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Pictured on the cover is a night view of the main entrance to ihe Phi)ip Morris Operations Center, Richmond, Virginla. Tapestries lining the lobby walls can be seen through the glass doors. Above, Joseph F. Cullman 3rd, chairman of the board and chief executive officer, and Johnny ("Call for Philip Morris") Roventini welcomed employees and their families at dedication ceremonies for the Operations Center, held on October 12, 1974. Mr. Culiman dedicated the Center to all Philip Morris employees. Philip Morris Incorporated, 100 Park Avenue, New York, N.Y. 10017. Transfer Agents: Morgan GuarantyTrust Company of New York, 30 West Broadway, New York, N,Y. 10015; United Virginia Bank, Box 6E, Richmond, Va. 23214. Annual Meeting: April 30, 1975, 3601Commerce Road, Richmond, Va. Financial Highlights: 1 Review of the Year: 2 Philip Morris U.S.A.: 14 Philip Morris International: 16 Miller Brewing Company: 18 Philip Morris Industrial: 20 Mission Viejo Company: 21 Financial Review: 22 Management's Discussion and Analysis of the Summary of Operations: 24 Directors and Officers: 40

Philip Morris Incorporated Annual Report 1974 Financial Highlights 1974 Net Earnings ............ ............. ........ .............. .._........ 175,516 Earnings Per Common Share: Primary ..................................................::...... $3.15 Fully Diluted ................................................. :. 3.07 1973 1972 1971 1970 (dollar amounts except per-share amounts expressed in thousands) $2,602,498 $2,131,224 $1,852,495 $1,509,540 148,632 124,466 101,498 77,498 $2.71 $2.34 $2.01 $1.68 2.61 2.18 1.82 1.43 Dividends Declared Per Common Share ............ _ .775 .674 .631 .605 .525 Percent Increase Over Prior Year: Operating Revenues ........................................ 15.7% 22.1% 15.0% Net Earnings ...... ................... .............. :............ .. 18.1% 19.4% 22.6% Earnings Per Common Share: Primary .......... ........ ..................................... :....- 16.2% 15.8% 16.4% Fully Diluted .....................:............................. _ . 17.6% 19.7% 19.8% Operating Companies Revenues: Philip MorrisU.S.A . ...................................... ._ . $1,502,267 $1,303,629 $1,164,550 Philip Morris International ............................... 887,077 822,907 623,699 Miller Brewing Company (A) ........................ 403,551 275,860 211,262 Philip Morris Industrial .................. .......... ........ _ 155,390 132,126 113,136 Mission Viejo Company (A) ............... ........... - 62,676 67,976 18,577 Consolidated Operating Revenues (A) .... $3,010,961 $2,602,498 $2,131,224 22.7% 32.1% 31.0% 32.8% 19.6% 30.2% 27.3% 19.2% $1,035,178 $ 920,323 517,670 424,800 204,134 78,542 95,513 85,875 $1,852,495 $1,509,540 Operating Companies Income: Philip Morris U.S.A . ........................................ .. $ 286,225 $ 227,282 $ 194,072 $ 166,734 $ 138,051 Philip Morris International .............................. - 94,017 92,150 84,095 66,968 54,167 Miller Brewing Company (B) ........................ . 6,291 (2,371) 228 1,300 4,913 Philip Morris Industrial ..................................... 12,280 8,300 7,735 6,135 6,049 Mission Viejo Company (B) .......................... ... 4,772 4,122 1,331 - - Consolidated Operating Income (B) ........ $ 403,585 $ 329,483 $ 287,461 $ 241,137 $ 203,180 (A) Consolidated operating revenues include operating revenues of the company and all wholly-owned subsidiaries (Miller Brewing Company since August 1,1970, and Mission Viejo Company since September 30, 1972). Operating revenues of Miller Brewing Company for the entire year 1970 were $198,479,000, and operating revenues of Mission Viejo Company for the entire year 1972 were $60,824,000. (B) Consolidated operating income includes the operating income of the company and all wholly-owned subsidiaries (Miller Brewing Company since August 1, 1970, and Mission Viejo Company since September 30, 1972), and the company's equity in the net earnings of unconsolidated subsidiaries (Miller Brewing Company from January 1, 1970 through July 31, 1970). Operating income of Miller Brewing Company for the entire year 1970 was $11,409,000, and operating income of Mission Viejo Company for the entire year 1972 was $5,714,000. Corporate expenses, interest, and items which are not directly attributable to the operating companies are not allocated to them. In the opinion of management, any allocation thereof would be arbitrary and would diminish the accuracy of measurement of their performances. Total Philip Morris tobacco product sales, both within and without the United States, accounted for 77% of consolidated operating revenues in 1974, 79% in 1973, 80% in 1972 and 1971, and 85% in 1970, and 94% of consolidated operating income in 1974, 97% in 1973 and 1972, 101 % in 1971, and 100% in 1970. Sales of beer by Miller Brewing Company accounted for 13% of consolidated operating revenues in 1974, 11 % in 1973, 10% in 1972, 11 % in 1971, and 5% in 1970, and 2% of consolidated operating income in 1974, (1 %) in 1973, 0% in 1972, 1% in 1971, and 2% in 1970. No other class of similar products accounted for as much as 10% of consolidated operating revenues or operating income in any year. ~ O ~ O 3 % 1

Review of the Year We are pleased to report that 1974 was the 21 st consecutive year our company established new records in operating revenues, profits, and earnings per share. Consolidated operating revenues reached $3.0 billion, up 15.7%. Net income was $175.5 million, a gain of 18.1 % over 1973. Fully diluted earnings per share reached $3,07 for an increase of 17.6%. The 1974 results were gratifying in light of the unstable economic, social, and political conditions that prevailed throughout the world. Philip Morris continued to experience strong worldwide demand for its cigarettes as well as significantvolume increases in our Miller Brewing operations. The combined cigarette sales of our company increased to more than 7% of the world cigarette market, which now totals about 3.7 trillion cigarettes. One of our many growing brands, Marlboro, increased its lead as the world's largest- selling cigarette, although it accounted for less than half of our worldwide unit sales. In the U. S. cigarette market, our four major brands continued to show good growth, and Marlboro strengthened its position as the second largest brand. 1974 was the fifth consecutive year in which the U.S. cigarette industry increased unit sales. Total industry volume was approximately 592 billion units, up 2.6% over 1973. Philip Morris's unit sales increased 8.4% last year. In addition to being the fastest-growing cigarette company in the U.S., Philip Morris ranks as the largest and fastest-growing U.S.-based company operating in the worldwide cigarette market. Similarly, Miller Brewing Company in 1974 registered the largest percentage gains in revenues and barrel sales of any major U.S. brewer. Miller's barrel sales increased 31.0% compared with the industry rate of growth of about 5%. Over the last five years, our consolidated operating revenues increased at an average compounded rate of 21.4%. During this period, net income increased at an average annual rate of 24.6%, and fully diluted earnings per share rose 20.7% per year. The increased demand for our cigarettes and beer, our expectations of further growth in both areas, plus the need for greater manufacturing efficiencies, have required continuing a large capital expansion program. Capital expenditures in 1974 amounted to $215.8 million. In 1974, costs of tobacco leaf, paper and packaging, cans, bottles, and agricultural commodities used in brewing all increased significantly. However, we were able to obtain the necessary quality and quantity of materials to meet the growing demand for our products. We are fortunate that the two principal products of our company are cigarettes and beer-relatively low-cost consumer products which provide pleasure, with consumption historically resistant to unsettled economic conditions. As a direct result of this demand situation, Philip Morris has been able to provide steady employment for 38,000 people in the U,S. and around the world. In April, 1974, stockholders of Philip Morris approved a two-for-one common stock split. The annual dividend rate on the common stock was increased from 700 to 800 per share. This was the seventh consecutive year dividends were increased, and 1974 marked the 47th consecutive year that Philip Morris has paid dividends on its common stock. / Philip Morris U.S.A. The continued growth of each of our four major brands-Marlboro, Benson & Hedges 100's, Virginia Slims, and Parliament-enabled our largest operating company to expand its U.S. sales to a record total of 133 billion cigarettes. Operating revenues increased 15.2%; operating income increased 25.9%. Philip Morris U.S.A. maintained its position as the fastest-growing U.S. cigarette manufacturer as our share of the U.S. market rose to 22.5%, up from 21.3% in 1973. Marlboro unit sales were up 9.3%, and its share of the U.S. cigarette market rose from 13.7% in 1973 to 14.6% in 1974. Philip Morris is the leader in the large and growing 100mm segment of the U.S. cigarette market, and Benson & Hedges 100's, the leading 100mm brand, posted an increase of 10.3% in volume. Virginia Slims, another 100mm brand, recorded the largest percentage increase of our four major brands. Marlboro 100's and Parliament 100's also achieved strong unit sales gains. Benson & Hedges 100's Menthol and Virginia Slims Menthol together accounted for 23.4% of the sales in the growing 100mm menthol segment of the U. S. cigarette market. Parliament 100's accounted for more than 26% of total Parliament sales. Much new product activity by Philip Morris U.S.A. has involved the extension of established brands into new variations. In the case of Marlboro, unit sales of line extensions-Marlboro 100's, Marlboro Lights, and Marlboro Menthol-together increased 24.5% in 1974 and accounted for almost 20% of total Marlboro volume in the U. S. Marlboro Lights showed significant growth in 1974. Among low-delivery (high-filtration) brands, Philip Morris is soundly positioned with Marlboro Lights, Parliament, and Benson & Hedges Multifilter. During 1974, we began to realize some of the technological potentials inherent in the design of our new Richmond Operations Center. At year end, this facility was producing at the rate of more than 200 million cigarettes per day-lessthan 40% of its capacitywhen completely equipped in 1977. The timing of this facility has been fortunate for Philip Morris because buildings were completed ahead of schedule, on budget, and before the recent sharp rise in construction costs. For the first time in more than two decades, we have ample space to expand capacity to meet the growing demand for our cigarettes. . The American Safety Razor Division again contributed to corporate profits. Its best-known products are the Flicker ladies' shaver and Personna razors and blades. N cn 0 0 0 N ~ co ir c 2 ir ir P fr u b c 2

Philip Morris International. Our second-largest operating company continued to grow in unit sales, operating revenues, and operating income. Philip Morris International's unit volume in 1974 totaled 141 billion units, a gain of 13.5% over 1973 as compared with estimated worldwide unit growth of 4%. Philip Morris accounted for 4.5% of the total cigarette market outside the U. S. Marlboro sales accounted for about one-third of Philip Morris International unit sales. Operating revenues increased 7.8%; operating income increased 2.0%. In many markets last year, sharply increased costs and generally inadequate and delayed price relief were the primary constraints on the profit margins of Philip Morris International. Prices in many countries are government controlled. In the important Australian and Italian markets,we received much delayed and only partial price relief in late 1974. In addition to the problem of price controls, in some trading blocs translation changes between currencies of countries where products are sold and where they are manufactured also adversely affected profit margins.The problems of price controls, currency fluctuations, and inflation are continuing concerns of management. We now sell more than 175 brands in some 160 countries and territories. Our cigarettes are manufactured by 21 affiliates and 15 licensees. The unique features of, and increasing demand for, our cigarettes, plus our extensive international presence, were instrumental in helping Philip Morris maintain its high volume of cigarette exports from the U. S. Marlboro has great vitality and potential in international markets. There is an increasing worldwide trend toward filter and blended cigarettes. We should benefit from this trend with established international brands like Marlboro, plus strong regional and national brands such as Astor in Venezuela, Belvedere and Mark Ten in Canada, Muratti Ambassador in several European markets, Viscount in Australia, Cavander's in India, and K2 in Pakistan. All of our international regions continued to increase unit sales and operating revenues. Philip Morris International brands now have a market share of 10% or more in over 20 countries. Sales of Philip Morris brands in Western Europe increased at five times the overall industry growth rate. To serve the growing European markets, Philip Morris acquired the Reemtsma cigarette factory in Munich, Germany, expanded its factories in West Berlin and Bergen op Zoom, the Netherlands, and began production of Marlboro in a small London factory. A scientific and technical cooperation agreement with the Soviet Union was signed in March, 1974. We have licensing arrangements in Poland and Yugoslavia, where demand for Marlboro continued strong. In Africa, Philip Morris Nigeria Ltd. was profitable in 1974, after experiencing losses in recent years. In the Latin America/Iberia region, we increased market share in most of our important markets. The completion in 1975 of our new manufacturing plant in Brazil together with Companhia de Fumos Santa Cruz acquired in February, 1975, will provide entry to another large market. In Spain, Tabacalera, S.A., became a partner in our Spanish affiliates, which contract-manufacture Tabacalera brands in the Canary Islands. In Mexico, our affiliate, Cigarerra Nacional, S.A., was merged with La"Tabacalera Mexicana, S.A., giving us a minority participation in what is now the second largest cigarette company in that country. A new factory in Ecuador and increased leaf processing capacity at our facility in Guatemala were completed in 1974. In the Asia/Pacific region, Philip Morris (Australia) Ltd. now holds the largest share of the Australian cigarette market. This affiliate's cigarette manufacturing capacity was expanded and leaf storage capacity was doubled in 1974. Lindeman (Holdings) Ltd. increased its sales and share of the Australian wine market. A new winery in Mildura, New South Wales, was completed during 1974. Significant gains in cigarette market shares were recorded in Indonesia and Pakistan, among other markets in this region. Our licensing agreement in Japan for the Marlboro brand was implemented on a broader basis during 1974. In the Philippines, our licensee, La Suerte Cigar and Cigarette Factory, again set unit volume records in this growing market. In Canada, Benson & Hedges (Canada) Ltd. continued to increase cigarette unit sales, This affiliate sold Formosa Spring Brewery and is devoting all of its resources to our growing tobacco business. Last year, Philip Morris again made a positive contribution to the U.S. balance of payments. Our international manufacturing affiliate and licensee arrangements were established because tariff and other barriers precluded U.S. exports to these markets. However, our affiliates and licensees contribute to the rising demand for U.S.-made cigarettes and components and U.S.-grown tobacco, which provides jobs for thousands of American farm and factory workers. In addition to such important benefits within the U.S., our international operations also benefit host countries. All of our.operations, of course, are conducted in conformity with national interests in each country where we operate. Proposals in the U.S. for increased taxation of international earnings, limitations on flows of technology, and imposition of import quotas could restrict these operations, give rise to retaliatory trade barriers, and ultimately have an adverse effect on U.S. employment and the U.S. balance of payments. Miller Brewing Company. In 1974, Miller Brewing again registered the largest percentage gains in unit volume and operating revenues of all brewers in the U.S. Miller recorded a 31.0% gain in 1974-to 9,066,000 barrels-thus exceeding the 28.8% increase in 1973. Now the fifth largest U. S. brewer with a market share of 6.25%, Miller posted an absolute increase in barrel sales greater than all except the largest brewer in the U.S. Miller's operating revenues increased 46.3%, and operating income was $6,291,000-representing an $8,662,000 turnaround from the $2,371,000 operating loss sustained in 1973. Our extensive program to realign Miller, initiated in 1972, is meeting expectations. The company has begun to tV C.n 0 0 0 H ~ ~ ~ 3

achieve economies of large volume production while increasing the utilization of modern, efficient, and competitive equipment. Strict cost reduction programs were also in effect throughout the operations. The momentum of Miller High Life's growth has permitted a proportionate reduction in marketing costs per barrel. The overall growth of the Miller High Life brand has been accelerated through the success of Miller's 7-ounce "pony pack" bottles. Our new Lite brand-a low calorie, low carbohydrate beer-was successful in its test markets last year and will be introduced nationally in 1975. Also during 1975, Miller expects to assume full U.S. distribution of Lowenbrau, the world-renowned German export beer. A significant portion of the corporate capital expansion program is necessary to accommodate Miller's growth and modernize its facilities. A fourth brewery is being built in Fulton, N.Y. (near Syracuse), which will have an annual capacity of 2 million barrels by the end of 1976. The capacity of our Fort Worth brewery is being expanded from 2 million to 5 million barrels, and a new can plant is also under construction there. New high-speed packaging lines were added in 1974 at the Milwaukee brewery, and a new can plant began operation in Milwaukee in early 1975. By year-end 1976, Miller Brewing will have significantly improved its efficiencies while increasing annual capacity to 15 million barrels. Our long-term strategy for Miller Brewing Company is proceeding on schedule: we had a reorganization in 1972; a sales turnaround in 1973; and in 1974 the sales growth continued and we registered a profit turnaround. Philip Morris Industrial. The Paper, Chemical, and Packaging Groups which comprise Philip Morris Industrial all increased their sales and contributed to corporate profits last year. Industrial's operating revenues ihcreased 17.6%, with the largest gains being registered by the Paper Group. Operating income increased 48.0%. To a degree, the growth in income in 1974 reflected special circumstances. Under U.S. government price control guidelines, Philip Morris Industrial did not receive authorization for price increases until October, 1973. Product demand in 1974 was especially strong in paper and packaging operations, and the combination of improved product mix and more realistic prices helped to improve profits. Due to softening in the textile industry, the profit level of the Chemical Group-a prime supplier of textile chemicals- was below the 1973 level, despite higher sales in 1974. Polymer Europe was merged with the German chemical company acquired in 1973 to form Wikolin Polymer Chemie G.m.b.H. A new $2 million urethane plant was added to its facilities in Bremen, West Germany. Philip Morris Industrial concentrates on selected specialty markets where high technology and quality are the primary criteria. This concentration will enable the company to be more flexible in dealing with some of its markets which show evidence of softening-particularly textiles and paper. Mission Viejo Company. Our community development and homebuilding company recorded good sales in its large Orange County, California, planned commurrity. Sales in its other locations-Denver, Fresno, and Phoenix-were lower, reflecting the industry downturn in those markets. Although Mission Viejo Company's operating revenues declined 7.8%, as fewer homes were sold, operating income increased 15.8%. The income gain was especially significant in view of the very serious problems which faced the industry i n 1974. The company's principal location in Southern California remains a strong housing market, and Mission Viejo California is a rapidly growing community which has achieved a population of over 30,000 in just eight years. Sales remain strong because this community continues to offer the homeowner total value-including not only a home but also a thoroughlywell-rounded living environment. Mission Viejo California provides shopping and recreation centers, parks, a county library, and schools-ranging from pre-school through junior college. The future expansion of the California community will be closely linked to the development of Lake Mission Viejo, scheduled for completion in 1976. Mission Viejo Colorado is another growing community being built in Aurora, a suburb of Denver. This project also offers a wide variety of homes in a planned community. The underlying strength of the Mission Viejo Company became evident in 1974-a period when most housing companies were posting losses or experiencing severe downturns. Cigarette Taxes. Legislation increasing state cigarette excise taxes in the U.S. was enacted in only two states, Arizona and Maine, during 1974. Despite the regressive and discriminatory nature of thistype of tax, and despite increased cigarette bootlegging activity, bills proposing cigarette tax increases were introduced in 17 states last year. The fact that most of these bills did not pass indicates that legislators are becoming aware of the disproportionate burden such taxes place on smokers with lower incomes, as well as of the other problems associated with cigarette taxes. Total U.S. cigarette excise tax revenues in 1974 were $5.8 billion (federal $2.4 billion, state $3.3 billion, and municipal $0.1 billion). On a national average, excise taxes accounted for approximately 45% of the retail price of cigarettes. Sales taxes on cigarettes also pose a discriminatory tax burden on smokers. It is also noteworthy that in the U. S., federal excise taxes on beer account for approximately 10% of the retail price. Internationally, the trend toward increases in already sizable cigarette excise tax rates continues in many markets. 4

Such increases, particularly in a period of economic downtrend, can result in a movement toward consumption of lower-priced,lower-taxed brands. The increases prove to be counter-productive to the taxing authorities and detrimental to the industry. Smoking and Health. Philip Morris, in cooperation with other U.S. cigarette manufacturers, continued its support of medical research in relation to smoking and health through additional contributions to the Council for Tobacco Research -U.S.A. In addition, during 1974, three large-scale U.S. programs of fundamental research on cancer and, respiratory disease were in progress with support by Philip Morris and other manufacturers. Proceeding underthe direction of noted scientists, the programs are established at the Harvard Medical School, Washington University School of Medicine (St. Louis), and the University of California at Los Angeles School of Medicine. The industry's commitments to these special projects total approximately $8 million. A new aspect in the controversy over smoking and health has been the attempt by several anti-smoking groups to create concern overthe alleged effects of cigarette smoke on the non-smoker. Examination of the scientific evidence on this subject by a number of impartial experts indicates no valid basis for any claim that normal exposure to cigarette smoke exerts harmful effects on non-smokers. Nevertheless, the anti-smoking forces have had some success in obtaining the enactment of local laws and regulations limiting cigarette smoking in certain public places. During 1974, the Consumer Product Safety Commission, a U.S. federal agency, denied a petition by several anti-smoking advocates that it limit the "tar" delivery of cigarettes. After examination of the law, the Commission issued a decision that it lacked jurisdiction in this field. A suit has been filed in a federal court by the petitioners against the Commission in an attempt to overturn this decision. The six major U.S. cigarette manufacturers have intervened in support of the Commission. There continues to be debate in scientific circles about the interpretation of the statistical evidence which has been the principal basis forthe assertion that cigarette smoking is a major cause of cancer and other human diseases. During 1974, a prominent British scientist who once accepted the view that most cases of lung cancer were caused by cigarette smoking published an article in a British scientific journal in which he reexamined the data and reversed his original stand. An American professor reported evidence that the tendency of doctors to examine smokers more thoroughly than non-smokers for evidence of lung cancer could explain the seemingly high associa#'+en between smoking and the disease; he suggested a reappraisal of some of the statistical reasoning that has been used to form causal conclusions about smoking. Philip Morris in a Changing Society. As the pace of social change accelerates, the ability to understand and adapt to change takes on more significant dimensions. In this regard, the Public Affairs Committee of our Board is responsible for assessing and anticipating changes in the values, needs, and priorities not only of the general public but also of employees. During 1974, the company formally updated the company's original Corporate Social Responsibility Study, first done in 1970. The update appropriately included a valuable survey of the activities that Philip Morris International's affiliates engage in to be responsive to the needs and aspirations of host countries. It is through such long-range attention to actual and potential social dynamics that our company will continue to maintain its acceptance and profitability in international operations. The Committee's report, in addition to providing an update on specific new activities such as The Career Program Planning Task Force, also offers a useful new perspective on responsible business behavior in a rapidly changing environment. Altogether, the report covers hundreds of developments and programs, both external and internal, ranging from employee benefits, neighborhood renewal, and enhancement of the environment in plant communities to Philip Morris's continuing support of the arts and its contributions in the fields of education and medicine. During 1974, two new members were elected to the Philip Morris Board of Directors-Jacques G. Maisonrouge, chairman and chief executive officer of IBM World Trade Europe/Middle East/Africa Corporation, and Hamish Maxwell, corporate vice president and executive vice president of Philip Morris International in charge of the Asia/Pacific and Canadian regions of Philip Morris International. In closing, we pay special tribute to our employees throughoutthe world fortheir continued outstanding performance in a most challenging year. Respectfully submitted on behalf of the Board of D i rectors, Joseph F. Cullman 3rd Chairman of the Board and Chief Executive Officer George Weissman Vice Chairman of the Board Ross R. Millhiser President 5

