienet ons in staat stelt dergelijke problemen op te vangen. Begin 1973 is een uitvoerig onderzoek gedaan naar onze energiebehoeften en gedurende het gehele jaar hebben wij de nodige stappen ondernomen teneinde een ongestoorde toevoer van de voor ons vereiste energie te verzekeren. Bij al onze vestigingen is een uitgebreid intern programma voor ernergiebesparingen ingesteld. Dit programma heeft reeds tastbare resultaten opgele- verd, hetgeen bleek uit een aanzienlijke vermindering in ons energieverbruik. Prijskontroles De voortgaande prijskontrolemaatregelen van de Amerikaanse regering onder Fase IV beperkten ons om gestegen kosten geheel met prijsverhogingen te dekken. Begin 1973 werden ttjdens Fase III kleine prijsver- hogingen voor sigaretten toegestaan. Later dat jaar- onder Fase IV-kregen bier en tndustriele produkten enig respijt. Echter zelfs daar, waar prijsstijgingen werden toegestaan of nog zullen worden toegestaan, N t)'i O O O ~ N r-+ ~ O 2C

zal het totale effekt van de priiskontrolemaatregelen onder Fase IV een vermindering van marges betekenen, aangezien prijsverhogingen beperkt zijn tot het door- berekenen van kostenverhogingen op een "dollar-per- dollar" basis. Scherpe kostensttjgingen warden gekon- stateerd ten aanzien van tabak en graansoorten die voor het brouwen worden gebruikt, tengevolge van de vrijsteilmg voor deze agrarische produkcen. Behoorlijke stljg~aan doorued ` Cost of Living Council ,eveneens toeges ~ Op 11 januari 1974, stond deze Raad aan Philip Morris U.S.A. een prijsverhoging toe van 1,6% waarmee de kostenstijgmgen entgzins worden gedekt. Daze verhoging is voor a11e merken doorgevoerd en de grossiersprijzen van uw bedrijf komen nu overeen met die van andere Amerikaanse sigarettenfabrikanten. Ook Philip Morris International ervaarde in 1973 prijskontroleproblemen. In vele landen waar uw firma sigaretten op de markt brengt, warden de winstver- hogingen beperkt door de algemene inflatie, zonder dat een mogelijkheid bestond verhogingen van sigaretten- prijzen te bewerkstelligen. Ruwe tabak De totale vraag naar tabak over de gehele wereld is in 1973 gestegen. De tabaksoogst in bepaalde export- gebieden was kleiner dan voorzien, waardoor de _ toevoer van kwaliteitstabak verminderde an de ta- baksprijzen over de gehele wereld stegen. De interna- tionale vraag naar kwaliteitssigaretten, gekoppeld aan monetaire herwaarderingen, deed de export van ruwe tabak vanuit de Verenigde Staten hoog oplopen. Verwacht wordt dat tabak over de hele wereld beperkt voorradig zal zijn. Het gevolg zal zijn dat de prijs van ruwe tabak zal blijven stijgen. Uw firma is in staat geweest om voorraden van gerijpte tabak in de benodigde kwaliteit en hoeveelheid aan te houden. Sigarettenaccijnzen In 1973 werd in de Verenigde Staten slechts in edn staat, Colorado, een wet aangenomen voor een ver- hoging van sigarettenaccijnzen; deze wet verving in feite gemeentelijke belastingen en verhoogde de staats- accijns. Gedurende het afgelopen jaar, werden echter in 20 staten 41 wetten ter verhoging van accijns op sigaretten in werking gesteld. In 19 staten werden de accijnsverhogingen door de verantwoordelijke wet- gevers of wet ntet aangenomen of niet doorgevoerd, doordat men inzag, dat accijnzen niet alleen een vorm van regressieve belasting zijn, die konsumenten met lagere inkomens onevenredig belasten, maar dat zij ook een zwarte handel in de hand werken. In feite zijn er in 4 staten wetten in behandeling voor de vermindering van accijns op sigaretten. Op 10 januari 1974 raadde Gouverneur M. Wilson van New York aan, dat de belasting op sigaretten door New York City zou worden ingetrokken. Hij ver- klaarde: "De hoge sigarettenbelastingen van New York City, die over de staatsaccijns heen worden berekend, blijken een belangrijke stimulans te zijn voor georga- niseerde misdaad, zodat de stad "het beloofde land" is geworden voor zwartehandelaars." In rechtstreeks verband hiermee staat het schadelijk effekt dat ver- schillen in staatsaccijns hebben op de traditionele legale sigarettendistributie door erkende en bonafide grossiers en detailhandelaren. De totale opbrengst van stgarettenaccijnsbelastingen in de Verenigde Staten bedroeg in 1973 $5,5 miljard, waarvan respektievelijk S2,2 miljard in federate, $3,2 miljard in staats- en $0,1 miljard in gemeentelijke heffingen. Dit komt near op een totaal van $26,00 per bewoner van de Verenigde Staten, met inbegrip van vrouwen en kinderen. Dit is duidelijk onbillijk. Maatschappelijke aangelegenheden Philip Morris Incorporated is een van een klein aantal grote bedrijven, die een comite hebben ingesteld bestaande uit leden van de Raad van Bestuur, die spa- ciaal belast zijn met de aktiviteiten van het bedrijf op sociaal gebied. Dit "Public Affairs Committee" (Commissie voor Maatschappelijke Aangelegenheden) is niet alleen gemachtigd om onze huidige maatschappe- lijke prestaties als bedrijf te bekijken, maar is ook verant- woordelijk om vooruit te lopen op en het op de juis[e waarde schatten van veranderingen in maatschap- pelijke waarden en'behoeften en het stellen van prioriteiten. Een tweede comite van de Raad van Bestuur, het "Environmental Committee", heeft overeen- komstige verantwoordelijkheden op het_gebied van milieu-aangelegenheden. In het belang van grondstoffenbesparingen en milieu- bescherming heeft Miller Brewing Company bijna de omschakeling voltooid naar flessen en geheel uit aluminium bestaande blikjes, die beide opnieuw gebruikt kunnen worden. In een door Miller ontworpen pro- gramma, hebben veal van onze wederverkopers verzamelingscentra in het land opgezet. Niet alleen de viederverkopers, maar ook klanten en detailhandelaren kunnen meedoen in deze landelijke poging om grond- stoffen te besparen. Ook andere Philip Morris- verpakkingen worden momenteel bestudeerd teneinde grondstoffen te besparen. Ook is het onze politiek om vooruitstrevend te zijn in onze aktiviteiten voor de bevordering van maatschap- pelijke belangen en indien mogelijk anderen voor te gaan in de beantwoording aan maatschappelijke be- hoeften. Als tekenend voorbeeld werd het afgelopen jaar ons programma van studiebeurzen voor kinderen van onze werknemers uitgebreid. Het omvat nu zowel beroepsopleidingen, als opleidingen,voor hoger onderwijs. Het plan voor beroepsopleidingen, waarvan men veronderstelt dat het het eerste in zijn soort is, is gunstig ontvangen door overheidsautoriteiten bij het onderwijs en imde zakenwereld. Verschillende andere bedrijven zijn met overeenkomstige programma's begonnen. Op dezelfde wijze verrichtte Philip Morris in het af- gelopen jaar baanbrekend werk met betrekking tot studiebeursprogramma's voor volwassenen en part- time-studies voor vrouwen, die hetzij een baan hebben of can huishouden leiden. Men verwacht dat ook dit programma een prototype wordt, dat door andere bedrijven zal worden nagevolgd. De jaarlijkse Philip Morris "Study of Social Respon- sibility" (Studie van Maatschappelijke Verantwoordelijk- heid) houdt de Raad van Bestuur op de hoogte van de vooruitgang van het bedrijf wat betreft maatschappelijke aangelegenheden. De laatste studie laat bijvoorbeeld de proportionate stijging zien van minderheidsgroepen, vrouwen en oud-Vietnamstrijders in ons personeel. Evenzo vermeldt het de vooruitgang wat betreft hun bevordering tot meer verant- woordelijke posities. Philip Morris International en zijn geaffilieerde maatschappijen voerden talloze projekten uit op het gebied van sociale-bedrijfsverantwoordelijkheid, waar- onder hulp aan watersnoodslachtoffers in Pakistan en de Philippijnen, studiebeurzen voor universiteiten in Mexico, een uitgebreid programma voor hulpverle- ning voor medische, sociale en onderwijsinstellingen in Venezuela en de subsidiering van plaatselijke kulturele aktiviteiten in Australte en Canada. Over de gehele wereld wordt het personeel van Philip Morris aangemoedigd deel te nemen aan aktiviteiten in het gemeenschapsleven. De opsomming van gevallen waarin zij persoonlijk betrokken zijn, is indrukwekkend. Wat betreft het vrijg even van informatie stelde de "New York Stock Exchange" onlangs voor dat jaarverslagen ook beurskoersen, koers-winstver- houdingen, dividenden en boekwaarden zouden moeten omvatten hetgeen al verschillende jaren door Philip Morris wordt toegepast. Ons vorige jaarverslag werd overigens bij de jaarlijkse toekenning van onderschei- dingen door Financial World, als het beste van de gehele industrie gekozen. Het afgelopen jaar betreurde uw Raad van Bestuur het overlijden van Wirt H. Hatcher, gepensioneerd senior vice president en emeritus direkteur van Philip Morris Incorporated. De heer Hatcher, die in 1918 bij Philip Morris in dienst trad, was in de hele tabaksindustrie een zeer bekende persoonlijkheid. Hij werd in het bijzonder gewaardeerd voor zijn kennis en vele pu- blikaties over de groei van de industrie en de ontwik- keling van wetenschappelijke processen daarin. De hear Hatcher speelde een belangrijke rol bij de groei van uw firma. De Raad van Bestuur werd door de verkiezingen in april versterkt met het waardevolle adviseurschap van T. Justin Moore Jr., president, chief operating en financial officer van de Virginia Electric and Power Company. Sinds onze laatste funktieverschuivingen in 1967 is de omzet meer dan verdrievoudigd en de winst meer dan verviervoudigd. Bovendien zijn twee belangrijke werkmaatschappijen, Miller Brewing en Mission Viejo, overgenomen. Door uitbreiding genoodzaakt werd in oktober j1. toen de Raad van Bestuur besloot verschillende top- funktionarissen te promoveren, de struktuur van de hoofddirektie uitgebreid en versterkt. Drie van de belangrijkste veranderingen daarin waren de benoem- ing van George Weissman, president, tot vice-voor- zitter van de Raad van Bestuur; verder werd Ross R. Millhiser, president van Philip Morris U.S.A., werd gekozen tot president van Philip Morris Incorpor- ated; en Clifford H. Goldsmith, executive vice president, werd benoemd tot president van Philip Morris U.S.A. en executive vice president van Philip Morris Incorporated. Opnieuw brengen wij hulde aan at onze 37.000 per- soneelsleden over de hele wereld voor hun uitstekende prestaties gedurende het jaar. Hun werk is funda- menteel voor het sukses van uw bedrijf en wij danken hen voor hun toewijding. Met hoogachting aangeboden namens de Raad van Bestuur, , Joseph F. Cullman 3rd Voorzitter van de Raad van Bestuur en Chief Executive Officer An-1g_ OJi..,,+rn..-,.. George Weissman Vice-voorzitter van de Raad van Bestuur l2l~(~ /, Ross R. Millhiser President 21

