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Philip Morris Incorporated Annual Report 1975

I Operating revenues have risen from $705 million in 1965 to $3.6 billion in 1975 and thus have grown at an average annual compounded rate of 17.9%. Since 1965, earnings before income taxes have risen from $52 million to $361 million in 1975-for an average annual compounded rate of growth of 21.3°/a over the 1965 to 1975 period. Fully diluted earnings per common share have increased from 590 to $3.62 during this ten-year period-for an average annual compounded growth rate of 19.9%. 1 Transfer Agents: Morgan Guaranty Trust Company of New York, 30 West Broadway, New York, N.Y. 10015, for common and preferred shares; United Virginia Bank, Box 6E, Richmond, Va. 23214, for common shares, Annual Meeting: April 28, 1976 3601 Commerce Road, Richmond, Va. On the Cover: A Graphic Representation of the Growth of Philip Morris Incorporated from 1965 to 1975. 1 Financial Highlights 2 Review of the Year 14 Philip Morris U.S.A. 16 Philip Morris International 18 Miller Brewing Company 20 Philip Morris Industrial 21 Mission Viejo Company 22 Financial Review 40 Directors and Officers PQ cn r"I 0 0 ~ ~ N A 0

Philip Morris Incorporated Annual Report 1975 Financial Highlights 1975 1974 1973 1972 1971 (dollar amounts except per-share amounts expressed in thousands) Operating Revenues ............................................ . $3,642,414 $3,010,961 $2,602,498 $2,131,224 $1,852,495 Net Earnings ............................................................ 211,638 175,516 148,632 124,466 101,498 Earnings Per Common Share: Primary .......................................................... -- $3.62 $3.15 $2.71 $2.34 $2.01 Fully Diluted .................................................. . 3.62 3.07 2.61 2.18 1.82 Dividends Declared Per Common Share.......... .925 .775 .674 .631 .605 Percent Increase Over Prior Year: Operating Revenues ........................................ 21.0% 15.7% 22.1 % 15.0% 22.7% Net Earnings ...................................................... 20.6% 18.1 % 19.4% 22.6% 31.0% Earnings Per Common Share: Primary .......................................................... 14.9% 16.2% 15.8% 16.4% 19.6% Fully Diluted .................................................. ... 17.9% 17.6% 19.7% 19.8% 27.3% Operating Companies Revenues: Philip Morris U.S.A ........................................... $1,721,549 $1,502,267 $1,303,629 $1,164,550 $1,035,178 Philip Morris International .............................. _. 1,040,002 887,077 822,907 623,699 517,670 Miller Brewing Company ................................ 658,268 403,551 275,860 211,262 204,134 Philip Morris Industrial .................................... 151,960 155,390 132,126 113,136 95,513 Mission Viejo Company (A) ............................ 70,635 62,676 67,976 18,577 - Consolidated Operating Revenues (A) .... $3,642,414 $3,010,961 $2,602,498 $2,131,224 $1,852,495 Operating Companies Income: Philip Morris U.S.A ........................................... $ 337,314 " $ 286,225 $ 227,282 $ 194,072 $ 166,734 Philip Morris International ............................... 112,975 94,017 92,150 84,095 66,968 Miller Brewing Company .................................. 28,628 6,291 (2,371) 228 1,300 Philip Morris Industrial .................................... 8,052 12,280 8,300 7,735 6,135 Mission Viejo Company (B) ............................ 5,875 4,772 4,122 1,331 - Consolidated Operating Income (B) ........ $ 492,844 $ 403,585 $ 329,483 $ 287,461 $ 241,137 (A) Consolidated operating revenues include operating revenues of the company and all wholly-owned subsidiaries (Mission Viejo Company since September 30, 1972). 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 (Mission Viejo Company since September 30, 1972), and the company's equity in the net earrJngs of unconsolidated subsidiaries. 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 74% of consolidated operating revenues in 1975, 77% in 1974, 79% in 1973, and 80% in 1972 and 1971, and 91 % of consolidated operating income in 1975, 94% in 1974, 97% in 1973 and 1972, and 101 % in 1971. Sales of beer by Miller Brewing Company accounted for 18% of consolidated operating revenues in 1975, 13% in 1974, 11 % in 1973, 10% in 1972, - and 11 % in 1971, and 6% of consolidated operating income in 1975, 2% in 1974, (1 %) in 1973, 0% in 1972, and 1% in 1971. No other class of similar products accounted for as much as 10°/0 of consolidated operating revenues or operating income in any year.