R etrospective de 1'annee Nous avons le plaisir d'annoncer qu'en 1974, pour la vingt-et-unieme annee consecutive, notre societe a etabli de nouveaux records en ce qui concerne le chiffre d'affaires, les benefices et les revenus par action. Le chiffre d'affaires consolide a atteint $3,0 milliards, soit une augmentation de 15,7% et le benefice net $175,5 millions, soit un gain de 18,1 % par rapport a 1973. Le rendement par action (en tenant compte des titres convertibles), s'est eleve a$3,07, soit une augmentation de 17,6%. Dans le contexte des conditions economiques, sociales at politiques instables qui ont prevalu dans le monde, lea resultats de 1974 sont encourageants. Philip Morris a continue d'enregistrer une forte demande mondiale pour ses cigarettes at des augmentations de volume importantes pour sea biares Miller. L'ensemble des ventes de cigarettes de notre societe a augment6 pour atteindre plus de 7% du marche mondial qui se monte actuellement a environ 3.700 milliards de cigarettes. Marlboro, une de nos nombreuses marques en progression, a accentue sa position dominante. Elle est Ia cigarette Ia plus vendue dans le monde, bien qu'elle ne compte que pour moins de la moitie de nos ventes unitaires mondiales. Sur le marche americain de la cigarette, nos quatre marques principales ont continue d'enregistrer une forte croissance et Marlboro a renforce as position au deuxiPme rang des marques les plus vendues. En 1974, pour Ia cinquieme annee consecutive, lea ventes unitaires de I'industrie americaine de Ia cigarette ont augmente. Le volume total de I'industrie a atteint environ 592 milliards d'unites, soit une augmentation de 2,6% par rapport a 1973. L'annee derniere, les ventes unitaires de Philip Morris ont augment6 de 8,4%. Philip Morris est, d'une part, la societ8 de I'industrie de Is cigarette enregistrant la croissance la plus rapide aux Etats-Unis, et, d'autre part, la plus importante at celle se developpant Ie plus rapidement des societes domiciliees aux Etats-Unis at operant'sur le marche mondlal de Ia cigarette. De tous les principaux brasseurs des Etats-Unis, Miller Brewing Company est celui qui a enregistre, en pourcentage, la plus forte augmentation aussi bien en ce qui concerne le chiffre d'affaires que le nombre de barils vendus, en 1974. Les ventes de Miller, en barils, ont augment6 de 31,0%, alors que le taux de croissance de l'industrie a ete d'environ 5°10. Durant les cinq dernieres annees notre chiffre d'affaires consolide a augmente, au taux moyen compose, de 21,4%. Pendant cette periode, Is benefice net s'est accru, au taux annual moyen de 24,6%, at Ie rendement par action (en tenant compte des titres convertibles), a augment6 de 20,7 % par an. Le demande croissante de nos cigarettes et de nos bi8res, nos previsions indiquant un developpement de ces deux marches ainsi qua la necessite d'une plus grande efficacite de Ia production, ont commande la poursuite d'un pro- gramme d'investissements important. En 1974, les investis- sements ont totalise 5215,8 millions. En 1974, le tabac brut, Ie papier et les emballages, les boites, les bouteilles at les produits agricoles utilises par les brasseries, ont rencheri considerablement. Toutefois, nous avons pu obtenir lea quantites et la qualite des materiaux necessaires pour repondre a la demande croissante de nos produits. Notre societe beneficie d'un avantage. En effet, sea deux produits principaux-la cigarette et la biere-sont des produits de consommation d'un coOt relativement bas, generateurs de plaisir, et'dont la consommation, par le passe, s'est maintenue dans des periodes d'instabilite economique. Cette situation de la demande a permis a Philip Morris de procurer un emploi regulier a 38.000 personnes aux Etats-Unis at dans le monde. En avril 1974, les actionnaires de Philip Morris ont approuve une distribution de deux actions pour une du capital ordinaire. Le dividende annual sur le capital ordinaire a ete augment6 de 70¢ a 80¢ par action. Pour la septieme annee consecutive, les dividendes ont augmente, et 1974 est la quarante-septieme annee consecutive a l'issue de laquelle Philip Morris a distribue des dividendes aux actions ordinaires. Philip Morris U.S.A. La croissance continue de chacune de nos quatre marques principales-Marlboro, Benson & Hedges 100's, Virginia Slims et Parliament-a permis a notre pltl.s-qrande societe d'exploitation d'accroitre ses ventes aux Etats-Unis pour atteindre un total record de 133 milliards de cigarettes. Le chiffre d'affaires a augment6 de 15,2%, et le revenu d'exploitation de 25,9%. Philip Morris U.S.A. a maintenu sa position de societe americaine de l'industrie de la cigarette enregistrant la croissance Ia plus rapide. Notre part du marche americain s'est elevee a 22,5%, en augmentation par rapport aux 21,3% de 1973. Les ventes unitaires de Marlboro ont augment6 de 9,3% at sa part du marche americain de la cigarette s'est accrue de 13,7 % en 1973 a 14,6% en 1974. Philip Morris occupe Is position dominante dans I'important at croissant segment du marche americain des cigarettes 100 mm et, Benson & Hedges 100's, Ia marque 100 mm la plus vendue, a augment6 ses ventes de 10,3%. Virginia Slims, une autre marque 100 mm, est celle de nos quatre marques principales qui a enregistre le plus fort pourcentage d'augmentation. Marlboro 100's at Parliament 100's ont egalement realise d'importantes augmentations de ventes unitaires. Benson & Hedges 100's Menthol et Virginia Slims Menthol ont obtenu ensemble 23,4% des ventes du segment des 100 millimetres menthol, un segment croissant du marche americain de Is cigarette. Parliament 100's a represente plus de 26% du total des ventes de Parliament. Une grande partie de I'activite de Philip Morris consacree au developpement de nouveaux produits, a consiste a elargir la gamme de marques existantes. Par exemple, lea ventes unitaires resultant de I'extension de Ia gamme Marlboro-Marlboro 100's, Marlboro Lights at Marlboro Menthol-ont augmente, pour I'ensemble, de 24,5% en 1974, at representees presque 20%_du total du volume des ventes de Marlboro. En 1974, Marlboro Lights a enregistre une forte croissance. Avec Marlboro Lights, Parliament at Benson & Hedges Multifilter, Philip Morris est bien represente dans le segment des cigarettes legeres (haute filtration). En 1974, nous avons commence de realiser une partie de Ia potentialite technologique qu'offrait Ia conception de notre nouveau centre de production de Richmond. A Is fin de I'annee, ce centre produisait a une cadence de plus de 200 millions de cigarettes par jour, moins de 40 % de sa capacite finale qui sera atteinte en 1977, iersqu'il sera completement termine. Pour Philip Morris, le programme de construction de ces installations s'est avere judicieux. En effet, les batiments, dont le coOt est reste dans le cadre du budget, etaient termines avant la date prevue, c'est-a-dire avant Ia forte hausse des co0ts de construction intervenue recemment. Pour Is premiere fois en plus de vingt ans, nous disposons de suffisamment d'espace pour augmenter la capacite de production qui nous permettra de repondre a la demande croissante de nos cigarettes. La division American Safety Razor a contribue, a nouveau, aux benefices de la societe. Ses produits les mieux connus sont le rasoir pour dames Flicker, lea rasoirs et les lames Personna. Philip Morris International Deuxieme en importance de nos societes d'exploitation, Philip Morris International a poursuivi sa croissance en ce qui concerne Ies ventes unitaires, le chiffres d'affaires et le benefice d'exploitation. En 1974, Ie volume des ventes de Philip Morris International a totalise 141 milliards d'unites, soit une augmentation de 13,5'/o par rapport a 1973, compare a I'aceroissement estime du marche mondial qui a ete de 4%. Philip Morris a obtenu 4,5% du marche mondial total de Is cigarette en dehors des Etats-Unis at Marlboro a totalise environ un tiers des ventes de Philip Morris International. Le chiffre d'affaires a augmente de 7,8% at le benefice d'exploitation de 2,0%. L'annee derniere, sur plusieurs marches, une forte aug- mentation des co0ts ainsi que des rel8vements de prix, generalement insuffisants et differes, ont ete lea raisons principales de la diminution des marges beneficiaires de Philip Morris International. Dans plusieurs pays, lea prix sont contr3les par Is gouvernement. En Australia et en Italia, deux marches importants, nous avons regu, fin 1974, une augmentation de prix tres, differee et seulement partielle. En plus du probleme inherent au controle des prix, dans certaines zones.economiques, des differences de change entre les monnaies des pays ou les produits sont fabriques at celles des pays ou ils sont vendus, ont egalement influence defavorablement lea marges beneficiaires. Les problemes du contr6le des prix, des fluctuations monetaires at de I'inflatien sont d'un inter@t permanent pour la direction de I'entreprise. Nous vendons actuellement plus de 175 marques dans quelque 160 pays et territoires. Nos cigarettes sont produites par I'intermediaire de 21 filiales et 15 licencies. La demande croissante pour nos cigarettes, leurs particularites, ajoutees a 1'expansion de notre presence internationale, ont ete les facteurs qui ont permis a Philip Morris de maintenir son grand volume d'exportation de cigarettes des Etats-Unis. Marlboro affirme sa grande vitalite et dispose d'un vaste potential sur les marches internationaux. II existe une tendance mondiale croissante pour les cigarettes "filtre" et les cigarettes "blend". Nous devrions beneficier de cette tendance avec nos marques internationales existantes telle qua Marlboro, ainsi que nos marques regionales et nationales telles qua Astor au Venezuela, Belvedere et Mark Ten au Canada, Muratti Ambassador dans plusieurs marches d'Europe, Viscount en Australia, Cavander's en Inde, at K2 au Pakistan. Toutes nos regions administratives internationales ont continue d'augmenter leura ventes unitaires at leur chiffre d'affaires. Les marques de Philip Morris International detiennent actuellement une part du marche de 10%, ou plus, dans quelque 20 pays. En Europe de I'Ouest, les ventes des marques de Philip Morris ont augment6 cinq fois plus rapidement que celles de I'industrie. Pour repondre a la croissance des marches europeens, Philip Morris a acquis Is fabrique de cigarettes de Reemtsma a Munich, en Allemagne, augmente la capacite de ses centres de production de Berlin-Ouest at de Bergen op Zoom, aux Pays-Bas, at commence de produire Marlboro dans une petite fabrique a Londres. En mars 1974, un accord de cooperation technique at scienti- fique a ete signe avec I'Union Sovietique. Nous avons des accords de licences en Pologne et en Yougoslavie ou la demande pour Marlboro continue de s'accroitre fortement. En Afrique, Philip Morris Nigeria Ltd. a realise des benefices en 1974 apres avoir enregistre des pertes au cours des dernieres annees. Dans Is region administrative Amerique latine/Peninsule iberique, nous avons augment6 notre quote-part dans Is plupart de nos principaux marches. En 1975, notre nouveau centre de production au Bresil, ainsi qua Companhia de Fumos Santa Cruz, une societe acquise en fevrier 1975, nous permettront d'entrer sur un autre marche important. En Espagne, Tabacalera, S.A. a pris une participation dans nos filiales espagnoles qui produisent sous contrat les marques de Tabacalera aux Iles Canaries. Au Mexique, notre filiale Cigarerra Nacional, S.A. a fusionne avec Ia Tabacalera Mexicana, S.A. nous donnant une participation minoritaire dans une societe qui est actuellement la seconde de I'industrie de Is cigarette de ce pays. En 1974, nous avons termine la construction d'une nouvelle fabrique an Equateur et augment6 la capacite de production, pour la preparation du tabac, de notre usine du Guatemala. Dans la region administrative Asie/Pacifique, Philip Morris (Australia) Ltd. detient maintenant Ia part principale du marche australien de la cigarette. En 1974, la capacite de production de cette filiale a ete augmentee at Is capacite de stockage du tabac brut doublee. Lindeman (Holdings) Ltd. a augment6 ses ventes at sa part du marche australien des vins. La construction d'une nouve4{e installation vinico_le a Mildura, Nouvelle Galles du Sud, a ete terminee en 1974. Nous avons enregistre d'importan- tes augmentations de notre part du marche de la cigarette an Indonesia at au Pakistan, parmi d'autres marches de cette region. Notre accord de licence pour Marlboro au Japon est devenu effectif, sur une base plus large, en 1974. Aux Philippines, notre licencie, la Suerte Cigar and Cigarette Factory, a une fois de plus, etabt}% nouveaux records de vente sur ce marche en expansion. Au Canada, Benson & Hedges (Canada) Ltd. a continue d'accroitre sea ventes unitaires de cigarettes. Cette filiale a vendu Formosa Spring Brewery afin de consacrer toutes ses ressources a notre branche du tabac, en pleine expansion. L'annee derniere, Philip Morris a, de nouveau, apporte une contribution positive a Ia balance des paiements des Etats-Unis. Notre reseau international de production, c'est- a-dire nos filiales et nos licencies, a ete constitue parce qua des barieres tarifaires at d'autres obstacles empechaient les exportations americaines vers ces marches. Cependant, nos filiales et nos licencies con- tribuent a accroitre la demande pour les cigarettes at leurs composants produits aux Etats-Unis, ainsi qua pour le tabac cultive dans ce pays, fournissant ainsi une occupation a des milliers de fermes at d'ouvriers americains. Outre les avantages considerables qu'elles representent pour les Etats-Unis, nos activites internationales profitent egalement aux pays-fiotes. Bien entendu, toutes nos entreprises sont dirigees en accord avec Ies interets nationaux des pays dans lesquels nous exergons ces activites. Les propositions faites, aux Etats-Unis, pour augmenter la fiscalite sur lea benefices realises a I'etranger, la limitation des echanges technolo'giques, at I'imposition de quotas d'importation, pourraient restreindre ces operations et dresser des barri8res de represailles com- merciales. Ces mesures pourraient avoir a la fin un effet negatif sur le marche de I'emploi aux Etats-Unis at la balance americaine des paiements. Miller Brewing Company En 1974, Miller Brewing a obtenu, a nouveau, le plus fort pourcentage d'augmentation de tous les brasseurs des Etats-Unis, en ce qui concerne le volume des ventes et le chiffre d'affaires. Miller a vendu, en 1974, 9.066.000 barils at enregistre une augmentation de 31,0%, depassant ainsi les 28,8% d'augmentation de 1973. Actuellement au cinquieme rang des brasseurs des Etats-Unis, avec une part du marche de 6,25%, Miller a obtenu une augmentation absolue des ventes en barils plus forte qua celle de tous les autres brasseurs, exception faite de la principale brasserie des Etats-Unis. Le chiffre d'affaires de Miller a augment6 de 46,3% at le benefice d'exploitation a atteint $6.291.000-ce qui represente un revirement de $8.662.000, par rapport au deficit d'exploitation de 52.371.000 supporte an 1973. Notre important programme, entrepris en 1972, pour restructurer Miller, atteint ses objectifs. La societe a commence de realiser lea economies resultant d'un grand volume de production at de l'utilisation d'un equipement moderne, efficace et competitif. Des programmes stricts pour reduire les coGts ont ete appliques a tous les niveaux des operations. Le dynamisme de la croissance de Miller High Life a permis une reduction proportionnelle des co0ts marketing par baril. La progression de Ia marque Miller High Life a ete acceleree par le succPs de Ia bouteille Miller de 7 onces, presentee en "pony pack". Notre nouvelle marque Lite- une biere faible en calories at en hydrate de carbone-a enregistre, des succes dans sea marches tests I'annee derniere; elle sera introduite sur tout Ie territoire national en 1975. D'autre part, en 1975, Miller a I'intention d'assumer la distribution, pour I'ensemble du territoire des Etats-Unis, de Lowenbrau, la biere d'exportation allemande de renommee mondiale. Une partie itnportante du programme d'investissements de la societe est necessaire pour repondre a la croissance de Miller at moderniser sea installations. Une quatrieme brasserie est en construction a Fulton, N. Y., (pres de Syracuse); elle aura une capacite de production annuelle de deux millions de barils a Ia fin de 1976. La capacite de notre brasserie de Fort Worth est actuellement portee de deux millions a cinq millions de barils, at une nouvelle fabrique de boites est egalement en construction a Fort Worth. En 1974, une nouvelle chaine d'emballage "haute vitesse" a ete ajoutee dans la brasserie de Milwaukee, et, depuis Is debut de 1975, une nouvelle fabrique de boites a ete mise en exploitation a Milwaukee. Vera la fin de 1976, Miller Brewing aura ameliore considerablement son efficacite en augmentant sa capacite annuelle a 15 . millions de barils. Notre atrategie a long terme pour Miller Brewing Company se poursuit selon le programme etabli: nous avons eu une reorganisation en 1972; un changement de la tendance des ventes en 1973; at, en 1974, I'augmenta- tion des ventes s'est maintenue et nous avons enregistre des benefices. Philip Morris Industrial Les secteurs Papier, Chimie at Emballage qui font partie de Philip Morris Industrial ont tous accru leurs ventes at contribue I'annee derniere au benefice de Is societe. Le chiffre d'affaires de Philip Morris Industrial a augment6 de 17,6%; la plus forte augmentation etant celle du secteur Papier. Le benefice d'exploitation a augmente de 48,0%. Dans une certaine mesure, I'accroissement du benefice en 1974, reflete des circonstances particulieres. Con- formement aux directives du gouvernement des Etats-Unis en matiere de contrdle des prix, ce n'est qu'en octobre 1973 qua Philip Morris a requ I'autorisation d'augmenter ses prix. La demande dans les secteurs Papier at Emballage a ete particulierement forte en 1974,-at les ~ 6 ` 2500011202

effets combines de I'amelioration de 1'assortiment ainsi En 1974, la "Consumer Product Safety Commission" que des prix mieux adaptes ont permis d'augmenter les (Commission pour le contr6le des produits de consomma- benefices. tion), une commission federale americaine, a oppose une poSymec Europe a fusionne avec (a societe allemande de fin de ncn-recevoir a une petition de plusieurs groupes anti-tabac demandant une li it ti i m a se en 1973, pour former Wikolin on de Ia teneur en produits chimiques, acqu Polymer Chemie G.m.b.H. Une nouvelle fabrique d'urethane, "goudron" des cigarettes. Apres examen de la loi, la Com- n coot de $2 millions, a ete construite pour completer mission a communique sa decision, faisant etat de d' u les installations de Br@me, en Allemagne de I'Ouest. Philip Morris Industrial concentre son activite dans des marches de specialites selectionnes dans lesquels la haute technologie et Ia qualite sont Ies critbres principaux. Cette concentration permettra a Ia soclete une plus grande flexibilite pour s'adapter a certains de ses marches qui montrent des signes de ralentissement, particulierement ceux du textile et du papier. Mission Vie/o Company Notre societe d'urbanisation et de construction d'habita- tions a enregistre des ventes.interessantes dans la communaute planifiee d'Orange County, en Californie. Les ventes, dans les autres sites en construction-Denver, Fresno et Phoenix-, ont ete plus faibles, refletant le flechissement de I'industrie dans ce marche. Bien que le chiffre d'affaires de Mission Viejo Company sit diminue de 7,8%, et que le nombre d'habitations vendues ait flechi, le benefice d'exploitation a augmente de 15,8%. L'augmentation du benefice est particullerement significative a Ia lumiere des problemes tres serieux auxquels I'industrie a do faire face en 1974. Le site principal de la societe, en Californie du Sud, demeure un important marche d'habitations et Mission Viejo California est une communaute se developpant rapidement et qui compte, apr8s huit ans, 30,000 habitants. Les ventes restent fortes parce que cette communaute continue d'offrir au proprietaire une valeur globale, com- prenant non seulement I'habitation, mais encore un . environnement bien conpu. Mission Viejo California offre des possibilites de shopping, des centres de loisirs, des pares, une bibliotheque municipale, des ecoles, allant de I'ecole maternelle a I'ecole moyenne. L'expansion future de la communaute de Californie sera etroitement liee au developpement du lac Mission Viejo, dont I'achevement est prevu en 1976. L'efficacite de I'infrastructure de Mission Viejo s'est concretisee en 1974-une periode durant laquelle Ia plupart des societes immobileres ont enregistre des pertes ou d'importants flechissements. Les Taxes sur les Cigarettes En 1974, aux Etats-Unis, des lois augmentant les imp8ts indirects sur les cigarettes ont ete promulguees dans deux Etats, I'Arizona et le Maine. Malgre la nature regressive at discriminatoire de cette categorie de taxe, et malgre I'augmentation de la contrebande de cigarettes, des profets de loi proposant I'augmentation des taxes sur Ies cigarettes ont.ete deposes dans 17 Etats au cours de I'annee derniere. Le fait que Is plupart de ces lois n'aient pas ete ratifiees, indique que le legislateur est conscient du fardeau disproportionne que de telles taxes font peser sur les fumeurs a faible revenu, ainsi que des autres problemes inherents aux taxes sur les cigarettes. En 1974, pour les Etats-Unis, le montant total des revenus de I'imp0t indirect sur les cigarettes s'est eleve a $5.8 milliards de dollars (taxes federales $2.4 milliards, des Etats $3.3 milliards, communales $0.1 milliard). La moyenne nationale de I'impot indirect sur les cigarettes represente environ 45% du prix de detail des cigarettes. Les taxes de vente sur les cigarettes imposent egalement une charge discrimina- toire aux fumeurs. II est egalement interessant de souligner qu'aux Etats- Unis, les taxes federales indirectes sur la biere representent environ 10% du prix de detaiL Sur le plan international, la tendance a I'augmentation de I'impdt indirect sur les cigarettes, pourtant deja im- portant, se manifeste sur plusieurs marches. De telles augmentations, particulierement dans une periode de recession economique, pourraient provoquer une tendance a consommer des marques de prix inferieurs et a marges fiscales plus basses. Ces augmentations s'avPrent contraires a I'interet des autorites fiscales et desservent ceux de I'industrie. La Tabac et la Sante Philip Morris, en cooperation avec d'autres fabricants de I'industrie americaine de la cigarette, a maintenu son aide a la recherche medicale dans Ie domafne "tabac- sante" parde nouvelles contributions'aV"Council for Tobacco Research-U.S.A." (le Conseil americain pour la recherche sur le tabac). D'autre part, en 1974, trois importants programmes americains de recherches fondamentales sur le cancer et les maladies respiratoires ont ete poursuivis grace au soutien de Phillip Morris et d'autres fabricants. Poursuivis scus la direction d'eminents hommes de science, ces programmes sont realises a la Faculte de Medecine de Harvard, a la Faculte de Medecine de I'Universite Washington (St-Louis), et a Ia Faculte de Medecine de I'Unlversrte de California a Los Angeles. La contribution financiere de I'industrie pour ces projets speciaux s'eleve a$8 millions environ. Un nouvel aspect de la controverse "Sante-Tabac" a consiste dans Ia tentative de plusieurs groupes anti- tabac d'attirer I'attention sur les pretendus effets de la fumee de la cigarette sur les non-fumeurs. Dans ce domaine, I'examen de I'evidence scientifique par des experts impartiaux, n'indique aucune base permettant de pretendre que Is fait d'@tre expose, dans des conditions normales, a Ia fumee de la cigarette exerce des effets nocifs sur les non-fumeurs. Neanmoins, les milieux anti-tabac ont enregistre quelques succes. obtenant la promulgation de lois et de reglements locaux restreignant Is liberte de fumer la cigarette dans certains Ileux publics. son Incompetence en la matiere. Les petitionnaires ont intente un proces a la Commission, devant un tribunal federal, pour recourir contre cette decision. Les six principaux fabricants de cigarettes des Etats-Unis sont intervenus pour appuyer la Commission. II continue d'y avoir debat dans lea milieux scientifiques au sujet de I'interpretation de I'evidence statistique qui a ete I'origine principale pour affirmer que la fumee de Is cigarette etait une des causes majeures du cancer at d'autres maladies de I'homme. En 1974, un eminent scientifique britanique qui, auparavant, avait accepte opinion selon Iaquelle la plupart des cas de cancer du poumon avait pour cause la fumee de Is cigarette, a publie un article dans un journal scientifique britanique. Dans cet article, ii reexamine les donnees et prend une position opposee a celle qu'il avait auparavant. Un professeur americain a presente un rapport demontrant que Ia tendance des medecins a examiner les fumeurs plus attentivement qua les non-fumeurs afin de detecter Ie cancer du poumon pourrait expliquer Ia forte correla- tion entre la fumee et la maladie. II suggere de recon- siderer quelques-uns des raisonnements statistiques avances jusqu'ici pour etablir une relation causale entre la fumee et la sante. Philip Morris dans une societe en evolution Alors qua Is mouvement de I'evolution sociale s'accelere, la capacite de comprendre et de s'adapter aux change- ments prend des dimensions toujours plus importantes. Dans cette optique, le "Comite•charge des Affaires publiques" de notre Conseil d'administration a la responsabilite d'evaluer et d'antfciper I'evolution des valeurs, des besoins at des priorites, non seulement pour le public en general mais egalement pour les employes. En 1974, la societe a mis a jour I' "Etude sur la respon- sabifite sociale de I'entreprise", qui avait ete faite, pour la premiere fois, en 1970. La nouvelle etude contient un inventaire utile des activites entreprises par les filiaies de Philip Morris International pour repondre aux besoins at aspirations des pays-hotes. C'est par ce genre d'analyse a long terme de Ia dynamique sociale, reelle et potentielle, que notre societe continuera de recevoir un accueil favorable et d'@tre profitable sur le plan international. Le rapport du "Comite" fournit une mise a jour de nouvelles activites specifiques telle que celle du Groupe de Travail charge du "Programme planifie des carri8res professionnelles". Ce'rapport contient en outre une nouvelle et utile etude perspective sur les comportements responsables tace a la dynamique de I'entreprise dans un environnement en permanente evolution. Le rapport comprend une centaine d'etudes et de programmes externes et internes, s'etendant par exemple, sur les avantages sociaux pour les employes, Ia restaura- tion at I'amelioration de I'environnement situe aux alentours du lieu de travail, ainsi que I'aide permanente que Philip Morris apporte aux arts at ses contributions dans le domaine de I'enseignement at de la medecine. En 1974, deux nouveaux membres ont ete elus au Conseil d'administration de Philip Morris-Jacques G. Maisonrouge, president du Conseil d'administration et Chief Executive Officer de IBM World Trade Europe/Middle East/Africa Corporation, et Hamish Maxwell, corporate vice-president et vice-president executif de Philip Morris,International, responsable des regions administratives Asie/Pacifique et Canada. Pour terminer, nous aimerions rendre hommage a tous nos employes, dans le monde entier, pour lea brillants resultats qu'ils ont obtenus au cours d'une annee particulierement exigeante. Revista del ano Nos es grato participar que el 1974 viene a ser el vigesimo primer ano consecutivo que nue'stra compaMa ha marcado nuevos fecords en ingreso bruto operacional, ganancias y utilidades por acci6n. El ingreso bruto operacional con- solidado alcanz6 la cifra de $3.000 millones, un aumento del 15,7%. Las ganancias netas asoendieron a$175,5 millones qua representan un aumento del 18,1% en comparaci6n con el 1973. Las utilidades por acci6n, incluyendo bonos convertibles, fueron de $3,07 que significa aumento de 17,6%. Los resultados del arjo 1974 fueron satisfactorios en vista de las inestables condiciones econ6micas, sociales y polfticas qua reinan por todo el mundo. Philip Morris continua gozando de una fuerte demanda mundial para nuestros cigarnllos, asf como tambien de significativos aumentos en el volumen de ventas de nuestra cerveza Miller. Las ventas globales de cigarrillos de nuestra companfa representan miis del 7% de mercado mundial de cigarrillos, que actualmente asciende a unos 3,7billones de cigarrillos. Una de nuestras numerosas marcas en gran crecimiento, Marlboro, aument6 su primacfa como ei cigarrillo de mayor vents; y no obstante, representa menos del 50'/c de nuestras ventas unitarias mundiales. En el mercado estadounidense de cigarrillos, nuestras cuatro marcas principales continuaron su crecimiento y Marlboro robusteci6 su posici6n como la segunda marca de mas venta. El 1974 ha sido el quinto ano consecutivo en qua la industria de cigarrillos en EUA viene aumentando sus ventas unitarias. El volumen unitario total de Ia industria fue de approximadamente 592 mil millones de cigarillos, o sea un aumento del 2,6% en comparaci6n con el ano 1973. Las ventas unitarias de Philip Morris aumentaron en 8,4% el ano pasado. Ademas de ser la compania de cigarrillos de mas rapido crecimiento en Estados Unidos, Philip Morris se destaca como la empresa estadounidense de mas rapido creci- miento y envergadura que actGa en el mercado mundial de cigarrillos, Por su parts, Miller Brewing Company alcanzb en 1974 Ios mayores porcentajes de ingresos y de aumentos de ventas de barriles de los principales cerveceros estadounidenses. Las ventas de barriles de Miller aumentaron el 31,0%, en comparaci6n con el porcentaje de desarrollo de Is industria, qua fue de aproximadamente el 5,0%. Nuestro ingreso bruto operacional ha venido aumentando a una tasa promedio compuesta de 21,4% a lo largo de los tiltimos cinco anos. Durante•ese mismo lustro las ganancias netas aumentaron a un ritmo promedio anual del 24,6%, y las utilidades por acci6n, incluyendo bonos convertibles, se elevaron a raz6n deI'20,7% por aho. La creciente demands por nuestros cigarrilios y nuestra cerveza, nuestras expectativas de alcanzar nuevas metas en ambos productos mas la necesidad de nuevas eficiencias de produccion han hecho necesario continua el programa de gran expansion de capital. Es asf que las erogaciones capitalizables en el ano alcanzaron la cifra de $215,8 millones. En 1974 aumentaron significativamente los costos del tabaco en rams, del papel y envases, de las Iatas, botellas y productos agrfcolas de cerveceria. Gracias a energicos esfuerzos de adquisicion, nos fue posible obtener las cantidades y calidades de materias primas y materiales para satisfacer la creciente demands de nuestros productos. Tenemos la suerte de qua los dos productos principales de nuestra compania son el tabaco y la cerveza, ambos de relativamente bajo costo, consumibles, que dan gusto, y cuyo consumo hist6ricamente no ha sido adversamente afectado por situaciones econ6micas inestables. Como resultado directo de esta situacion de demanda, Philip Morris ha logrado proporcionar empleo continua a sus 38.000 empleados, en Estados Unidos y alrededor del mundo. En abril de 1974, los accionistas de Philip Morris aprobaron el fraccionamiento de las acciones ordinarias a raz6n de dos por una. El dividendo sobre las acciones ordinarias fue aumentado a 800 en vez de 70, por acci6n. Este ha sido el septimo ano consecutivo de aumentos de los dividendos, y el 1974 marca el 47° ano consecutivo que Philip Morris ha pagado dividendos sobre sus acciones ordinarias. Philip Morris U.S.A. El continua crecimiento de nuestras cuatro marcas princi- pales-Marlboro, Benson & Hedges 100's, Virginia Slims y Parliament-le hizo posible a nuestra mayor compai'iia de operaciones, el ampliar sus ventas an Estados Unidos y alcanzar la cifra total record de 133 millares de millones de cigarrillos. El ingreso bruto operacional aument6 en 15,2%; las ganancias operacionales aumentaron 25,9%. Philip Morris U.S.A. mantuvo su rango como el fabricante de cigarrillos de Estados Unidos de mas r3pido creci- miento, pues nuestra participacibn en el mercado estado- unidense ascendi6 a 22,5%, en comparaci6n con el 21,3% en 1973. Las ventas unitarias de Marlboro aumentaron el 9.3'/0- y su partioipaci6n in el mercado estadounidense aument6 de 13,7% en 1973 al 14,6% in 1974. Philip Morris va a la cabeza en el considerable y creciente segmento de los 100mm del mercado estadounidense de cigarrillos, y Benson & Hedges 100's, la marca de mas venta en la clase 100mm, registr6 un aumento de 10,3% en volumen. Virginia Slims, otra marca nuestra de 100mm, registr6 ef mayor porcentaje de aumento entre las cuatro marcas principales. Marlboro 100 y Parliament 100 tambien alcanzaron ventas unitarias m3s altas. Benson & Hedges 100's Menthol y Virginia Slims Menthol representan en conjunto el 23,4% de las ventas en el segmento rApidamente creciente de los cigarrillos mentolados de 100mm del mercado estadounidense. Los Parliament 100 representaron mas del 26% de las ventas totales de esta marca. Una gran proporci6n de la actividad de Philip Morris U.S.A. dedicada a productos nuevos ha sido dirigida hacia la extensi6n de las marcas establecidas mediante la introducci6n de variaciones nuevas. Par ejemplo, las extensiones del rengl6n Marlboro-Marlboro 100, Marlboro Lights y Marlboro Menthol-en conjunto aumentaron cerca del 24,5% en 1974, Io cual representa casi 20% del volumen total de Marlboro en los EUA. Los Marlboro Lights, registraron aumentos significativos de ventas durante 1974. En el segmento de marcas de baja emisi6n de "brea" (alta fiitraci6n) Philip Morris se encuentra bien representado con: Marlboro Lights, Parfiamenty Benson & Hedges Multifilter. Durante ei 1974 comenzamos a aprovechar el potenciaf tecnol6gico inherente en el diseno del nuevo Centro de Operaciones de Richmond. A finales del ano este centro producia mas de 200 millones de cigarillos por dia, menos del 40% de su capacidad final cuando quede completamente equipado en 1977. La planificacidn cronol6gica de esta fAbrica ha sido muy afortunada para Philip Morris, porque los edificios quedaron terminados antes de lo previsto en el programa de trabajos, dentro del presupuesto, y antes de que los costos de construccion se elevaran en forma tan extraordinaria. Por primers vez, en mas de dos decadas, contamos con amplio espacio para expandir la capacidad de producci6n y hacer frente a la creciente demanda de nuestros cigarrillos. La Divisi6n American Safety Razor ha contribuido nueva- mente a las utilidades de la empresa. Sus productos mejor conocidos son la maquinilla de rasurar Flicker, para damas, y las maquinillas y cuchillas Personna. Philip Morris International Nuestra segunda compania de operaciones en orden de importancia, continu6 aumentando en sus ventas unitarias, en ingreso bruto operacional y en las ganancias opera- cionales. El volumen unitario de ventas de Philip Morris z500011>J0J