Philip Morris U.S.A. (000 omitted) (000 omitted) Operating Revenues Operating Income 1973 $1,303,629 227,282 1972 1971 $1,164,550 $1,035,178 194,072 166,734 100 Park Avenue Russell N. Freund, Shepard P Pollack, Edward M. Schaaf, Jr., New York. New York 10017 Vice President, Personnel Vice President, Finance & Vice President, Production Clifford H. Goldsmith, President John P. Jeb Lee, Planning Benjamin A. Soyars, John T. Landry, Vice President, Marketing Richard D. Robertson, Vice President, Manufacturing Executive Vice President & Services Vice President, Ecology & Dr. Helmut R. R. Wakeham Director of Marketing George W Macon, Jr., Environment and Director , Vice President, Research & Max L. Berkowitz Vice President, Leaf of Energy Resources and Development , Senior Vice President W Wallace McDowell, Conservation Charles H. Wilson, Robert H. Cremin, Vice President, Operations Vice President, General Products Vice President, Sales Coordination Alex Kay, Jr., Controller Clifford H. Goldsmith, President of Philip Morris U.S.A., viewing one of the five cigarette making bays. Each bay will ultimately produce more than 100 million cigarettes per day. Rows of cigarette "maker-packer" modules at the new Richmond complex, where production commenced in early 1973. Physical construction of the complex will be completed in 1974. In the right rear, outside the windows, is one of the fully landscaped garden courtyards which can be seen from each bay. The study of cigarette smoke composition is one area in which research and development works closely with the manufacturing and leaf departments to retain leadership in production of the highest quality cigarettes. Far left-Benson & Hedges 100's is the largest selling brand in the 100mm category, which is the fastest-growing segment of the U.S. cigarette market. 2500011162 Left-Parliament 100's is another important brand in the 100mm segment-"... the recessed filter works like a cigarette holder works." 22

23 Lord Todd, F.R.S., of Christ's College, Cambridge, England, winner of a Nobel Prize in 1957, speaking at the first Philip Morris Science Symposium held in conjunction with the Research Tower dedication. Cartons of Marlboro move along part of the new automatic materials and product handling system. Each cigarette-making machine is equipped with elaborate quality contro9 devices which are connected to a centrally controlled computer. At the dedication of the Research Center Tower in Richmond are (left to right) Gov. Linwood Holton of Virginia, Dr. Glenn T. Seaborg, former Atomic Energy Commission Chairman and Nobel Prize winner, Ross R. Millhiser, and Dr. H. R. R. Wakeham, Vice President-Research and Development. "Hogsheads" of the finest aged tobaccos are handled by a fully automated materials handling system in the "primary" area of the Richmond complex.

Phi9ip Morris lJ. 5. A. Philip Morris U.S.A. Operating Revenues Millions of Dollars Philip Morris U.S.A. Filter Cigarette Unit Sales  Non-Filter Cigarette Unit Sales Z 5ilfon Unlts 1500 130 1400 120 1300 1200 10 00 00 000 90 900 so 800 0 700 so 600 50 500 w 1 40 ~ 400 300 ~ M: a i 30 200 20 100 ~ . . i 10 64 65 66 67 68 69 70 71 72 73 Operating Revenues of Phi.lip Morris U.S.A. have increased at an average annual compounded rate of 11.0% since 1964. 64 65 66 67 68 69 70 71 72 73 Philip Morris U.S.A. cigarette unit sales have grown at an average annual compounded rate of 9.7% over the last 10 years. Filter cigarette sales represented 98% of Philip Morris U.S.A.'s total unit sales in 1973. The 1973 Virginia Slims circuit, with tennis stars like Margaret Court, received wide recognition. U.S. Cigarette Industry Unit Sales Total Filter Cigarettes  Total Non-Filter Cigarettes i Philip Morris Share of U.S. Industry (%) - . Bllllon Units 600. Percentage 30 2 Total U.S. cigarette industry unit sales have increased at an average annual compounded rate of 2.8% since 1970 and at a rate of 1.3% since 1964. The filter segment has grown at a rate of 5.1% over the past 10 years. Philip Morris U.S.A.'s share of U.S. industry was 21.3% in 1973 versus 9.8% in 1964. One survey revealed that "Marlboro Country" is one of the two best known themes in all American advertising. Marlboro Share of Total U.S. Industry Percenl-ge 14 10 8 6 2 I 64 65 66 67 66 69 70 71 72- 73 All categories of Marlboro now represent 13.7% of industry. Marlboro has grown at an average annual compounded rate of 12.0% since 1964. A Philip Morris salesman takes the order. Continued upgrading of our sales force is essential to meet the growing sophistication of distributor and retailer operations. Seminars and advanced teaching methods are used to update sales techniques. r•.) ~ 0 0 a ~ ~ ~ T ~ Over 61/s million Flicker Ladies' Safety Shavers were purchased in 1973, the first full year of national distribution. More cigarettes are purchased in supermarkets than in any other outlet. Specialists in the company's sales force work to increase Philip Morris's sales in these outlets. 24

loomm Cigarette Share of U.S. fndustry t Philip Morris 100mm Share of U.S. Industry - Since 1965, the year 100mm cigarettes were introduced, this category has grown to 22.6% of total industry sales. Philip Morris U.S.A. brands account for more than 29% of this category, or 7% of the total industry sales. At the National Automatic Merchandisers' Association Conference, a Philip Morris computer operator assisted vending machine accounts in determining the optimum brand mix in their machines. Cigarette filters being sent to the "making packing" area. The Richmond facility has established a new standard of excellence. The first annual "Marlboro Cup" race at Belmont, which featured Secretariat, Riva Ridge and other top horses, was one of the most exciting sports events of the year.

Philip Morris International (000 omitted) (000 omitted) Operating Revenues Operating Income 1973 1972 1971 $822,907 $623,699 $517,670 92,150 84,095 66,968 100 Park Avenue Ronald H. Thomson, Carlos E. Salguero, Vice Presiderit, Aleardo G. Buzzi, Vice President New York, New York 10017 Executive Vice President, Latin America/Iberia Staff an Gunnarsson, Vice President Hugh Cullman, President Europe/dliddle East/Africa James E. Turner, Fred C. Moessinger, Hamish Maxwell, Charles F. Lombard, Vice President, Vice President, Sales Vice President, Personnel Executive Vice President, Canada Canada William J. O'Connor, Robert H. Souther, and Asia/Pacific Vice President and Chief Vice President, Finance Administrative Officer Albert E. Bellot, Vice President a '' - _ '---V'3i-f' RRN _ iYt~VOI~~I~A~Y eQC en A.m 0991011 ~Ol/I~i!!!!!1%/Il ;fachgQS[haft-_~, Marlboro is now among the top ten cigarette brands in West Germany where sales of the brand increased 31 percent during 1973. Our Lindeman wine affiliate in Australia had record sales and earnings last year. This company's new tank farm, bottling plant and warehouse complex is now in operation. Hugh Cullman, President of Philip Morris International, announced the strengthening of the regional management structure, including geographical consolidation and creation of two executive vice president positions. 2500011166 Far left-Our U.S. Sea and Air Stores Region reported strong sales growth during 1973. Marlboro is the number one cigarette brand in the U.S. duty free market. Left-The large leaf, packaging, and finished goods warehouse near our Swiss affiliate's factory in Neuchatel is one of the new European installations opened in 1973. 26

\,\ Astor, the leading\ora~.d in Venezuela, further irtcrbised its market share during'`heyear, and our Venezuelan afilli~te reported record sales in`-W3. The Four Square filter brand has received strong marketing support from Godfrey Phillips, India, Ltd. Despite difficult business conditions, this affiliate and Premier Tobacco Industries Ltd., Pakistan, continued profitable in 1973. Philip Morris brands made under license in the Philippines achieved record sales levels in 1973. Also last year, Marlboro became the first U.S. cigarette brand to be made under.ficense in Japan. Marlboro is the leading cigarette in Ecuador where our affiliate, established in 1973 with Ecuadorian and Spanish 27 partners, completed construction of a new factory.