Review of the Year We are pleased to report that our company had another excelrent year rn 1975. ' We are especially gratified with our company's results in 1975 in light of the worldwide recession that had an adverse economic impact in many of the countries in which we operate. Fortunately, the demand for our two major products -cigarettes and beer-proved relatively unaffected by the changed economic climate. Both industries achieved record high unit sales levels, although their growth rates were slower in 1975 than in previous years. The cigarette unit sales of Philip Morris U.S.A. and Philip Morris International and the barrel volume of Miller Brewing all established record highs. Our financial results are highlighted on the previous page. Operating revenues, net earnings, and earnings per share established record highs for the 22nd consecutive year. Operating revenues in 1975 were up 21.0%, net income rose 20.6%, and fully diluted earnings per share were up 17.9%. In 1975, U.S. cigarette industry unit sales increased for the sixth consecutive year. Total sales were 599 billion units-up 1.3% over 1974. Philip Morris U.S.A. continued to outpace the industry, increasing its unit sales by 6.1 %-to 141 billion units. In the last quarter of the year, it was estimated that Marlboro became the top-selling brand in-this country- a position it had achieved worldwide in 1972. The cigarette market outside the U.S, also continued to grow in 1975, with total sales estimated at 3.2 trillion units- up 3.2%. Philip Morris International increased its sales by 9.7%-to 155 billion units. The U.S. brewing industry in 1975 increased barrel sales for the 18th consecutive year, with a total of approximately 148.5 million barrels sold-a gain of 2.1 %. For the third consecutive year, Miller Brewing was the fastest growing brewer in the U.S., with total sales of 12,862,000 barrels, an increase of 41.9% and 3,796,000 barrels more than the 9,066,000 barrels shipped in 1974. Over the last five years, Philip Morris's consolidated operating revenues have increased at a compounded average annual rate of 19.3%, and fully diluted earnings per share have grown at a compounded average annual rate of 20.4%. In March, 1975, with the largest financing ever for the company, Philip Morris issued $150 million of long-term debt and strengthened its equity base with the public sale of two million shares of common stock. Although the stock offering increased the number of outstanding shares of common stock, our company still registered a 17.9% increase in fully diluted earnings per share over 1974. The growing demand for our cigarettes and beer and the need for additional efficient manufacturing facilities have required a continuing capital expansion program. Capital expenditures in 1975 amounted to $244.5 million. During the next five years-1976 to 1980-we anticipate capital expenditures of slightly more than $1 billion, with approximately half of these funds to be spent on our worldwide cigarette operations and the other half on our brewing operations in the U.S. For the 48th consecutive year Philip Morris paid dividends on its common stock, and for the eighth consecutive yearthe annual dividend rate was increased. During 1975, the Board of Directors authorized two increases in the annual dividend rate-first from an annual rate of 80 cents to a rate of 90 cents and then to $1.00 per share of common stock. Philip Morris U.S.A. The growth of Philip Morris U.S.A., our largest operating company, continued in 1975 with our share of the U.S. market increasing to 23.6% from 22.5% in 1974. Operating revenues increased by 14.6%, and operating income rose by 17.8% in 1975. Marlboro had the largest unit sales gain in the industry and increased its market share to 15.2% from 14.6% in 1974. Marlboro 100's, Marlboro Lights, and Marlboro Menthol increased their sales and accounted for 21 % of all Marlboros sold in the U. S. Benson & Hedges 100's strengthened its position as the leading 100mm brand. The national introduction of its new box packing was achieved in 1975. Virginia Slims and Parliament 100's also posted strong unit sales gains in 1975. In the 120mm segment, we introduced Saratoga 120's nationally in April, 1975, and by year-end Saratoga 120's had attained an important position in the small 120mm segment. Low-tar cigarettes were estimated to account for about 10% of the industry in 1975. We have been well represented in this category with Marlboro Lights, Parliament, and Benson & Hedges Multifilter. In December, 1975, culminating 12 years of research, we announced a major scientific breakthrough in the cigarette industry. Our researchers isolated the high intensity flavor components in smoke, Utilization of this discovery led to the development of the 'Enriched Flavor' process that increases natural flavor in the cigarette without the usual increase in tar. This process was applied to a new cigarette-Merit-which was launched nationally in January, 1976. Merit, in regular and menthol versions, delivers only 9 mg. of tar and 0.7 mg. of nicotine and is lower in tarthan 98% of all cigarettes sold in the U.S. today. In the most extensive consumer product testing ever conducted by the company, Merit was tested against the leading low-tar brands. The results were that, even if the cigarette had 60% more tar, a significant majority of all smokers tested reported that Merit delivered as much or more taste. Our sales growth has been accompanied by an increasing utilization of the modern facilities at our new Richmond Operations Center. At year-end, the Operations Centerwas producing more than 300 million cigarettes a day, or slightly over 50% of its capacity when fully equipped in 1977. The efficiency of this cigarette manufacturing facility will put Philip Morris in a favorable competitive position for the years ahead. The new Operations Center has become an important conference site, having served as the location for two science symposia and the site of our 1975 National Sales Meeting, which was attended by more than 1,000 of our sales personnel from all over the country. During the year, about 450 employees from our New York headquarters visited the new facilities over a three-day period. Also during 1975, more than 22,000 visitors toured the facilities. These visits provided Philip Morris employees and the general public with the opportunity to witness at firsthand our scientific quality control and our modern, high-speed, highly efficient operations. 2