International se elev6 a un total de 141 millares de milrones de unidades, o sea un aumento de 13,5% en oomparaci6n con el 1973, y contrasta con el 4% de crecimiento estfmado del mercado global de cigarri!(os. APhitip Morris le corresponde el 4,5% del mercado total de cigarrillos fuera de los EUA. Las ventas de Marlboro representaron aproximadamente un tercio de las ventas unitarias de Philip Morris International. El ingreso bruto operacional aument6 en 7,8%; las ganancias operacionales aumentaron en 2%. Los pronunciados aumentos en los costos y los alivios, generalmente tardios a inadecuados de los precios, en muchos mercados durante el ano pasado, fueron los principales factores que afectaron los margenes de ganancia de Philip Morris International. Los precios en muchos paises se encuentran bajo control gubernamental. A fines de 1974, recibimos alivios de precies, tardios e insuficientes, en los importantes mercados de Australia e Italia. Adem3s del problems de precios controlados, en afgunas zonas comerclafes, diferencias en los cambios mone- tarios del lugar donde se produce la mercaderfa al lugar donde se vende, ha tenido un efecto negativo en los margenes de utilidades. Los problemas de controles de precios, pariedad mone- taria y la intlaci6n se mantienen en primer pfano en la mente de la administracl6n. Vendemos en la actualidad m3s de 175 marcas en unos 150 paises y terntor,os. Nuestros cigarrillos son e!aborados por 21 ahliadas y t5 concesionanas de licencia. Estas extraordinanas caracter,st cas y!a creciente demanda por nuestros cigarrillos. rnas nuestra prominente y eztensa presencia en esos mercados, nan contribuido a que Philip Morris mantenga su alto volumen de exportaci6n de cigarril!os de los Estados Umdos. Marlboro posee una enorme viralidad y grandes perspec- tivas potencia!es en los mercados de todo ei mundo. Hay una creaente tendencia hacia los cigarrillos de filtro y"mezcta americana". Nos hallamos en excelentes condiciones para satisfacer las tendencias con marcas bien estab!ecidas Internacionalmente, como la Marlboro, mAS marcas de prestigio regionales y nacionales como Astor en Venezuela, Belvedere y Mark Ten en el Canad3, Muratti Ambassador en varios mercados europeos, Viscount en Australia. Cavanders en La India y K-2 en Pakistsn. Todas nuestras cuatro regiones internacionales continua- ron sus aumentos en ventas unitarias y en ingresos bruto operaciona!es. Philip Morris International goza hoy en dfa de un 10% o mSs del mercado de cigarrillos en unos 20 paises por todo el mundo. Las ventas de las marcas de Philip Morris en Europa occidentaf aumentaron al quintuple del ritmo de aumento de la industria en general. Para satisfacer la creciente demanda de los mercados europeos, Philip Morris adquiri6 la f6brica de cigarrillos Reemtsma en Munich, Alemania, ampli6 sus fabricas en Berlin Occidental y Bergen op Zoom, Holanda, y comenz6 la producci6n de Marlboro en una pequer5a fSbrica en Londres. En marzo de 1974 fimamos un convenio de cooperaci6n cientifica y t6cnica con la Uni6n SoviBtica. Tenemos arreglos de concesi6n de licencia en Polonia y Yugoslavia, donde la demanda de cigarrillos Marlboro continila muy vigorosa. En Africa, Philip Morris Nigeria Ltd. fue lucrative en 1974, despues de haber experimentado perdidas en ar5os recientes. En la regi6n America Latina/Iberia, aumentamos nuestra participaci6n en la mayoria de nuestros mercados importantes. La terminaci6n en 1975 de nuestra nueva fabrica en Brasil conjuntamente con la Companhia de Fumos Santa Cruz, adquirida en febrero de 1975, nos proporcionar6 acceso a otro mercado de grandes dimensiones. En Esparia, la Tabacalera, S.A. se constituy6 en socia de nuestra filial espanola, la cual elebora bajo contrato las marcas de la Tabacalera en nuestra f3brica de las Islas Canarias. En Mexico, nuestra filial Cigarrera Nacional, S.A. se incorpor6 a la Tabacalera Mexicana S.A. d3ndonos una participaci6n minoritaria en lo que es actualmente Is segunda empresa tabacalera en ese pais, en orden de importancia. Se han completado una nueva fabrica en el Ecuador e instalaciones para incrementarIa capacidad de proceso de hoja en nuestra fabrica de Guatemala, durante 1974. En la regi6n Asia/Pacffico, Philip Morris (Australia) Ltd. goza actualmente de la participacl6n mayor del inercado de cigarrillos de Australia. La capacidad elaboradora de esta febrica ha sido aumentada y el e$p-acio de almacenamiento de hoja $e ha aumentado al doble en 1974. Lindeman Holding, Ltd. aument6 sus ventas y participaci6n en el mercado australiano de vinos. Durante el 1974 se termin6 una nueva instalaci6n vinfcola en Mildure, Nueva Gales del Sur. Entre otros mercados de cigarrillos en esta regi6n, se han registrado aumentos significatfvos en nuestra participaci6n en los mercados de Indonesia y Pakistan. Nuestros convenio de licencia concesionaria en el Jap6n, de la marca Marlboro, fue puesto en efecto en base mes amplia durante el 1974. En Filipinas, La Suerte Cigar & Cigarette Factory, nuestra concesionaria de licencia, otra vez impuso nuevo topes de ventas unitarias en este creciente mercado. En el Canad3 continuamos aumentando nuestra partici- paci6n en el mercado de cigarrillos, Benson & Hedges (Canada) Ltd. vendi6 la cervecerfa Formosa Spring Brewery con objeto de dedicar todos sus recursos a nuestro creciente negocio tabacalero. El ano pasado, Philip Morris hizo de nuevo una contribu- ci6n positive a la balanza de pagos do los Estados Unidos. Nuestras filiaies internacionales y convenios de licencias concesionarias en el extranjero fueron estable- cidos por motivo de que las tarifas y otros obstbculos impedian las exportaciones de los Estados Unidos a esos mercados. Nuestras filiales y concesionarias contribuyen a•la creciente demanda de cigarriilos hechos en Estados Unidos, y componentes, asf como tabaco cultivado en Estados Unidos, todo lo cual slgnifica empleos para millares de trabajadores agricoias y obreros de fabricas en los Estados Unidos. Ademas de rendir beneficios tan importantes dentro de los EUA nustras operaciones internacionale tambien benefician a los paises donde operan. Nuestras operaciones internacionales se realizan de acuerdo con los intereses nacionales de cada pais donde actuan. Las propuestas en Estados Unidos orientadas al aumento de impuestos sobre las utilidades internacionales, limitaci6n en el flujo de tecnologia hacia el exterior, y la imposici6n de cuotas de importaci6n, podrian restringir dichas operaciones, dar motivo a represalias y obstaculos comerciales, y finalmente tendrian un efecto adverso sobre empleos en Estados Unidos y la balanza de pagos de este pafs. Miller Brewing Company De nuevo, en 1974, Miller Brewing registr6 los mAs elevados porcentajes de aumento en volumen de ventas unitarias entre todas las cervecerias de Estados Unidos. Sobre-pasando el aumento del 28,8% en ventas de barriles en 1973, Miller vendi6 9.066.000 barriles, un aumento del 31,01Yo en 1974. Miller ocupa actualmente el quinto lugar entre las cervecerfas de Estados Unidos, con una participaci6n del 6,25% del mercado, registr6 un aumento absoluto en ventas de barriles mucho mayor que todas las demAs cervecerias de Estados Unidos, excepto la que ocupa ef primer lugar. El ingreso bruto operacional aument6 en 46,3 % y Is ganancias operacionales ascendieron a $6.291.000 lo cual representa un cambio de situaci6n de $8.662.000 con respecto a Is perdida operacional de $2.371.000 sostenida en 1973. Nu stro extenso programa de realineaci6n de Miller, e El ingreso operacional de la Mission Viejo Company disminuy6 en 7.8%, aunque se vendieron menos viviendas, las ganacias operacionales aumentaron en 15.8%. La cifra mayor de utilidades fue particularmente significativa en un ano de serios problemas en la industria durante 1974. La regiBn principal de la compania en la California del Sur contintia ofreciendo un vigoroso mercado de viviendas, y Mission Viejo California es una comunidada en rdpido desarrollo que he alcanzado una poblaci6n de mbs de 30.000 residentes en apenas ocho anos. Las ventas continuan fuertes porque esta comunidad ofrece muchas ventajas al propietario de vivienda, pues no s61o le proporciona un hogar sino tambien todo un ambiente de vida c6moda y agradable. Mission Viejo California pro- porciona las comodidades de centros comerciales, centros de recreo, parques, una bibiioteca de condado, Y escuelas -desde pre-primaria hasta inclusive los dos primeros ahos universitarios. La expansi6n futura de nuestra comunidad de California se vincularb fntimamente con Ia urbanizaci6n del lago Mission Viejo, que est6 programada para terminaci6n en 1976. El vigor intrinseco de Mission Viejo Company se hizo patente en 1974, en una epdca en que la mayorfa de las empresas urbanizadoras constructoras estaban sufriendo perdidas o, por lo menos, serias bajas en el negocio. Impuestos sobre los cigarrillos Durante el aho 1974, en Estados Unidos sofamente dos Estados, Arizona y Maine legislaron un aumento de impuesto estatal sobre la venta de cigarrillos. A pesar de la fndole regresiva y discriminatoria de este tipo de impuesto, y a pesar del aumento en el trdfico de cigarrillos de contrabando, se Introdujeron proyectos de leyes dies~ siete estados elsa"no pasadotos sobre cigarrillos en emprendido en 1972, estA dando los resultados perse- El hecho de que la mayoria de estos propuestas de leyes guidos. La empresa ha comenzado a realizar economies no fueron aprobadaa indica que los legisladores se est3n de producci6n en gran volumen al mismo tiempo que ha dando cuenta de la desproporcionada carga que esos intensificado la utilizaci6n de equipo moderno, mds efectivo impuestos significan para los fumadores de las clases y competitivo. Tambien se instituyeron estrictos programas econ6mlcas inferlores, asi como de 0tros problemas que de reducci6n de costos a traves de todas las operaciones. acompailan a los impuestos sobre cigarrillos. Las cifras El impu!so y desarrollo do la cerveza Miller High Life totales de impuestos sobre la venta de cigarrillos en 1974 han hecho posible una reducci6n proporcional en los se elevaron a$5.800.000.000, (impuesto federal, costos de distribuci6n y venta por barril. $2.400.000.000, impuesto estatai $3.300.000.000 e El desarrollo global de ventas de la marca High Life de impuesto municipal, $100.000.000). Como promedio Miller se ha visto acelerado en virtud del exito logrado- nacional, los impuestos representan aproximadamente ef por Miller con sus botellas de 7 onzas Ilamadas "pony 45% del precio al menudeo de los cigarrillos. Los packs." Nuestra nueva marca Lite-cerveza de bajas impuestos sobre la venta al detalle tambirsn constituyen calories, y contenido mbs bajo de hidrato de carbono- un gravamen discriminatorio contra los fumadores. tuvo exito en los mercados donde se ensay6 el ano pasado Cabe tambi8n senalar que los impuestos federales en y se proyecta lanzarla al mercado nacional en 1975. Estados Unidos sobre la cerveza representan aproximada- Durante el 1975 Miller espera tambien hacerse cargo de mente el 10% del precio de venta al menudeo. toda la distribuci6n en Estados Unidos de la mundial- mente famosa cerveza alemana Lowenbrau. Internacionalmente, la tendencia hacia aumentos de los Se necesita una porci6n significativa del programa de impuestos internos sobre la vents de cigarrillos contin6a expansf6n de capital corporativo para dar campo al en numerosos mercados. Tales aumentos, sobre todo crecimiento de Miller y modernizer sus instalaciones. en tiempos de descenso econ6mico, pueden conducir, Actualmente se construye en Fulton, Nueva York (cerca por lo menos temporalmente, un movimiento hacia el de Syracuse) la cuarta cervecerfa que contar3 con una consumo de marcas mbs econ6micas que acarrean capacidad de 2 millones de barriles para fines del 1976. impuestos menores. El resultado de tales aumentos de La capacidad de nuestra cervecerfa de Fort Worth est3 impuestos es contraproducente, para la industria y en vias de expansi6n de sus 2 millones de barrilles actuafes tambien para los respectivos fiscos. a 5 millones. Af mismo tiempo, se esta construyendo alla El fumar y la salud una nueva fabrica de latas. En la cerveceria de Milwaukee se anadieron en 1974 nuevas lineas de envase de alta velocidad, y en 1975 comenzarA a funcionar en Milwaukee una nueva fabrica de latas. Para fines del 1976, Miller Brewing habr3 aumentado su capacidad de operaci6n significatfvamente, al mismo tiempo que aumentara su capacidad anual a 15 millones de barrifes. Nuestra estrategia a largo plazo con respecto a Miller Brewing Company se va desarrollando de acuerdo con el programa cronol6gico trazado; tuvimos una reorganiza- ci6n en 1972; un cambio de situaci6n en materia de ventas en 1973; y en 1974 eI desarrollo de ventas con- tinu6 y logramos tambien un cambio de situaci6n en materia de utifidades. Philip Morris Industrial Los Grupos-Papel, Productos Qufmicos, y Envases-que integran a Philip Morris Industrial, todos incrementaron sus respectivas ventas y contribuyeron a las utifidades corporativas el a!io pasado. El ingreso bruto operacional do Philip Morris Industrial aument6 en 17,6%, y fue en el Grupo Papel en el que se registr6 el incremento mayor. Las ganancias operacionales aumentaron en 48%. Hasta cferto punto, el aumento en utilidades en 1974 reflej6 circunstancias de car3cter especial. De conformi- dad con los controles de precios del gobierno de Estados Unidos, Philip Morris Industrial no recibi6 autorizaci6n para aumentar sus precios sino hasta octubre del 1973. La demanda de productos en 1974 fue particufarmente vigorosa en los ramos de papel y de envase, y la com- binaci6n de mejor diversidad de productos y precios mbs favorables contribuy6 decididamente a realizar las utilidades. Polymer Europe se uni6 a la empresa qufmica alemana adquirida en 1973, formando asf la Wikolin Polymer Chemie G.m.b.H. A sus instalaciones en Bremen, Alemania Occidental, se ha anadido una nueva fAbrica de uretano, a un costo de $2.000.000. Philip Morris Industrial se concentra en mercados de especlalldades seleccionadas, donde aftos grados de tecnologfa y calidad son criterios primarios. Esta concen- traci6n permite a la companfa mas flexibilidad en hacer frente a algunos mercados que muestram debilidades, en particular, textiles y papet. Mission Viejo Company Nuestra compat'ifa de urbanizaci6n y construcci6n de viviendas registr6 buenas ventas en su extensa urbaniza- ci6n planeada en Orange County, California. Las ventas en sus otras urbanizaciones en Denver, Fresno y Phoenix fueron mes bajas, lo cual refleja la cafda de la industrla constructora en esos mercados. Phlllp Morrls, en colaboracl6n con otros fabrlcantes de cigarrillos en Estados Unidos, continu6 su apoyo a las investigaciones medicas con respecto al fumar y a la salud mediante conttibuciones adicionales al "Council for Tobacco Research-U.S.A. Consejo de Investigaci6n sobre Tabaco de E.U.A. Adem6s, durante el 1974, iban en marcha tres programas estadounidenses en gran escala dedicados a investigaci6n fundamental sobre cancer y enfermedades respiratorias, tambien con el apoyo de Philip Morris y otros fabricantes. Emprendidos bajo la direcci6n de destacados cientificos, los programas se desarrollan en la Escuela de Medicina de Harvard, La Escuela de Medicina de la Universidad Washington (St. Louis), y en la Escuela de Medicina de Ia Universi- . dad de California en Los Angeles. El compromiso de la industria tabacalera destinado a estos tres programas asciende a un total de cerca de $8.000.000. Un nuevo aspecto en Ia controversia acerca del fumar y la salud radica en las tentativas de varios grupos ene- migos del tabaco de atraer la atencidn con respecto a los alegados efectos del humo de cigarrillos sobre las personas no fumadoras. El analisis de la evidencia cientifica sobre la materia, por varios expertos imparciales, indica qua no existe fundamento para las alegaciones de que el humo de cigarrillos ejerce efectos perjudiciales sobre Ios no fumadores. A poser de todo esto, las fuerzas anti-tabaco han alcanzado ciertos exitos en conseguir Ia promulgaci6n de leyes y reglamentos locales que limitan el fumar cigarrillos en determinados lugares publicos. - Durante ef1974,1a agenciafederal estadounldense "Consumer Product Safety Commission" (Comisi6n do Seguridad de Productos de Consumo), rehus6 dar curso a una solicitud por parte de varios grupos contra el fumar, para que limitara la emisi6n de "brea" de los cigarrillos. Luego de examinar Ia Iey, la Comisi6n resofvi6 que carecfa de jurlsdicci6n en la materia. Los grupos mencionados han presentado una demanda ante los Tribunales Federales contra la Comisi6n, en una tentativa para revocar dicha decisi6n. Los seis principales fabricantes de cigarrillos en Estados Unidos han intervenido en apoyo de Ia Comisi6n. En el ambiente cientifico continua el debate sobre las interpretaciones de las pruebas estadisticas sobre las cuales se han basado las afirmaciones que el humo de cigarrillos es una de las causas principales del cancer 4 y otras enfermedades humanas, En 1974, un distinguido clentifico ingfes quien en una 6poca acceptaba la opini6n de que la mayoria de los cAnceres pulmonares eran causa- ~. dos por fumar cigarrillos, ha publfcado un articulo en una (: revista cientifica inglesa, en el cual re-examin6 los datos y Ileg6 a la conclusion opuesta. Un profesor norteameri- cano he presentado evidencias que Ia tendencias de los medicos de examinar a los fumadores mas extensamente J V t, 2500011204 8

s a- qua a los no-fumadores en relaci6n con canceres pulmores, puede explwar la aparentemente frecuente correlacion entre el fumar y la enfermedad; EI profesor sugiere una re-evafuaci6n de /os razonamientos estadisticos que han sido usa po entre n el fum ar ey Ia salu una relaci6n de causa efec y Philip Morris frente a/os cambios sociales A medida que va acelerandose el ritmo de cambios sociol6gicos, la habilidad de comprender y adoptarse a ellos adquiere dimensiones mds significativas. A este respecto, el Comite de Asuntos Publicos de nuestra Junta Directrva es ef encargado de valorar y anticipar mutaciones en los valores, requisitos y prioridades, no solo en lo relativo al publico en general sino tambien con respecto a los empleados. Durante el 1974, dicho Comite orden6 que se actualizara formalmente eI Estudio de Responsabilidad Social Corporativa originalmente formulado para la compania en 1970. Para realizar debidamente dicha actualizaci6n habia que incluir un estudio de gran importancia respecto a las actividades que Ilevan a cabo las filiales de Philip Morris International para responder responsablemente a las aspiraciones y necesidades de los respectivos parses donde actuan. Es en virtud de estas preecupaciones de argo alcance acerca de la dinamica de cambios sociales, tanto reales como potenciates, que nuestra companfa , continuard manteniendo su buena acogida, y rentabilidad en sus operaciones internacionales. El informe del Comite, ademas de proporcionar una actualizeci6n sobre nuevas actividades especificas, tales como "The Career Program Planning Task Force" (Grupo Especial de Planeamiento de Programs Profesional), tambien ofrece una nueva y util perspective respecto a comportamiento diecreto y razonabie en el trabajo, dentro del ambiente rdpidamente cambiante. En conjunto, ei informe abaroa centenares de rumbos y programas, tanto externos como internos, desde el terreno de prestaciones beneficios laborales, renova- ci6n de vecindarios y realce del ambiente en cemunidades donde esten nuestras fabricas, hasta el continuado y original apoyo de Philip Morris a las artes y a las aportaciones de Ia empresa en los campos de la Edu- caci6n y de la Medicina. Durante el ano 1974 se nombraron dos nuevos miembros a la Junta Directiva de Philip Morris: Jacques G. Maisonrouge, presidente de la Junta Directiva y primer oficial ejecutivo de la IBM World Trade Europe, Middle East, Africa Corporation; y Hamish Maxwell, vicepresidente de la corporacion y vicepresidente ejecutivo de Philip Morris International, encargado de las regiones Asia/ Pacifico y Canada de Philip Morris International. Para terminar, rendimos homenaje bien merecido a nuestos empleados en todo el mundo por su continua y destacada actuaci6n en el muy diffcil ano pasado. Jahresrieckblick Wir freuen uns mitzuteilen, dass 1974, zurn 21. Mal in ununterbrochener Folge,unser Unternehmen neue Rekorde in Umsatzerlosen,JahresuberschGssen und Gewinnen je Aktie aufgestellt hat. Die konsolidierten Umsatzerl6se erreichten $ 3,0 Mrd. und lagen damit um 15,7 % uber dem Vorjahreswert. Der Reingewinn betrug $ 175,5 Mio., ein Anstieg um 18,1 % gegenOber dam Jahr 1973. Unter voller Berucksichtigung alier Umtauschrechte ergibt sich ein Gewinn je Aktie von $ 3,07, was eine Verbesserung von 17,6 % gegenuber dem Vorjahr bedeutet. Die Ergebnisse von 1974 sind umso erfreulicher, wenn man sie angesichts der weltweiten wirtschaftlich, sozial und politisch unsicheren Bedingungen betrachtet. Philip Morris konnte sowohl eine fortgesetzte weltweite Nachfrage nach ihren Zigaretten als auch ein betrachtliches Volumen- wachstum des Miller Brewing Unternehmens verzeichnen. Der weltweite Absatz unseres Unternehmens an Zigaretten stieg auf mehr als 7 % des Weltzigarettenmarktes, der gegenwartig ungefahr 3,7 Billionen Zigaretten umfasst. Marlboro, eine unserer zahlreichen, wachsenden Marken, baute ihren Vorsprung ais meistverkaufte Zigarette auf der Welt aus, obwohl sie nur wenlger als die Halfte unserer weltweiten Verkaufe ausmacht. Auf dem amerikanischen Zigarettenmarkt verzeichneten unsere vier Hauptmarken einen weiteren guten Zuwachs, und Marlboro baute seine Stellung als zweitstarkste Marke aus. -- - - 1974 war das filnfte aufeinanderfolgende Jahr, in dem die amerikanische Zigarettenindustrie ihren Absatz steigern konnte. Der Gesamtabsatz betrug ungefahL592 Milliarden Stuck-eine Steigerung um 2,6 % gegeniiber 1973. Der Absatz von Philip Morris dagegen atieg um 8,4 % im vergangenen Jahr. Als des am schnellsten wachsende Zigarettenunternehmen auf dem amerikanischen Markt, ist Philip Morris such gleichzeitig das grosste und am schnellaten wachsende amerikanische Unternehmen auf dem Weltzigarettenmarkt. Aehnliches gilt auch fOr die Miller Brewing Company, die im Jahr 1974 den grossten Zuwachs an Umsatzerlosen und Ausstoss ailer grosseren amerikanischen Brauereien erzielte. Der Ausstoss von Miller erhohte sich um 31,0 % im Vergleich zu einer Zuwachsrate von ungefahr 5% dergesamten Brauereibranche. In den letzten funf Jahren verzeichneten die konsolidierten Umsatzerlbse von Philip Morris eine durchschnittlich zusammengesetzte Zuwachstrate von 21,4 %. Der Jahresuberschuss stieg wahrend derselben Zeitspanne jahrlich um durchschnittlich 24,6 %, und der Gewinn je Aktie unter voiier Berucksichtigung der Umtauschrechte erhohte sich um 20,7 % jahrlich. Die wachsende Nachfrage nach unseren Zigaretten und unserem Bier und unsere Erwartungen in efn weiteres Wachstum in beiden Bereichen sowie der Bedarf an gr6sseren Betriebsleistungsfahigkeiten bedingten ein fortgesetztes, umfangreiches Investitionsprogramm. So beliefen sich die Sachinvestitionen im Jahr 1974 auf S 215,8 Millionen. Im Jahr 1974 stiegen die Kosten fOr Rohtabak, Papier- und Verpackungsmaterial sowie fOr Dosen, Flaschen und Iandwirtschaftlichte Produkte fur Brauereien betrachtlich an. Es war uns jedoch moglich, die Materialien unter Beibehaltung des geforderten Qualitatstandards in den notwendigen Mengen zu beschaffen, die durch die wachsende Nachfrage nach unseren Produkten bedingt waren. Wir sind in der gluckligen Lage, dass die zwei wichtigsten Produkte unseres Unternehmens-Tabak und Bier- Konsumguter, die zu relative geringen Preisen erwerbbar sind und Vergnugen bereiten, und deren Verbrauch unter unsicheren Wirtschaftsbedingungen in der Vergangenheit sich als widerstandsfahig erwiesen hat. Als ein direktes Ergebnis dieser Nachfragesituation war Philip Morris in der Lage, seinen 38,000 Angestellten in den Vereinigten Staaten und weltweit eine gesicherte Erwerbsgrundiage zu bieten. Im.April 1974 stimmten die Aktionare von Phifip Morris einer 2:1 Spaltung der Stammaktien zu. Die Jahresdivi- dende der Stammaktien wurde von 700 auf 80¢ per Aktie erhoht. 1974 wurde die Dividende zum siebten Mai in ununterbrochener Folge erhoht. Es war dies des 47. Geschaftsjahr in ununterbrochener Reihenfolge, in dem eine Dividende auf die Stammaktien des Unternehmens ausgeschuttet wurde. Philip Morris U.S.A. Dank des fortgesetzten Wachstums jeder unserer vier wichtigsten Zigarettenmarken-Marlboro, Benson & Hedges 100's, Virginia Slims und Parliament-konnte unser umfangreichstes Konzernunternehmen einen Rekordabsatz von 133 Milliarden Zigaretten auf dem amerikanischen Markt erzielen. Die Umsatzerlose stiegen um 15,2 %, derJahresiiberschuss erhohte sich urn 25,9 %. Philip Morris U.S.A. behauptete seine Stellung als zuwachsstarkstes Unternehmen aller amerikanischen Zigarettenhersteller. Unser Marktanteil in den U.S.A. stieg von 21,3 % im Jahre 1973 auf 22,5 % im abgelaufenen Jahr. Der Absatz an Marlboro stieg um 9,3 % und ihr Anteil auf dem amerikanischen Zigarettenmarkt stieg von 13,7 % im Jahr 1973 auf 14,6 % im Jahr 1974. Philip Morris nimmt die fuhrende Stellung in dam grossen und wachsenden 100 mm Segment des amerikanischen Zigarettenmarktes ein. Benson & Hedges 100's, die fuhrende 100 mm Zigarettenmarke, erzielte einen Absatzzuwachs von 10,3 % Virginia Slims eine andere 100 mm Zigarettenmarke, verzeichnete den grossten prozentualen Zuwachs unserer vier Hauptzigarettenmarken. Marlboro 100's und Parliament 100's erreichten ebenfalis einen starken Zuwachs. Benson & Hedges 100's Menthol und Virginia Slims Menthol nahmen zusammen 23,4 °/ der Verkaufe in dem wachsenden 100 mm Menthol Segment des amerikanischen Zigarettenmarktes fur sich in Anspruch. Parliament 100's war fur mehr als 26 % des gesamten Parliamentabsatzes verantwortlich. Viele Neuentwicklungen von Produkten der Philip Morris U.S.A. ertreckten sich auf die Enveiterung bestehender Zigarettenmarken in neuen Formen. Zum Beispiel erhohte sich der Absatz durch Erweiterung der Marke Marlboro, d.h. Marlboro 100's, Marlboro Lights und Marlboro Menthol, um 24,5 % im Jahr 1974 und belief sich auf fast 20 % des Marlboro Gesamtabsatzes. Marlboro Lights wies einen betrachtlichen Zuwachs im Jahr 1974 auf. Mit Marlboro Lights, Parliament und Benson & Hedges Multifilter ist Philip Morris gut in dem Segment der leichten ("High-Fiitration") Zigarettenmarken vertreten. Wahrend des Jahres 1974 erkannten wir erst die technischen Leistungsfahigkeiten, die diese neue Anlage in Richmond durch ihre Ausstattung besitzt. Unser neu errichteter Betriebskomplex in Richmond, der zurn Ende des Jahres mehr als 200 Millionen Zigaretten pro Tag herstellte, arbeitet gegenwartig mit weniger als 40 % seiner geplanten Kapazitat, die bei Fertigstellung im Jahr 1977 errefcht werden soll. Der Zeltpunkt zur Erstellung dieser Anlage erwies sich nachtraglich als kostengunstig fiir Philip Morris. Dervorzeitige Bezug der Gebaude erm6glichte es, die Kosten einzuhalten und so den kiirzlich erfoigten, einschneidenden Kostenerhohungen in der Bauindustrie zuvorzukommen. Zum ersten Mai seit mehr als zwei Jahrzehnten verfugen wir somit uber genugend Platz, um die Kapazitat mit der wachsenden Nachfrage nach unseren Zigaretten zu enveitern. Auch American Safety Razor, eine weitere Division von Philip Morris, trug erneut zurn Konzerngewinn bei. Ihre bekanntesten Produkte sind der Damenrasierer "Flicker" und die "Personna" Rasierer und Klingen. Philip Morris International Unser zweitgrosstes Unternehmen setzte sein Wachstum im Absatz, in Umsatzerlosen und im Betriebsgewinn fort. Der Gesamtabsatz von Philip Morris International erreichte im Jahr 1974 141 Milliarden StGck, was einem Zuwachs von 13, 5 % gegenOber dem Jahr 1973 entspricht. Im Vergleich dazu betrug der geschatzte Zuwachs auf der ganzen Welt 4 %. Philip Morris hatte 4,5 % des gesamten Zigarettenmarktes susserhalb der Vereinigten Staaten. Der Absatz von Marlboro nahm ungefahr ein Drittel des Gesamtabsatzes von Philip Morris International ein. Die Umsatzerlose stiegen um 7,8 %, der Betriebsgewinn nahm um 2,0 % zu. • Die im vergangenen Jahr in vielen L'andern stark ange- stiegenen Kosten und die im aligemeinen unzulang- lichen und verspateten Preisanpassungen waren die Hauptursachen fur die Beeintrachtigung der Gewinn- spannen von Philip Morris International. In vielen Landern unterllegen die Preise zudem einer Regierungskontrolle. In den wichtigen Markten Australiens und Italiens gestand man uns nur mit viel Versp2tung und nur teilweise eine Preisanpassung zum Ende des Jahres 1974 zu. Ausser dem Problem der Preiskontrollen, beeintrach- tigten Wechselkursanderungen in den Landern einiger Handelsbiocke, in denen unsere Zigaretten verkauft und hergestellt werden, die Gewinnspannen. Die Probleme der Preiskontrollen, der Wechselkursschwankungen und der Inflation sind fortdauernde Sorgen der Geschafts- fiihrung. Wir verkaufen gegenwartig mehr als 175 Zigarettenmarken in ungefahr160 Landern und Territorien, Unsere Zigaretten warden durch 21 Filialen und 15 Lizenznehmer hergestef(t. Die spezifischen Eigenschaften unserer Zigaretten und ihre wachsende Nachfrage tragen, neben unserer umfassenden internationalen Prasenz, dazu bei, den umfangreichen Zigarettenexport von Philip'Morris aus den Vereinigten Staaten aufrechtzuerhalten. --- - - Marlboro besitzt eine grosse "Vitalitat" und ein Potential auf den internationalen Markten. Es besteht eine weltweite wachsende Tendenz zu Filter-und "Blend" Zigaretten. Mit internationalen Marken wie Marlboro sowie starken regionalen und nationalen Marken wie Astor in Venezuela, Belvedere und Mark Ten in Kanada, Muratti Ambassador in mehreren europaischen Markten, Viscount in Australian, Cavanders in Indien und K2 in Pakistan, mussten wir von dieser Tendenz einen Nutzen ziehen. In allen unseren internationalen Regionen setzte sich der Zuwachs im Absatz unserer Zigaretten und deren Umsatzerlosen weiterhin fort. Zigarettenmarken von Philip Morris International haben jetzt einen Marktanteil von 10 % oder mehr in uber 20 Landern. Der Absatz von Philip Morris Zigarettenmarken in Westeuropa ubertraf um das Funffache die Zuwachsrate der gesamten Zigarettenindustrie. Urn die wachsende Nachfrage auf den europaischen Markten zu befriedigen, erwarb Philip Morris das Reemtsma Zigarettenwerk in Munchen, (Deutschland), erweiterte seine Betriebsstatten in West Berlin und Bergen op Zoom, (Niederlande) und begann mit der Herstellung von Marlboro in einem kleinen Betrieb in London. Ein wissenschaftlicher und technischer Zusammenarbeitsvertag mit der Sowjetunion wurde im Marz 1974 unterzeichnet. Wir haben Lizenzabkommen in Polen und Jugoslawien, wo weiterhin eine starke Nachfrage nach Marlboro besteht. In Afrika warf Philip Morris Nigeria Ltd.-nach Jahren aufgetretener Verluste- ' im Jahre 1974 erstmals einen Gewinn ab. In der Region Lateinamerika/Iberische Halbinsel steigerten wirden Marktanteil in den meisten unsererwichtigsten Markte. Die Fertigstellung unseres neuen Herstel- lungsbetriebes im Jahr 1975 in Brasilien, sowie der Erwerb der Companhia de Fumos Santa Cruz im Februar 1975, verschaffen uns die Prasenz in elnem weiteren grossen Markt.In Spanien wurde die Tabacalera, S.A. Partner unserer spanischen Beteiligungsgesellschaften, in weicher nun vertragsgemass Zigarettenmarken der Tabacalera auf den Kanarischen Inseln hergesteilt werden. In Mexiko wurde unsere Beteiligungsgesellschaft Cigarerra Nacional, S.A. mit La Tabacalera Mexicana, S.A. fusioniert. An diesem nun zweitgrossten Zigarettenunter- nehmen des Landes besitzen wir eine Minoritatsbeteiligung. Ein neuer Fabrikationsbetrieb in Equador sowie die Erweiterung der Rohtabakaufbereitungsanlage in unserem Werk in Guatemala wurden im Jahr 1974 fertiggestellt. In der Region Asien/Pazifik weist Philip Morris (Australia) Ltd. nun den grossten Marktanteil am australischen Zigarettenmarkt auf. Im Jahre 1974 wurde die Zigaretten- herstellungskapazitat dieses Unternehmens enveitert und die Rohtabaklagerhallen flachenmassig verdoppelt. Lindeman (Holdings) Ltd. vergrosserte sefnen Absatz und Marktanteil auf dam australischen Weinmarkt. Eine neue Weinkellerei wurde im Jahr 1974 in Mildura, New South Wales, fertiggestellt. Betrachtliche Zuwachse an Zigarettenmarktanteilen wurden in verschiedenen anderen Markten dieser Region, unter anderen in Indonesien und Pakistan, verzeichnet. Unser Lizenzabkommen in Japan fur die Marke Marlboro wurde im Jahre 1974 auf einer breiteren Basis abgeschlossen.ln den Philippinen verzeichnete unser Lizenznehmer, La Suerte Cigar and Cigarette Factory, wiederum Rekordabsatze in diesem wachsendem Markt. In Kanada setzte Benson & Hedges (Canada) Ltd. weiterhin sein Wachstum an Zigarettenabsatzenfort. Dieses Unternehem verkaufte die Formosa Spring Brewery und setzt alle seine Mittel fur unser wachsendes Tabakgeschaft ein. Vergangenes Jahr leistete Philip Morris wiederum einen positiven Beitrag zur amerikanischen Zahlungsbilanz. Unsere internationalen Beteiligungs- und Lizenzabkommen wurden zum Zwecke abgeschlossen, Z&Ilen und anderen Handelsschranken, die einen Export von Amerika aus in diese Markte erschwerten, auszuweichen. Jedoch, unsere Beteiligungsgesellschaften und Lizenzabnehmer trugen zu der wachsenden Nachfrage nach amerikanischen Zigaret- ten und deren Bestandteilen sowie nach amerikanischem Tabak bei, was tausenden von amerikanischen Land- und Fabrikarbeitern eine Arbeitsstelle sichert. Zusatzlich zu solch wichtigen Nutzen fiir die Vereinigten Staaten haben auch die Lander, in denen wir mit internationalen Tatigkeiten vertreten sind, einen Vorteil. Alle unsere Tatigkeiten werden selbstverstandlich in Uebereinstimmung mit den nationalen Interessen jedes Landes, in dem wir vertreten sind, durohgefurt. Vorschlage in den Vereinigten Staaten in Richtung einer hoheren Besteuerung von Gewinnen aus internationalen Tatigkeiten, Beschrankungenim Austausch von Technologie sowie die Errichtung von importquoten, konnten diese Tatigkeiten hingegen einschranken, zu repressiven Zollschranken ais Vergeltung fiihren und hatten schliesslich einen entsprechend negativen Effekt auf die amerikanische Beschaftigung und die amerikanische Zahlungsbilanz. Miller Brewing Company Im Geschaftsjahr 1974 verzelchnete die Miller Brewing wiederum die hochste Zuwachsrate im Bier-Absatz und Umsatzerlosen aller amerikanischen Brauereien. Die Miller Brewing Company erreichte eine Zuwachstrate von 31,0 % im Jahre 1974-der Bier-Absatz betrug 9,066,000 Barrels-und Obertraf damit sogar die Zuwachstrate von 28,8 % im Jahre 1973. Miller Brewing Company ist jetzt die funftgr6sste amerikanische Brauerei mit einem Marktanteil von 6,25 % und hat abgesehen von der grossten Brauereiin den Vereinigten Staaten den grossten Zuwachsin absoiuten Zahlen am Bierausstoss. Die Umsatzerlbse von Miller stiegen um 46,3 % und der Betriebsgewinn belief sich auf $ 6,291,000. Dies bedeutet eine Wende von $ 8,662,000, nachdem im Jahr 1973 noch 2500011205 9