Philip Morris International Philip Morris International Operating Revenues Consolidated ^ Unconsolidated ^ 64 65 66 67 68 69 70 71 72 73 Philip Morris International Consolidated Operating Revenues-excluding affiliates not wholly owned-have grown at an average annual compounded rate of 30°b since 1964. Operating Revenues of consolidated and unconsolidated affiliates combined have increased at a rate of 28% since 1964. Philip Morris International Cigarette Unit Sales Export, Affiliates, Licensees Billicn Uni1s Total Exports of U.S.-Made Cigarettes ^ Philip Morris Share (%) - Billion Unils Percentage Total World Cigarette Unit Sales Excluding U.S.A. Total Filter Cigarettes ^ Total Non-Filter Cigarettes ^ Philip Morris Share of World Market (%) - Billion Units Percentage 130 3000 15 60 60 120 2200 74 2600 13 1t0 50 50 100 2400 2 2200 90 2010 0 40 40 80 1800 70 i600 60 1400 30 30 50 1200 fl 40 1000 800 20 20 30 600 Mi 20 10 Ii ~ 400 200 64 65 66 67 68 69 70 71 72 73 _ Since 1964, Philip Morris International's unit sales of cigarettes by affiliates, licensees, and through exports have grown at an average annual compounded rate of 21% per year. 64 6 66 67 68 69 70 71 72 73 World industry unit cigarette sales in international markets (excluding the United States) were 3.0 trillion in 1973. Unit sales have grown at an average annual compounded rate of 4.5% over the last 10 years. Philip Morris's share of the world market reached 4.1% in 1973. Total exports of U.S.-made cigarettes have grown 3.1% per year compounded annually since 1964. Philip Morris's share of U.S -made cigarette exports reached 31.5% in 1973. Mark Ten (left) and Belvedere (above) are major brands of the tobacco division of Benson & Hedges (Canada) Ltd. During 1973, this affiliate recorded increased market share, operating revenues and earnings and its tobacco manufacturing facilities were further expanded. Philip Morris (Australia) Ltd. now manufactures all cigarettes at one expanded and integrated complex in Moorabbin (above). Sales and income from cigarette operations again increased in 1973. 2s #

29 Marlboro is one of the leading brands of Philip Morris Holland B.V. This affiliate is the largest exporter of cigarettes in the Netherlands, and during the year it expanded the Bergen op Zoom factory to accommodate _ present and future sales growth. Our U.S. export sales continue to rise and Philip Morris remains the leading exporter of cigarettes from the U.S. Over the last ten years, Philip Morris's exports of U.S.-made cigarettes have increased at an average annual compounded growth rate of 13.1 percent. Marlboro is a popular, premium priced brand in Panama where Tabacalera Nacional, S.A. recorded increased sales and profits. During the year leaf processing facilities were expanded. International brands, such as Marlboro and Muratti Ambassador, accounted for the largest portion of sales gains in Europe. New activities in Europe included agreements with the Spanish Monopoly for Philip Morris to manufacture and market in the EEC their leading brand, Ducados, and to produce their new brand, Lola, in the Canary Islands for sale on mainland Spain.

Miller Brewing Company (000 omitted) (000 omitted) Operating Revenues Operating Income 1973 1972 1971 $275,860 $211,262 $204,134 (2,371) 228 1,300 4000 West State Street Lauren S. Williams, Clifford R. Wilmot, Robert H. Lindstrom, Milwaukee, Wisconsin 53201 Vice President, Marketing and Sales Vice President, Brand Management Vice President, Finance John A. Murphy, President and Thomas B. Shropshire, Clement G. Meyn, Warren H. Dunn, Chief Executive Officer Vice President, Allarket Planning Vice President, Lfaster Brewer General Counsel, Secretary William K. Howell, Thomas A. Fulrath, Travis G. Adler, Controller Executive Vice President Vice President, Personnel 6 More beer-drinkers are enjoying "Miller time" than ever before. M ® John A. Murphy, President and Chief Executive Officer, led Miller Brewing from seventh to fifth place in the U.S. brewing industry. Cyclists preparing for a "Miller Classic" race. Races were held in California, Colorado, Florida, Illinois and Georgia. ® Miller High Life at the supermarket, in recyclable aluminum cans. 3 TIM1111E116 , _..thaYSwhenyou•pulfinyourlines.head-homeand.have-timetoappreciate - the difference-a great tasting~ beer can~ make-Miller High Life. If you've g~tthe time, we've got the beer. ;,~',~ 9~ tiIsM41F. . ~, ~ills.

0 m ~ The new distributor reclamation ` program involves the consumer and retailer as well as distributors and Miller Brewing. Consumer acceptance of the "Pony 8-Pack" of Miller High Life in 7 oz. bottles is one of the reasons for Miller's dramatic volume gains in 1973. Expansion and modernization at the Milwaukee brewery is well underway.

INiller Brewing Company Miller Brewing Company Miller Brewing Company Operating Revenues  Millet Unit Sales  Miller Share of U.S. Industry (%) - Millions of Oollars 275 75 50 25 00 64 65 66 68 70 73 67 69 71 72 Miller's Operating Revenues have increased at an average annually compounded rate of 10.7% over the last . ten years. Revenues since 1970 have risen at an average rate of 9.3% per year. Miller Bartender's Cup ski races feature competition among racers from local taverns. Millions of Barrels Percentage 10 10 9 9 8 7 7 6 6 64 65 66 67 66 69 70 7 73 72 Barrel volume has grown at an average annual rate of 8.5% since 1964 and at a rate of 8.9% per year since 1970. Market share in 1973 was 5.0% versus 4.0% last year. Domestic Beer Industry Unit Sales Nationally Distributed Premium Beer (est.) 0 Regional and Non-Premium Beer (est.) E Millions of Barrels 140 64 65 66 67 68 69 70 7 73 72 In the last ten years total beer industry unit sales have grown at an annual rate of 3.9%. The premium segment has increased 10.7% per year during the same period. Beer Pricing Trends (1964 = 100) Wholesale Price Index All Commodities L! Wholesale Price Index Beer - Index 1c0 64 65 66 67 68 59 70 71 72 73 The wholesale price index for all commodities has risen at an average rate of 4.1% since 1964 while the wholesale price index for beer has risen at 1.5% annual rate. In the last year, the index for all commodities rose 13.8% while the index for beer increased 1%. j The Miller Quality Awareness ; Program applies not only to I A product but also to people and all other facets of the business. 32

33 In addition to Miller High Life, Brewing takes place in the Miller line of malt beverages copper kettles such as includes Miller Ale, Miller Malt, these at the Milwaukee Meister Brau and Lite. Lite brewery (below). contains one-third fewer calories than Miller's regular beer. Miller High Life is the fastest growing major U.S. brand. Miller High Life is sold in all 50 states and 56 countries ' around the globe. Many of the nation's top anglers competed in the first annual Miller High Life Bass Masters Classic fishing tournament held at Clark Hill Reservoir in South Carolina. The Azusa, California brewery produces Miller products for the West Coast market.

Philip Morris industrial (000 omitted) (000 omitted) Operating Revenues Operating Income 1973 $132,126 8,300 1972 1971 $113,136 $95,513 7,735 6,135 4200 North Holton Street William D. McCoy, James B. Kurtzweil, Robert G. Etter, President, Milwaukee, Wisconsin 53212 Executive Vice President, Executive Vice President, Paper Group Fred M. Stefan, President General Administration Operations Edward B. Kime, Jr., President, Karl M. Bierman, President, Chemical Group Packaging Group Glassine and greaseproof papers for such uses as food packaging are manufactured at Nicolet's De Pere, Wisconsin facility. Total computer processing control is employed in paper Fred M. Stefan, President of making operations at De Pere. Philip Morris Industrial. 34

At Milprint's Milwaukee plant, designing and producing consumer product packaging is the major business. Philip Morris Industrial Operating Revenues Milllors of Dollars 140 130 _ 20 110 100 90 so 70 60 50 40 30 20 10 64 65 66 67 68 69 70 71 72 73 Philip Morris Industrial's Operating Revenues have increased at an average annual rate of 7.1 °lo since 1964. Construction of one of the world's largest coaters of paper and plastics for Nicolet's Nicholasville, Kentucky facility was completed during the year. A fifth polymer reactor began operating in late 1973 at Polymer's Greenville, South Carolina plant (right). ° Flexo-Lack, a specialty chemical lacquer for flexible packaging paper, is produced by Wikolin-Werk of Bremen, West Germany. Fine quality printing papers, such as the paper used in this annual report, are manufactured at the Plainwell Paper Company plant in Michigan. 35

Mission Viejo Company (000 omitted) (000 omitted) Operating Revenues Operating Income 1973 $67,976 4,122 1972 1971 $60,824 $37,812 5,714 2,256 26137 La Paz Road Philip J. Reilly, President Roger F Clark, Vice President Geurt Henri Lodder, Mission Viejo, California 92675 James G. Toepfer, James G. Gilleran, Vice President James E. West, Senior Vice President Vice President Robert M. Rodman, Controller Chairman of the Board William K. Smith, Secretary expansion of this master- planned community. There are now more than 25,000 residents. , Philip J. Reilly, President of Mission Viejo, sets the pace for the environmental planning of Mission Viejo's new communities. Mission residents about to ride out into the rolling hills of Southern California. 71 An aerial view of Mission Viejo, ; California, shows the orderly Mission Viejo offers many family activities; it's more than just a place to live. 36

37 The recreation center of the Casta del Sol neighborhood of Mission Viejo, California offers numerous social aniT-' recreational activities for residents in the"45 pius" age group. An Olympic size pool at the Marguerite Recreation Center was the site for the 1973 Los Angeles Invitational Swimming Meet. Mission Viejo Operating Revenues  Homes Sold - 60 2400 50 2000 40 1800 30 1200 20 s 800 Since the first home was sold in 1967, Mission Viejo Company's Operating Revenues have increased at an average annual compounded rate of 27.2%'0. In 1973, 1,650 homes were sold in all Mission Viejo communities. The company's Mission Viejo, California community offers a broad line of homes like this Granada model. The Aurora, Colorado planned community offers similar Caiifornia-type housing. Eleven schools, ranging from grade schools on up to college, meet the educational needs of Mission Viejo, California, residents.