To meetthe increasing sales demand for our products, we strengthened our headquarters and field sa(es organizations in 1975. - Th.e American Safety Razor Division's vitality was reflected in significant sales gains for Flicker, the number one selling brand in the growing women's shaving market segment, and in new packaging with repositioned advertising for Personna Double II. The Lady Double II, a new razor, was also introduced for women. The division contributed to corporate profit. Our Latin America/Iberia region also reported record unit sales in 1975. Iri Brazil; Philip Morris Brasileira S.A. de Cigarros completed a new factory in Curitiba, and we acquired Companhia de Fumos Santa Cruz, which has an extensive distribution system and manufactures and markets a number of popular national brands. Starting at mid-year, Marlboro was introduced in major urban areas of Brazil. The rapidly growing Brazilian cigarette market, with annual sales of 110 billion units, offers great opportunity. A strong competitor with a dominant market share is one of the challenges we face. We anticipate significant losses in Philip Morris International Operating revenues and income Brazil while we build our market share, as we did in similar of Philip Morris International advanced to record highs situations in other major markets. We are confident of the in 1975, increasing by 17.2% and 20.2%, respectively. long-term profit potential of our Brazilian operations. In the first half of the year, excise tax increases, higher costs, and government price restraints in a number of markets restricted the operating income margins of Philip Morris International. Unit volume increases and greater operating efficiencies, combined with price relief received In Costa Rica, we acquired a substantial share of equity in a cigarette manufacturing company, Tabacalera Costarricense, S.A., and a distribution firm, Mendiola & Company. - Despite depressed economic conditions in most Asian in many of our markets, resulted in improved margins during countries and, in Australia, price increases due in large part the second half of the year. As in recent years, currencyfluctuafions under the present international monetary system remain a continuin concern to Philip Morris and many international companiesl to excise and other tax increases, the Asia/Pacific region reported record cigarette unit sales in 1975. --F~hilip Morris (AustraliaLL.imited's major cigarette brands, arlboro and Alpine increased market shares as did , Lindeman and Leo Buring wines. Godfrey Phillips, India, Limited successfully placed a new public issue of stock, which both strengthened this company's equity base and reduced our share of equity in accordance with Indian government policy. In Pakistan, we increased our minority equity in Premier Tobacco Industries Limited. In Canada son & Hedges (Canada) Limited, whose principal rands are Mark Ten, Belvedere, and Benson & Hedges 100's, increased its unit cigarette sales to record levels. Belmont and Viscount, two high-filtration brands, registered particularly strong growth; and Plus, Canada's first 120mm cigarette, was introduced successfully, Toward the end of 1975, the Canadian government announced a policy of wage and price controls that may have some effect on future profitability in Canada. Last year, Philip Morris again made a positive contribution to the U.S. balance of payments and U.S. employment. Our international manufacturing affiliate and licensee arrangements were established because tariff and other barriers precluded U.S. exports to many markets. Since we began international manufacturing operations 20 years ago, the number of Philip Morris employees in the U.S. working in support of our international business- primarily exports-has increased by more than 500%. During the same period, our exports of U.S.-made cigarettes have also risen over 500%. In the past ten years, our exports of U.S.-grown tobacco have increased more than 300%. Proposals in the U.S. for increased taxation of overseas earnings of U.S. corporations, including elimination of foreign tax credits and tax deferrals, would be counterproductive. They would restrict expansion of international operations of .U.S. companies, including U.S. exports, and would lead ultimately to a loss of jobs in the U.S. However, these changes had no significant net effect on ouk operations in 1975. Philip Morris International sells more than 175 brands in . more than 160 countries and territories, through manufacturing affiliates in 22 countries, licensees in 17 countries and territories, and export sales organizations. The increasing demand for American-type blended filter cigarettes has contributed to our continued growth. Well over one-third of our total unit sales outside the U.S. are in international brands like Marlboro, which continues to increase its market share around the world. The presence of these international brands has influenced the further growth of our cigarette exports from the U.S. Regional and national brands accounted for the largest portion of Philip Morris International's unit sales and continued to contribute significantly to our market shares in many countries in 1975. Philip Morris International corltinues to maintain market shares of 10% or more in over 20 countries. Again in 1975, all of our international regions contributed to the increase in cigarette unit sales and operating revenues. Philip Morris Europe/Middle E~st/Africa registered recor uni sa es Marlboro is now the largest selling filter cigarette in this region. Sales of regional and national brands also continued their upward trend. To meet the growing demand for Marlboro and our other brands in the European Economic Community, we fiave initiated a five-year program for expansion of our production facilities in the E.E.C. In the first phase of this program, Philip Morris G,m.b.H. in Germany is enlarging its Munich cigarette factory, acquired in 1974, and has established a satellite factory near its existing factory in West Berlin. Last year, Marlboro, made under license in Bulgaria and Greece, was introduced in these markets. Also in 1975, under the terms of the scientific and technical cooperation agreement between Philip Morris and the Soviet Union, a commemorative American-blend cigarette brand called Apollo-Soyuz was jointly developed, produced, and marketed bythe U.S.S.R. Ministry of Food Industry and Philip Morris. r.) 0 0 0 ~ ~ -~ 31