ein Betriebsverlust von $2,371,000 ausgewiesen wurde. Die Tatsache, dass diese GesetzentwOrfe nicht durchkamen. Unser umfangreiches Programm zur Neugliederung der zeigte, dass sich die Gesetzgeber neben der grund- Mltler B(ew)ng Company begann im Jahr 1972 und satzlichen Problematik der Zigarettensteuer, der erfullte unsere Erwartungen vollauf. Das Unternehmen unverhaltnismassig grossen Last dieser Steuer auf erzte{te elne grossere Wirtschaftllchkelt durch Massen- Raucher kleinerer Einkommensklassen bewusst waren. produktion, indem es die modernen, leistungs- und Die gesamten amerikanischen Einnahmen aus den konkurrenzfdhigen Anlagen bessernutzte. Reine Zigarettenverbrauchsteuern betrugen im Jahr1974 $ 5,8 Kostensenkungsprogramme wurden ebenfalls im gesamten Mrd. (Bund: 5 2,4 Mrd. Bundesstaaten $ 3,3 Mrd. und Unternehmungsbereich eingefuhrt. Der Dynamismus der Gemeinden S 0,1 Mrd.). Im nationalen Durchschnitt entfielen Zuwachsrate von Miller High Life's gestattete eine ungefahr 45 % des Einzelverkaufspreises von Zigaretten proportionale Senkung der Marketingkosten pro "Barrel". auf Verbrauchssteuern. Die Verkaufssteuern auf Zigaretten Am Gesamtzuwachs der Marke Miller High Life waren die stellen zweifelsohne ebenfalls eine diskriminierende erfolgreichen Miller's 7 Unzen (Ounce) ''Pony Pack" Steuerlast fOr den Raucher dar. Flaschen massgeblich beteiligt. Unsere neue ''Lite" Es ist ebenso darauf hinzuweisen, dass in den Vereinigten Marke-ein kalorien-und kolenhydratarmes Bier-bestand Staaten die Bundesverbrauchssteuer auf Bier ungefahr ihre Probe in den Testmarkten des abgelaufenen Jahre 10 % des Einzelverkaufspreises betragt. erfolgreich und wird 1975 national eingefuhrt. Ebenfalls Auf internationaler Ebene setzt sich die Tendenz zu einer im Jahre 1975 hofft Miller die alleinige Verteilung von Erhohung der bereits betrachtlichen Zigarettenverbrauch- Ldwenbrau, des weltbekannten deutschen Exportbiers steuern in vielen Markten fort. Solche Erhohungen, auf dem amerikanischen Markt zu erreichen. besonders in einer Zeit wirtschaftlichen Abschwungs, Ein betrachtlicher Teil des Investitionsprogramms der konnten zu einem Wechsel der Verbraucher zu billigeren Gesellschaft ist notwendig, um das zukunftige Wachstum und weniger besteuerten Marken ftihren. Die Erhohungen der Miller Brewing Company zu sichern und die Werke erweisen sich als wenig ertragreich fOr die Steuerbehbrden d E' B ' d' F It und als schadlich fOr die Industrie. t Objektiven des Unternehmens in einer sich schnell wandelnden Umwelt. Im ganzen genommen schliesst der Bericht Hunderte von Vorschlage und Programme ein, sowohl externer als interner Art, die von Vergunstigungen fGr Angestellte, Erneuerungen der Nachbarschaft und einer Verbesserung der Umwelt in der Nahe der Arbeitsstatten bis zur weiteren Unterstutzung der Kunste durch Philip Morris und zum Beitrag auf den Gebieten der Erziehung und Medizin reichen. Wahrend des Jahres 1974 wurden zwei neue Mitglieder in den Verwaltungsrat von Philip Morris gewahlt: Jacques G. Maisonrouge Vorsitzender des Verwaltungsrates und Vorstandsvorsitzender von IBM World Trade Europe/ Middle East/Africa Corporation und Hamish Maxwell, Vize Prasident des Konzerns und geschaftsfuhrender Vize Prasident von Philip Morris International, der die Verant- wortung fOr die Regionen Asien/Pazifik und Kanada von Philip Morris International tragt. Zum Abschluss mdchten wir unsere besondere Anerkennung unseren Angestellten in der ganzen Welt fur ihre weiterhin ausgezeichneten Leistungen in einem ausserstherausfordernden Jahraussprechenr zu mo ernisierenn ine vier e rauerei wir in u on, New York (in der Nahe von Syracuse) errichtet. Sie wird Rauchen und Gesundheit Rassegna annuale J h einen a res-Ausstoss von 2 Millionen Barrels zum Ende des Jahres 1976 erreichen. Der Ausstoss unserer Im Zusammhang mit dem Theme Rauchen und Gesundheit Brauerei in Fort Worth wird von 2 Millionen auf 5 unterstutzte Philip Morris gemeinsam mit anderen Millionen Barrels erweitert, wo eine neue Dosenabfullan- Unternehmen der amerikanischen Zigarettenindustrie lage im Bau ist. Neue Schnellabfullanlagen wurden im weiterhin die vom Council for Tobacco Research-U.S.A. Jahre 1974 in der Brauerei in Milwaukee installiert. betriebenen Forschungen mit finanziellen Mitteln. ' Eine neue Dosenabf0llanlage kam do t zu Beginn des Ausserdem machten die drei von Philip Morris und ! Jahres 1975 in Betrieb. Am Ende des Jahres 1976 wird anderen Herstellern unterstt tzten grossangelegten i amerikaniechen Programme uber die Grundlagenforschung i die Miller Brewing Company ihre Leistungsfahigkeit der Krebs- und Atemwegkrankheiten im Jahre 1974 betrachtlich verbessert haben, und der jahrliche Fortschritte. Die Programme, die unter der Leitung Ausstoss wird auf 15 Millionen Barrels ansteigen. bekannter Wissenschaftler stehen, werden an der Harvard Unsere langfristige Strategie fOr die Miller Brewing Medical School, Washington University School of Company wird planmassig weitergefOhrt: auf die Medicine (St. Louis) und der University of California Reorganisation im Jahr 1972 folgte eine Absatzwende im at Los Angeles School of Medicine durchgeftihrt. Die Jahr 1973, ein weiterer Absatzanstieg brachte die Wende Beitrage der Zigarettenindustrie zu diesen speziellen zu einem positiven Betriebsergebnis im Jahr 1974. Projekten betragen ungefahr$ 8,000,000. Ein neuer Aspekt Philip Morris Industrial in der Streitfrage uber das Thema Rauchen und Gesundheit bestand in dem Versuch verschiedener Alie Produktbereiche der Philip Morris Industrial-Chemie, Anti-Rauchergruppen, die Aufmerksamkeit auf die Papier und Verpackungsmaterialien-konnten ihre Umsatze angeblichen Wirkungen von Zigarettenrauch auf steigern und trugen zu den Geselischaftsgewinnen des Nichtraucher zu lenken. Die Untersuchung nach einem vergangenen Jahres bei. wissenschaftlichen Beweis dieser Behauptung zeigt Die Umsatzerlose von Philip Morris Industrial stiegen um keine Berechtigung zum Vonvurf von einer Anzahl un- 17,6 %, wobei die Papiergruppe die grosste Zuwachsrate parteiischer Sachverstandiger, dass Zigarettenrauch verzeichnete. Der Betriebsgewinn stieg um 48,0 %. unter normalen Umstanden schadiiche EinflOsse auf Besondere Umstande spielten zu einem gewissen Grad Nichtraucher ausube. Nichtdestoweniger verzeichneten die bei dem Gewinnzuwachs im Jahre 1974 eine Rolle. Im Anti-Rauchergruppen einige Erfolge, indem sie die Rahmen der Preiskontrollrichtlinien des amerikanischen Inkraftsetzung lokaler Gesetze und Verordnungen erreichten, Stabilitatsprogrammes erhielt Philip Morris Industrial die das Zigarettenrauchen in bestimmten offentlichen nicht die Genehmigung zu Preiserhdhungen vor Oktober Platzen einschrankte. 1973. Im Jahr 1974 war die Nachfrage speziell im Papier- Wahrend des Jahres 1974 wies die amerikanische und Verpackungsmaterialienbereich sehr stark, wobei Bundesbehdrde zur Ueberwachung der Sicherheit von die Verbindung eines verbesserten Produktsortiments mit Konsumartikeln (Consumer Product Safety Commission) realistischeren Preisen halfen, die Gewinne zu verbessern. eine Eingabe verschiedener Anti-Rauchergruppen zuruck, Polymer Europe wurde mit dem deutschen chemischen die darauf hinzielte, den "Teergehait" der Zigaretten zu Unternehmen, das im Jahr 1973 erworben wurde, fusioniert, beschranken. Nach dem Studium des bestehenden und es entstand daraus die Wikolin-Polymer Chemie Gesetzes kam die Kommission zu dem Schluss, dass ihr G.m.b.H. Ein neues S 2 Millionen Urethan Werk wurde zu auf diesem Gebiet die rechtmassige Handhabe fehle. den Anlagen in Bremen, Westdeutschland, hinzugefOgt. Die Antragsteller erhoben bei einem Bundesgerichtshof Philip Morris Industrial kozentriert sich auf ausgewahlte gegen die Kommission Anklage mit dem Ziel, diese Entscheidu ngSpezialmarkte, in denen hohe Technologie und Qualitat ng aufzuheben. Die sechs wichtigsten die Hauptmerkmale sind. Diese Konzentration wird es amerikanischen Zigarettenhersteller griffen zu Gunsten dem Unternehmen gestatten, auf einigen seiner Markte, der Kommission ein. die ein Anzeichen einer Abschwachung zeigen- In wissenschaftlichen Kreisen geht die Streitfrage uber insbesondere im Textil-und Papierbereich-beweglicher die Auslegung der statistischen Beweisfuhrung weiter, zu sein. die die Hauptgrundlage fOr die Behauptung darstellte, dass Mission Vielo Company Unser Siedlungs- und Eigenheimbauunternehmen verzeichnete gute Verkaufe in dem geplanten Siedlungsge- biet von Orange County, Kalifornien. Die Verkaufe in den ubrigen Gebieten-Denver, Fresno und Phoenix-waren hingegen geringer und spiegeln die gegenwartige Abwartsbewegung der Industrie in diesem Markt wider. Obwohl die Umsatzerlose der Mission Viejo Company um 7,8 % zuruckgingen, da weniger Eigenheime verkauft wurden, stieg der Betriebsgewinn um 15,8 %. Der Gewinnzuwachs war angesichts der sehr schwerwiegenden Problems, die diese Industrie im Jahre 1974 hatte, besonders bedeutungsvoll. Des Hauptsiedlungsgebiet des Unternehmens in - Sudkalifornien bleibt weiterhin ein starker Eigenheimmarkt. Mission Viejo California ist eine schneli wachsende Siedlung, weiche in nur acht Jahren bereits eine Einwohnerzahl von uber 30,000 erreicht hat. Die Verkaufe ziehen weiterhin stark an. Diese Siedlung bietet dem Eigenheimbesitzer einen vollen Gegenwert, der nlcht nur ein Heim, sondern auch eine wohldurchdachte Umgebung einschliesst. Mission Viejo California sorgt fOr Einkaufs- und Erholungszentren, Parkanlagen, eine Bibliothek und Schulen, die von der Vorschulstufe bis zur Oberschule reichen. Die'zukunftige Ausweitung dieser Siedlung in Kalifornien ist eng mit der Entwicklung des Mission Viejo Sees verbunden, desen Vollendung fOr 1976 vorgesehen ist. Die grundlegende Starke der Mission Viejo Company wurde im Jahr 1974 ersichtlich, in einer Zeit, in der die meisten Wohnungsbauunternehmen Verluste hinnahmen, oder zumindest niedrigere Auftragseingange entgegen- nehmen mussten. Zigarettensteuer Im Laufe des Jahres 1974 wurde in den U.S.A. nur in zwei Staaten, namlich in Arizona und Maine, ein Gesetz zur Erhdhung der Verbrauchssteuer auf Zigaretten erlassen Trotz der regressiven und diskriminierenden Form dieser Besteuerung und trotz wachsendem Zigarettenschmuggel wurden im abgelaufenen Jahr in 17 Bundesstaaten GesetzentwOrfe eingebracht, die auf eine Erhohung der Verbrauchssteuern auf Zigaretten abzielten. Zigarettenrauchen eme der Hauptursachen fOr Krebs und andere menschliche Krankheiten sei. Wahrend des Jahres 1974veroffentlichte ein bekannter britischer Wissenschaftler der fruher den Kausalzusammenhang zwischen Lungenkrebs und Zigarettenrauchen befurwortete, einen Artikel in einer britischen Wissenschaftszeitschrift, in welchem er seine ursprunglichen Angaben neu untersuchte und zu einer umgekehrten Schlussfolgerung kam. Bin amerikanischer Professor brachte die Beweisftihrung, dass die Neigung der Aerzte, Raucher grundiicher auf Lungenkrebs zu untersuchen als Nichtraucher, den anscheinend hohen Zusammenhang zwischen Rauchen und der Krankheit erklaren kdnnte. Er forderte eine Neubewertung einiger statistischer Schlussfolgerungen, die fOr die Kausalzusammenhange des Rauches bisher verwendet wurden. Philip Morris in einer sich wande/nden Gesselschaft Da der Gang der sozialen Veranderungen sich beschleunigt, nimmt die Notwendigkeit, diese Veranderungen zu verstehen und sich entsprechend anzupassen,eine grdssere Bedeutung ein.In dieser Beziehung ist das Public Affairs Committee unseres Verwaltungsrates zustandig, die Veranderungen in den Wertvorstellungen, Bediurfnisstrukturen und Prioritaten nicht nur der Gesamtbevolkerung, sondern auch unserer Angestellten, zu beurteilen und vorauszusehen. Wahrend des Jahres 1974 brachte das Unternehmen die ursprungliche Studie des Unternehmens uber soziale Verpflichtungen (Corporate Social Responsibility Study), die zum ersten Mal 1970 erstellt wurde, offiziell auf den neuesten Stand. Diese neue Fassung schliesst richtigerweise eine wertvolle Untersuchung Ober die Tatigkeiten der Beteiligungsgesellschaften von Philip Morris International ein, die sie verpflichten, den BedOrfnissen und Verlangen der Gastlander entgegen- zukommen. Durch eine solch langfristige Beachtung der gegenwartigen und potentiellen sozialen Krafte wird unser UnternehmenAnerkennung und Rentabilitat in semen interilationalen Tatigkeiten aufrechterhatten. Der Bericht der Kommission bietet zusatzlich zu der Neufassung bestimmter neuer Tatigkeiten, wie z.B. die Arbeitsgruppe zur Erstellung eines Programmes fOr Berufslaufbahnen (The Career Program Planning Task Force) ebenfalls einen nutzlichen und neuen Ausblick auf ein verantwortungavolles Verhalten gegenuber den Siamo lieti di comunicare che nel 1974, per il ventunesimo anno consecutivo, la societa ha raggiunto nucvi livelli di fatturato, di utili e di reddito netto per azione. Rispetto all'anno precedents, il fatturato consolidato a I'utile netto hanno raggiunte la cifra di $3,0 miliardi e di $175,5 miiioni, registrando rispettivamente un guadagno del 15,7% a del 18,1 %. II reddito per azione (tenendo conto del titoli convertibili) e salito a$3,07, ii che rappresenta un aumento del 17,6 % rispetto al 1973. I risultati conseguiti nel 1974 sono soddisfacenti alla luce dell'instabile congiuntura economica a sociopolitica ohe ha prevalso in tutto il mondo. La domanda di sigarette Philip Morris si P mantenuta sostenuta in tutti I paesi, e la domanda di birra Miller ha registrato una notevole espansione. Le vendite complessive delle sigarette prodotte dalla nostra societe sono aumentate fino a rappresentare piu del 7% del mercato mondiale delle sigarette, il quale totalizza attualmente 3.700 miliardi di pezzi. Le Marlboro, una delle nostre numerose marche in espansione, hanno accentuato la loro posizione dominante; - esse sono Is marca piu venduta del mondo, pur non costituendo se non meno della meta delle vendite unitarie della societe su scala mondiale. Sul mercato statunitense delle sigarette, le nostre quattro marche principali hanno continuato a registrare una vivace espansione, e le Marlboro hanno rafforzato la loro posizione di seconds marca americana. Negli Stati Uniti, II 1974 e stato il quinto anno consecutivo in cui I'industria delle sigarette ha registrato un aumento delle vendite in termini reali. II volume di produzione dell'intero settore b stato dell'ordine del 592 miliardi di pezzi, con un incremento del 2,6% rispetto al 1973. Nello stesso periodo, le vendite in termini reali della Philip Morris sono aumentate del' 8,4%. Oltre ad essere la societ8 in piu rapids espansione all'interno degli Stati Uniti, la Philip Morris e anche la piu importante e Is pi0 dinamica fra le societa con sede statunitense che operano sul mercato mondiale delle sigarette. Anche la Miller Brewing Company ha realizzato nel 1974 incrementi percentuaii di utile e di barili venduti superiori a quelli di qualsiasi altra primaria industria del settore birrario. II volume di vendite della Miller e aumentato del 31,0%, laddove II corrispondente tasso di sviluppo del settore P stato del 5% circa. Negli ultimi cinque anni, il fatturato consolidate della nostra societ8 e aumentato ad un tasso medio composto del 21,4%, mentre I'utile netto 8 aumentato nello stesso periodo ad un tasso annuo medio dei 24,6%, ed il reddito . per azione (tenendo conto del titoli convertibili) ha registrato un aumento annuo'deI 20,7%. L'accresciuta domanda delle nostre sigarette e prodotti birrari, unita alla previsione di un'ulteriore sviluppo in ambedue i settori, e alla necessit8 di una maggiore efficienza produttiva, hanno richiesto il proseguimento di un vasto programme di espansione degli investimenti. Nel corso dell'anno gli immobilizzi sono stati di 5215,8 milioni. Nel 1974 sono sensibiimente aumentati i costi del tabacco in fogtia, della carte e degli imballaggi, del barattoli e bottiglie, e del prodotti agricoli utilizzati per la produzione birraria. Ciononostante, siamo riusciti ad assicurarci le quantite a Ie qualita di materiali necessarie a far fronte alia crescente domanda dei prodotti. E' circostanza favorevole per noi che la societa si regga sopratutto su due prodotti principali: le sigarette e la birra-beni di consumo di costo relativamente basso, che all'acquirente procurano piacere, e il cui consumo si e visto resistere anche in periodi di instabilita economioa. Per effetto diretto di tali caratteristiche della domanda, la Philip Morris ho potuto assicurare una continuitA - d'impiego a 38.000 persone, all'interno degli Stati Uniti ed in altri paesi del mondo. Nell'aprile del 1974, I'assemblea degli azionisti della Philip Morris ha approvato la distribuzione di due azioni per una del capitale ordinario. II livello del dividendo annuale delie azioni ordinarie 6 stato portato da 70¢ per azione ad 802 per azione. Questo 8 stato il settimo anno consecutivo in cui il dividendo a stato aumentato, ed il 1974 P stato il quarantasettesimo anno consecutivo in cui la Philip Morris ha remunerato il capitale ordinario. Philip Morris U.S.A. La continua espansione di ciascuna delle quattro marche principali-Marlboro, Benson & Hedges 100's,.Virginia Slims e Parliament-ha consentito alla maggiore delie nostre societa operative di aumentare il volume di vendite negli Stati Uniti, fino a raggiungere il nuovo priinato di 133 miliardi di pezzi. ~ 10 2500011206