i: iroancial Review 5-10-15-Year Growth Record (in thousands except earnings per share) 5 Years 1973 1968 Compounded Average Operating Revenues $2,602,498 $1,019,846 Annual Growth Rate 20.6% Pre-TaxIncome _ 255,609 100,107 20.6% Earnings Per Share Primary 5.42 2.18 20.0% Fully Diluted 5.21 2.14 19.5% 10 Years 1973 1963 Compounded Average Operating Revenues $2,602,498 $ 585,059 Annual Growth Rate 16.1 % Pre-Tax Income 255,609 46.729 18.5% Earnings Per Share Primary 5.42 0.99 18.5 % Fully Diluted 5.21 0.99 18.1 % 15 Years 1973 1958 Compounded Average Operating Revenues $2,602,498 $ 473,552 Annual Growth Rate 12.0% Pre-Tax Income 255,609 39,854 13.2% Earnings Per Share Primary 5.42 0.81 13.5 % Fully Diluted 5.21 0.81 13.2% Nineteen seventy-three was a year of important gains for Philip Morris Incorporated in terms of unit sales, operating revenues and profits. Throughout the year, the corporation continued to strengthen its overall position. The above table highlights the record of growth during the last five, ten and fifteen-year periods. This performance continues to place Philip Morris among the leading growth companies in American industry. As noted in Chart No. 1, there was a slight decline in our pre-tax margin which reversed the trend which started eight years ago. While we had the benefit of a small increase in the price of cigarettes, effective in February of 1973, substantial cost increases in all areas of our business caused the decline in this ratio. We anticipate continuing cost increases in 1974 and all of our U.S. operating companies applied for price increases with the Cost of Living Council during 1973. The most important of these requested price increases amounted to $0.15 per thousand cigarettes in the U.S., and this request was approved and implemented on all our brands in January, 1974. Capital expenditures during 1973 amounted to $174,665,000 and were at an all-time peak for the corporation. We anticipate that this high level of capital expenditure will continue for at least the next five years and we are currently estimating that the five-year aggregate will be approximately $750,000,000. These funds will be primarily spent to enlarge and improve manufacturing facilities for our world-wide tobacco operations and for our Miller Brewing Company operations. As noted in Chart No. 2, our funds from operations after dividends have, over the past fifteen years, generally exceeded our consolidated capital expenditures. This was not the case in 1973 and we anticipate that it will riot be the case in 1974 and 1975. However, over the next five-year period we anticipate that funds from operations after dividends will be in excess of our projected $750,000,000 capital expenditure program. As indicated in Chart No.7, stockholders' equity increased significantly while our high level of working capital was maintained. The effect on our balance sheet of our rapidly growing business coupled with the substantial capital expenditures is clearly reflected in Chart No. 6. While the ratio of debt to equity is considerably below the peaks reached in 1969 and 1970, it is still at a high level for the company. However, our substantial cash flow, coupled with the liquidity of our leaf inventories, continues to maintain the corporation in a strong financial position. For the sixth consecutive year, dividends on the common stock were increased and the current annual rate is now $1.40 per share. As indicated in Chart No. 3, while dividends have been on an upward trend for the past fifteen years, earnings per share have grown far faster with the result that earnings reinvested in our business have increased from 3 8 % in 1959 to 75% in 1973. In view of our large capital expenditure program, we believe this conservative dividend policy is in the best interest of the corporation and its stockholders. The high pre-tax return on stockholders' equity which continues to exceed 3 0 % provides further support for the continuation of this dividend policy. The trend of this return on equity is illustrated in Chart No. 4 and it is interesting to note that our return is substantially higher than the return on Operating Revenues  Pre-Tax Margins (%) - Chart 1 Mlllions of Dollars 2800 0 2 00 2200 Percentagz 13 1111111:1'111[i ...-...----- 59606 62 63 64 65 66 6 68 69 70 71 72 73 Funds from Operations (after Dividends)  Consolidated Capital Expenditures - Chart 2 Millions of Dollars 180 60 140 20 100 80 60 4 20 59 60 6 62 63 64 65 66 67 68 69 70 71 72 73 Primary Earnings per Share  Dividends Declared per Share - Chart 3 Dollars 5.50 5,00 4 50 4.00 3.50 3.00 20 2.00 10 1A0 50 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 Pre-Tax Return on Stockholders' Equity Philip Morris  Dow Jones 30 Industrials - Chart 4 Percentage 35 30 25 20 15 10 s r ~F V 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 F, 38

equity of 30 Dow Jones Industrial companies. For the last seven years the growth in our per share earnings has been substantially ahead of the comparable growth of the 425 stocks used in the Standard & Poor's Industrial average as shown in Chart No. 5. During 1973 we sold $24,615,000 of fifteen-year Swiss franc debentures at an interest cost of 61/2 % to satisfy some of our requirements under the government's balance of payment program. We also arranged a 180,000,000, three-year, Eurodollar Revolving Credit. The currency fluctuations during the year had significant but mixed impact on the corporation. In Europe these fluctuations affected margins. In other areas, notably Australia, our earnings benefited from the dollar devaluation. From an overall point of view, our income from international operations was in line with our 1973 budget and well above the 1972 results. During the year we continued our conservative accounting procedure of not taking unrealized profits or losses from foreign operations into earnings but crediting or charging them to our Reserve Applicable to International Operations which at year end was $9,104,000 versus $17,963,000 in 1972. The decrease in the Reserve results principally from translating long-term foreign currency debt into U.S. dollars at year-end exchange rates rather than at exchange rates in effect on the dates the debt was sold. Start-up expenses at our new manufacturing complex in Richmond amounted to over $6,000,000. These expenses were not capitalized but were charged directly to earnings. The same high level of start-up costs will continue into 1974 when this facility will be operating at considerably less than 50% of capacity. Our investment tax credit in 1973 was $4,841,000 and at this time we are estimating it will be up considerably in 1974. The total cost of our pension plans, including prior service, amounted to $14, 805,000 in 1973 versus $10,620,000 in 1972. Unfunded prior service costs are amortized over thirty years. In 1973, the total of such prior service liabilities was $14,500,000 contrasted with $15,000,000 in 1972. There has been much discussion in recent months about the amount of "inventory profits" resulting from inflation which may be artificially distorting 1973 reported results of corporations. This matter is not a significant factor with Philip Morris. Our major product is cigarettes and tobacco leaf is approximately one-half of the cost of this product, excluding excise taxes, in the United States. Tobacco is a commodity subject to government price support with a history of small but continuously rising prices-averaging about 5% per year over the last five years. The increase in leaf tobacco prices has been substantially smaller than almost every other raw material. Accordingly, our results have not been importantly affected by inventory profits. All publicly-held corporations are required to file with the Securities & Exchange Commission "Form 10-K" which contains a great deal of detailed statistical and technical information about the companies. Any Philip Morris stockholder who wishes this 10-K report may obtain a copy without charge by writing to the Secretary, Philip Morris Incorporated, 100 Park Avenue, New York, New York 10017. Quarterly Operating Results Quarters Operating Net Income Earnings Per Share Revenues Fully Diluted 1972 I $ 486.2 $ 27.5 $0.97 II 524.1 31.8 1.12 III 563.6 34.6 1.21 IV -- 557.3 30.6 1.07 Year $2,131.2 $124.5 $4.37 1973 I $ 570.6 $ 32.3 $1.13 II 634.3 38.4 1.34 III 683.0 42.3 1.48 IV 714.6 35.6 1.25 Year $2,602.5 $148.6 $5.21 Primary Earnings per Share (1959 - 100) Philip Morris ! Standard & Poor's 425 - Chart 5 Index 700 0 00 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 Long-Term Debt to Equity Senior Long-Term Debt  Subordinated Long-Term Debt  Chart 6 Percentage 100 59 60 6 62 63 6 1t1 IEl'1 72 65 66 67 66 69 70 Stockholders' Equity  Working Capital - Chart 7 Mlllions of Dollars 900 800 700 71 73 59 60 61 62 63 64 65 66 67 88 69 70 71 72 73 ~