Philip Morris also has a record of positive contributions to economic and social conditions in host countries, where managements of our affiliates are primarily nationals of these countries. These contributions are particularly significant in developing countries. We have provided investment capital introduced advanced technology, established modern management systems, and trained nationals for management jobs while developing skills of hourly workers. Nationals in virtually all developing countries where we have affiliates share in the success of these companies through equity participation. Miller Brewing Company Operating revenues for Miller Brewing increased 63.1 % over 1974, and operating income rose to $28.6 million from last year's $6.3 million. Miller's income gain reflects the combination of greater barrel volume, economies of large-scale production, increased utilization of efficient new production facilities, and higher prices. Miller's 41.9% increase in barrel sales in 1975 exceeded both the 31.0% gain in 1974 and the 28.8% rise in 1973, and enabled Millerto move up to fourth place among the U.S. brewers. Miller's market share increased to approximately 8.6% from 6.2% in 1974. The Miller High Life brand continued to grow at a rapid rate, increasing its penetration of the premium-price category. Lite, our new low-calorie, low-carbohydrate beer, was successfully introduced nationally in 1975. Also in 1975, Miller assumed full U.S. distribution rights for Lowenbrau, the world-famous German beer, under a multi-phase agreement signed with the 600-year-old Munich brewery. During most of the year, the demand for Miller's products exceeded the company's production capacity. As a result, strict product allocation of all our brands has been necessary since April, 1975. To keep pace with the growing demand, Miller has accelerated its capital expansion program. The expansion of our Fort Worth brewery from two million to five million barrels of rated capacity was completed during 1975. Our Milwaukee brewery, the largest brewery in the state of Wisconsin, with a rated capacity of seven million barrels, has been expanded and modernized with high-speed equipment. Miller also has a brewery in Azusa, California, with a rated capacity of 1.5 million barrels. Our fourth brewery, in Fulton, NewYork, is scheduled to begin production this year and should be operational by the end of the year with a rated annual capacity of 3.3 million barrels. Miller will have approximately 17 million barrels of rated production capacity at year-end 1976, and most of our facilities will be utilizing the most efficient technology and modern equipment. Since 1973, Miller has spent more than $250 million in expansion projects to double its capacity. Ourfirst aluminum can manufacturing plant in Milwaukee, which started operation in 1975, was profitable despite start-up costs. Other can making plants are currently under construction at Fort Worth and Fulton, with production scheduled for 1976. Philip Morris Industrial During 1975, the operating results of Philip Morris Industrial were adversely affected by the inability to put needed price increases into effect and by higher costs for energy. These factors were partially offset by Industrial's cost reduction program. Operating revenues decreased by 2.2%, and operating income declined 34.4%. The Packaging, Paper, and Chemical Groups that comprise Philip Morris Industrial all operated profitably last year, with the Packaging Group producing record levels of profit. The recession and customer inventory liquidation had a severe effect on both the Paper and Chemical Groups. Excess capacity in the paper industry and continued softening in the textile industry significantly reduced demand, and efficient operating levels could not be maintained. In the fourth quarter, however, operating results for both of these groups improved. Philip Morris Industrial strengthened its research capabilities in 1975 and continued to pursue the development of new products and new product applications in keeping with its strategy of concentrating on specialty markets. Mission Viejo Company In 1975, Mission Viejo, our community development and homebuilding company, increased its revenues and income to record levels even though the national homebuilding industry was in a deep recession. Operating revenues and operating income were up 12.7% and 23.1 %, respectively, over 1974 levels. Mission Viejo Company's total backlog of orders for new homes at year-end 1975 was up 76.2% overthe previous year, and its inventory of`unsold homes was the lowest since September, 1971. The company's major operation, Mission Viejo, in Southern California, set a particularly strong sales pace throughout 1975. This new community offers its 32,000 residents a wide variety of recreational, educational, and commercial facilities as well as a highly desirable living style. Construction of a 125-acre lake in Mission Viejo, California, commenced in 1975. The lake is expected to enhance further the prestige of this growing planned community. Development of two smaller communities-in Denver and Fresno-continued in 1975. But the effects of the housing recession were felt more strongly in these markets. The company is no longer actively involved in the Phoenix housing market. Cigarette Taxes Among the problems faced by the U.S. tobacco industry in 1975 was the intensification of state and local.efforts to raise additional revenue through cigarette excise taxes. In 1975, four states enacted legislation to raise cigarette excise taxes, compared with two states that did so in 1974. Bills proposing cigarette excise tax increases were introduced in the legislatures of 30 states and in many municipalities last year. In several states in the U.S., proposals for cigarette tax increases were defeated in 1975.