II fatturato e I'utile d'esercizio sono aumentati rispettiva- cinque volte il tasso di sviluppo dell'industria press nel mente del 15,2% e del 25,90/c. _ suo insieme. Per adeguarsi all'espansione dei mercati La Philip Morris U.S.A. ha mantenuto Is posizione di europei, la Philip Morris ha effettuato I'acquisto secieta in piiu rapido sviluppo fra le aziende produttrici dell'impianto produttivo Reemtsma, a Monaco of Baviera, of sigarette degli Stati Uniti, dato che la nostra quota del potenziando inoltre i centri produttivi di Berlino mercato statunitense o salita al 22,5%, dal 21,3% del 1973. Occidentale e di Bergen op Zoom, nei Paesi Bassi, e La vendite unitarie delle Marlboro sono salite del 9,3%, dando I'avvlo alla produzione of Marlboro in an piccolo e la Iero quota del mercato statunitense delle si arette impianto londinese. Nel marzo 1974 e stato firmato un , ° g accordo of cooperazione scientifica e tecnica con d passata del 13,7% nel 1973 al 14,6% nel 1974. La I'Unione Sovietica. Abbiamo anche altri contratti of Philip Morris 8 al primo posto anche in un altro vasto e licenza con Is Polonia e con Ia Yugoslavia, paesi in cui dinamico segmento del mercato statunitense, quello delle Is richiesta di sigarette Marlboro continua ad essere sigarette da 100 mm, in cui le Benson & Hedges 100's, sostenuta. In Africa, la Philip Morris Nigeria Ltd. ha che sono la principale marca da 100 mm, hanno registrato registrato quest'anno an andamento positivo, dopo aver un incremento delle vendite pari al 10 31/o Le Virginia , . subito delle flessioni negli ultimi anni. Slims, altra marca di sigarette da 100 mm hanno registrato , il massimo aumento percentuale tra Is nostre quattro Nelle regione amministrativa dell'America Lat'na/Liberia Per adeguarsi all'espansione della Miller e per modernizzarne gli impianti, 8 necessaria una porzione considerevole del programmato aumento di capitale sociafe. Nella Stato of New York, a Fulton (nei dintorni of Syracuse), 8 in corso di costruzione una quarta fabbrioa of birra che alla fine del 1976 avra una capacit~ annua di 2 millioni di barilil. E' anche in corso di potenziamento Is capacita produttiva dell'impianto di Fort Worth, per portarlo da 2 milioni a 5 milioni di barili; presso lo stesso centro o in corso Is costruzione di an nuovo barattolificio. Nell'impianto of Milwaukee, sono state installate nel 1974 delle nuove linee d'imballaggio ad alta velocita, ad all'inzio del 1975 6 entrato in funzione un nuovo barattolifico. Per Is fine del 1976, Is Miller Brewing avra sensibilmente migliorato Is propria efficienza a portato Is capacita produttiva annuale a 15 milioni le barili. marche principali. Anche Is Marlboro 100's e le Pariiament abbiamo conseguito un'espansione della quota of mercato La strategia a lungo termine ro rammata er la Mill p g p er 100's hanno conseguito un sensible accrescimento delle sulla maggior parte dei nostri principali mercati. II Brewing Company si realizza secondo il programma vendite unitarie. completamento entro il 1975 del nuovo centro of produzione prestabilito: nel 1972 he avuto Iuogo una riorganizzazione; Le Benson & Hedges 100's Menthol e le Virginia Slims in Brasile, e I'acquisto, effettuato nel febbraio 1975, della nel 1973 si o verificato un capovolgimento delle vendite; - Menthol hanno rappresentato insieme if 23,4% delle vendite Companhia de Fumos Santa Cruz ci consentiranno di fare nel 1974 6 continuata I'espansione delle vendite, e si e globali of an segmento del mercato statunitense che ~ in il nostro ingresso su di un nuovo, vasto mercato. In Spagna, registrato un capovolgimento degli utili. svilu la Tabacalera, S.A. he acquistato una partecipazione nelle rapido ppo, quella delle sigarette da 100 mm al nostre societa affiliate spagnole, che producono su Philip Morris Industrial mentolo. Le Parliament 100's hanno rappresentato piu Iicenza le marche della Tabacalera nelle isole Canarie. I Gruppi Carta, Chimica e Imballaggi della Philip Morris del 26% del volume totale delle vendite delle Parliament. Nel Messico, I'affiliata Cigarrera Nacional, S.A. ha Industrial, nell'esercizio ora concluso hanno registrato Buona parte dell'azione di sviluppo del prodotti della effettuato una fuslone con La Tabacalera Mexicana, S.A; tutti uno sviluppo delle vendite e contribuito all'utile Philip Morris U.S.A. he comportato I'est:,nsione delle cio of conferisce una quota di minoranza in una societ9 sociale. marche affermate in nuove varianti. Le vendite unitarie che 6 attualmente al secondo posto fra le societa II fatturato della Philip Morris Industrial ha registrato un delle marche risultanti dall'estensione della gamma messicane produttrici di sigarette. Nel 1974 sono stati aumento del 17,6%, e fra tutti I'aumento pi0 alto e Marlboro, ad esempio, -Marlboro 100's, Marlboro Lights inoltre portati a termine i lavori of an nuovo centro di quello realizzato dal Gruppo Carta. L'utile d'esercizio d a Marlboro Menthol-sono aumentate complessivamente produzione nell'Ecuador, a potenziati gli impianti per la aumentato del 48,0%. del 24,5% nel 1974, e rappresentano quasi il 20% del preparazione del tabacco nel Guatemala. fatturato totale of quella marca negli Stati Uniti. Nella regione amministrativa dell'Asia/Oceano Pacifico, la In certa misura, I'espansione dei redditi del 1974 a Nel 1974, le Marlboro Lights hanno registrato una sensibile Philip Morris (Australia) Ltd. detiene oggi Is quota piu il riflesso of circostanze particolari. Nell'ambito delle espansione. Fra le marche di sigarette leggere ("high- elevata del mercato australiano delle sigarette. Nel 1974, direttive per il con4rollo dei prezzi imposte dal governo filtration"), Is Philip Morris e ben rappresentata dalle gli impianti per Is produzione.di sigarette of questa statunitense, Is Philip Morris Industrial non ha ottenuto Marlboro Lights, dalle Parliament e dalle Benson & societe affiliata sono stati potenziati, e raddoppiata la I'autorizzezlone a aumentare i prezzi fino alI'ottobre 1973. Hed Mutifilter. capacit~ di stocca Nel 1974, Is domanda d stata particolarmente forte nei 9es ggio del tabacco in foglia. La Lindeman confronti della carta a degli imballaggi, a Is combinazione Nel corso del 1974, si d cominciata ad applicareparte (Holdings) Ltd. ha registrato un aumento delie vendite ad of an miglior assortimento e di prezzi piu realistici ha della Potenzialita tecnologica insita nella ro ettazione esteso la quota che detiene sul mercato australiano del p 9 contribuito all'aumento dell'utile. del nuovo Centro Operativo di Richmond. Alla fine vino. Nel corso dell'anno e stato inoltre portata a termine dell'esercizio, gli impianti avevano un ritmo of produzione la realizzazione di an nuovo impianto di vinificazione a La Polymer Europe he effettuato una fusione con la di 200 milioni of sigarette al giorno, per una produzione Mildura, nella Nuova Galles del Sud. Significativi aumenti societii chimica tedesca one era stata acquistata nel pari a meno del 40% della capacite produttiva disponible della quota del mercato delle sigarette si sono registrati, 1973, formando Is Wikolin Polymer Chemie G.m.b.H. II quando il centro sarA completamente attrezzato, nel 1977. fra altri mercati della regione, anche nell'Indonesia e nel centro di produzione of Brema, nella Germania I tempi of realizzazione di questo complesso produttivo Pakistan. Nel 1974, in Giappone, if nostro accordo of Occidentale, 8 stato dotato di un nuovo impianto per Is in quanto le licenza per le Marlboro 8 stato applicato su una base produzione dell'uretano, del costo di $2 milioni. sono stati fortunati per la Philip Morris , opera murarie sono state completate in anticipo sul pi0 estesa. Netle Filippine, la concessionaria La Suerte termine previsto, senza eccedere I limiti di bilanclo, e Cigar and Cigarette Factory he stabilito nuovi primati di prima one si verificasse Is recente, brusca lievitazione del vendite unitarie su questo mercato in espansione. costi nel settore delle costruzioni. Per Is prima volta, Nel Canada, Is Benson & Hedges (Canada) Ltd. ha in oltre due decenni, abbiamo ampia disponibilit~ of continuato ad accrescere le vendite unitarie di sigarette. spazio per potenziare gli impianti, e far fronte aila Quest'affiliata he inoltre venduto Is fabbrica di birra crescente domanda della produzione di sigarette. Formosa Spring Brewery, a sta concentrando tutte le Anche quest'anno Is Divisione dell' "American Safety risorse nell'attivit~ ta_bacchifera, che c in espansione. Razor" he contribuito all'utile sociale. I suoi prodotti piu noti sono if rasolo persignora "Flicker" ed if rasoio e le lame da barba "Personna". Philip Morris International Questa societA, che o per dimensioni Is nostra seconda societa operative, ha registrato ulteriori aumenti del volume di vendite unitarie, del fatturato e dell'utile d'esercizio. Nel 1974, il volume di vendite unitarie della Philip Morris International he totalizzato 141 miliardi di pezzi, realizzando an guadagno del 73,5%.rispetto al 1973, laddove lo sviluppo unitario mondiale e valutato intorno al 4%. Le vendite della Philip Morris Oltre a comportare tali significativi vantaggi all'interno rappresentano if 4,5% del volume globale of vendite degli Stati Uniti, Is nostre attivita internazionali sono realizzato al di fuori degli Stati Uniti. Le vendite della proficue anche Si paesi ospitanti; tutte Is nostre Marlboro hanno rappresentato circa an terzo delle vendite attivite sono infatti gestite in conformit~ con gli interessi unitarie della Philip Morris International. nazionali of ciascun paese in cui operiamo. II fatturato e I'utile d'esercizlo hanno registrato an Le proposte avanzate negli Stati Uniti, nel senso di aumento, rispettivamente, del 7,8% e del 2,0%. aggravare I'onere fiscale sulle entrate di origine inter- Su molti mercati, I'anno scorso, bruschi rialzi del costi e nazionale, le limitazioni degli scambi tecnologici e adeguamenti of prezzo generalmente insufficienti e tardivi I'imposizione di contingenti all'importazione potrebbero hanno costituito Is fondamentale causa of limitazione del ridurre tati attivitb e dare origine a barriere commerciali margine of utile della Philip Morris International. In of rappresaglia, if cui effetto ultimo sarebbe negativo numerosi paesi vige If controllo governativo del prezzi. per if livello dell'occupazione negli Stati Uniti e per la Su due importanti mercati, quello australiano e quello bilancia dei pagamenti statunitense. alla luce del gravissimi problemi affrontati dall'industria nel 1974. La localitA piu importante della societd, nella California meridionale, rimane un remunerativo mercato per I'edilizia residenziale, e la Mission Viejo California -_~ an centro residenziale in rapida espansione, one dopo soli otto anni raggruppa una popolazione di oltre 30.000 abitanti. II mercato rimane attivo, in quanto il centro residenziale continua ad offrire all'acquirente an contro- valore globale: non solo una casa, ma anche an ambiente armonicamente costituito intorno ad essa. La Mission Viejo California offre infatti anche centri acquisti, centri ricreativi e parchi, oltre ad una biblioteca muni- i l d pa e e a servizi scolastici che vanno dalla scuola ita)iano, abbiamo ottenuto degli adeguamenti di prezzo c Miller Brewing Company materna alle medie superiori. solo parzialmente e con molto ritardo verso Is fine del 1974. In alcune zone commerciali Nel 1974, la Miller Brewing ha registrato di nuovo i massimi L'espansione futura della comunita californiana dipendera , oltre al problema del prezzi controllati, anche differenze di cambio aumenti percentuali of vendite unitarie e di fatturato che strettamente dalla disPonibilitb del la9o Mission Vie1o, if . fra Is valuta del luogo di commercializzazione e quella siano stati ottenuti fra tutte le aziende statunitensi cui completamento 6 previsto per il 1976. del luogo di produziene hanno avuto an riflesso negativo produttrici of birra. La Miller he registrato nel 1974 un La fondamentale solidit& della Mission Viejo Company si sul margine di utile. I problemi re.tativi al controllo del aumento del 31,0 /o-per un totale di 9.066.000 barili- a resa evidente nel 1974-periodo in cui Is maggior parte prezzi, she fluttuazioni delle paritii monetarie ad superando cosi I'aumento del 28,8% registrato nel 1973. delle imprese edilizie hanno registrato una flessione o all'inftazione sono oggetto di costante attenzione da Al quinto posto fra le societa americane produttrici of subito gravi diminuzioni degli ordini. parte della societa. birra, e detenendo una quota di mercato del 6,25%, Is La societa effettua attualmente la distribuzione di oltre Miller he registrato un aumento assoluto della quantitii di Gravami fiscali suile sigarette barili venduti, che e superiore a quello di tutti eccettuato Net 1974, solo in due stati americani, I'Arizona e If Maine, 175 marche in circa 160 paesi e territori. Le nostre sigarette if massimo produttore statunitense. sono entrate in vigore delle leggi volte ad aumentare sono prodotte da 21 societ8 affiliate e 15 commissionarie. Le caratteristiche esclusive e Is crescente domanda delle tl fatturato della Miller he registrato un aumento del I'imposta of consumo sulle sigarette. Nonostante if nostre sigarette, unitamente alla nostra diffusa presenza 46,3%, mentre I'utile d'esercizio he raggiunto if livello di carattere regressivo a discriminatorio di tale genere a livello internazionale, hanno permesso alla Philip Morris $6.291.000-i1 che rappresenta un capovolgimento di d'imposta, e nonostante if rinvigorirsi di fenomeni of of mantenere alto if volume of sigarette esportato dagli $8•662.000 rlapetto alle perdite d'esercizio di $2.371.000 contrabbando, I'anno scorso sono stati presentati disegni Stati Uniti. subite net 1973. di legge tesi ad an inasprimento del gravame in 17 La Marlboro he motta v'talta nd d' II vasto programma di ristrutturazione della Miller, i e ra e mam smo stati federali. g i sui intrapreso nel 1972, inizia a dare i suoi frutti. La societ8 II fatto che Is maggior parte di tali disegni non siano mercati internazionali. In tutto if mondo si riscontra una crescente tendenza verso le sigarette con filtro e comincia a realizzare le economie della produzione su stati approvati conforta I'ipotesi che il legislatore stia of tipo "blend". Tale tendenza dovrebbe esserci favorevole, vasta scala, e ad intensificare l'uso of attrezzature acquistando consapevolezza sia del fatto one I'onere poiche possediamo marche qie affermate a livello moderne, piu efficienti e concorrenziali. In ogni settore ricade sproporzionatamente sui consumatori delle fasce internazionale, quali Is Marlboro, e marche regionali e produttivo, si sono applicati anche rigorosi programmi di of reddito piu basse, sia degli altri problemi connessi nazionali, quali Is Astor in Venezuela, Is Belvedere e la contrazione dei costi. L'impulso della birra Miller High Life con I'imposta sulle sigarette. Nel 1974, Is imposte di Mark Ten nel Canada, la Muratti Ambassador su parecchi ha consentito inoltre una rtduzione proporzionale del costi consumo sulle sigarette negli Stati Uniti hanno apportato mercati europei, la Viscount in Australia, Is Cavander's in unitari of commercializzazione. an gettito complessivo $5,8 miliardi (di cui $2,4 miliardi India e Is K2 nel Pakistan. • Le sviluppo complessivo della marca Miller High Life 6 a livello federale, $3,3 a livello statale e$0,1 a livello In tutte be nostre re ioni amministrative internazionali sistato favorito anche del successo delle bottiglie da locale). Su una media nazionale, le imposte di consumo g 1/5 della confezione "pony-pack". La nuova marca Lite- hanno rappresentato approssimativamente il 45% del ' registrato un continuo aumento delle vendite in termini una birra a basso contenuto calorico e di carboidrati- prezzo al dettaglio delle sigarette. Anche Is imposte sulla reali e del fatturato. In oltre 20 paesi, le marche della he dato risultati positivi sul mercati sperimentali del vendita delle sigarette comportano an onere discriminatorio Philip Morris International detengono attualmente una 1974, e per il 1975 ne e prevista Is distribuzione su scala P er i fumatori. quota del mercato pad al 10 /o o piu. nazionale. Sempre net 1975, Is Miller prevede di assumere E' inoltre da rilevare che le imposte federali di consumo Le vendite delie marche Philip Morris nell'Europa Is distribuzione della notissima birra tedesca d'esporta- sulla birra rappresentano if 10% circa del prezzo al occidentale hanno registrato un aumento che supera di zione L"owenbrau su tutto if territorlo degli Stati Uniti. dettaglio. 2500011207 La Philip Morris Industrial concentra Is sua azione su mercati of specialita selezionate, in cui i requisiti fonda- mentali sono I'alto livello tecnologico a Is qualitb. Tale concentrazione permettera alla societa di adeguarsi con maggior flessibilit~ ad alcuni del suoi mercati che danno segni of rallentamento-in particolare i tessili a Is carta. Mission Viejo Company Anche nell'anno ora concluso, la Philip Morris he uuesta societa, one opera nel settore del centri residen- apportato an positivo contributo alla bilancia dei paga- ziali e dell'edilizia residenziale, he conseguito an menti statunitense. La rate internazionale di fabbricazione, soddisfacente volume di vendite nell'estesa comunit& costituita dalle societa affiliate e concessionarie, si e residenziale di Orange County, in California. Nelle altre formata perch6 tariffe doganali a altre barriere pre- localitd-Denver, Fresno e Phoenix-le vendite sono cludevano he esportazioni dagli Stati Uniti verso altri state inferiori, a riflesso della diminuita attivitd industriale paesi. Le nostre societa affiliate a concessionarie, tuttavia, del rispettivi mercati. contribuiscono alla crescente domanda of sigarette a Sebbene if fatturato della Mission Viejo Company abbia componenti di fabbricazione statunitense e of tabacco registrato an andamente riflessivo dell'ordine del 7,8%, coltivato negli Stati Uniti, fornendo cosi un'occupazione a essendo diminuito if numero of unita residenziali vendute, ' migliaia di lavoratori americani del settore agricolo a Iutile d esercizio he registrato an aumento del 15,8%. industriale. L'aumento dell'utile e stato particolarmente significativo 11

A livello internazionale, continua a riscontrarsi su molti Ter~ b9ik op het jaar Marlboro Lights vertoonde in 1974 een groel van betekenis. mercati la tendenza ad aggravare le gia onerose imposte g Onder de lichte, Zogen8amd2 "high-filtfdti0n" merken, dr consumo. Aumenti del genere-specre rn periodi di Wij hebben het genoegen u mee te delen dat 1974 het is Philip Morris goed vertegenwoordigd met Marlboro tendenza ai ribasso-possono determinare uno sposta- 21 ste achtereenvolgende jaar was waarin ons bedrijf Lights, Parliament en Benson & Hedges Multifilter. mento dei consumi verso marche dl prezzo plu contenuto nieuwe rekords boekte in omzet, winst en winst per gedeelte- e marginefiscale piu ristretto, si che gll inasprimenti aandeel. De gekonsoii°deerde omzet steeg tot $3P0 miljard, ke reals atie van4het t ch oeo.g sch potent eegdat elte- finiscono per rivelarsi controproducenti per le autorit$ een toename van 15,7 /o. De nettowinst bedroeg $175,5 inherent is aan de oozet van ons nieuwe produktiecentrum fiscali, e dannose all'industria. miljoen, een toename van 18,1 % ten opzichte van 1973. in Richmond. Eind 1974 produceerde dit centrum gemiddeld II fumo e/a salute De winst per aandeel (op basis van volledige konversie) ruim 200 miljoen sigaretten per dag, ofwel bijna 40% van In cooperazjone con altre sooieta statunitensi produttrici vanelg7,g /a3,07, hetgeen neerkomt op een toename o de kapaciteit die het bij voltooiing in 1977 zal hebben rdiceirearmedica rPelatv a alr fumo e alltansalute medeante la In het licht van de onbestendige ekonomische, sociale en segekoment, IslvoolrpPhalip Morris drod aarom zo gtunstig geveest ulteriori contributi al "Council for Tobacco Research- Politieke situaties die over de gehele wereld bestonden, omdat de bouw voorbleef op het schema en ook binnen het U.S.A." (Comitato Statunitense Ricerche sul Tabacco . waren de resultaten over 1974 bevredigend. De sterke budget werd gerealiseerd, voordat zich kortgeleden een Nel 1974, inoltre, sono stati portati avanti negli Stati ) vraag naar Philip Morris-sigaretten zette zich over scherpe bouwkostenstijging voordeed. Voor de eerste Uniti, col contributo della Philip Morris e di altre societa de gehele wereld voort tenvijl ook de aktiviteiten in de keer in ruim twee decennia hebben wij voldoende ruimte produttrjci, tre programmi di ricerca fondamentale su Miller-brouwerijen veelbetekenend bleven toenemen. Hat cm de kapaciteit te vergroten, teneinde aan de stijgende aandeel van ons bedrijf in de wereldsigarettenmarkt is met vraag near onze sigaretten te voldoen. sotto la dliaez one di sc enziatiedi ehiaraf ama, letreondotti ruim 7% gestegen. Op deze markt worden thans ongeveer De American Safety Razor-divisie droeg opnieuw bij tot programmi son rispettivamente accentrati alla Facolta di 3,700 miljard sjgaretten per jaar omgezet. Ean van onze onze ondernemingswinst. De bekendste produkten van Medicina dell'Universitd di Harvard, alla Facolta di vele groeiende merken. Marlboro, heeft zijn leidende deze divisie zijn de Flicker lady-shave en de Personna Medicina dell'Universit8 Washin ton (St. Louis), ed alla Positie als de meest verkochte sigaret ter wereld scheerapparaten an -mesjes. Facolta di Medicina di Los Angeles dell'Universita di vergroot, hoewel dit merk minder dan de helft van onze California. L'impegno globale dell'industria in tali progetti afzet over de gehele wereld voor zijn rekening nam. Philip Morris International specializzati ammonta a circa $8 milioni. Op de Amerikaanse sigarettenmarkt bleven onze vier Onze op een na grooste werkmaatschappij heeft zowel Un nuovo aspetto della controversia sul fumo e la belangrijkste merken een belangrijke groei vertonen en hear groei in afzet, in omzet, als in bedrijfsresultaten salute 6 sorto col tentativo, effettuato da diversi gruppi Marlboro heeft zijn positie daar verstevigd als het op gekontinueerd. De afzet van Philip Morris International anti-fumo, di attirare I'attenzione sul presunti effetti che aan na grootste merk. bereikte in 1974 een totaal van 141 mjljard stuks, een il fumo di sigaretta avrebbe sui non fumatori. L'esame Het afgelopen jaar was het vijfde achtereenvolgende jaar toename van 13,5% ten opzichte van 1973, vergeleken delle prove scientifiche sull'argomento, effettuato da waarin de Amerikaanse sigarettenindustrie haar afzet met de geraamde groei over de gehele wereid van 4/o. esperti imparziali, induce tuttavia a ritenere che vergrootte. De totale afzet van deze bedrijfstak bedroeg Philip Morris nam 4,5% van de totale sigarettenmarkt I'affermazione che il fumo di sigaretta abbia effetti ongeveer 592 miljard stuks, ofwel 2,6% meer dan in 1973. buiten de Verenigde Staten voor haar rekening. De verkoop nocivi sui non fumatori sia priva di fondamento. Cionono- De sigarettenverkoop van Philip Morris steeg vorig jaar van Marlboro bedroeg ongeveer een-derde van de totale stante, gIi ambient anti-fumo sono riusciti in alcuni casi ad met 8,4% afzet van Philip Morris International. ottenere I'approvazione di leggi e regolamenti looali Behalve dat Philip Morris de snelst groeiende sigaretten- De omzet steeg met 7,8%, tervrijl de bedrijfsresultaten restrittivi delta liberta di fumare sigarette in determinati maatschappij binnen de Verenigde Staten is, is zij de toenamen met 2,0%. luoghi pubblici. grootste en snelst groeiende Amerikaanse maatschappij Het afgelopen jaar zetten op vele markten vooral de Net 1974, 1'ente federate che va sotto it nome di die op de wereldsigarettenmarkt opereert. sterke kostenstijgingen en de over het algemeen "Consumer Product Safety Commission" (Commissione Evenzo boekte Miller Brewing Company in 1974 ten ontoereikende en vertraagde prijskompensaties de di Vigilanza sui Beni di Consumo) ha respinto la richiesta, opzichte van alle andere grote Amerikaanse brouwerijen, `winstmarges van Philip Morris International onder druk. avanzata da parecchi gruppi anti-fumo, di limitare it de grootste procentuele vooruitgang, zowel in inkomsten In vele landen worden de prilzen door de regering tenore di "catrame" consentito nelle sigarette. Sulla base als in de verkoop in.barrels. De verkoop in barrels van geregeld. Op de belangrijke Australische en Itallaanse della normativa pertinente, la Commissione ha emesso la Miller steeg 31,0%, vergeleken met een gemiddelde groei markten ontvingen wij eind 1974 sterk vertraagde en decisione di non poter giudicare nei merito per vizio de in daze bedrijfstak van 5%. gedeeltelijke prilskompensaties. Buiten de problemen met competenza. Contro la Commissione 6 state intentata prilskontroles warden in Sommige handelsblokken de un'azione legate presso un Tribunale Federale, per Gedurende de afgelopen vijf jeer is onze qekonsolideerde wintsmarges nadelig beinvloed door wijzigingen in ottenere la revoca della sentenza. Le sei piu importanti omzet met een gemiddelde van 21,4 /o qestegen. Over wisselkoersen tussen de landen waar de produkten worden daze periode is de nettowinst met een jaarlijks gemiddelde verkocht en wear zij worden geproduceerd. De problematiek ntervenut van 24,6% toegenomen en de winst oeroaandeel (op basis met betrekking tot prijskontroles, koersschommelingen e a n sostegnpo della Commssiotnee sono Negli ambienti acientifici continua it dibattito sull'interpre- van volledige konversg e) steeg me 920,7/° per jaar. en inflatie staan onder voortdurerende aandacht van de tazione delle prove statistiche su cui si b basata De toegenomen vraa near onze si aretten en naar ons direktie. I'asserzione che it fumo di sigaretta sia una delle bier, onze verwachtingen voor een verdere groei in beide Wij verkopen thans ruim 175 merken in zo'n 160 landen en principali cause del tumori e di altre affezioni umane. sektoren, plus de behoefte aan grotere produktie- gebieden. Onze sigaretten worden door 21 geaffilieerde Nel 1974, un eminente scienziato inglese, gia fautore kostenbesparingen, maakten de voortzetting van een maatschappijen en door 15 licentiehouders geproduceerd. dell'opinione che la maggior parte del casi di tumore veelomvattend kapitaalinvesteringsprogramma wenselijk. De unieke kenmerken van onze sigaretten en de Do investeringen over het afgelopen jeer bedroBgen toenemende vraa polmonare fossero causati dal fumo di sigaretta, ha g er near, plus onze reeds wijd verspreide pubblicato su una rivista scientifica inglese un articolo $215,8 miljeen. internationale aanwezigheid op de markt, hebben in cui, riprendendo in considerazione i dati, arrive a In 1974 vond een Sterke kostenstijging plaats van ruwe gezamenlijk bijgedragen tot de handhaving van conclusioni opposte a quella che sosteneva in precedenza. tabak, papier en verpakkingen, blikjes, flessen en Philip Morris' omvangrijke sigarettenexport vanuit de Un professore americano ha presentato una relazione brouwerijgrondstoffen. Wij waren echter in staat de nodige Verenigde Staten, che dimostra come la tendenza del medici ad effettuare un kwantiteit en kwaliteit aan materialen to verkrijgen, Marlboro heeft grote vitaliteit en mogelijkheden op esame piu accurato sul fumatori che sui non fumatori, teneinde aan de stijgende vraag near onze produkten internationale markten. Er is over de gehele vrereld een nelle diagnosi di tumori polmonari, basterebbe a spiegare tegemoet to komen. etijgende tendons near filtersigaretten en zogenaamde I'apparentemente frequente correlazione tra fumo e fatto Wij prijzen ons gelukkig dat de twee voornaamste "blended"-sigaretten. Wij zouden van deze tendens morboso; I'autore suggerisce quindi di riprendere in produkten van ons bedrijf sigaretten en bier zijn; moeten profiteren met gevestigde. Internationale merken esame parte di quel ragionamenti statistici che sono stati genotsartikelen met een relatief lage kostprijs, waarvan het zoals Marlboro, plus sterke regionale en lokale merken usati per concludere che esiste un rapporto causale fra verbruik door de tijd heen-zowel in goede als in slechte zoals Astor in Venezuela, Belvedere en Mark Ten in Canada, ii fumo e la salute. tijden-bestand was tegen onzekere ekonomische situaties. Muratti Ambassador op verscheidene Europese markten, La Philip Morris in una societa che si trasforma Een reohtstreeks gevolg van de konstanta vraag naar Viscount in Australia, Cavander's in India en K2 in Pakistan. Man mano che si accelera il ritmo del mutamenti sociali, onze produkten is, dat Philip Morris in staat is in de In al onze internationale regionen bleef zowel de afzet la oa acit8 di com rendere e di adattarsi at mutamento Verenigde Staten an daarbuiten aan 38.000 mensen een als de omzet stijgen. De merken van Philip Morris P P bestendige werkgelegenheid te bieden. International hebben momenteel in ruim 20 landen een acquista dimensioni piu significative. Sotto questo marktaandeel van 10% of ineer. aspetto, il Comitato Affari Pubblici del nostro Consiglio In april 1974 stemden de aandeelhouders van Philip Morris d'Amministrazione ha it compito di valutare e di precorrere in met een 2 : I aandelensplitsing op de gewone De verkoop van Philip Morris-merken in West-Europa i mutamenti nei valorj, nei bisogni e nelle priorita non aandelen. Het jaardividend op de gewone aandelen word nam vijf meet zo snel toe als de gemiddelde groei n de solo del vasto pubblico ma anche del dipendenti. opgetrokken van 700 tot 800 per aandeel. Dit was het gehele bedrijfstak. Teneinde de groeiende Europese markt Nel 't974, la societa he formalmente aggiornato to Studio zevende achtereenvolgende jeer waarin de dividenden to bedienen, heeft Philip Morris de sigarettenfabriek van warden verhoogd. Voorts word 1974 gekenmerkt als het Reemtsma in Munchen, Duitsland, gekocht. Zij breidde sulla Responsabilita Societe dell'Azienda, la cui prima 47ste opeenvolgende jaar waarin Philip Morris dividenden voorts haarfabrieken uit in West-Berlijn en Bergen op Zoom, stesura 6 del 1970. L'aggiornamento comprende oppor- heeft uitgekeerd op hear gewone aandelen. Nederland, en maakte een begin met de produktie van tunamente anche un'utile rassegna delle attivita intraprese Marlboro in een kleine Londense fabriek. In maart 1974 dalle societa affiliate della Philip Morris International, Philip Morris U.S.A. werd een wetenschappetijke en technische samen- per venire incontro ai bisogni ad alle aspirazioni del De voortdurende groei van elk van onze vier belang- werkingsovereenkomst getekend met de Sovjet-Unie. rispettivi paesi ospitanti. E' grazie a questa preveggente rijkste merken-Marlboro, Benson & Hedges 100's, Wij hebben licentie-overeenkomsten in Polen en attenzione alla dinamica sociale in atto e in potenza, Virginia Slims en Parliament-stelde onze grootste Jeegoslavie, waar de vraag near Marlboro stork bleef. che la nostra societa continuera ad essere ben accetta werkmaatschappij in staat hear Amerikaanse afzet to Nadat Philip Morris Nigeria Ltd. de afgetopen jaren in e rimunerativa nell'attivita internazionale. - vergroten tot een rekordhoogte van totaal 133 miljard Afrika met verliezen to kampen had, word 1974 La relazione stesa dal Comitato, oltre a fo-r-niire un sigaretten. winstgevend. aggiornamento su nuove attivita specifiche, quail it De omzet steeg met 15,2%, terwijl de bedrijfsresultaten In de regio Latijns-Amerika/Iberia steeg ons marktaandeet Gruppo di Lavoro per la Programmazione Pianificata della met 25,9% stegen. in de meeste van onze belangrijke markten. De in 1975 Carriere, offre un'utile, nuova prospettiva sul comporta- Aangezien ons aandeel op de Amerikaanse markt steeg tot to realjseren voltooiing van ons nieuwe produktiebedrijf mento aziendale responsabile in un ambiente in rapida trasformazione. 22,5%, tegenover 21,3% o in 1973, handhaafde Philip Morris in Brazilie, plus de in februari 1975 aangekochte . La relazione tratta complessivamente centinaia di U.S.A. haar positie als de snelst groeiende Amerikaanse Companhia Fumos Santa Cruz, zullen ons toegang tot een svilu sigarettenfabrikant. andere grote markt verschaffen. In Spanje word ppi e di programmi, tanto esterni quanto interni, ohe 3%, terwi I haar Tabacalera, S.A., een deelgenoot in onze Spaanse vanno dai sussidi ai dipendenti al rinnovamento De afzet van Marlboro steep met 9, 1 geaffilieerde ondernemingen, die onder kontrakt ambientale, dalla valorizzazione dell'ambiente nelle aandeel op de Amerikaanse sigarettenmarkt toenam van Tabacalera-merken produceren op de Canarische Eilanden. comunita residenziali annesse ai centri di produzione, 13,7% in 1973, tot 14,6% in 1974. Philio Morris geeft oD In Mexico ging onze geaffilieerde maatschappij Cigarra fino al continuo sostegno che Ia Philip Morris d'a alle de Amerikaanse sigarettenmarkt de toon aan in het grote Nacional, S.A. een fusie aan met La Tabacalera Mexicans, arti, ad ai suoi contributi nei settori medico a dell' en groeiende 100mm-segment. Benson & Hedges 100's, S.A., waarmee ons een minderheidsaandeel word geboden istruzione. het best verkochte 100mm-merk, boekte een verkoopstijging in wat momenteel de op ddn na grootste sigarettenmaat- van van 10,3%. Virginia Slims, een ander 100mm-merk, schappij in dat land is. Er werd een meuwe fabriek in Nel 1974: sono stati eletti due nuovi membri al Consi lio noteerde van onze vier belangrijkste merken de grootste Ecuador gebouwd. Eveozo werd in 1974 de kapaciteit voor g procentuele stijging. Marlboro 100's en Parliament 100's de behandeling van ruwe tabak in ons produktiecentrum d'Amministrazione della Philip Morris: bereikten eveneens hogere verkoopcijfers. - te Guatemala voltooid. Jacques G. Maisonrouge, presidente del consiglio Benson & Hedges 100's Menthol en Virginia Slims Menthol In de regio Azie/Pacific heeft Philip Morris (Australia) Ltd. d'amministrazione e"chief executive officer" defla IBM namen samen 23,4% van de verkoop in het groeiende momenteel het grootste deel van de Australische World Trade Europe, Middle East, Africa Corporation, 100-millimeter menthol-segment van do Amerikaanse sigarettenmarkt in handen. Niet alleen werd in 1974 de e Hamish Maxwell, "corporate vice president" e"executive sigarettenmarkt voor hun rekening. Ruim 26% van de produktiekapaciteit van deze geaffilieerde maatschappij vice president" delta Philip Morris International, respon- totale verkoop van Parliament, kwam op naam van uitgebreid, maar ook werd de opslag voor ruwe tabak sabile per la regionj, amministrative dell'Asia/Pacifico a Parliament 100's. verdubbeld. Lindeman (Holdings) Ltd. vergrootte hear Canadese della Philip Morris International. Philip Morris U.S.A. heeft veel aktiviteiten gewijd aan de verkoop en verwierf tevens een groter deel van de Prima di chiudere, rendiamo un omaggio particolare ai onhvikkeling van nieuwe produkten door de urtbreiding van Australische wijnmarkt. In Mildura, New South Wales, werd dipendenti della societa in tutto il mondo, per la varieties op bestaande merken. Zo is bijvoorbeeld de in 1974 een nieuw wijnverwerkingsbedrijf voltooid. Op een continua, eccellente prestazione che henna fornito in un gezamenlijk afzet in de Marlboro-lijn-Marlboro 100's, aantal markten in deze regio waaronder Indonesie en anno particolarmente impegnativo. Marlboro Lights en Marlboro Menthol-in 1974 met 24,5% Pakistan, werden op de sigarettenmarkt belangrijke gestegen en maakten doze merken samen bijna 20% van stijgingen in marktaandelen geboekt. Onze licentie- de totale Marlboro-afzet in de Verenigde Staten uit. 12 2500011208