Fl i-#e@n`Y®aC FInanC9a, g[evIewPhi7ip Morris Incorporated and Consolidated Subsidiaries- (in thousands except last nine items) 1973 1972 1971 1970 Operating Revenues .................................................................... $2,602,498 2,131,224 1,852,495 1,509,540 Federal Excise Taxes .............:............................................:......... .. 558,947 494,778 441,143 372,092 Foreign Excise Taxes ..................................................................... 334,512 228,151 201,386 147,12 4 Operating Income ..................... ......................................... .......... 329,483 287,461 241,137 203,180 Earnings Before Income Taxes .................................................. 255,609 229,634 189,800 150,008 Pre-Tax Profit Margins ............ .............................................. ....... ---- - 9.8% 10.8% 10.2% 9.9% Net Earnings ................................................................................ 148,632 124,466 101 ,498 77,498 Dividends Declared: Common .................................................. 37,128 33,882 31,080 24,452 Common Dividends Declared As % of Net Earnings .............. 25.0% 27.2% 30.6% 31.6% Dividends Declared: Preferred .................................................... 128 690 752 870 Net Earnings Reinvested ............................................................ 111,376 89,894 69,666 52,176 Capital Expenditures ..... ........................................... ................ ..._ _ . 174,665 120,034 . 68,001 39,595 Annual Depreciation ................................................................... _ 30,245 26,576 21,500 17,658 Property, Plant & Equipment (Gross) ....................................... . 728,726 571,148 447,075 394,088 Property, Plant & Equipment (Net) ............................................ 510,286 373,372 274,070 236,697 Inventories ...................................................................................... 1,009,414 801 ,145 670,244 568,428 Current Assets .............................................................................. 1,245,934 989,708 826 ,453 728,837 Working Capital .......................................................................... 515,347 524,791 417,591 3 47,682 Total Assets .................................................................................. 2,108,403 1,701,4 94 1,392,035 1,239,424 Short-Term Debt ........................................................................ .. 440,343 197,900 201,400 187,100 Senior Long-Term Debt .............................................................. 408,387 373,400 216,500 178,500 Subordinated Long-Term Debt .................................................. 98,634 109,700 136,000 192,100 Total Debt .................................................................................... 947,364- 681,00 0 553,900 557,700 Stockholders' Equity ................................................................... 815,028 695,549 579,114 452,849` Primary Earnings Per Common Share ...................................... $5.42 4.67 4.02 3.36 Fully Diluted Earnings Per Common Share .............................. 5.21 4.37 3.64 2.85 Dividends Declared Per Common Share .................................._ .. 1,348 1.262 1.21 1.05 Book Value Per Common Share ................................................. 29.32 25.10 21.44 17.87 Market Price of Common Share High-Low .............................. . 1363/4-971/a 1181/4-673/4 71-463/4 501/4-28 Closing Price Year End ........... ...............................:.................... _ 1143/4 118i/4 701/4 491h Price/Earnings Ratio .................................................................. 21 25 17 14 No. of Common Shares-Actual Year End ................................ 27;689,217 27,222,045 26,169,454 24,158,840 No. of Common Shares-Weighted Average .............................. 27,402,087 26,499,669 25,063,307 22,806,598 1969 '. 1,142,373 319,086 54,247 153,237 115,613 10.1%° : 58,340 , 21,794 s, 37.4% 887` 35,659 23,636 13,512 236,962 147,354 447,319 574,988 . 315,871 976,489 158,100 168,700 163,600 490,400 355,808 2.58 2.40 .98 14.78 363/s-251/s 353/4 13 22,565,334 22,269,461 ti Ln 0 0 a ~ ~ ~ co 0

1968 1967 1966 1965 1964 1963 1962 1961 1960 1959 1,019,846 904,841 771,975 704;544 641,439 585,059 550,624 529,127 509,332 499,598 295,903 271,073 234,975 214,128 194,312 193,768 187,133 184,146 175,947 168,608 41,841 39,658 30,057 27,780 22,462 8,276 3,785 126,159 101,838 81,867 65,128 55,568 56,634 56,402 52,701 52,376 49,690 100,107 81,317 65,144 52,423 44,466 46,729 47,464 45,985 44,578 41,159 9.8% 9.0% 8.4% 7.4% 6.9% 8.0% 8.6% 8.7% 8.8% 8.2% 48,866 43,601 34,183 26,509 22,614 22,052 21,946 21,511 20,984 19,590 18,755 15,226 15,101 12,896 12,867 12,855 13,046 13,212 13,085 11,140 38.4% 34.9% 44.2% 48.6% 56.9% 58.3% 59.4% 61.4% 62.4% 56.9% 922 922 923 943 953 953 953 970 1,011 1,024 29,189 27,453 18,159 12,670 8,794 8,244 7,947 7,329 6,888 7,426 26,373 25,688 17,089 12,078 19,366 26,243 11,843 8,733 7,300 12,380 12,139 10,903 9,532 8,857 8,316 6,765 6,293 5,638 5,362 4,932 219,346 193,656 172,593 159,759 153,224 139,595 110,204 99,066 93,641 90,050 138,704 123,555 110,157 104,044 102,417 93,150 68,664 61,560 59,960 59,655 451,922 386,576 297,761 271,823 257,256 235,375 228,088 232,541 209,326 210,967 561,685 485,908 372,895 339,082 318,978 297,295 279,068 277,350 249,819 252,239 312,406 306,172 253,257 213,826 202,810 190,982 179,222 190,859 190,423 187,404 , 786,578 648,994 512,549 466,277 443,438 412,543 365,024 351,018 321,717 321,620, 153,800 82,600 27,200 57,300 56,700 53,800 57,400 45,200 21,000 30,000 - 176,000 173,800 133,800 100,800 102,300 91,400. 63,400 65,400 67,400 69,100 25,000 354,800 256,400 161,000 158,100 159,000 145,200 120,800 110,600 88,400 99,100 314,496 280,186 249,821 230,677 217,783 208,711 201,720 199,685 195,956 189,317 ` 2.18 1.97 1.54 1.19 1.01 .99 .98 .94 .91 .85 2.14 1.94 1.54 1.19 1.01 .99 .98 .94 .91 .85 .85 .70 .70 .60 .60 .60 .60 .60 .60 .52 " .13.12 11.77 10.48 9.63 9.03 8.62 8.25 7.99 7.74 7.47': 34i/4-22 283/4-153/4 177/8 -121/4 161/s-12i/s 141/s-11i/4 15-111/a 1831-10i/s- 20~/s-13 13i/a-10 10~/s-9 32 221/4 17 143/4 121/a ' 123/s 121/4 183/s 133/s 103/a 14 11 . 11 12 12 12 12 19 14 12 22,200,308 21,830,874 -~i,613,344 21,521,730 21,458,478 21,429,444 21,526,428 21,972,954 22,029,792 21,937,6864 21,928,890 21,674,884 1 rIJ Lri a 0 0 ~ ~ ~ ~ ~ 1 ;

Consolidated Balance Siieets Phiup Morris Incorporated and Consolidated Subsidiaries December 91, 1979 and 1972 1973 Assets: Cash and cash equivalents ..................................... ............... .................. ................. ,............... .... .-$ 56,139,000 Receivables . . 171 608 000 ........................ .............................. ......... ......... ........::,.............._........................... -_ . . , , Inventories: Leaf tobacco .....................:................................................................:............. .:.,............... - 690,509,000 Other raw materials ................................................. .......................................... ..:............ 63,800,000 Work in process and finished goods ..... .................................................... ..................... 218,456,000 Housing programs under construction .......................................................................... 36,649,000 1,009,414,000 Prepaid expenses .......................... ............... ................ ::....................................................... :. . 8,773,000 Total current assets ................................................................................................ 1,2 45,934,000 Investments in and advances to unconsolidated foreign subsidiaries and affiliates...... 103,702,000 Land and offtract improvements ........................................................................................ 26,877,000 Property, plant and equipment, at cost: Land and land improvements ........................ ..... ......... ..................... .......... ._............ .:..... 26,177,000 Buildings and buildingequipment:...... .............. ................................... ................ ........... . 175,268,000- Machinery and equipment ........................... ...................... ........ _........... ......... .............. 368,439,000 Construction in progress .............................. ................................. ......... ....................... . 158,842,000. 728,726,000 Less, Accumulated depreciation ............ ........... ................................................... ....... 218,440,000- 510,286,000 Other assets. ....................... ..................................... .. .......................:......................:............ . 17,673,000 Brands, trademarks, patents and goodwill:.-.............. ................... ..................................... .. 203,931,000 $2,108,403,000 See notes to financial statements. 591, 894,000 51,997,000 130,827,000 26,427,000 801,145,000 5,157,000 989,708,000 92,431,000 25,999,000 18,796,000 129,171,000 313,639,000 109,542,004 571,148,000 197,776,000' 373,372,000 17,696,000' 202,288,000: $1,701,494,000 .

Liabilities: Notes p ayable ..................... ............................. . ........ .....................:..................................... Current portion of long-term debt ......................................................................................:.-.- Accounts payable and accrued liabilities .......................................................................... Federal and other income taxes ........................................................................................... Dividends payable ........................... ............. ....... ........._ ............................................. Total current liabilities ...................................... ................................. ....................... . Long-term debt: Senior ............. .................................................................. .._,..._,.._.. Subordinated .......... ............................................. :........................................................... Deferred income taxes .......................... .............................................. ......... _........::............. Reserve applicable to international operations .................... ......................................... Other liabilities ........ ....................................... ............................ ..:........................................ Total liabilities .......................... ......................................................... ....................... Stockholders' Equity; Cumulative preferred stock, par value $100 per share .................................................... Common stock, par value $1 per share ............................................................................ Additional paid-in capital .................................................................................................. Earnings reinvested in the business ............... .................................................................... ... ~ Less, Cost of treasury stock .......................... - .................. ............ ................. . ............... ~ 1973 $ 440,343,000 --7,186,000 232,655,000 40,681,000 9,722,000 730,587,000 404,801,000 95,034,000 46,507,000 9,104,000 7,342,000 1,293,375,000 10,269,000 27,754,000 197,348,000 585,301,000 820,672,000 5,644,000 815,028,000 $2,108,403,000 1972 $ 197,900,000 3,300,000 212,489,000 42,287,000 8,941,000 464,917,000 35,674,000 17,963,000 7,585,000 24,773,000 27,315,000 179,581,000 _ 473,925,000 705,594,000 10,045,000 695,549,000 $1,701,494,000