Many of the bills proposed at both the state and municipa( level represent an automatic response to budgetary problems in fiscally troubled areas. State and local administrators propose such increases as a readily available source of additional revenue. However, these taxes are regressive and discriminate directly against lower income consumers. The variances in the amount of the excise tax from area to area encourage illegal bootlegging activities that result in lower total cigarette tax revenues to the taxing locality. U.S. cigarette excise tax revenues totaled $5.7 billion in 1975, of which $2.2 billion was federal, $3.4 billion state, and $0.1 billion municipal. These excise taxes accounted for approximately 42% of the average retail price of a pack of cigarettes on a national basis. Again in 1975, cigarette excise taxes were raised in many of our international markets. As in the U.S., such increases generally prove counterproductive. In some international markets where there are several price categories of cigarette brands, such tax increases tend to encourage shifts in consumer demand to lower priced, lower taxed brands, thus reducing the potential amount of revenue to the taxing authorities. Smoking and Health The controversy concerning alleged relationships between smoking and health continued in 1975, although the nature of the attacks on the industry changed considerably. As one medical writer observed: "Hardly a week goes by without a new report that some previously unsuspected substance has been found to cause cancer. Thus far the scientists have pinpointed more than 1,000 agents as definite or suspected causes of cancer in man. In recent years, such agents-called carcinogens-have been identified in the air we breathe, the water we drink, the food we eat, the clothes we wear, the drugs we take, the jobs we hold, the habits we pursue." Such findings serve to confirm the complexities of the cancer problem and to dramatize the uncertainties surrounding data that have been used as the basis for allegations against cigarettes. In our opinion, such findings also tend to put the smoking and health question into a broader perspective and may lead to a recognition that not only the total environment but also an individual's genetic predisposition, age, sex, and immunologic responsiveness- and perhaps even psychological state-could be major factors affecting the occurrence or non-occurrence of cancer. The principal activities of-the anti-cigarette forces over the past year have been focused on an attempt to severely limit or prohibit the rights of cigarette smokers in many public facilities. To date, there is no valid scientific evidence that establishes that cigarette smoke causes any harm to non-smokers. The company and the cigarette industry have continued a long-term commitment to research-through the Council forTobacco Research-U.S.A. and through direct research grants. The Public Interest Philip Morris continued to broaden its social commitments to its employees, to the people in its plant communities, and to the citizens of countries where it operates. Our company achieved further progress in the employment and upgrading of minorities and women in the U.S. In 1975, 10.5% of our managerial, professional, and technician level jobs were filled by members of minority groups, compared with 9.6% in 1974. Women held 15.4% of these jobs, compared to 14.4% a year earlier. At year-end 1975, about 25% of our U.S. employees were members of minority groups and 28% were women. In the educational area, Philip Morris has more than doubled its scholarships since 1971. As a result, education accounted for more than 50% of our contributions last year, with a large portion of the increase in contributions going to private, independent colleges. We were the first corporation in the U.S. to offer scholarships to employees' children for vocational and technical training, in addition to our college scholarship program, and the first to support scholarships for women wishing to upgrade their positions or reenter the work force. Last year, we were one of the first corporate contributors to Howard University's Joint Center for Political Studies, an information resource for black elected officials. . Philip Morris International's social commitments, which are determined by host country needs, range from basic health care and educational development to wildlife conservation and support of cultural programs. For more than a decade, Philip Morris has been a pioneering corporate art patron, and major exhibitions have toured the U,S. under our corporate sponsorship almost every year, During 1975, "Frontier America: The Far West" opened at the Boston Museum of Fine Arts and subsequently" traveled to Denver, San Diego, and Milwaukee. The exhibit was sponsored jointly by the National Endowment for the Arts and Philip Morris on behalf of Marlboro and will tour Europe in 1976. All of us were saddened in December by the death of Buford A. Tynes, who had been Treasurer of Philip Morris since 1973. During 1975, John S. Reed, executive vice president of . First National City Bank, was elected to the Philip Morris Board of Directors. We extend our appreciation and thanks to our 48,000 employees around the world for their continuing dedication and excellence. Respectfully submitted on behalf of the Board of Directors, Joseph F. Cullman 3rd Chairman of the Board and Chief Executive Officer George Weissman Vice Chairman of the Board Ross R. Millhiser President 5

Retrospective de !'annee Nous avons Ie pfaisir de vous annoncer qu'en 1 975,'notre societe a obtenu d'excellents resultats. En depit de repercussions economiques defavorables dues a une situation mondiale recessionnaire ayant eu des incidences sur un grand nombre de territoires ou nous operons, nous sommes particulierement satisfaits des resultats enregistres en 1975. Heureusement, la demande pour nos deux principaux produits: cigarettes et biere, ne s'est pas montree particulierement affectee par la deterioration du climat economique, ces deux secteurs ayant obtenu de nouveaux records de vente, bien que leurs taux de croissance etaient inferieurs en 1975 par rapport a ceux des annees precedentes. Les ventes unitaires de cigarettes realisees par Philip Morris U.S.A. et par Philip Morris International ainsi que les ventes de barils de Miller Brewing, ont enregistre de nouveaux records, Nos resultats financiers sont mis en valeur sur la premiere page du present rapport. Le chiffre d'affaires, les benefices et les revenus par action ont enregistre do nouveaux records pour la vingt-deuxieme annee consecutive. En 1975, Ie chiffre d'affaires a augmente de 21,0%, Ies benefices de 20,6°,o at Ie rendement par action (en tenant compte des titres convertibles) s'est eleve de 17,9%. En 1975, pour la sixieme annee consecutive, les ventes unitaires de I'industrie americaine de la cigarette ont augmente. Les ventes totales se sont elevees a 599 milliards d'unltes, en augmentation de 1,3% par rapport a 1974. Philip Morris U.S.A. a continue de surclasser l'industrie avec une augmentation des ventes de 6,1 %, soit 141 milliards d'unites. On peut estimer qu'au cours du dernier trimestre, Marlboro est devenue la cigarette Ia plus vendue aux Etats-Unis, position qui lui etait deja reconnue pour le monde antler des 1972. Le marche de la cigarette en