overeenkomst in Japan voor het merk Marlboro werd gedurende 1974 op een bredere basis geplaatst. Op de Philippijnen bewerkste(figde onze onder licentie werkende maatschappii, La Suerte Cigar and Cigarette Factory, opnieuw een rekordafzet op deze groeiende markt. In Canada bleef de sigarettenafzet van Benson & Hedges (Canada) Ltd. stijgen. Daze geaffilieerde maatschappij verkocht Formosa Spring Brewery en zet al haar beschikbare middelen in voor onze toenemende tabaksbelangen. Vorig jaar leverde Philip Morris opnieuw een positieve bijdrage tot de Amerikaanse betalingsbalans. Onze internationale produktieregelingen met geaffilieerde maatschappijen en licentiehouders zijn in het leven geroepen omdat tariefgrenzen en andere handelsbelemme- ringen Amerikaanse exporten naar die markten beletten. Onze geaffilieerde maatschappijen en licentiehouders dragen echter bij tot de stijgende vraag naar Amerikaanse sigaretten en komponenten en naar tabakssoorten van Amerikaanse origine, die duizenden Amerikaanse landbouwers en fabrieksarbeiders werkgelegenheid verschaffen. - Behalve dergelijke belangrijke voordelen binnen de Verenigde Staten, bieden onze internationale vestigingen ook voordelen aan gastlanden. Al onze vestigingen worden vanzelfsprekend geleid in overeenstemming met de lokale belangen van elk land waar wij werken. Voorstellen in de Verenigde Staten voor belastingver- hogingen op winsten in het buitenland behaald, indamming van de uitwisseling van technologie en de instelling van importquota's die deze aktiviteiten aan banden zouden kunnen leggen, geven aanleiding tot represailles. Deze zouden uiteindelijk een averechtse uitwerking kunnen hebben op de Amerikaanse werkgelegenheid an op de Amerikaanse betalingsbalans. Miller Brewing Company Om 1974 noteerde Miller Brewing opnieuw de grootste procentuele stijging zowel in afzet als in omzet van alle brouwerijen in de Verenigde Staten. In 1974 boekte Miller een stijging van 31,0%-tot 9,066,000 barrels-waarmee de toename van 28,8% in 1973 werd overtroffen. Dit betekent dat Miller momenteel met een marktaandeel van 6,25% de vijfde plaats inneemt onder de Amerikaanse brouwerijen.. Met uitzondering van de grootste brouwerij in de Verenigde Staten bereikte Miller de grootste verkoopstijging in barrels. Miller's omzet steeg met 46,3% an de bedrijfsresultaten bedroegen $6.291.000, hetgeen een ommekeer van $8.662.000 betekende ten opzichte van 1973 toen het bedrijfsverlies nog $2.371.000 bedroeg. Ons uitgebreide herstruktureringsprogramma voor Miller, waarmee in 1972 een aanvang werd gemaakt, beantwoordt aan de verwachtingen. Het bedrijf begint de eerste vruchten te plukken van de kostenbesparingen op de omvangrijke produktie, door in toenemende mate moderne, efficiente en konkurrerende installaties in te schakelen, Daarnaast warden in het gehele produktieproces stipte programme's uitgevoerd die gericht zijn op het terugdringen van de kosten. De vaart in de groei van Miller High Life heeft een evenredige verlaging van marketingkosten per barrel mogellik gemaakt. De aigehele groel van het mark Miller High Life werd versneld door het sukses van Miller's zogenaamde 11 pony-pack"-flessen van elk 20 cl. Ons nieuwe mark Lite -een biersoort met een laag kalorisch en laag kool- hydraat-gehalte-bleek het afgelopen Jaar op zijn testmarkten een sukses te zijn an zal in de loop van 1975 op de lokale markt worden gelanceerd. Voorts verwacht Miller in 1975 de volledige Amerikaanse distributie van Ldwenbrau op zich te nemen. L'owenbrau is het wereldvermaarde Duitse export-bier, Een belangrijk deal van het bedrijfskapitaal gemoeid met ons investeringsplan zal nodig zijn om de groei van Miller te financieren en het produktiecentrum te moderniseren. Er wordt een vierde brouwerij gebouwd in Fulton, New York, (in de buurt van Syracuse). Daze brouweril zal tegen eind 1976 een kapaciteit van 2 miljoen barrels per jaar hebben. De kapaciteit van onze brouwerij in Fort Worth wordt uitgebreid van 2 miljoen tot 5 miljoen barrels, terwijl daar tevens een nieuwe blikjesfabriek wordt gebouwd. In 1974 werden aan de brouweril in Milwaukee snelle verpakkingslijnen toegevoegd. Begin 1975 werd in Milwaukee een nieuwe blikjesfabriek in bedrijf gesteld. Tegen eind 1976 zal Miller Brewing hear rendement in belangrijke mate verbeterd hebben en zal de jaarlijkse kapaciteitsnt15 miljoen barrels zijn vergroot. Onze lange termijn strategie voor Miller Brewing Company verloopt geheel volgens plan: er vond een reorganisatie plaats in 1972; er werd een positief verkoopresultaat bereikt in 1973; terwijl in 1974 de verkoop bleef stijgen an wij verlies in winst omzetten. Philip Morris Industrial De Papier-, Chemicalien- en Verpakkingsdivisies, die samen Philip Morris Industrial vormen, hebben het afgelopen jaar allen hun omzetten vergroot an tot de bedrijfswinst bijgedragen. De omzet van Industrial steeg 17,6%, waarbij de grootste vooruitgang werd geboekt bij de Papier-divisie. De bedrijfsresultaten stegen met 48,0%. Tot op zekere hoogte weerspiegeide de winstgroeiin 1974 bijzondere omstandigheden. Binnen het kader van de door de Amerikaanse regering uitgevaardigde richtlijnen voor prijskontroles, kreeg Philip Morris Industrial tot oktober 1973 geen goedkeuring voor prijsverhogingen. In 1974 deed zich vooral een grote vraag voor in de papier- en verpakkingssektor. De kombinatie van een verbeterd assortiment en reelere prijzen droegen bij tot een verhoging van de wrnst. Polymer Europe ging met het in 1973 ven,vorven Duitse chemische bedrijf een fusie aan, teneinde Wikolin Polymer Chemie G.m.b.H. te stichten. Er werd een nieuwe urethaan-fabriek aan het bedrilf in Bremen, West-Duitsiand, toegevoegd. Met daze investering v as $2 miljoen gemoeid. Philip Morris Industrial koncentreert zich op specifieke markten voor specialites, waar zowel geavanceerde technologie als hoge kwaliteit, de voornaamste criteria zijn. Dit beleid stelt het bedrijf in staat flexibeler te zijn bij de behandeling van haar markten die een verslapping blijken te vertonen, zoals in het bijzonder die van textielprodukten en papier. Mission Viejo Company Onze projektom,vikkelingsmaatschappij voorstadsplarining an woningbouw boekte goede verkoopcijfers in haar grote planmatig opgezette woongemeenschap in Orange County, Californi8. De verkoopcijfers in haar overige lokaties -Denver, Fresno en Phoenix-lagen lager, wearmee de teruggang in de bouwindustrie wordt weergegeven. Hoewel de omzet van Mission Viejo terugfiep met 7,8%, doordat er minder huizen warden verkocht, stegen de bedrijtsresultaten met 15,8o1c. De winsttoename was van bijzondere betekenis, gezien de ernstige problemen waarmee deze bedrijfstak in 1974 werd gekonfronteerd. De voornaamste lokatie van de maatschappij in Zuid- Californie blijft een sterke markt voor huizen, terwijI Mission Vlejo California een snel groeiende woongemeen- schap is die in krap acht jaar een inwonertal van ruim 30.000 heeft bereikt. De verkoopcijfers blijven stark stijgen omdat daze woongemeensohap de huiseigenaar waar voor zijn geld biedt, Hieronder rekent men niet alleen het huis, maar ook een goad woon- en leefklimaat. Mission Viejo California biedt winkel- an rekreatiecentra, parken, een openbare bibliotheek an vele schooltypen, die varieren van kleutersoholen tot middelbare scholen en zogenaamde "junior colleges". De toekomstige uitbreiding van de Californische woongemeenschap zal nauw verbonden zijn met de ontwikkeling van het Mission Viejo-meer, dat volgens plan in 1976 voltooid.moet zijn. De werkelijke waarde van het koncept van Mission Viejo werd duidelijk zichtbaar in 1974; een jaar waarin de meeste bouwondernemingen verliezen boekten of een ernstige terugslag ondervonden. Accijnzen op sigaretten Wettelijke regelingen ter verhoging van de staatsaccijnzen op sigaretten in de Verenigde Staten, warden in 1974 slechts in twee staten gerealiseerd, namelijk in Arizona en in Maine. Ondanks de regressieve an discriminerende aard van dit soort belastingen en ondanks de toegenomen zwartehandel in sigaretten, warden het afgelopen jeer in 17 federale staten wetsontwerpen ingediend voor de verhoging van sigarettenbelastingen. Het felt dat het merendeel van daze wetsontwerpen niet werd doorgevoerd, toont aan dat de wetgevers zich beginnen bewust te worden van de onevenredige druk die dergelijke belastingen leggen op rokers met lagere nkomens, evenals van andere probiemen die met sigarettenbelastingen samenhangen. De totale opbrengst aan accijnzen op sigaretten in de Verenigde Staten bedroeg in 1974 $5,8 miljard ($2,4 miljard aan federale, $3.3 miljard aan staats-en $0,1 miljard aan gemeentelijke accijnzen). Gemiddeld genomen bedragen de accijnzen op sigaretten in de Verenigde Staten ongeveer 45% van de detailhandelsprijs. Omzetbelastingen op sigaretten hebben eveneens een discriminerende fiskale last op rokers gelegd. Ook moet vermeld worden dat de Amerikaanse federale accijns op bier ongeveer 10% van de detailhandelsprijs uitmaakt. Internationaal gezien blijft de tendens naar procentuele stijgingen van de toch al omvangrijke sigarettenaccijns zich in vele markten voortzetten. Dergelijke verhogingen kunnen, vooral in een periode van ekonomische teruggang, resulteren in een verschuiving near het verbruik van lager geprijsde en lager belaste merken. De accijnsverhogingen blijken een averechtse uitwerking te hebben voor de belastingheffende overheden en blijken nadelig te zijn voor de industrie. Roken an gezonheid Philip Morris kontinueerde in samenwerking met andere in de Verenigde Staten gevestigde sigarettenfabrikanten haar steun aan medisch onderzoek met betrekking tot roken en gezondheid door nieuwe bijdragen te verstrekken aan de "Council for Tobacco Research-U.S.A." (Raad voor Tabaksonderzoek in de Verenigde Staten). Daarnaast waren in 1974, met steun van Philip Morris en andere fabrikanten, drie uitvoerige Amerikaanse programma's voor fundamenteel onderzoek naar kanker en ademhalingsziekte in bewerking. Onder teiding van vermaarde wetenschapsmensen worden de programma's tot stand gebracht aan de medische fakulteit van Harvard, aan de medische fakulteit van de Washington Universiteit te St. Louis en aan de medische fakultelt van de Universiteit van Californie te Los Angeles. De financiele bijdragen van de industrie aan daze speciale projekten bedragen in totaal omstreeks $8 miljoen. Een nieuw aspekt in de kontroverse met betrekking tot roken an gezondheid was de poging van verscheidene anti- rook-groeperingen om bezorgdheid te wekken over de aangevoerde effekten van sigarettenrook op de niet-roker. Bestudering van het wetenschappelijk bewijsmateriaal over dit onderwerp door een aantal onpartijdige deskun- digen duidt aan dat er geen grond is voor enige bewering dat de normale blootstelling aan sigaretten- rook schadelijke gevolgen heeft op niet-rokers. Desalniettemin hebben de anti-rook-groeperingen enig sukses geboekt door te bewerkstelligen dat er lokale wetten en regelingen zijn uitgevaardigd, waarbij het roken van sigaretten in bepaalde openbare gelegenheden wordt beperkt. In 1974 wees de "Consumer Product Safety Commission" (Commissie voor de Veiligheid van Consumentenartikelen), een Amerikaanse federale instelling, een petitie van verscheidena anti-rook-groeperingen af, die de "teer"- afgifte van sigaretten limiteert, Na bestudering van de wet besliste de Commissie dat zij op dit gebied geen kompetentie bezat. De indieners van deze petitie hebben bij een federale rechtbank een proces aangespannen tegen de Commissie in een poging om daze beslissing omver te werpen. De zes' belangrijkste Amerikaanse sigarettenfabrikanten hebben zich in de zeak gemengd om de Commissie steun te verlenen. Er blijven in wetenschappelijke kringen debatten gaande over de interpretatie van het statistisch bewijsmateriaal, dat tot nu toe de belangrijkste basis vormde voor de verklaring dat het roken van sigaretten een van de hoofdoorzaken is van kanker an van andere oij mensen voorkomende ziekten. In 1974 publiceerde een vooraanstaande Britse geleerde, die er eens van overtuigd was dat da meeste gevallen van longkanker veroorzaakt warden door het roken van sigaretten, een artikel in een belangrijk Brits wetenschappelijk tijdschrift. In dit artikel onderwierp hij de gegevens opnieuw aan een onderzoek en wijzigde zijn oorspronkelijk ingenomen standpunt. Een Amerikaanse professorveklaarde er van overtuigd te zijn dat de neiging van doctoren om bij de diagnose-stelling van longkanker rokers grondiger te onderzoeken dan niet-rokers, het ogenschijnlijk nauw verband tussen roken en de ziekte zou kunnen verklaren. Hij heeft voorgesteld over te gaan tot een herbeoordeling van de statistische beredeneringen, die tot nu toe gebruikt zijn bij het leggen van causale verbanden met betrekking tot roken en gezondheid. Philip Morris in een veranderende maatschapi/ Naar mate het tempo van sociale veranderingen zich versnelt, wordt het belangrijker daze veranderingen te kunnen begrijpen en zich eraan aan te passen. Wat dat betreft is het "Public Affairs Committee" (Commissie voor Maatschappelijke Aangelegenheden) van onze Raad van Bestuur verantwoordelijk voor het waarderen van en het vooruitlopen op veranderingen in waarden, behoeften en prioriteiten; niet alleen met betrekking tot het publiek in het algemeen maar cok tot onze medewerkers. In 1974 heeft het bedrijf de corspronkelijke "Studie met betrekking tot de Maatschappelijke Verantwoordelijkheid van het BedrijY'-die vanaf 1970 werd ingesteld-formeel bijgewerkt. Daze bijwerking bevatte terecht een waardevol overzicht van de alitiviteiten die de geaffilieerde bedrijven van Philip Morris International ontplooien bij het voldoen aan de behoeften en aspiraties van de landen waarin zij werken. Door zulke aandacht op lange termijn voor aktuele en potentiele sociale dynamiek, zal ons bedrijf haar waardering voor en winstgevendheid in internationale vestigingen blijven handhaven. Het rapport van de Commissie bevat, naast de bijwerking van specifieke nieuwe aktiviteiten zoals die van de "Career Program Planning Task Force'' (een werkgroep die zich bezighoudt met carriere-planning), tevens een waardevol nieuw perspektief ten aanzien van een verantwoord zakelijk gedrag in een snel veranderende maatschappij. Ailes bij elkaar omvat het rapport honderden ontwikkelingen en plannen, zowel op extern als op intern gabled, varierend van secundaire arbeidsvoorwaarden, stadsrenovatie an het op de voorgrond plaatsen van het milieu in industriele gebieden, tot de doorlopende steun van Philip Morris aan de kunst in het algemeen en hear bijdragen op het gabled van opvoeding en geneeskunde. k f • _ * Gedurende 1974 warden twee nieuwe leden gekozen in de Raad van Bestuur van Philip Morris, namelijk Jacques G. Maisonrouge, Voorzitter van de Raad van Bestuur en Chief Executive Officer van IBM World Trade Europe/Middle East/Africa Corporation en Hamish Maxwell, Corporate Vice President en Executive Vice President van Philip Morris International, die voor Philip Morris International de verantwoording heeft over de regionen Azie/Pacific en Canada. Tenslotte spreken wij onze grote waardering uit voor de voortreffelijke wijze waarop onze medewerkers over de gehele wereld hun werk in een zeer veeleisend jaar hebben uitgevoerd. Respectfully submitted on behalf of the Board of Directors, .~ Joseph F. Cullman 3rd Chairman of the Board and Chief Executive Officer L\a ,.~,..~ n v/V 2a.A.A M+n.~.l 'Georg e W eissman Vice Chairman of the Board Ross R. Millhiser President ss

Philip Morris U.S.A. O perating Revenues Operating Income 1974 $1 ,502,267,000 286,225,000 1973 $1,303,629,000 227,282,000 1972 1971 1970 $1 ,164,550,000 $1 ,035,178,000 $920,323,000 194,072,000 166,734,000 138,051,000 100 Park Avenue Robert H. Cremin, W. Wallace McDowell, Richard D. Robertson, Benjamin A. Soyars, New York, New York 10017 Vice President, Sales Vice President, Operations Vice President, Ecology & Vice President, Manufacturing Clifford H. Goldsmith President Russell N. Freund, . Coordination Environment and Director Dr. Helmut R. R: Wakeham , Personnel Vice President Morgan James J of Energy Resources and , Vice President Research & John T. Landry, , . , Conservation , Executive Vice President & John P.Jeb Lee, Vice President, Vice President, Director of Development Director of Marketing Marketing Services Brand Management Edward M. Schaaf, Jr., Charles H. Wilson Max L. Berkowitz, William C. Longest, Shepard P. Pollack, Vice President, Production , Vice President, General Products Senior Vice President Vice President, Leaf Vice President, Finance & Alex Kay, Jr., Controller Planning Above: At the Philip Morris Research and Development Center in Richmond, extensive leaf and manufacturing research helps to maintain our leadership in the manufacture of quality cigarettes. Below: On October 12, 1974, Philip Morris em- ployees joined in dedicating the new Richmond Operations Center. Warning: The Surgeon Genera! Has Determined That Cigarette Smaking Is Dangerous toYaur Health. Above: The enduring Marlboro Country theme illustrates the strength of continuity in our brand advertising. Left: The 1974 Virginia Slims Women's Professional Tennis Tour again featured top stars of women's tennis. N tPl O O O . t~ ~ 0 14

Philip Morris U.S.A. Operating Revenues Mlllions of Dollars 1500 1400 1300 1200 1100 1000 900 800 700 00 500 00 300 2C0 100 U. S. Cigarette Industry Unit Sales Total Filter Cigarettes a Total Non-Filter Cigarettes 3 Philip Morris Share of U. S. Industry )- Billion Units 600 500 25 30 Percentage Percentage Marlboro Share of Total U. S. Industry Marlboro 80-85mm Full Flavor , Marlboro Line Extensions ; 16 14 12 100mm Ci,'iret U. S. Indus.ry ar, Philip Mor is 1l U. S. Indua,try - Peroentage 24 20 Share 65 66 67 68 69 70 71 72 73 74 65 66 67 68 69 70 71 72 73 74 65 66 67 68 69 70 71 72 73 74 65 66 67 68 69 70 71 72 73 74 Phtllp Morris U.SA. operating revenues have increased at an average annual compounded rate of 12.3°,o since 1965. The filtersegment of the U,S. clgarette industry has grown at an average annual rate of 5.2°'0 over the past ten years whlle the total U.S. industry has increased at an average rate of 1.7% since 1965. Phllip Morris U.S,A.'s share of total U.S. industrysales rose from 10.3% in 1965 to approximately 22.5% in 1974. AII categories of b9arlboro accounted tor 14.6% of total U.S. cigarette industry sales In 1974 versus 5.3% In 1965. The Ilne extenslons of Marlboro, including 100's. Menthol and Lights, now acoount for almost 20% of totzl Marlboro volume, and grew by 24.5 ;'o in 1974. S'mce the introducfion of 100mm cigarettes in 1965, the category has grown to 24.4% of total industry sales. Philip Morris U,S.A.'s share of this segment has risen to 30.8 ;'°, or about 7,4% of the total U.S, industry. ~~~`(arl6uro~adboiSlar~horo ui I W, r- 11 - ~b nm . ar Above: Philip Morris U.S.A. produces a full line of cigarette brands to meet the various tastes of smokers throughout the country. Below: Retail displays play an important role in our total marketing program. Above: The Richmond Operation_s Center was producing at the rate of more than 200 million cigarettes a day at the end of 1974. Near Right: Philip Morris representatives actively assist tobacco distributors at national and regional trade conventions held throughout the year. Far Right: Benson & Hedges 100's "disadvantages" theme reinforces the brand's top position in the rapidly-growing 100mm market segment. 15

Philip Morris International 1974 1973 1972 1971 1974 Operating Revenues S887,077,000 $822,907,000 $623,699,000 $517,670,000 $424,800,000 Operating Income 94,017,000 92,160,000 84,095,000 66,968,000 54,167,000 100 Park Avenue Hamish Maxwell, R. William Murray, William J. O'Connor, Staffan Gunnarsson New York, New York 10017 Executive Vice President, Canada Vice President, Canada Vice President and Chief , Vice President Hugh Cullman, President and AsialPacific Carlos E. Salguero, Administrative Officer Charles F. Lombard, Ronald H.Thomson, Vice President, Latin Americal Albert E. Bellot, Vice President Vice President, New Development Executive Vice President, Iberia Vice President Aleardo G. Buzzi and Planning EuropelMiddle EastlAfrica , Robert H. Souther, Vice President, Finance Above: Muratti Ambassador is a popular brand in several European countries. Right: In Australia, premium-priced Marlboro showed strong sales gains despite a general trend toward lower-priced brands. Above: In Venezuela, C. A. Tabacalera Nacional maintained its strong leadership position. Its Astor brand is the best-selling cigarette in the country. Left: In West Germany, Marlboro continues to increase sales and market share and ranks among the ten most popular brands. V!UlUIV'1AY R'Anue r c.1t t 7 s' @OwLE RS NEPEA R DAYi'ES „?c ° N:fCHOLLS p 0:5 3 WICKETS FOR 14. 7 ® SUNDRIES i ® G= 2500011212 -16

Philip Morris international Operating Revenues Consotldated i Unconsolidated Miuicns of Dollars I500 400 1300_ 1200 1100 000 500 800 700 eo0 sco 73 74 Fnllip P.lorns Internatlonal operating revenues of both cocsolidzted and unconsolidated affiliates have tncre_sed at an average rate of 24.6:ro compounded since 1965.0verthe same peried, consolidated operating revenues have increased at an average of 24.1=5 compounded peryear. Philip Morris International Cigarette Unit Sales Export, Affiliates, Licensees Blllicn Unlts 140 130 120 i_10 80 70 60 e0 40 30 20 0 ftftFHTh 65 66 67 68 69 71 74 70 72 73 Since 1965, total affiliale, licensee, and export unit sales of Philip Morris International have-increased at an average annual compounded rate of 19.5°;b. Above: In Spain, Fortuna was introduced and received excellent consumer acceptance in 1974. Our affiliates in the Canary Islands contract- manufacture this brand for Tabacalera, S.A. Total World Cigarette Unit Sales Excluding U.S.A. Total Filter Cigarettes ® Total Non-Filter Cigarettes Philip Morris Share of World Market 311!ion Units Percentage 3300 . 11 ~ 3000 ~ 10 2400 8 2100 7 1800 - . - ~ - 6 1200 - 90 ® 0 i6 ~~LNla '05 66 67 68 69 70 7 72 7 73 Overthe last ten years, world cigarette industry unit sales (excluding the U.B.) have risen an average of 4.4% peryear, reaching 3.1 trillion In 1974. Philip Morris nternational's share of the world market has grown from 1_3% in 1965 to 4,5% in 1974. Exports of U.S.-Made Cigarettes Exports of U. S.-Made Cigarettes 2 Philip Morris Share Bllllcn Units E0 20 2 i otal exports of U..S.-made cigarettes have grown at an average compounded rate of 3 3% peryeu since 1965. Philip Morris's share of these exports has been approximately 30°ro over the past thre=_ years. a 20 Above: In the Philippines, Philip Morris brands have been made under license for 20 years and now hold a 50% share of the premium-price market. Philip Morris Menthol 100's is the largest- selling international cigarette there. Far Left: The Philip Morris Holland B. V. Bergen op Zoom factory was expanded and modernized to meet growing demand for Marlboro and other brands in the European Economic Community. Near Left: Mark Ten is the leading brand of Benson & Hedges (Canada) Ltd. This affiliate expanded production capacity of its Brampton, Ontario, plant.