Consolidated Statements of Earnings PhiligMorris Incorporated and t:onsolidatedSubsidiaries jor the years ended December 31, 1973 and 1972 1973 Operating revenues ................. .............. ...... .......... .;.............................................. .......... ,...... : $2,602,498,000 Cost of sales: Cost of products sold ..... .............................................................. ...-, .~..,.....,................... - 1,060,777,000 Federal and foreign excise taxes on products sold ...................................................... _- 893,459,000 Gross profit ....................... .................................... .............................. ........................... 648,262,000 Marketing, administration and research costs .................................................................. 338,978,000 309,284,000 Equity in net earnings of unconsolidated foreign subsidiaries and affiliates .................. 20,199,000 Operating income of operating companies .........................................,..........,.,.,,,..... . 329,483,000 Corporate expense......................................................:.....:..........:.....,:.:...........: ................. 21,016,000 Interest expense........... .................................. .............................. .-.......,:...........:............... 50,993,000 Other deductions, net .................................. .......................................................................... 1,865,000 Earnings before income taxes .......... ................ .................... .._......:...... ...:._.................... , - 255,609,000 Provision for federal and other income taxes: Current ................................................................. _._:............ ._:.....:.................... ......:.............. 100, 617,000. Deferred ................................................... .............. _...:_...._............- ......:..........:.....:......... 6,360,000 106,977,000 Net earnings .................................................................................................... ........... $ 148,632,000 Earnings per common share. Primary .................................................................... _ ......................... $5.42 Fully diluted ........ ........................ ........... .......................................... ._..._..,....... ................... $5.2L See notes to financial statements. $2,131,224,000 832,890,000 722,929,000 575,405,000 299,422,000 275,983,000 11,478,000 287,461,000 19,870,000 37,870,000 87,000 229,634,000 100,278,000 4,890,000 105,168,000 $ 124,466,000 $4.67 $4.37 44

Consolidated Staternents-of Stockholders' Equaty PhilipMorris Incorporated and Consolidated Subsidiaries for the years ended December31,1973 and 1972 Preferred Stock, Authorized and Issued at $ 100 Par Value Common Stock, Authorized 50,000,000 Shares at $1 Par Value dditional Paid-In Capital Earnings Reinvested Cost of in the Treasury Business Stock otal Stockholders' Equity Balance, January 1, 1972 $25,104,000 $26,285,000 $150,104,000 $384,031,000 ($ 6,410,000) $579,114,000 Net earnings for the year 1972 124,466,000 124,466,000 Cash dividends declared: Preferred stock: 4% Series ( 447 000) 447 000 3.90% Series , ( 243,000) ( , ) ( 243,000) Common stock, $1.262 per share ( 33,882,000) ( 33,882,000) Preferred stock purchased for treasury ( 4,188,000) ( 4,188,000) Common stock issued upon conversion of debentures 886,000 25,098,000 311,000 26,295,000 Proceeds from common stock issued under stock options 144,000 4,290,000 4,434,000 Preferred stock retired ( 331,000) 89,000 242,000 Balance, December 31, 1972 24,773,000 27,315,000 179,581,000 473,925,000 ( 10,045,000) 695,549,000 Net earnings for the year 1973 148,632,000 148,632,000 Cash dividends declared: Preferred stock: 4% Series ( 84,000) ( 84,000) ~ 3.90% Series ( 44,000) ( 44,000) ~ Common stock, $1.348 per share ( 37,128,000) ( 37,128,000). ~ Preferred stock purchased for treasury ( 6,739,000) ( 6,739,000) 1 Common stock issued upon conversion of debentures 353,000 10,129,000 389,000 10,871,000 Proceeds from common stock issued under stock options 86,000 3,885,000 3,971,000. : Preferred stock retired (14,504,000) ; 3,753,000 10,751,000 Balance, December 31, 7973 $10,269,000 $27,754,000- $197,348,000 $585,301,000 ($ 5,644,000) $815,028,000 ( ) Denotes deduction. See notes to financial statements. 4

Consolidated Statements of CIIange51n FSnanCta1 P®51iQ®11; Phiifp Morris Incorporated and Consolidated Subsidiarfes for the years ended December 31,1973 and 1972 Additions to Working Capital: Operations: Net earnings ................................................. .... ................ ...... ......... ,.............................. Add (deduct) items not requiring current use of working capital: Depreciation .............................. ................................... ......_.......................................... .. Amortization........................................................................................ ...........................:.. Deferred income taxes ............................................................................................... . Provision for reserve applicable to international operations .................................. 1973 1972 $148,632,000 $124,466,000 30,245,000 26,576,000 1,702,000 1,563,000 .. . 6,360,000 4,890,000 . 3,000,000 Equity in net earnings of unconsolidated foreign subsidiaries and affiliates...... .... (20,199,000) Dividends received from unconsolidated foreign subsidiaries and affiliates .............. 8,612,000 From operations ......................................................................................... 178,352,000 Financing: Long-term debt: Issued ......................... .............. ...................... ........... ........ ........ .................................. . 28, 639,000. Prepayments and retirements ........................................................................................ ( 7,776,000 ). From long-term debt ........... ........... .................................................... ....................... ..- . 20,863,000 Stockholders' equity: Shares issued under stock options .......... ............ .-........................ ............ ..........._.:..:_ 3,971,000 Shares of preferred stock purchased for treasury ............................... _.................. .. ( 6,739,000) From equity transactions .... ....................... ....... _..._............. ................ .................... . (2,768,000) From financing ............................................................................................. ___ . 18,095,000 Land and offtract improvements transferred to housing programs under construction 2,528,000 Disposal of property, plant and equipment ....................................................................... .. . 7,798,000 Net unrealized exchange gains, resulting from translation of working capital, _ added to reserve applicable to international operations .............................. ..._............_ 2,798,000<' Additions to working capital ........................... ........ ............. ....... ....... .......... 209,571,000' Uses of Working Capital: Dividends .............................................................. :.:..-- -......... .,_....... :........... _.:....._....... . 37,256,000.- Expansion and modernization of property, plant and equipment: :...............................: - 174,665,000' Land and offtract improvements ........ ............ ................ :.:..:..._....._................ ._.....-......... ..__. 3,711,000-:- Investments in and advances to unconsolidated foreign subsidiaries and affiliates .. .:_ (316,000) - Investments in consolidated subsidiaries, net of working capital acquired_......_.......__. 2,053,000' " Other, net ............. .......................... .............. ...................................... ...:.............. ... _..:..... ._.:.._ 1,646,000 Working capital used .................... ....._.... . ....._._ _, 219,015;000 Increase (decrease) in working capital ............................._............................. ($ 9,444,000) Changes in components of working capital: Cash and receivables......:.--:..-.......... ........... .... ..... $ 44,341,000'- ..... , Inventories ................................ ............................:. ........... ....:....: ....... :...... .... .. _........ . .. . 208;269,000= Notes payable .....................................................................:......:...:................... .........._.::... - (242,443,000) Accounts payable and accrued liabilities........_..................... .. ....... ............... ............ ..,,- (20,166,000), Other, net ..............................................................:..............:...................:_. ...:....._:.:.:.....:.. . 555,000. ($ 9,444;000)_ ~ Other significant changes in financial position not affecting workingcapital:: - Increase in foreign currency long-term liabilities resulting from translation - at year-end rates with a corresponding decrease in the reserve- applicable to international operations ......... .................. _..................... _...............:.....:- __ :$ 14,657,0001Increase in common stock and additional paid-in capital resulting from y conversions of debentures with a corresponding decrease in long-term debt::...:.:.. $ 11,018,000-- *Net noncurrent assets, principally land and offtract improvements ................................ ~ Cost in excess of net assets acquired ............. ......................... ........-:.............. ............... .:..... ; Less, Amount invested in Mission Viejo Company in 1970 See notes to financial statements. (11,478,000) 4,692,000 150,709,000 184,108,000 (38,892,000) 145,216,000 4,434,000 (4,188,000) 246,000 145,462,000 1,429,000. 1,433,000 3,755,000 302,788,000 34,572,000- 120,034,000 2,234,000 5,276,000 29,397,000* 4,075,000 195,588,000 $107,200,000 $ 32,615,000 130,901,000 3,500,000 - (45,785,000) (14,031,000) $107,200,000 $ 26,351,000 $ 21,004,000 28,479,000 , ( 20,08'6,000 ) $ 29,397,000

Notes to Consolidated Financial Statements Summary of AccountingPolicies: The significant accounting policies followed by Philip Morris Incorporated and its subsidiaries and affiliates are presented below to assist the reader in reviewing the consolidated financial statements and other data contained in this report. These policies comply with generally accepted accounting principles and have been consistently applied. Consolidation: The consolidated financial statements include the accounts of the Company and all wholly owned subsidiaries. Investments in and advances to unconsolidated subsidiaries and affiliates are stated at cost adjusted for equity in undistributed earnings or losses since the dates of acquisition. Foreign operations: Foreign currency accounts are translated into U.S. dollars as follows :(1) current assets, current liabilities and long-term debt at year-end rates; (2) other assets and liabilities generally at historical rates; and (3) revenues, costs and expenses at average rates during the year except for depreciation and amortization which are based on the historical dollar cost of the relatedd assets. Appropriate amounts provided from earnings are added to the reserve applicable to international operations for possible losses which might arise from diminution in value of the Company's investments in foreign subsidiaries and affiliates as the result of events such as governmental actions or currency devaluations. Net unrealized translation gains are added to this reserve and net unrealized translation losses would be charged to income should such losses exceed previous unrealized gains and provisions. Receivables: Current earnings are charged and an allowance is credited with a provision for doubtful accounts based on experience and on any unusual circumstances which may affect the ability of customers to meet their obligations. Accounts deemed uncollectible are- charged against this allowance. Receivables are reported in the balance sheet net of such accumulated allowances. Inventories: Inventories are valued at the lower of cost or market. The cost of leaf tobacco is determined on an average cost basis and the cost of other inventories is determined generally on a first-in, first-out basis. It is a generally recognized industry practice to classify the total amount of leaf tobacco inventory as a current asset although part of such inventory, because of the duration of the aging process, ordinarily would not be utilized within one year. The cost of housing programs under construction represents the cost of land, including offtract improvements, interest and property taxes, plus housing construction costs on sites currently under development. Real estate operations: The cost of land, including offtract improvements, interest and property taxes, is reported as a noncurrent asset until a designated area is placed into development. Offtract improvements are items such as access roads, utilities, etc., which are essential to the development of a community, but which are not directly attributable to the development of a particular tract or area. The cost of these improvements is allocated to the entire acreage available for sale and is charged to cost of sales as each parcel of the property is sold. Revenue and profit from real estate sales are recognized at the time of closing when payment is received. Brands, trademarks, patents and goodwill..< Cost in excess of net assets of companies acquired prior to November 1, 1970 is not being amortized because, in the opinion of management, the related investments have not experienced any diminution in value. Excess cost in connection with investments made after November 1, 1970 is being amortized over a period of no more than 40 years, as required by pronouncements of the American Institute of Certified Public Accountants. Patents and patent rights are being amortized on the straight-line method based on their respective lives. Income taxes: The provisions for federal and foreign income taxes are calculated on reported pre-tax earnings. Certain items of income and expense included in the financial statements, such as depreciation, are reported in different years in the tax returns in accordance with applicable incomeux raws. The resulting difference between the financial statement income tax provision and income taxes currently payable is reported in the financial statements as deferred income taxes. Investment tax credits on assets placedin service during the year are accounted for as a reduction in the provision for income taxes. Provision is also made for federal income taxes on the portion of undistributed earnings of foreign subsidiaries and affiliates that is expected to be remitted to the United States. Property, plant and equipment: _ Maintenance and repairs are charged to income and expenditures for renewals and improvements are capitalized. When the;' construction period of facilities exceeds one year, the capitalized cost of the facilities includes interest and real estate taxes- e ri incurred during the construction period. Provision for depreciation of assets is recorded by a charge against income at rates ; considered adequate to amortize the cost of such assets over their useful lives computed on the straight-line method. ~ 0 ~ N 4' 4