dehors des Etats-Unis a egalement maintenu sa progression en 1975 avec un volume total des ventes estime a 3.200 milliards d'unites, en augmentation de 3,2%. Philip Morris International a augmente ses ventes de 9,7% soit 155 milliards d'unites. Pour la dix-huitieme annee consecutive, les brasseries americaines ont enregistre en 1975 une augmentation des ventes avec un total d'approximativement 148,5 millions de barils vendus, soit un gain de 2,1 %. Pour la troisieme annee de suite, Miller Brewing s'est revelee etre aux Etats-Unis Ia brasserie avec le taux de croissance Ie plus rapide, avec une vente totale de 12.862.000 barils, en augmentation de 41,9 % ou 3.796.000 barils supplementaires par rapport aux 9.066.000 livres en 1974. Au cours des cinq dernieres annees, le chiffre d'affaires consolide de Philip Morris s'est eleve au taux moyen compose de 19,3% par an, at le rendement par action (en tenant compte des titres convertibles) a augmente au taux moyen compose de 20,4% par an. En mars 1975, a travers le plus important financement jamais realise par la societe, Philip Morris a emis un emprunt a long terme de $150 millions et a renforce son capital actionnaire avec la mise en vente publique de 2 millions d'actions ordinaires. Bien qua I'offre ait augmente le nombre d'actions ordinaires en circula- tion surIe marche, notre societe a enregistre une augmen- tation de 17,9% du rendement par action (en tenant compte des titres convertibles) par rapport a 1974. La demande croissante de nos cigarettes et de nos blares ainsi qua les besoins d'une plus grande efficacite de production, nous ont conduits a poursuivre notre programme d'inveslisse- ments. En 1975, les investissements ont totalise 5244,5 millions. Pour les cinq annees a venir, de 1976 a 1980, nous prevoyons d'atteindre un peu plus d'un milliard de dollars. Environ la moitie de ces fonds sera consacree a nos centres de production de cigarettes dans Ie monde, I'autre moitie devant repondre aux besoins de nos brasseries aux Etats-Unis. Pour la quarante-huitieme annee consecutive, Philip Morris a distribue des dividendes aux actions ordinaires et pour la huitieme annee de suite, Ie taux annual des dividendes a eta augmente. Par deux fois en 1975, le conseil d'administration a autorise le relevement du taux annuel, une premiere fois de 80 a 90 cents pour atteindre la deuxieme fois un dollar par action ordinaire. Philip Morris U.S.A. La croissance de Philip Morris U.S.A., notre societe d'exploitation Ia plus importante, s'est maintenue en 1975 avec une part du marche americain en augmentation de 23,6% par rapport a 22,5% en 1974. En 1975, le chiffre d'affaires a augmente de 14,6% et le revenu d'exploitation de 17,8%. Les ventes unitaires de Marlboro ont enregistre Ia plus forte croissance du secteur et sa part du marche a augmente de 15,2% contre 14,6% en 1974. Les ventes de Marlboro 100s, Marlboro Lights et Marlboro Menthol ont augmente at ont represente 21,0% de I'ensemble des Marlboro vendues aux Etats-Unis. Benson & Hedges 100s a renforce sa position a la tete du segment des cigarettes 100mm. En 1975 a eu lieu I'introduction au niveau national de sa nouvelle presentation an paquet rigide; d'autre part, Virginia Slims et Parhament 100s ont egalement enregistre une forte progression des ventes. - Dans Ie segment des cigarettes 120 mm, nousavons lance en avril 1975 a I'echelon national Saratoga 120s qui a atteint des la fin de I'annee une position importante dans cette etroite categorie. La part des cigarettes a faible teneur an goudron avait ete evaluee a 10% du marohe pour 1975. Grace a Marlboro Lights, Parliament at Benson & Hedges Multifilter, nous nous sommes fort bien positionnes dans cette categorie. En decembre 1975, resultat de douze annees de recherches, nous avons annonce une importante decouverte scientifique pour I'industrie de la cigarette. Nos chercheurs ont procede a I'isola- tion dans la fumee, de composants d'une forte densite en ar6me. L'application de cette decouverte a conduit au developpe- ment d'une methode qui rehausse I'arome naturel de Is cigarette ("Enriched Flavor"), sans I'habituelle augmentation de goudron. Cette methode a ete appliquee a une nouvelle cigarette: Merit, qui a ete introduite en janvier 1976 a I'echelon national. Merit, en version standard ou mentholee, ne contient que 9 mg de goudron et 0,7 mg de nicotine at se revele etre plus legere en goudron que 98% de toutes les cigarettes an vente aux Etats-Unis aujourd'hui. A travers la plus vaste enqu@te de consommation jamais conduite par notre societe, Merit a ete testee par rapport aux plus impor- tantes marques a faible teneur en goudron. Les resultats ont montre que m@me si les cigarettes comparees avaien! 60% de goudron en plus, Merit etait reconnue comme ayant autant ou plus de saveur, par une majorite significative des fumeurs ayant participe au test. L'accroissement de nos ventes a ete accompagne par une utilisation progressive des equipements madernes du nouveau Centre de production de Richmond, qui, a la fin de I'annee, produisait plus de 300 millions de cigarettes par jour, ou leg8rement plus de 50% de sa capacite finale prevue en 1977, lorsqu'il sera completement equipe. L'efficacite de ce centre de production permet a Philip Morris d'occuper, pour les annees a venir, une position favorable face a la concurrence. Notre nouveau centre de production est egalement devenu un important centre de conferences puisqu'il a deja abrite deux symposiums scientifiques at que s'y est deroule notre congres national des ventes en 1975 auquel ont participe plus de 1.000 employes de notre departement des ventes, venus de tout le pays. Au cours de I'annee, environ 450 employes de notre quartier-general de New York ont pu visiterces nouvelles installa- tions pendant les trois journees reservees a cat effet. De m@me, plus de 22.000 personnes ont visite le centre au cours de I'annee. Ces visites ont donne I'opportunite aux employes de - Philip Morris et au grand public d'etre confrontes pour la premiere fois avec des methodesde controle de qualite scientifiques, des installations modernes, at la haute efficacite des procedes ultra-rapides qua nous utilisons. En 1975, pour repondre a la demande croissante de nos produits, nous avons renforce les structures organisatives de notre quartier-general at de notre force de vente. La vitalite de la division American Safety Razor s'est refletee dans une augmentation significative desventes de Flicker, le produit enregistrant Ies meilleurs resultats dans le segment en progression