Miller Brewing Company 1974 Operating Revenues $403,551,000 Operating Income 6,291,000 1973 1972 1971 1970 $275,860,000 $211,262,000 $204,134,000 $198,479,000 (2,371 ,000) 228,000 1,300,000 11,409,000 4000 West State Street Edward W. Frantl, Clement G. Meyn, Georgy Tarala, Clifford R. Wilmot, Milwaukee, Wisconsin 53201 Vice President, Sales Vice President, Master Brewer Vice President, Engineering Vice President, Brand John A. Murphy, President and Thomas A. Fulrath, Thomas B. Shropshire, Lauren S. Williams, Management Chief Executive Officer Vice President, Personnel Vice President, Market Planning Vice President, Marketing Warren H. Dunn, William K. Howell, General Counsel, Secretary Executive Vice President Travis G. Adler, Controller Above: Six-packs of Miller High Life 12-ounce bottles move along a new high-speed packaging line at the Milwaukee brewery. Above Right: To meet increasing demand, annual capacity at the Fort Worth brewery is being increased from 2 million to 5 million barrels. Below: "Miller time" theme focuses on the real beer drinkers. Above: Miller's Quality Awareness program ensures consistent excellence in Miller products. Near Left: Miller High Life is available in a full line of packaging to satisfy various consumer preferences. r•J Cf7 0 0 0 ~ ~ ~ .~ 1s

Milier Brewing Company Miller Brewing Company Domestic Beer Industry Unit Sales Beer Pricing Trends Operatrng Revenues! Miller Unit Sales a Nationally Distributed (1965 - 100) Mlller Share of U. S. Industry Premium Beer (est.)  Wholesale Price Index Regional and Non-Premium Beer (est.) ~ All Commpdities  Wholesale Price Index Beer - Mllllonsof Dollars Millions of Barrels Percentage Mfllions of Barrels Index 450 4;_o 350 300 65 66 67 68 69 70 71 72 74 73 Operating revenues of Miller Brewing have increased at an average annual compounded rate of 12.9% since 1965.S ince Millerwas acquired in 1970, revenues have risen atan average rate of 15.8%. 10 - . _1_0. _ 9 65 66 67 68 69 70 71 72 73 74 Miller barrel volume has increased 13.2'fo per year since 1970.Overthe past ten years, the average annual growth in barrel sales has been 10.7%. Above: Miller's new eastern brewery in Fulton, New York, was "topped out" in October, 1974. It will begin operations in early 1976. Above Right: Lite, a low calorie, low carbohydrate beer, will be introduced nationally in 1975. Right: Miller offers a full line of quality malt beverages. 140 ,g 170 120 ~ 130 80 150 140 130 ~ 130 40 110 20 ~ 100 I 65 66 67 68 69 70 71 72 73 74 65 66 67 68 69 70 71 72 73 74 Since 1965, total U,S. beer industry barrel sales have risen In the last decade, the wholesale price index of all on an average of 3.9°'o perannum. During the same period, commodities has risen on an average of 5.8?~o peryear, thepremiumbeersegmentoftheindustryhadanannual whilethewholesalepriceindexforbeerhasgrown growth rate of 11.3 %. . 2.5°~. In the past twoyears, the all commodities index was up 18.9% while beerwas up 9.2 %. is

Philip Morris indus$rial -4 1974 1973 1972 1971 1970 Ope~a<~ng Rever~ues 5155,390,000 $132,126,000 $113,136,000 $95,513,000 $85,875,000 Operating Income 12,280,000 8,300,000 7,735,000 6,135,000 6,049,000 4200 North Holton Street Milwaukee, Wisconsin 53201 William D. McCoy, Executive Vice President, James B. Kurtzweil, Executive_ Vice President, Operations Robert G. Etter, -- President, Paper Group George R. Lewis, Vice President Financial and Planning Fred M. Stefan, President General Administration Karl M. Bierman, President, Chemical Group Ed,vard B. Kime, Jr., Alan G. Wernick, President, Packaging Group Vice President, Personnel Above: Wikolin Polymer Chemie G,m.b.H. supplies packaging adhesives and coatings throughout Europe. Near Right: Surtech Coating Company, formerly the Special Products Division of Philip Morris Industrial, has one of the world's largest coaters of papers and other materials. Far Right: Philip Morris Industrial is a recognized leader in the development of printing technology for the Universal Product Code. Above: Electro-sensitive paper, developed by Philip Morris industrial for portable printing calculators, facilitates recording of data at a faster rate than with conventional paper tapes. Left: Fred M. Stefan, president of Philip Morris Industrial. Below: Philip Morris Industrial supplies the varied flexible packaging materials used by leading U.S. consumer product companies. 2500011216 20

Mission Viejo Company Operating Revenues Operating Income 1974 1973 1972 1971 $62,676,000 $67,976,000 $60,824,000 $37,812,000 4,772,000 4,122,000 5,714,000 2,256,000 1970 $26,834,000 682,000 26137 La Paz Road John E. Cookman Philip J. Reilly, President Roger F. Clark, Vice President Geurt Henri Lodder, Mission Viejo, California 92675 Chairman of the Board. James G. Toepfer, James G. Gilleran, Vice President Vice President Senior Vice President Robert M. Rodman, Controller William K. Smith, Secretary Above: Mission Viejo California provides a wide-ranging educational system from pre- school through junior college. Left: Mission Viejo California offers a full range of amenities for its homeowners. Above: Mission Viejo offers a full line of quality homes to meet the needs of homebuyers. Far Left: Philip J. Reilly, president of Mission Viejo Company, reviewing a topographic model of Lake Mission Viejo, which is scheduled for completion in 1976. Left: The Mission Viejo High School Marching Band has participated in parades and reviews throughout the Southern California area. 21

Financial Review , 5-10-15-Year Growth Record (in thousands except earnings per share) 5 Years 1974 1969 Compounded Average Annual Growth Rate Operating Revenues $3,010,961 $1,142,373 21.4% Pre-Tax Income 297,502 115,613 20.8% Net Earnings Earnings Per Share 175,516 58,340 24.6% Primary 3.15 1.29 19.5% Fully Diluted 3.07 1.20 20.7% 10 Years 1974 1964 Compounded Average Annual Growth Rate Operating Revenues $3,010,961 $ 641,439 16.7°/D Pre-Tax Income 297,502 44,466 20.9% Net Earnings Earnings Per Share 175,516 22,614 22.7% Primary 3.15 .50 20.2 °/D Fully Diluted 3.07 .50 19.9% 15 Years 1974 1959 Compounded Average Annual Growth Rate Operating Revenues $3,010,961 $ 499,598 12.7% Pre-Tax Income 297,502 41,159 14.1 % Net Earnings Earnings Per Share 175,516 19,590 15.7% Primary 3.15 .42 14.4% Fully Diluted 3.07 .42 14.2% Despite the diversity and magnitude of the problems which confronted the company during 1974, it was a good year. Throughout the world we had to contend with price controls, inflation, currency fluctuations, high interest rates and tight material supplies which included the threat of a serious energy shortage.Some of these problems are continuing into 1975. Net income and earnings per share were up approximately 18% in 1974. The earnings per share growth of Philip Morris continues to surpass the average of the Standard & Poor's 425 stocks (Chart 1). During the year, costs of U. S. tobacco leaf increased roughly 20%, while agricultural commodities for brewing increased 40%, cans 34% and bottles 14%. The new Richmond cigarette facility and new packaging lines at the Milwaukee brewery were the primary contributors to start-up costs of about $9 million. These costs were 50% above 1973 and similar start-up costs are anticipated in 1975. By 1976, we expectthatthe Richmond facility and Miller's expanded brewing capacity will produce major benefits for the corporation. Despite the impact of severely increased costs, consolidated operating margins were increased as a result of expanded volume in cigarettes and beer, tight control of marketing and overhead expenses and pri_ce i-ncreases in the U. S. of 15% for our cigarettes and approximately 10% for our beer products. Pre-tax margins (Chart 2) increased slightly in 1974, as contrasted with a decline in the prior year, despite the exceptionally high level of interest costs which at $82.7 million were approximately 60% greaterthan last year. After-tax margins were likewise up slightly benefitting from an increase in investment tax credit, $9,863,000 in 1974 versus $4,841,000 i n 1.973. ' Capital expenditures (Chart 3) in 1974 were $215.8_million, of which the major components were the Richmond cigarette complex, now operating at less than 40% of its planned 1977 capacity, and the Miller Milwaukee brewery, which at year end had increased capacity by about 3 million barrels per year. For 1975 capital expenditures are forecast above the 1974 level, or about $250 million. Chart 3 also illustrates that net funds from operations, after dividends, were less than capital expenditures. This condition is expected to continue into 1975 and is one of the principal reasons for limiting dividends (Chart 4). The financial condition of the company was further strengthened during 1974. Philip Morris sold $200 million of long and medium term debt and the three outstanding subordinated convertible debenture issues were called and largely converted into common Primary Earnings Per Share (1960 = 100) Philip Morris 7 Standard & Poor's 425 - Chart I Index 700 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 Operating Revenues  Pre-Tax Margins (%)- Chart 2 Millions of Dollars 3300 60 6 Funds from Operations (after Dividends)  Consolidated Capital Expenditures - Chart 3 Millions of Dollars 220 200 80 Percenta9e 11 7 72 73 74 160 40 20 00 60 60 0 20 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 Primary Earnings per Share  Dividends Declared per Share - Chart 4 Dollars 3.25 3.00 2.75 2.e0 2.25 2.00 175 1.50 1.25 U0 75 so .25 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 2500011218 62 63 64 I 66 67 65 68 69 70 22

stock. As a consequence of the new financing, the long-term debt to equity ratio (Chart 5) increased to 81 %, while working capital (Chart 6) increased by $210 million. At year end, current assets alone continue to exceed the aggregate of current liabilities and senior long-term debt. The high level of annual earnings retained in the business and the conversion of the convertible debentures have resulted in rapid increases in stockholders' equity to $974.7 million (Chart 6). Nonetheless, the company has continually achieved a level of pre-tax return on equity above the average of the 30 companies comprising the Dow Jones Industrial average (Chart7). In 1974, the rapid escalation of costs caused many companies to consider the adoption in the U.S. of last-in, first-out (LIFO) accounting for inventories. We considered the adoption of LIFO and concluded that the LIFO method of accounting was not appropriate in the case of Philip Morris. Seventy-five percent of the company's U. S. inventories are comprised of tobacco, which move through the production cycle on average over a two-year period. We believe, therefore, that for Philip Morris the average cost method for valuing tobacco inventories provides a more appropriate matching of costs and revenues than LIFO does. The company's public accountants concur with this conclusion. Rapid escalation in costs has also given rise to considerable discussion concerning "inventory profits." In the company's opinion, "inventory profits" have had no important effect on its consolidated profits. In April, 1974, stockholders approved a revised pension plan which provided improved retirement benefits for many of our employees. As a result of this revision and increased payrolls, our pension costs increased from $14.8 million in 1973 to $19.5 million in 1974. Our revised pension plan is in substantial compliance with the new U. S. pension legislation enacted in September, Currency fluctuations throughout the world had an impact on Philip Morris's balance sheet. Principally as a result of reflecting foreign currency long-term debt at current exchange rates, the Reserve for International Operations was reduced from $9,104,000 to $1,002,000. Currency changes benefitted profits in certain countries and adversely affected them in others. While the overall impact was unfavorable, it was not significant. During 1974, two purported class actions by tobacco growers were brought against the six major U.S. cigarette manufacturers, including Philip Morris, and others. The suits allege violations of antitrust laws and seek damages computed on speculative bases for substantial amounts. We are advised by counsel that the actions are not proper class actions. We believe Philip Morris has not violated the antitrust laws, and we will vigorously contest the actions. Looking toward 1975, Philip Morris expects continued strong volume gains in both worldwide cigarette sales and U. S. beer sales. However, due to economic conditions, volume gains forthe company's industrial and housing products are less likely. Further cost increases in all operations are expected, especially in tobacco leaf for cigarette production. The ability to maintain profit margins will require continued tight control of expenditures and the capability to offsetthe higher costs, at least in part, through product pricing. This is particularly true in certain international markets where government control of pricing has resulted in unsatisfactory profit margins in these markets. Late in the year, there were some favorable developments in these areas, improving the outlook for 1975. Long-Term Debt to Equity Senior Long-Term Debt 11 Subordinated Long-Term Debt ' Chart 5 Percentage 100 90 80 60 6 62 63 6 65 66 67 66 69 70 7 Stockholders' Equity  Working Capital - Chart 6 Millions of Dol!ars 1000 900 60 6 62 63 6 65 66 67 68 69 70 71 72 73 74 72 73 74 Pre-Tax Return on Stockholders' Equity Philip Morris ! Dow Jones 30 Industrials - Chart 7 Percentage 35 30 25 2_0 15 10 5 11 U 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 23 I

Quarterly Results Per Share of Common Stock Quarters Operating Revenues Net Earnings Earnings, Fully Diluted Dividends Paid Market Price* (High-Low) 1974 Year $3,011.0 $175.5 $3.07 $.75 $613/8-34'/s IV 782.6 42.2 .74 .20 491/z -343/s 111 815.7 50.4 .88 .20 55'/8 -341/8 II 769.1 45.2 .79 .175 613/e-475/s 1 643.6 37.7 .66 .175 583/8-49 1973 Year $2,602.5 $148.6 $2.61 $.661 $683/8-483/4 IV 714.6 35.6 .62 .175 605/8-483/4 III 683.0 42.3 .74 .162 635/s-53'/2 II 634.3 38.4 .67 .162 67'/8-52y/4 I 570.6 32.3 .57 .162 683/s-59 °New York Stock Exchange The company's annual report on Form 10-K, which will be filed with the Securities and Exchange Commission, will be available to stockholders without charge by writing to: Eugene J. T. Flanagan, Secretary Philip Morris Incorporated 100 Park Avenue New York, New York 10017 Management's Discussion and Analysis of the Summary of Operations The Securities and Exchange Commission now requires annual reports to shareholders to include a five-year summary of operations and an analysis thereof. In this report, the summary appears in bold face type on page 26 as part of the company's fifteen-year financial review. In reviewing the five-year summary, please note that operating revenues include operating revenues of Miller Brewing Company since August 1,1970, and Mission Viejo Company since September 30, 1972, and operating income includes the company's equity in the net earnings of Miller Brewing Company from January 1, 1970 through July 31, 1970 and the operating income of Miller Brewing Company since August 1, 1970 and Mission Viejo Company since September 30, 1972. In accordance with the Commission's requirerrients, the following discussion is limited to changes between 1974-1973 and 1973-1972. Revenues Consolidated operating revenues increased 15.7% in 1974; all operating companies experienced higher sales revenues except Mission Viejo Company. Philip Morris U.S.A. unit cigarette volume was up 8.4% over the prior year and price increases during 1974 contributed approximately $90 million to the $199 million increase in the operating revenues of , Philip Morris U.S.A. Philip Morris International contributed 29.5% of the higher 1974 consolidated operating revenues mainly due to higher unit volume. Volume gains for Miller Brewing Company of 31 % plus beer price increases during the year of approximately $29 million accounted for $128 million of the $408 million increase in consolidated 1974 revenues. Philip Morris Industrial represented-5.2% of consolidated revenues in 1974 and 5.1 % in 1973. The decrease of 7.8% in Mission Viejo's revenues compared to 1973 was attributable to a 19.6% decline in unit house sales compared to recently published declines of 35% in industry housing starts for 1974. 1973 operating revenues increased 22.1 % over 1972, due to higher unit volume sales of Philip Morris U.S.A. (volume up 11.3%), Philip Morris International (worldwide volume up 9.5%) and Miller Brewing Company (barrels up 28.8%). Philip Morris Industrial recorded a 16.8% increase in sales due to higher sales of its paper and chemical groups. Mission Viejo's operating revenues of $68 million accounted for $49 million of the $471 million increase in consolidated revenues; 1973 was the first full year of Mission Viejo's inclusion in the consolidated results. Ongoing price control regulations under Phase IV of the U.S. Economic Stabilization Program restricted the ability of Philip Morris to offset increased costs through higher prices during 1973. Early in 1973, under Phase III, a price increase of 20¢perthousandcigarettessoldforconsumptionintheUnitedStateswasputintoeffect. 2500011220 Costs and Expenses Cost of products sold in 1974 increased at a faster rate than consolidated revenues mainly due to higher raw material costs. The increase in labor rates to historic highs was not as great as the rate increases in raw material prices and other supply items. Cost of sales was 75.0% of revenues compared to 75.1 % for 1973 and 73.0% for 1972. Internal cost reduction programs and volume economies resulted in lower marketing, research, administration and corporate expenses as a percent 24

of operating revenues (13.2% in 1974 vs. 13.8% in 1973 and 15.0% in 1972) although on a total dollar basis, 1974 expenses were up 10,6o/o and 1973 expenses were up 12.7%. Increases in interest expense were recorded in each of the years 1972, 1973 and 1974 with 1974's total representing an increase of 62.3% over the comparable 1973 expense due to higher levels of debt and higher interest rates. Debt levels were expanded to support record dollar level inventories and newly constructed factory facilities. 1973 interest expense was up 34.7% over 1972 primarily due to higher debt levels. Equity in Unconsolidated Subsidiaries and Affiliates Equity in net earnings of partly-owned unconsolidated subsidiaries and affiliates was 22% higher in 1974 than in 1973, reflecting continued improvement in sales and profits of these operations. 1973 equity in the net earnings of these subsidiaries and affiliates was 76% h igherthan in 1972 mainly due to higher profits of the Australian subsidiary which benefitted from the appreciation of the Australian dollar. Income Taxes Federal, foreign and state income taxes represented 41.0% of earnings before income taxes in 1974, compared to 41.9% in 1973, and 45.8% in 1972. The lower effective income tax rate in 1973 compared to 1972 was attributable mainly to the substantial increase in equity in net unremitted earnings of unconsolidated subsidiaries and affiliates included in earnings before income taxes and which bear no further income tax provision. In addition, the rate was lowered by foreign income which was taxed at less than the U.S. rate of 48% and by higher investment tax credits. Net Earnings Net earnings were up 18.1 % in 1974, mainly attributable to increases in cigarette unit volume and prices, favorable operating results at Miller Brewing Company, and tight control of marketing and administration expenses by all operating companies. 1973 net earnings were 19.4% higher than 1972 mostly due to unit volume increases in Philip Morris U. S.A. where operating income was up 17.1 % and to Philip Morris International which recorded a 9.6% increase in operating income on worldwide volume increases of 9.5%. Miller Brewing Company experienced an operating loss of $2.4 million in 1973 although operating revenues increased 30.6%. Philip Morris Industrial posted operating income of $8.3 million, a 7.3% increase in 1973, while Mission Viejo Company recorded operating income of $4.1 million for the full year 1973, compared to $1.3 million forthe last three months in 1972 when it was first consolidated. Net earnings also benefitted, from the lower effective tax rate in 1973 as explained above. rv Ct7 0 0 G ~ ro N 2

Fifteen Year Financiai 4teview Philip Morris Incorporated and Consolidated Subsidiaries (dottar amounts except per-share amounts expressed rn thousands) 1974 1973 1972 1971 1970 Summary of Operations: Operating Revenues ....................................................................... $3,010,961 Cost of Sales: Cost of Products Sold ........................................... .:................. .____ 1,290,319 Federal Excise Taxes ............................................................. _._ . 619,504 Foreign Excise Taxes ............ ................. .............. ....... ........... ..._._ 349,363 Operating Income .............................................................................. . . 403,585 Interest Expense ..............................................................._..............._ 82,741 Earnings Before Income Taxes .................................................. 297,502 Pre-Tax Profit Margins ........................................... ...................... .... 9.9% Provision for Income Taxes ......................................................... 121,986 Net Earnings ....................................................................................... 175,516 Primary Earnings Per Common Share ........................................... $3.15 Fully Diluted Earnings Per Common Share ............... ......... ..... . 3.07 Dividends Declared Per Common Share ......................... ._.......... ..-. . . .775 Weighted Average Shares-Primary .......................................... 55,649,417 Weighted Average Shares-Fully Diluted ................ ................ .- 57,339,255 2,602,498 1,060,777 558,947 334,512 329,483 50,993 255,609 9.8% 106,977 148,632 2.71 2.61 .674 54,804,174 57,315,784 2,131,224 832,890 494,778 228,151 287,461 37,870 229,634 10.8% 105,168 124,466 2.34 2.18 .631 52,999,338 57,265,432 1,852,495 700,021 441,143 201,386 241,137 35,472 189,800 10.2% 88,302 101,498 2.01 1.82 .605 50,126,614 56,556,948 1,509,540 577,106 372,092 147,124 203,180 35,425 150,008 9.9% 72,510 77,498 1.68 1.43 .525 45,613,196 56,596,566 Capital Expenditures ....................................................... ................ ...__ 215,770 174,665 120,034 68,001 39,595 Annual Depreciation ..................................................._........................_ . 38,006 30,245 26,576 21,500 17,658 Property, Plant & Equipment (Gross) ............................................ 899,810 728,726 571,148 447,075 394,088 Property, Plant & Equipment (Net) ................................................. .. 659,520 510,286 373,372 274,070 236,697 Inventories ......................................................................__...._............_ 1,269,212 1,009,414 801,145 670,244 568,428 Current Assets ..................................................................................._ 1,557,908 1,245 ,934 989,708 826,453 728,837 Working Capital ........................... ............................................. ....:.:.::... 725,000 515,347 524,791 417,591 347,682 Total Assets ...........................:.............................................._._._..,......._ 2,653,263 2,108,403 1,701,494 1,392,035 1,239,424 Total Debt ...................................................................................___........ . 1,239,312 947,364 681,000 553,900 557,700 Stockholders' Equity ............................ ........................ .......,...,,: ,...,. 974,673 815,028 695,549 579,114 452,849 Net Earnings Reinvested .........., .....................................................- _ _ 131,890 111,376 89,894 69,666 52,176 Common Dividends Declared As % of Net Earnings ................ 24.8% 25.0% 27.2% 30.6% 31.6% Book Value Per Common Share .................................................... . $16.97 14.66 12.55 10.72 8.93 Market Price of Common Share High-Low ................................... 613/a-34'/a 683/8-483/4 59'/8-33'/a 35'/2-233/8 25'/8 -14 Closing Price Year End ........................................................... ........ . _ 48 573/a 591/8 351/8 243/4 Price/Earnings Ratio ........................................................................ 15 21 25 17 14 No. of Common Shares-Actual Year End ..........:....................... 57,264,806 55,378,434 54,444,090 52,338,908 48,317,680 26

~ 1969 1968 1967 1966 1965 1964 1963 1962 1961 1960 1,142,373 1,019,846 904,841 771,975 704,544 641,439 585,059 550,624 529,127 509,332 454,718 409,912 363,115 311,784 292,588 277,522 244,540 228,030 218,122 210,093 319,086 295,903 271,073 234,975 214,128 194,312 193,768 187,133 184,146 175,947 54,247 41,841 39,658 30,057 27,780 22,462 8,276 3,785 153,237 126,159 101,838 81,867 65,128 55,568 56,634 56,402 52,701 52,376 28,640 15,949, 10,205 8,094 6,098 5,919 4,814 3,985 3,080 3,465 115,613 100,107 81,317 65,144 52,423 44,466 46,729 47,464 45,985 44,578 10.1 % 9.8 % 9.0% 8.4% 7.4% 6.9% 8.0% 8.6% 8.7% 8.8% 57,273 51,241 37,716 30,961 25,914 21,852 24,677 25,518 24,474 23,594 58,340 48,866 43,601 34,183 26,509 22,614 22,052 21,946 21,511 20,984 1.29 1.09 .98 .77 .59 .50 .49 .49 .47 .45 1.20 1.07 .97 .77 .59 .50 .49 .49 .47 .45 .488 .425 .35 .35 .30 .30 .30 .30 .30 .30 44,538,922 43,857,780 43,349,768 49,558,612 45,069,770 43,982,508 23,636 26,373 25,688 17,089 12,078 19,366 26,243 11,843 8,733 7,300 13,512 12,139 10,903 9,532 8,857 8,316 6,765 6,293 5,638 5,362 236,962 219,346 193,656 172,593 159,759 153,224 139,595 110,204 99,066 93,641 147,354 138,704 123,555 110,157 104,044 102,417 93,150 68,664 61,560 59,960 447,319 451,922 386,576 297,761 271,823 257,256 235,375 228,088 232,541 209,326 574,988 561,685 485,908 372,895 339,082 318,978 297,295 279,068 277,350 249,819 315,871 312,406 306,172 253,257 213,826 202,810 190,982 179,222 190,859 190,423 976,489 786,578 648,994 512,549 466,277 443,438 412,543 365,024 351,018 321,717 490,400 354,800 256,400 161,000 158,100 159,000 145,200 120,800 110,600 88,400 355,808 314,496 280,186 249,821 230,677 217,783 208,711 201,720 199,685 195,956 35,659 29,189 27,453 18,159 12,670 8,794 8,244 7,947 7,329 6,888 37.4% 38.4% 34.9% 44.2% 48.6% 56.9% 58.3% 59.4% 61.4% 62.4% 7.39 6.56 ' 5.88 5.24 4.81 4.51 4.31 4.13 3,99 3.87 181/s -12 y/2 17 ~/a -11 14 3/s -7 ~/s 9-6 1/8 8 y/s -6 1/s 7 y/s -5 5/s 71/2 -5 5/s 9 3/s-5 1/s 10 1/2 -6 1/2 6 3/4 -5 1 7'/s 1 6 1 1'/s 81/2 7 3/s 61/8 6 y/s 61/s 91/6 6 5/s 13 14 11 .11 12 12 12 12 19 14 45,130,668 44,400,616 43,661,748 43,226,688 43,043,460 42,916,956 42,858,888 43,052,856 43,945,908 4 4,059,584 27