Pension plans: The Company and certain of its consolidated subsidiaries have pension plans covering substantially all of their employees. Prior service costs, which are being amortized over periods of up to thirty years, and accrued pension costs are funded with independent trustees. Research and development: Research and development costs are charged against earnings in the year incurred. Foreign Subsidiaries: Principal financial data of foreign subsidiaries and affiliates are as follows: Consolidated Unconsolidated 1973: Assets .......................... .._,............................. . ....._: ................................... ............................... 6,000 $279,400,000 Liabilities, other than due the Company ............................................................................ 253,300,000 133,040,000 Net assets ........................... _................................................................................... ............................ :.:..... _ 203,056,000 146,360,000 Company's equity and advances ....................................................................................... 203,056,000 95,577,000 Operating revenues ................ ................... ._............... ............................................................. ....: 710,079,000 521,685,000 Net earnings .................................................................................. .. ..-................................... 28,814,000 32,145,000. Company's equity .............................................. ...............:,.................. .............. .............. 28,814,000 20,199,000 1972: Operating revenues ..................... ................................................... .............. .......................... 521,159,000 456,131,000 . Net earnings ..................................................... ............................................... ......,.........:............. - . 25,031,000 19,168,000 Company's equity ........................ .............. ........ .............................. _..._............................. _. 25,031,000 11,478,000 At December 31, 1973, investments in unconsolidated foreign subsidiaries and affiliates exceeded equity in net assets by approximately $8,200,000, including $2,900,000 which arose subsequent to November 1, 1970 and is being amortized. Federal income tax has not been provided on $185,000,000 of undistributed earnings of foreign subsidiaries and affiliates, accumulated since inception of such investments, which is expected to be permanently invested abroad. Expansion of Facilities: Commitments for plant, equipment and machinery at all locations approximated $84,000,000 at December 31, 1973. Cash and Cash Equivalents: Included herein are $20,008,000 and $18,131,000 of short-term time deposits at December 31, 1973 and 1972, respectively. Brands, Trademarks, Patents and Goodwill: At December 31, 1973, this account included approximately $13,000,000 applicable to investments made subsequent to November 1, 1970 which is being amortized over a period of up to forty years. In connection with the acquisition of the remaining ownership interest in Mission Viejo in 1972, the Company agreed to pay $21,010,000 over a five-year period, subject to downward adjustment if Mission Viejo's cumulative earnings, as defined, fail to reach a specified level. At December 31, 1973, $1,611,000, the amount payable under such agreements, is included in brands, trademarks and goodwill and is subject to amortization. Short-Term Borrowing Arrangements: Average bank loans and commercial paper obligations outstanding during 1973, both domestic and foreign, were $107,000,000 and $109,000,000, respectively, on which the weighted average interest rates were 9.0% and 7.7%, respectively. At December 31, 1973, notes payable consisted of bank loans of $248,948,000 and commercial paper obligations of $191,395,000 on which the average rates of interest were 9.9% and 9.6%, respectively. During 1973, the Company and its consolidated subsidiaries maintained average demand deposit book balances of approximately $16,000,000 with a number of banks, principally in the United States, to compensate the banks for account handling and other important services and to support lines of credit. At December 31, 1973, lines of credit for bank and commercial paper short-term financing, including the 180,000,000 Eurodollar three-year revolving-eredit facility, amounted to approximately $560,000,000:

Long=1'erm Debt: 4.90% Notes, payable $2,600,000 annually from 1974 to 1988 and $16,000,000 T)ecemhnr 41 1973 1972 in 1989 ...................................... :.... .......... .....::.::: ........ ........ :.: ................ .:.'............. ..... :.... $ 55,000,000 $ 55,000,000 65/s % Sinking Fund Debentures, payable $3,500,000 annually from 1976 to 1992 and $15,500,000 in 1993 ............... :......................... .-.-....>............ ............................:...... 75,000,000 75,000,000 Bank Term Loan Agreement maturing in 1980. Interest is at 1/2 % above . the bank prime rate .................................... :::-...... -.... :...... ..-.............................................. 150,000,000 150,000,000 63/a % Loan 100,000,000 Deutsche mark, payable 10,000,000 Deutsche mark annually from 1978 to 1987 ........................ ...... :...:-_.:., :......... ....................... :.................... 37,037,000 31,226,000 81/2 % Sinking Fund Debentures, payable $600,000 annually 1975 through 1979, $1,500,000 annually 1980 through 1985 and $3,000,000 in 1986 ............................ 15,000,000 15,000,000 8% Notes, payable in 1978 ............................. ......... .,,:.::.::..... .............. ............................... 15,000,000 15,000,000 71/2 % Notes 60,000,000 Dutch guilders, payable 15,000,000 Dutch guilders annually beginning in 1975 .................................... _--._.,....,-._:._..::.......:............... ............ ... 21,429,000 17,868,000 Secured trust deed notes of Mission Viejo Company. Interest ranges from 5% to 8.875% .... ............................ ........................................................................ ....... 7,053,000 10,943,000 61/2 % Swiss Franc Loan due 1988 ....................... .:.............. . .......... ...........:................... 24,615,000 Other notes and debentures ................................................................................................ 8,253,000 3,417,000 Less, Portion currently payable ................. ................... ............ .............................. :..... Senior debt .................................................................................................... ................ 10% Subordinated Notes, payable $3,600,000 annually from 1974 to 1976, $5,760,000 annually from 1977 to 1981 and $32,400,000 in 1982. Callablee at no premium .................................................................................................... ............... 6% Convertible Subordinated Debentures due 1994, convertible at $27.75 per share ............................................................:..........:......:,..........:......... ........................ Other subordinated convertible debentures Less, Portion currently payable ....................................................................................... Subordinated debt ....... .................... ........... ......................... :............................ ........... .. 408,387,000 373,454,000 3,586,000 3,300,000 $404,801,000 $370,154,000- $ 72,000,000 $ . 72,000,000 19,871,000 28,590,000 6,763,000 9,062,000 98,634,000 109,652,000 3,600,000 $ 95,034,000 $109,652,000 Foreign currency long-term debt is translated at year-end rates. Generally, the long-term debt is callable, at annually decreasing premiums. Expenses incurred in securing long-term loans are included in other assets. and are being amortized on the straight-line method over the respective lives of the issues giving rise thereto. Aggregate maturities of long-term debt in each of the following years are 1974, $7,186,000; 1975, $14,288,000; 1976, $20,933,000; 1977, $19,153,000; 1978, $37,858,000. During 1973, the Company entered into a 180,000,000 Eurodollar revolving credit agreement, expiring September 15, 1976. This credit is available to support short term borrowing requirements: At December 31, 1973, there were no amounts borrowed under this agreement.