des rasoirs pourdames. D'autre part, un nouveau conditionnement pour le Personna Double II aete mis au point, soutenu par Ie repositionnement de la campagne publicitaire. Un nouveau rasoir destine au marche feminin, le Lady Double II, a egalement fait son apparition. La division a contribue aux benefices de Ia societe. Philip Morris International Le chiffre d'affaires et le benefice de Philip Morris International ont atteint de nouveaux records en 1975, augmentant respective- ment de 17,2% et de 20,2%. Au cours du premier semestre, I'augmentation des impots indirects, les prix de revient plus eleves, et le contrble des prix effectue par les gouvernements de plusieurs pays, ont entraine des repercussions defavorables sur les marges beneficiaires de Philip Morris International. L'augmentation du volume de ventes unitaires at une plus grande efficacite operationnelle, auxquels se sont ajoutes les reajustements des prix de vente survenus dans . un grand nombre de nos marches, ont permis d'ameliorer les benefices d'exploitation au cours du deuxieme semestre. Comme pour les annees precedentes, la fluctuation des taux de change sous I'emprise du systeme monetaire international actuel, demeure pour Philip Morris et pour beaucoup de societes internationales, une preoccupation permanente, bien que cette instabilite n'ait pas affecte d'une maniere significative nos activiteq en 1975. Philip Morris International, par I'intermediaire de societes affiliees dans 22 pays, de licencies dans 17 pays et territoires at grace a des organisations de ventes a I'exportation, commer- cialise plus de 175 marques de cigarettes dans quelque 160 pays at territoires. La demande croissante pour les cigarettes filtre de type americain a contribue ® notre developpement constant. Sur le total des ventes unitaires realise a I'exterieur des Etats-Unis, plus du tiers est constitue de marques intemationales comme la Marlboro, qui continue d'augmenter ses parts du marche mondial. La presence de telles marques a egalement influence la croissance de nos exportations de cigarettes en provenance des Etats-Unis. Nos marques regionales et nationales representant la majeure partie des ventes unitaires de Philip Morris International, ont maintenu en 1975, leur contribution a I'accroissement de nos parts de marche dans de nombreux pays. Philip Morris Interna- tional continue de detenir une part de marche de 10% ou plus, dans quelque vingt pays. De nouveau en 1975, toutes nos regions administratives internationales ont contribue a I'augmentation des ventes unitaires de cigarettes et du chiffre d'affaires. Philip Morris Europe/Moyen Orient/Afrique a enregistre des ventes unitaires record. Marlboro est maintenant la cigarette la plus vendue dans cette r@gion administrative. Les marques regionales at nationales ont egalement maintenu leur progression. Afin de repondre a la demande croissante de Marlboro et de nos autres marques de cigarettes dans la Communaute Econo- mique Europeenne, nous avons entrepris un programme quin- quennal pour le developpement de nos centres de production a I'interieur de la C.E.E. Salon la premiere partie de ce programme, Philip Morris G.m.b.H. an Allemagne procede a I'agrandissement de sa fabrique de cigarettes de Munich, acquise en 1974, et a installe une usine satellite pres de son centre de production deja existent de Berlin Ouest. L'annee derniere, Marlboro a fait son apparition an Bulgarie et en Grece ou elle est fabriquee sous licence. De meme, en 1975, grace a un accord de cooperation technique et scientifique signe entre Philip Morris et I'Union Sovietique, une cigarette commemorative de type americain, appelee Apollo-Soyuz, a ete developpee, produite at com- mercialisee ensemble par le Ministere sovietique de I'Industrie alimentaire et Philip Morris. Notre region administrativeAmerique Latine/Peninsule Iberique a egalement enregistre des records de ventes unitaires an 1975. Au Bresil, Philip Morris Brasileira S.A. de Cigarros a acheve son nouveau centre de production de Curitiba et a fait I'acquisition de Companhia de Fumos Santa Cruz qui beneficie d'un important reseau de distribution, fabrique et commercialise un certain nombre de marques nationales populaires. Au milieu de I'annee, Marlboro a ete lance dans les prinoipales zones urbaines du Bresil. L'evolution rapide du marche bresilien de la cigarette, avec un chiffre de vente de 110 milliards d'unites, represente une vaste opportunite. Un puissant concurrent, disposantd'une partde marche preponderante, est I'un des defis qua nous devrons affronter dans ce pays. Nous prevoyons des pertes assez signifi- catives au Bresil, pendant que nous etablirons notre part du marche, comme nous an avons deja faitl'experience dans d'autres marches importants. Nous sommes confiants du potentiel de profits a long terme de notre operatlon bresfl'ienne. A Costa-Rica, nous avons acquis une importante participa- tion dans une societe de production de cigarettes, Tabacalera Costarricense, S.A. at une societe de distribution, Mendiola & Company. . Malgre les conditions economiques defavorables dans la plupart des territoires asiatiques at une hausse considerable des prix an Australia, en grande partie due aux majorations fiscales, la region administrative Asie/Pacifique a etabli des records de ventes unitaires de cigarettes en 1975. Philip Morris (Australia) Limited a vu ses principales marques, Marlboro et Alpine, gagner de nouvelles parts de marche tout comme Lindeman at Leo Buring pour les vins. Godfrey Phillips, India, Limited a ecoule avec succes une nouvelle emission publique d'actions qui a permis de renforcer Ie capital actionnaire de la societe et de diminuerproportionnelle- ment sea parts, repondant ainsi a la politique du gouvernement indien. Au Pakistan, nous avons augmente notre participation minoritaire au capital de Premier Tobacco Industries Limited. Au Canada, Benson & Hedges (Canada) Limited, dont les marques les plus importantes sont Mark Ten, Belvedere at Benson & Hedges 1 00s, a eleve ses ventes unitaires de cigarettes a de nouveaux records. Belmont at Viscount, deux cigarettes legeres (haute filtra- tion) ont enregistre une croissance particuli8rement importante, at Plus, la premiere cigarette canadienne 120 mm a ete lancee avec succes. Vers Ia fin de 1975, le gouvernement canadien a annonce Ia mise an vigueur prochaine d'une politique de controle des salaires et des prix qui pourrait avoir des repercussions sur notre rentabilite future dans ce pays. Philip Morris a, de nouveau, apporte une contribution