Coresolidatesl Balance Sheets Philip Morris Incorporated and Consolidated Subsidiaries December 31, 1974 and 1973 1974 1973 Assets: Cash and cash equivalents ......................... .............. .................... ....... ,.............. :........... $ 61,917,000 $ 56,139,000 Receivables ..................................... ................. .._........... ................................ ......... .......... ... 216,270,000 171,608,000 Inventories: Leaf tobacco ............................................................ ..................... :_.:.....:_...,................... ........ 873,727,000 690,509,000 Other raw materials ........................................ ......... ...................................... ............ ........ . 125,233,000 63,800,000 Work in process and finished goods ............................ .............................. ......... :.:...... 228,909,000 218,456,000 Housing programs under construction 41,343,000 36,649,000 1,269,212,000 1,009,414,000 Prepaid expenses ........................................................ ........................................ :............ 10,509,000 Total current assets .......................................... ...................... .,_.::.:...-..:. ..:...:........ . 1,557,908,000 1,245,934,000 4v< Investments in and advances to unconsolidated foreign subsidiaries and affiliates ............................... .............. ................................................. ..:.............................. 146,439,000 tk' 103,702,000 Land and offtract improvements ............................................................. ......... .................. : 41,213,000 26,877,000 Property, plant and equipment, at cost: .:.. Land and land improvements ...................................... ...:...:...... :................................. Buildings and building equipment ............................................................................. 38,546,000 264,809,000 26,177,000 175,268,000 Machinery and equipment .......................................... ....................... ......................... 449,019,000 368,439,000 Construction in progress ............................................................................................ 147,436 ,000 158,842,000 899,810,000 728,726,000 Less, Accumulated depreciation ........................................................................... 240,290,000 218,440,000 659,520,000 510,286,000 Brands; trademarks, patents and goodwill ......................... ......................... ....-.-..................... 201,490,000 203,931,000 Long-term receivables .......................................................... ....:........................... ................ 27,420,000 5,084,000 Other assets ..................... ................................................. ..:........................ .:.......................... 19,273,000 12,589,000 $2,653,263,000 $2,108,403,000 See notes to financial statements. 28

Liabilities: 1974 1973 Notes payable .................................................................................................... .................... $ 454,068,000 $ 440,343,000 Current portion of long-term debt ........................................................................... :......... 16,941,000 7,186,000 Accounts payable and accrued liabilities ............................................. ......................... 294,939,000 232,655,000 Federal and other income taxes ............. ................................................... ................................... 55,478,000 40,681,000 Dividends payable .........................................................._.................................,....... .......................... 11,482,000 9,722,000 Total current liabilities ............................................................................................ Long-term debt: 832,908;000 730,587,000 Senior .......................................................... ...... ...... .--- _.. . .... .... -. 690,441,000 400, 082, 000 Subordinated ..................................................... .............. . ...... .............................. 64,800,000 95,034,000 Purchase money obligations ................................... ............... ........... .......................... 13,062,000 4,719,000 Deferred income taxes .................................................................................................... 67,175,000 46,507,000 Reserve applicable to international operations .................................... ..................... .. 1,002,000 9,104,000 Other liabilities .................................................................................................... ............... 9,202,000 7,342,000 Total liabilities .................................................................................................... ...... 1,678,590,000 1,293,375,000 Stockholders' Equity: Cumulative preferred stock, par value $100 per share ................................................ 9,679,000 10,269,000 Common stock, par value $1 per share .......................................................................... '57,267,000 27,754,000 Additional paid-in capital ................................................:................................................ 19 5,022,000 197,348, 000 Earnings reinvested in the business .............................................................................. 717,191,000 585,301,0 00 979,159,000 820,672,000 Less, Cost of treasury..slock ............. ........... ................... .:........................................ 4,486,000 5,644,000 974,673,000 815,028,000 $2,653,263,000 $2,108,403, 000 rll~ ~ 0 0 a ~ ~ N) rQ c.n 29

Consolidated Statements of Earnings Philip Morris Incorporated and Consolidated Subsidiaries for the years ended December 31, 1974 and 1973 1974 1973 Operating revenues ......................................... ...... $3,010,961,000 $2,602,498,000 Cost of sales: Cost of products sold .................................................................................................... .. 1,290,319,000 1,060,777,000 Federal and foreign excise taxes on products sold ................................................ -968,867,000 893,459,000 Gross profit .......................................... .:.................... :..... ..:................ - _...............,:..- - 751,775,000 648,262,000 Marketing, administration and research costs ................................................................... 372,804,000 338,978,000 378,971,000 309,284,000 Equity in net earnings of unconsolidated foreign subsidiaries and affiliates.......... 24,614,000 20,199,000 Operating income of operating companies ........................................................... 403,585,000 329,483,000 Corporate expense ............................................:....................................................... .................... 25,292,000 21,016,000 Interest expense (excluding interest capitalized of $9,427,000 in 1974 and $8,872,000 in 1973) ................................................:.................................................. 82,741,000 50,993,000 Other (income) deductions, net ..................................................................................... (1,950,000) 1, 865,000 Earnings before income taxes ................................................................................. 297,502,000 255,60 9,000 Provision for federal and other income taxes: Current .................................................................................................... ......._...................... 108,858,000 100,617,000 Deferred .................................................................................................... ....................... 13,128,000 6,360,000 121,986,000 106,977,000 Net earnings ................................................................_................................... ................ $ 175,516,000 $ 148,632,000 Earnings per common share: Primary .................................................................................................... ......................... $3.15 $2.71 Fully diluted .................................................................................................... ................. $3.07 $2.61 See notes to financial statements. 30

Consolidated Statements of Stockholders' Equity Philip Morris Incorporated and Consolidated Subsidiaries for the years ended December 37, 1974 and 1973 Preferred Stock, $100 Par Value Common Stock, $1 Par Value Additional Paid-In Capital Earnings Reinvested in the Business Cost of Treasury Stock Total Stockholders' Equity Balance, January 1, 1973 $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 (128,000) (128,000) ~ Common stock, ~ $.674 per share (37,128,000) (37,128,000) Preferred stock purchased for treasury (6,739,000) (6,739,000) 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, 1973 10,269,000 27,754,000 197,348,000 585,301,000 (5,644,000) 815,028,000 Net earnings for the year 1974 175,516,000 175,516,000 Two-for-one common stock split effected in the form of a 100% stock dividend 27,886,000 (27,886,000) Preferred stock purchased for treasury (126,000) (126,000) Cash dividends declared: Preferred stock (122,000) (122,000) Common stock, $.775 per share (43,504,000) (43,504,000) Common stock issued upon conversion of debentures 1,566,000 23,596,000 857,000 26,019,000 Proceeds from common stock issued under stock options 61,000 1,801,000 1,862,000 Preferred stock retired (590,000) 163,000 427,000 Balance, December3l, 1974 $ 9,679,000 $57,267,000 $195,022,000 $717,191,000 ($ 4,486,000) $974,673,000 ( ) Denotes deduction. See notes to financial statements. 31

Consolidated Stat@1'i1@9'8tS0f Changes in Financial P®SI$i019 Philip Morris Incorporated and Consolidated Subsidiaries for the years ended December 31, 1974 and 1973 1974 1973 Additions to Working Capital: Operations: Net earnings ............................................................ .......................... __........................... .. . . . $175,516,000 $148,632,000 Add (deduct) items not requiring current use of working capital: Depreciation ............ ................................................................... ..:_........................... 38,006,000 30,245,000 Amortization .................................................................................................... ............... 1,852,000 1,702,000 Deferred income taxes ........................... ........ .............. :............. .-........................... .. . 13,128,000 6,360,000 Provision for reserve applicable to international operations ........................... 2,500,000 3,000,000 Equity in net earnings of unconsolidated foreign subsidiaries and affiliates., (24,614,000) (20,199,000) Dividends received from unconsolidated foreign subsidiaries and affiliates..... 4,429,000 8,612,000 From operations ....................... ........................ ............................ ................. 210,817,000 ~178,352,000 Financing: Long-term debt: Issued ...................................... ................ ................................... ...................... ..._.................. ...... 302,032,000 28,639,000 Prepayments and retirements ........................................................................_.......,....... _ (20,359,000) (7,776,000) From long-term debt .............................................. ............................. ............... 281,673,000 20,863,000 Stockholders' equity: Shares issued under stock options ........................... .................. ............. .................. ....._ , 1,862,000 3,971,000 Shares of preferred stock purchased for treasury .............................................. (126,000) (6,739,000) From equity transactions ....................................................... ...................... ........... . .. 1,736,000 (2,768,000) From financing ................................................... ....... ._...._.................. ........... . 283,409,000 18,095,000 Land and offtract improvements transferred to housing programs under construction ....................................................... ........._. :...._.....................,........... 2,513,000 2,528,000 Disposal of property, plant and equipment ............................. .................... ................ . 7,025,000 7,798,000 Net unrealized exchange gains, resulting from translation of working capital, added to reserve applicable to international operations ............................. ........... 11,065,000 2,798,000 Additions to working capital .......................................... ...................... ...... -. , 514,829,000 209,571,000 Uses of Working Capital: Dividends .................................................................................................... .............._..._.......... 43,626,000 37,256,000 Expansion and modernization of property, plant and equipment ............................. 215,770,000 174,665,000 Land and offtract improvements ....................................... .......................... ....... :::......... ..... 16,849,000 3,711,000 Investments in and advances to unconsolidated foreign subsidiaries and affiliates ....... ................ ........... ......... ................... _............ ..... . .._.._...._.,..:........................ 22,552,000 (316,000) Investments in consolidated subsidiaries ......................... ..............._......................... ... 1,768,000 2,053,000 Other, net .............................................. ........................... . ......... ............. .................... 4,611,000 1,646,000 Working capital used 305,176,000 219,015,000 Increase (decrease) in working capital $209,653,000 ($ 9,444,000) Changes in components of working capital: Cash and receivables .................................................................................................... .... $ 50,440,000 $ 44,341,000 Inventories .............................. _._........................................... .................................. ........... 259,798,000 208,269,000 Notes payable and long-term debt currently payable ............................................ (23,480,000) (246,329,000) Accrued liabilities and other payables ............................................................................ (77,081,000) (18,560,0 00) Oth e r, n et ......................... ............................................................................................... (24, 000) 2,835,000 $209,653,000 ($ 9,444,000) Other significant changes in financial position not affecting working capital: 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 .........................................................:.................................. 21 667 000 N cn 14 657 000 , , -c7 , , Increase in common stock and additional paid-in capital resulting from 0 0 conversions of debentures with a corresponding decrease in long-term ~ debt .................................................................................................... ......:..................._ $ 26,634,000 ~ ~ $ 11,018,000 Sale of net noncurrent assets of a consolidated subsidiary in exchange for rl~ ~ long-term receivables .......................................................... ..................................... .._ $ 21,505,000 See notes to financial statements. 32

Notes to Consolidated Financial Statements Summary of Accounting Policies: 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 related 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 and net unrealized translation losses are charged to the reserve. Should such losses exceed accumulated unrealized gains and provisions the net losses would be charged to income. The Company enters into forward exchange contracts to minimize the effect of currency fluctuations on its operations. Gains or losses on such contracts are included in the reserve applicable to international operations over the term of the contracts. 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. Interest is capitalized in accordance with the general industry practice. The amount of interest capitalized is determined by the average short and long-term borrowing rates applicable to loans incurred for use in these operations. Offtract improvements are 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 which includes applicable capitalized interest and property taxes is allocated to the saleable acreage remaining in each project and is charged to cost of sales when such acreage is sold. Revenue and profit from real estate sales are recognized as cash is received. t 33

Brands, trademarks, patents and goodwill: Cost in excess of net assets of companies acquired 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. Other goodwill is not amortized unless there has been a diminution in its value. 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 income tax laws. 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 placed in 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 incurred during the construction period. In the opinion of management, the capitalization of interest and property taxes results in a more realistic presentation of the economic cost of a constructed facility. The interest capitalized on construction of facilities is determined by applying the Company's average short-term borrowing rates to th-e outstanding construction balance. 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. Pension plans: The Company and certain of its subsidiaries have pension plans covering substantially all of their employees. Prior service costs, which are being amortized over periods of up to thirtyyears, and accrued pension costs are funded with independent trustees. Research and development: Research and development costs are charged against earnings in the year incurred. cn 0 0 ~ ~ ~ O 34

Foreign Subsidiaries: Principa) financial data of foreign subsidiaries and affiliates are as follows: Consolidated (Wholly Owned) Unconsolidated (Partially Owned) 1974: Assets ............................ ..... ............... ............... .-................. ..........,.......... :.............. .............. $575,726,000 $390,594,000 Liabilities ................................................................. .............:........... 348,145,000 182,665,000 Net assets .................................................................................................... .......................... 227,581,000 207,929,000 Company's equity and advances .............................. ................................ . -.................. :......... 227,581,000 127,239,000 Operating revenues .......... ........................ ............... ......_............:::.::.-......... :........... :........... ... 738,420,000 646,954,000 Net earnings ...... ........... ....................................... .....-................................................... ....... ...: 25,593,000 32,224,000 Company's equity ................................... ........ ..-:.-_,:: . .................. ... . _.....:.:...... ........:.. 25,593,000 24,614,000 1973: 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 At December 31, 1974, investments in unconsolidated foreign subsidiaries and affiliates exceeded equity in net assets by approximately $9,400,000, including $4,900,000 which arose subsequent to November 1, 1970 and is being amortized. Federal income tax has not been provided on $220,000,000 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 $145,000,000 at December 31, 1974. Cash and Cash Equivalents: Included herein are $6,098,000 and $20,008,000 of short-term time deposits at December 31, 1974 and 1973, respectively. Brands, Trademarks, Patents and Goodwill: At December 31, 1974, this account included approximately $14,000,000 of goodwill which is being amortized. 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. Short-Term Borrowing Arrangements: Average bank loans and commercial paper obligations outstanding during 1974, both domestic and foreign, were $150,000,000 and $233,000,000, respectively, on which the weighted average interest rates were 10.1 % and 10.2%, respectively. At December 31, 1974, notes payable consisted of bank loans of $171,837,000 and commercial paper obligations of $282,231,000 on which the average rates of interest were 9.9% and 9.5%, respectively. During 1974, the Company and its consolidated subsidiaries maintained average demand deposit book balances of approximately $25,000,000 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, 1974, lines of creditfor bank and commercial paper short-term financing amounted to approximately $540,000,000. r, 35

Long-Term Debt: 37s % Sinking Fund Debentures, payable $6,250,000 annually from 1984 to 2003 1974 December 31 1973 and $25,000,000 in 2004 .................................................................................................. $150,000,000 - 3.85% Notes, payable in 1982 .................................... ...-......:......:_ .............................. 50,000,000 ~ - 3ank Term Loan Agreement maturing in 1980. Interest is at 1/2 % above the bank prime rate, but not more than an average of 73/4% per annum if outstanding to maturity ..................................... .............................. ..-...... .---......:-:.-..-:,............ ............. 150,000,000 $150,000,000 os/s% Sinking Fund Debentures, payable $3,500,000 annuallyfrom 1977 to 1992 and $15,500,000 in 1993 ........................................... ::..:,................ .................................... 71,500,000 75,000,000 4.90% Notes, payable $2,600,000 annually to 1988 and $16,000,000 in 1989.......... 52,400,000 55,000,000 63/4% Loan 100,000,000 Deutsche mark, payable 10,000,000 Deutsche mark annually from 1978 to 1987 ............................................................................................... . 40,816,000 37,037,000 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 7'/2 % Notes 60,000,000 Dutch guilders, payable 15,000,000 Dutch guilders annually beginning in 1975 ...................................... ....:.. ......._..:.........-...... ......... ......... 23,529,000 21,429,000 180,000,000 Eurodollar revolving credit maturing on September 15, 1976. Interest on current notes is 10.9% to 11 .8% .......................................:.............:......... 61/% 80,000,000 Swiss Franc Loan due 1988 ............. 90,000,000 31,373,000 24,615,000 Other notes and debentures ............................... ........ .......................... .............................. 11,476,000 9,801,000 701,094,000 402,882,000 Less, Portion currently payable ........................................................:............................, 10,653,000 2,800,000 Senior debt ....... ................................................................. ................... ...... ............ ....... $690,441,000 $400,082,000 10% Subordinated Notes, payable $3,600,000 annuallyto 1976, $5,760,000 annually from 1977 to 1981 and $32,400,000 in 1982. Callable at no premium.... Subordinated Convertible Debentures ................................................................................... Less, Portion currently payable ............................................................................................. Subordinated debt ................................................................................................:... ...... Purchase money obligations of Mission Viejo Company .............................................. Less, Portion currently payable ................................................................................... Purchase money obligations ........................................................................................ $ 68,400,000 $ 72,000,000 - - 26,634,000 68,400,000 98,634,000 3,600,000 3,600,000 $ 64,800,000 $ 95,034,000 $ 15,750,000 $ 5,505,000 2,688,000 786,000 $ 13,062,000 $ 4,719,000 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 overthe respective lives of the issues giving rise thereto. Aggregate maturities of long-term debt in each of the following years are: 1975, $16,941,000; 1976,.$109,431,000; 197,7, $21,155,000; 1978, $40,245,000; 1979, $24,035,000. ~6

Capitalized Interest: Interest capitalized for 1974 and 1973 was $9,427,000 and $8,872,000, respectively. The effect of the policy to capitalize interest relating to major facilities was an increase in pre-tax income of $4,842,000 in 1974 and $5,794,000 in 1973; the effect relating to real estate operations was an increase in pre-tax.income of $2,398,000 in 1974 and $1,434,000 in 1973. The combined effect on net income was an increase of $3,499,000 in 1974 and $3,522,000 in 1973. Reserve Applicable to International Operations: Amounts added to and deducted from the reserve during the years 1974 and 1973 were: 1974 1973 Balance, beginning of year .................................................................................:.............. Add: $ 9,104,000 $ 17,963,000 Provision .................................................................................................... ....................... _ Net unrealized exchange gains resulting from translation of working 2,500,000 3,000,000 capital .................................................................................................... ................................. Deduct: 11,065,000 2,798,000 Translation of foreign currency long-term liabilities at year-end rates............ (21,667,000) (14,657,000) Balance, end of year .................................................................................................... ............... $ 1,002,000 $ 9,104,000 At December 31, 1974 the unrealized loss on unperformed exchange contracts was $3,100,000, Capital Shares: Authorized Issued Treasury Outstanding Preferred: At December 31, 1973 ............................................ 102,689 102,689 .(70,937) 31,752 Purchased ...................................................................... (1,737) (1,737) Retired ......................................................... ........... .. (5,903) (5,903) 5,903 At December 31, 1974 ........................_..................... . . 96,786 96,786 (66,771) 30,015 Common, $1 par value: At December 31, 1973 .............................................. 50,000,000 27,754,298 (65,081) 27,689,217 Two-for-one common stock split ......................... 50,000,000 27,886,293 (59,848) 27,826,445 Issued for: Debenture conversions ...................................... 1,565,465 122,705 1,688,170 Stock options ............................................._..._...... 60,974 60,974 At December 31, 1974 .............................. :............. ._ 100,000,000 57,267,030 (2,224) 57,264,806 Effective April 25, 1974 the Company's authorized common stock was increased from 50,000,000 shares to 100,000,000 shares with the par value remaining at $1 per share. Concurrently, a common stock split was effected in the form of a 100% stock dividend. To account for these changes, the common stock capital account was increased by a transfer of $27,886,000 from the additional paid-in capital account. All references in the financial statements with regard to number of shares of common stock and related prices, dividends and per share amounts have been restated to reflect the foregoing common stock split. As of December 31, 1974, 732,306 shares are reserved for the exercise of stock options. Stock Options: Pursuant to stock option plans approved by stockholders, common stock of the Company has been made available for option to officers and other key eraployees at market prices on the dates granted. 1974 1973 Shares under option, beginning of year ............................................................................ . 645,344 547,184 Options granted ..................................... ................ ........... ..................................... ..................- 181,000 280,600 Options exercised . . . 528) (77 (172 420) .. ................. .......................................... .. ..................................... .......... ...Options canceled ........................................................................,........................... ................... - , (16,510) , (10,020) Shares under option, end of year ................................................................................ 732,306* 645,344 Shares available for option, end of year ................... ....... ...... ........... ....................... .......... 416,914 581,404 'At prices ranging from $17.88 to $59.72. r1i ~ 0 a ~ ~ ~-: r,3 w 37

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, 1974, approximately $260,000,000 of consolidated earnings reinvested in the business was free of such restrictions. Other debt agreements require the Company to have consolidated year-end working capital of at least $400,000,000 and limit senior debt for borrowed money at that date to not more than 125% of stockholders' equity. Earnings Per Share: Primary earnings per common share is calculated on the weighted average number of shares of common stock outstanding during each year, which was 55,649,417 in 1974 and 54,804,174 in 1973. Fully diluted earnings per common share gives effect to the reduction in earnings per share which would result from 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 atthe higher of the average market price during the periods or the market price at the close of the periods. The number of shares of common stock used in this computation was 57,339,255 for 1974 and 57,315,784 for 1973. Pension Plans: The total pension expense for the years 1974 and 1973, respectively, was $19,549,000 and $14,805,000. The increase in expense principally reflects additional benefits which were approved by the stockholders in 1974. Incentive Compensation Plan: In accordance with the Company's Incentive Compensation Plan, which was approved by stockholders at the 1967 annual meeting, a provision of $2,400,000 was made against 1974 earnings for awards that will be made to officers and other key employees in 1975. A provision of $2,200,000 was made against 1973 earnings. These amounts were less than the maximum amounts that could be provided under the plan. Provision for Federal and bther Income Taxes: • Federal Foreign State and Local Total The 1974 provision includes: Currently payable .................................................... _ - $79,274,000 $17,036,000 $12,548,000 $108,858,000 Deferred .................................... ............. ........ ,............ 17,568,000 (4,440,000) 13,128,000 $96,842,000 $12,596,000 $12,548,000 $121,986,000 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 Deferred tax expense results from timing differences in the recognition of certain items of revenue and expense for tax and financial statement purposes. The source of such differences and the tax effect of each are as follows: 1974 1973 Excess of tax over book depreciation ............................... ............... ._............................. .. $ 6,852,000 $8,686,000 Provisions charged to expense on books, deductible in future years for tax purposes, net ................................................................,.............................. . 2,114,000 (4,551,000) Additional taxes provided on unremitted earnings of foreign subsidiaries and affiliates ..................................... _.................. ........ .:,.............................. 2,200,000 1,600,000 Carrying costs of real estate operations deferred on books, deductible currently for tax purposes ...::. .............. .....................:..:.: .,.._._...,..., ..::,........ .:..---------- .. . 1,594,000 1,061,000 Decrease (increase) in intercompany profit in inventory deferred on books ............ 295,000 (855,000) Other .............................. ........................................ ............ :........:.............. .. ..:....... ._._................. . . 73,000 419,000 $13,128,000 $6,360,000

Reconciliation of the provision for income taxes computed at the federal statutory rate to the reported provision for tederal and other income taxes is: 1974 1973 Amount Percent to Pretax - Amount Percent to Pretax Provision computed at 48% of reported pre-tax earnings ................ $142,801,000 48.0% $122,692,000 48.0% Increases (decreases) in the provision resulting from: Inclusion of equity in net earnings of unconsolidated subsidiaries and affiliates in pre-tax earnings ............................ (11,815,000) (4.0) (9,696,000) (3.8) Investment tax credit ........................ .......---- ...... .........................•. (9,863,000) (3.3) (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 .......................... (3,479,000) (1.2) (6,305,000) (2.5) State and local income taxes, net of federal tax benefit ................ 6,525,000 2.2 6,438,000 2.5 Other .................................................... ................................_........_....,... (2,183,000) 7 ~• ) (1,311,000) (.4) Provision as reported ........ ............................................ ............................. ....-._- $121,986,000 41.0% $106,977,000 41.9% Litigation: During 1974 two purported class actions by tobacco growers were commenced against the six major United States cigarette manufacturers, including the Company, and others, alleging violations of the United States antitrust laws and seeking damages aggregating approximately $2,500,000,000 for the years 1970-1974. The Company has denied any violation of law, will vigorously contest the actions, and has concluded, based upon the opinion of counsel, that these cases are not proper class actions. Furthermore, based on the investigation made to date, counsel is of the opinion that the Company has substantial factual and legal defenses to each of the alleged charges. Accordingly, no adjustment or provision has been made on account of the litigation. Additional Information: 1974 1973 Working capital at year end ................................................................................................ $72 5,000,000 $515,347,000 Depreciation expense .................................................................................................... ....... - $ 38,006,000 $ 30,245,000 Rental expense ................................. ............................. ...................................................... ._...... $ 14,590,000 $ 12,166,000 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, 1974, 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, 1973. In our opinion, the financial statements mentioned above present fairly the financial position of Philip Morris Incorporated and consolidated subsidiaries at December 31, 1974 and 1973 and the results of their operations and the changes in financial position for the years then ended, in conformity with generally accepted accounting principles applied on a consistent basis. New York, January 28, 1975 Coopers & Lybrand 39

Directors and Officers 40

Directors T. Justin Moore, Jr. John T. Landry Executive Committee james C. Bowling President of Virginia Electric and Vice President and Executive Vice J F Cullman 3rd Chairman Vice President and Director of Power Company, Richmond, Va. President, Director of Marketing, . . , J E Cookman Corporate Affairs John A. Murphy Philip Morris U.S A . . Alfred Brittain III Vice President and President of . . Jetson E. Lincoln H. Cullman R W Dammann Chairman of the Board of Bankers Miller Brewing Company Vice President, Planning . . C. H. Goldsmith Trust Company, New York, N. Y. George Weissman Charles F. Lombard E. Lasker George V. Comfort Vice Chairman of the Board Vice President and Vice President, T. N. Lawler President of George Comfort & Sons Margaret B. Young Philip Morris International H. R. Marschalk Company, Inc., New York, N. Y., Chairman, Whitney M. Young, Jr. Hamish Maxwell R. R. Millhiser real estate management Memorial Foundation, Vice President and G. Weissman John E. Cookman New York, N.Y. Executive Vice President, Finance Committee Chairman of the Andrew C. Britton Philip Morris International J. E. Cookman, Chairman Finance Committee Director Emeritus John A. Murphy A. Brittain I I I Dr.Jose Antonio Cordido-Freytes Chandler H. Kibbee Vice President and President and H. Cullman Member of Arismendi, Betancourt, Director Emeritus Chief Executive Officer, E. Lasker Cordido and Associates, Harvie Wilkinson Jr J Miller Brewing Company H. R. Marschalk Caracas, Venezuela, . , . Director Emeritus William J. O'Connor R. R. Millhiser and President of Attorneys Vice President and Vice President T. J. Moore, Jr. , Ray Jones G Weissman C.A. Tabacalera Nacional Hugh Cullman Member, Advisory Board *Newly elected director and Chief Administrative Officer, Philip Morris International . Audit Committee Executive Vice President and Philip J. Reilly A. Brittain III, Chairman President of Vice President and President, R. W. Dammann Philip Morris International Officers Mission Viejo Company E. Lasker H R Marschalk Joseph F. Cullman 3rd Cullman 3rd Joseph F Carlos E. Salguero . . Chairman of the Board and . Chairman of the Board and Vice President and Vice President, T. J. Moore, Jr. Chief Executive Officer Chief Executive Officer Philip Morris International Management Committee Richard W. Dammann George Weissman Benjamin A. Soyars J. F. Cullman 3rd, Chairman Member of Dammann & Heming, Vice Chairman of the Board Vice President and Vice President, T. F. Ahrensfeld Attorneys N Y New York Manufacturing Philip Morris U S A J. C. Bowling . ., , Ross R. Millhiser , . . . J Cookman E Goldsmith Clifford H President Walter F. Sperber . . . Executive Vice President and Vice President and Controller H. Cullman Hugh Cullman H Goldsmith C President of Philip Morris U.S.A. Executive Vice President and Fred M. Stefan . . R. R. Millhiser John T. Landry President, Vice President and President, J. A. Murphy Vice President and Executive Vice Philip Morris International Philip Morris Industrial P. J. Reilly President of Philip Morris U.S.A. Clifford H. Goldsmith Ronald H. Thomson F. M. Stefan Edward Lasker Executive Vice President and Vice President and G. Weissman Counsel, McKenna & Fitting, President, Philip Morris U.S.A. Executive Vice President, Office of the Chairman Attorneys Calif Los An eles Philip Morris International ., , g Thomas F. Ahrensfeld J. F. Cullman 3rd, Chairman T. Newman Lawler Vice President and General Counsel Dr. Helmut R. R. Wakeham J. E. Cookman Member of Hall, Dickler, Lawler, James C. Bowling Vice President and H. Cullman Kent & Howley, New York, N.Y., Vice President Assistant to the Vice President, R & D, C. H. Goldsmith Attorneys , Chairman of the Board, and Philip Morris U. S. A. R. R. Millhiser Jacques G. Maisonrouge* Director of Corporate Affairs Eugene J. T. Flanagan G. Weissman Chairman of IBM World Trade Associate General Counsel Europe/Middle East/Africa C. Gilbert Collingwood Vice President and , Secretary Corporation, Paris, France Chief Financial Officer Alexander Holtzman H. Robert Marschalk S. Lyle Graham Associate General Counsel President of Richardson -Merrell Vice President, Personnel Buford A. Tynes Incorporated, Treasurer pharmaceuticals manufacturer Mary E. Russell Hamish Maxwell* Assistant Secretary Vice President and utive Vice President of Exec Anthony W. Giraldi . Assistant Secretary Philip Morris International Robert A. White Millhiser Ross R . Assistant Controller President John C. Lino Assistant Controller t`J (11 N N N U O Q ~ 0 }.-.+ Q N O c7~ k-' f•J V ~rv `w

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