Reserve Applicable to International Operations: This reserve consists of (a) amounts provided from earnings for possible losses which might arise from any downward revaluation of the Company's investments in foreign subsidiaries and affiliates which could be caused by governmental actions or by currency devaluations and (b) net unrealized exchange gains or losses arising from translation of foreign currency accounts. In 1973, foreign currency long-term debt was translated at year-end rates. Prior to 1973, such long-term debt was translated at historical rates; the difference between translation at year-end or historical rates was not significant. Net translation losses for the year ended December 31, 1973 of $11,859,000 were deducted from the reserve applicable to international operations. Capital Shares: Authorized Issued Treasury Outstanding Preferred, 4% Series: At December 31, 1972 ........................................... 145,874 145,874 (65,080) 80,794 Purchased ........................................................... . ... . . . (60,217) (60,217) Retired ................................................................. (92,882) (92,882) 92,882 AtDecember3l, 1973 ........... ....... .................... ..__ 52,992 52,992 (32,415) 20,577 Preferred, 3.90% Series: At December 31, 1972 ....... ................................ .101,856 101,856 (60,855) 41,001 Purchased .......... ............... ............................. ...._... - (29,826) (29,826) Retired ........................................................:........ ._ - (52,159) (52,159) 52,159 AtDecember3l, 1973 ......................................... 49,697 49,697 (38,522) 11,175 Common, $1 par value: At December 31, 1972 ....................................... 50,000,000 27,315,156 (93,111) 27,222,045 Issued for: Debenture conversions .................................... - - . - - - ; - 352,932 28,030 380,962 Stock options .................................................. 86,210 86,210 At December 31, 1973 ..................:................... 50,000,000 27,754,298 (65,081) 27,689,217 As of December 31, 1973, 910,700 shares of common stock are reserved for conversion of convertible debentures and 322,672 shares are reserved for the exercise of stock options. Stock Options: - Pursuant to stock option plans approved by stockholders (the most recent plan covering 400,000 shares having been approved in 1973), common stock of the Company has been made available for option to officers and other key employees at market prices on the dates granted. 1973 1972 Shares under option, beginning of year .................................................................................. 273,592 363,835 Options granted ........................................ ......... ._................................................................. ....._ . 140,300 55,750 Options exercised .................................................................................................... ............_... (86,210) (143,873) Options canceled .................................................................................................... ................... (5,010) (2,120). Shares under option, end of year ............................. ._............................ ...................... ..... 322,672* 273,592 Shares available for option, end of year ......................................................................... 290,702 25,992. *At prices ranging from $29.00 to $119.44. Restrictions: Certain of the agreements covering long-term debt contain restrictions with respect to the payment of cash dividends on common - stock and to the purchase, redemption or retirement of capital shares. At December 31, 1973, approximately $395,000,000 of. consolidated earnings reinvested in the business was free of such restrictions. Other agreements covering privately placed long-term debt require the Company to maintain consolidated working capital of at least $400,000,000. Earnings Per Share: _ Primary earnings per common s-tiare is calculated on the weighted average number of shares of common stock outstanding- during each year, which was 27,402,087 in 1973 and 26,499,669 in 1972_ Fully diluted earnings per commonshare gives effect to the reduction in earnings per sharewhichwould resultfrom the conversion- of all outstanding convertible securities and the exercise of.stock options. Convertible securities were assumed to have been - converted from the beginning of the period and net earnings were adjusted for related interest net of tax. Funds assumed to have been received from exercise of stock options were assumed to have been used to acquire shares for the treasury at the- higher of the averaae market price during the periods or the market price at the close of the neriods. The number of shares of common stock used in this computation was 28,657,892 for 1973 and28,632;716: for 1972. ~ ~ 0 Incentive Compensation Plan: ~ p In accordance with the Company's Incentive Compensation Plan, which was approved by stockholders atthe 1967 annual_ meeting, a provision of $2,200,000 was made against 1973 earnings for awards that.will_bel made to officers and other key- ~~ employees in 1974. A provision of $1,933,000 was made against 1972 earnings. These amounts were less than the maximum I ~ amounts that could be provided under the plan. 0

Provision for Federal and Other Income Taxes: Federal Foreign State and Local Total The 1973 provision includes: Currently payable .......................................:.......- $74,660,000 $13,576,000 $12,381,000 $100,617,000 Deferred 3,839,000 2,521,000 6,360 000 $78,499,000 $16,097,000 $12,381,000 , $106,977,000 The 1972 provision includes: Currently payable ................ ........................... ... $74,716,000 $15,462,000 $10,100,000 $100,278,000 Deferred ...... ................... ................. ............. ........... 285,000 4,605,000 4,890,000 $75,001,000 $20,067,000 $10,100,000 $105,168,000< Reconciliation of the provision for income taxes computed at the federal statutory rate to the reported provision for federal and other income taxes is: 1973 Amount Percent to Pretax Provision computed at 48% of reported pretax earnings ................ .$122,692,000 48.0% Increases (decreases) in the provision resulting from: Inclusion of equity in net earnings of unconsolidated subsidiaries and affiliates in pretax earnings ............................ .. . .(9,696,000) (3.8) Investment tax credit .............. ............... .........,,....._....._.................... _ (4,841,000) (1.9) Foreign income taxed at less than 48 % and not expected to be subject to U.S. tax in the foreseeable future .................. . (6,305,000) (2.5) State and local income taxes, net of federal tax benefit ................ 6,438,000 2.5 Other ........................................... ............ ._........................ ._............. .......... ...... (1,311,000) (.4) Provision as reported ............................................................................ ---$106,977,000 41.9% Additional Informafion: 1972 (5,509,000) (2.4) (2,702,000) (1.2) (1,052,000) (.5) 5,252,000 2.3 (1,045,000) (.4) $105,168,000 45.8% 1973 Working capital at year end .......................... ............... ........................ .................. ............. .. $515,347,000 $524,791,000 Depreciation of plant and equipment .............................. ........ .......... ............... .................. $ 30,245,000 $ 26,576,000 Pension plan expense .......... .......................... .................. ............ •.--................ ...... . _....:......... . $ 14,805,000 $ 10,620,000 Rental expense .................................................. ........ ....................................... .... ................ ......... $ 12,166,000 $ 9,551,000 Report of Independent Certified Public Accountants To the Board of Directors and Stockholders of Philip Morris Incorporated: We have examined the consolidated balance sheet of PHILIP MORRIS INCORPORATED and Consolidated Subsidiaries as of December 31, 1973, and the related consolidated statements of earnings, stockholders' equity and changes in financial position for the year then ended. Our examination was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. We previously examined and reported upon the consolidated financial statements for the year ended December 31, 1972. In our opinion, the financial statements mentioned above present fairly the financial position of Philip Morris Incorporated and- consolidated subsidiaries at December 31-,1973 and 1972 and the results of their operations and the changes in financial position for the years then ended, irrconformity with generally accepted accounting principles applied on a consistent basis. New York, January 29, 1974. Coopers & Lybrand:

Directors and Officers m 5z.

Directors James C. Bowling Vice President Alfred Brittain III President, Bankers Trust Company Andrew C. Britton* George V Comfort President, George Comfort & Sons Company, lnc. John E. Cookman Senior Vice President Dr. J. A. Cordido-Freytes President, C. A. Tabacalera Nacional Hugh Cullman Executive Vice President Joseph F Cullman 3rd Chairman of the Board Richard W. Dammann Dammann & Heming, Attorneys-at-Law Clifford H. Goldsmith Executive Vice President John T. Landry Vice President Edward Lasker Counsel, McKenna, Fitting & Finch, Attorneys-at-Law T. Newman Lawler Lawler, Sterling & Kent, Attorneys-at-Law H. Robert Marschalk President, Richardson-Merrell Inc. Ross R. Millhiser President T Justin Moore, Jr.** President, Virginia Electric & Power Company John A. Murphy Vice President George Weissman Vice Chairman of the Board J. Harvie Wilkinson, Jr. Consultant, United Virginia Bankshares Incorporated Margaret B. Young Chairman, Whitney M. Young, Jr. Memorial Foundation Chandler H. Kibbee Director Emeritus Ray Jones Member, Advisory Board Arthur Snapper Member, Advisory Board "Retired Vice President y'*Newly elected director Officers 7oseph F. Cullman 3rd Chairman of the Board and Chief Executive Officer George Weissman Vice Chairman of the Board Ross R. Miilhiser President Hugh Cullman Executive Vice President and President, Philip Morris International Clifford H. Goldsmith Executive Vice President and President, Philip Morris U.S.A. John E. Cookman Senior Vice President and Chief Financial Officer Thomas E Ahrensfeld Vice President and General Counsel James C. Bowling Vice President, Assistant to the Chairman of the Board and Director, Corporate Affairs C. Gilbert Collingwood Vice President, Finance S. Lyle Graham Vice President, Personnel John T. Landry Vice President and Executive Vice President, Director of Marketing, Philip Morris U.S.A. Jetson E. Lincoln Vice President, Planning Charles F. Lombard Vice President and Vice President, Philip Morris International George W Macon, Jr. Vice President and Vice President-Leaf, Philip Morris U.S.A. Hamish Maxwell Vice President and Executive Vice President, Philip Morris International John A. Murphy Vice President and President and Chief Executive Officer, Miller Brewing Company William J. O'Connor Vice President and Vice President and Chief Administrative Officer, Philip Morris International Philip J. Reilly Vice President and President, Mission Viejo Company Carlos E. Salguero V ice President and Vice President, Philip Morris International Benjamin A. Soyars Vice President and Vice President- Manufacturing, Philip Morris U.S.A. Walter F. Sperber Vice President and Controller Fred M. Stefan Vice President and President, Philip Morris Industrial Ronald H. Thomson Vice President and Executive Vice President, Philip Morris International Dr. Helmut R. R. Wakeham Vice President and Vice President-R & D, Philip Morris U.S.A. Eugene J. T. Flanagan ' Associate General Counsel, Secretary R. William Murray Director of Finance Buford A. Tynes Treasurer George R. Lewis Assistant Treasurer Mary E. Russell Assistant Secretary Robert H. Souther Assistant Controller Robert A. White Assistant Controller Executive Committee J. F Cullman 3rd, Chairman G. V Comfort J. E. Cookman H. Cullman E. Lasker T. N. Lawler R. R. Millhiser G. Weissman J. H. Wilkinson, Jr. Finance Committee J. E. Cookman, Chairman A. Brittain III H. Cullman E. Lasker R. R. Millhiser T J. Moore, Jr. G. Weissman J. H. Wilkinson, Jr. C. H. Kibbee, Ex Officio Audit Committee J. H. Wilkinson, Jr., Chairman A. Brittain III R. W. Dammann E. Lasker H. R. Marschalk Management Committee J. F Cullman 3rd, Chairman T. F Ahrensfeld J. C. Bowling J. E. Cookman H. Cullman C. H. Goldsmith R. R. Millhiser J. A. Murphy P. J. Reilly F M. Stefan G. Weissman Office of the Chairman J. F. Cullman 3rd, Chairman J. E. Cookman H. Cullman R. R. Millhiser G. Weissman I

Nd'"v-Philip Morris Manufacturing Complex in Richmond,Yirginia.

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