positive a la balance des paiements des Etats, Unis at a la main-d'oeuvre americaine. Nous avons conclu des accords inter- nationaux be fabrication avec des societes affiliees et des . licencies car les barrieres tarifaires, et autres obstacles, ecartaient les possibilites d'exportation vers de nombreux marches. Depuis Ie debut de nos operations de production a I'etranger il y a 20 ans, le nombre d'employes de Philip Morris aux Etats- Unis impliques dans nos activites internationales, principale- ment I'exportation, a augmente de plus de 500%. Pour la m@me periode, nos exportations de cigarettes fabriquees aux Etats-Unis se sont egalement eleves de plus de 500% at au cours des dix dernieres annees, notre exportation de tabac cultive dans ce pays a augmente de plusde 300%. Les propositions pour relever la fiscalite sur les benefices realises a I'etranger par les societes americaines, visant a eliminer d'une part, les accords qui evitent une double imposition, et d'autre part, les delais de paiement des taxes, seraient, en cas d'application, contreproductives. Cela ralentirait Ie developpe- ment des activites internationales des societes americaines, diminuerait les exportations en provenance des Etats-Unis et aurait un effet negatif sur le marche de I'emploi dans ce pays. Philip Morris a beaucoup contribue a I'amelioration des conditions socio-economiques des pays-hotes. ou les cadres de nos societes affiliees sont en majeure partie d'origine locale. Cette contribution est particulierement significative dans les pays en voie de developpement, ou nous avons mis a disposition des capitaux pour les investissements, mis en place une technologie d'avant-garde at des methodes de gestion modernes, forme des employes locaux pourdes postes de responsabilites et developpe la competence professionnelle de nos ouvriers. Dans pratique- ment tous les pays en voie de developpement ou nous avons des affilies, les ressortissants sont associes au succes de I'entreprise en participant au capital actions. Miller Brewing Company Le chiffre d'affaires de Miller Brewing a augmente de 63,1 % par rapport a 1974 at le benefice d'exploitation s'est eleve a S28,6 millions contre 56,3 millions I'annee precedente. L'accroissement des benefices est le resultat d'un ensemble comprenant : un plus grand volume de ventes, les economies realisees grace a une plus vaste production, I'utilisation intensifiee des equipements modernes et efficaces et des prix plus eleves. L'augmentation des ventes de barils realisee par Miller, soit 41,9% en 1975, a depasse a la fois les 31,0% obtenus en 1974 et les 28,8% de 1973, permettant ainsi a Miller de s'elever au quatrieme rang des brasseries americaines. Les parts de marche de Miller ont atteint approximativement 8,6% contre 6;2% en 1974. La progression de la marque Miller High Life s'est acceleree at a renforce sa penetration dans la categorie des prix superieurs. Lite, notre nouvelle marque faible en calories et hydrate de carbone, a ete lancee avec succes sur le marche national en 1975. Toujours en 1975, Miller a repris les droits pour la distribution sur tout le territoire des Etats-Unis, de L'owenbrau, la biere allemande de ienommee mondiale, grace a un accord a effet progressif signe en 1974 avec cette brasserie etablie depuis 600 ans a Munich. Pendant la majeure partie de I'annee, la demande pour Ies bieres Miller a excede sa capacite de production, rendant neces- saire a partir d'avril 1975, une stricte repartition de distribution de toutes sea marques. Pour repondre a la demande croissante, Miller a accelere son programme d'investissement etd'expansion. L'agrandissement de notre brasserie de Fort Worth pour obtenir une augmentation de capacite passant de 2 a 5 millions de barils, a ete acheve courant 1975. Notre brasserie de Milwaukee, la plus grande brasserie de I'etat du Wisconsin, avec une capacite de 7 millions de barils, a ete agrandie at modernisee par I'adjonction d'un equipement uitra-rapide. Miller dispose egalement d'une brasserie a Azusa an California, d'une capacite de 1,5 millions de barils. L'entree en production de notre quatrieme brasserie a Fulton, dans I'etat de New York, est prevue pour cette annee at pourrait etre operationnel le des la fin 1976 aveo une capacite de 3,3 millions de barils. Miller aura unecepacite annuelle totale d'environ 17 millions de barils fin 1976 et la plus grande partie des installations utili- seront une technologie d'avant-garde etserontdotees d'equipe- ments ultra-modernes. Depuis 1973, Millera investi plus de $250 millions pour son programme d'expansion afin de doubler sa capaoite. 250001I24b

Notre premiere fabrique de boites de biere en aluminium don,9le Milwaukee, dont Is production debutait en 1975, s'est averee beneficiaire en depit des (rais de demarrage. D'sutres centres de production de boites sont actuellement en cours de gj6 tion a Fort Worth et Fulton, devant @tre operationnels en 1 phiqp Morris lndustrial Pour 1975, les resultats d'exploitation de Philip Morris Industrial ont ete contrecarres par I'impossibilite de proceder a un releve- ment des prix, pourtant indispensable, et le cout plus eleve de I.enetgle, elements partiellement compenses par la reduction des depenses de Philip Morris Industrial. Le chiffre d'affaires a diminue de 2,2% et les benefices d'exploitation de 34,4°/ . Les sections conditionnement, papier et chimique qui constituent Philip Morris Industrial ont toutes obtenu des resu!tats oositifs I'annee derniere, Is section conditionnement ayant etab!i des records de production et de benefices. La recession et Is diminution des stocks client ont eu une severe repercussion sur, a Is fois, les sections papier at chimique. L'excedent de capacite de production dans I'industrie du papier et le ramo!lissement de l'industrie textile ajoutes a une baisse de la demande n'ont pas permis de maintenir de hauts niveaux de rendement operationne!s. Neanmoins, au cours du quatrieme Irimestre, les resultats d'exploitation ont pu etre ameliores pour ces deux divisions. Philip Morris Industrial a renforce ses capacites de recher- che en 1975 et a poursuivi le deve!oppement de nouveaux produits at leurs applications, en maintenant sa politique de con- centratlon surdes marches specifiques. Mission Viejo Company En 1975, notre societe d'urbanisation at de construction d'habita- tions a augmente son chiffre d'affaires at ses benefices dans des proportions records bien qua l'industrie nationale dusecteur soit en forte regression. Le chiffre d'affaires et les benefices d'exploitation ont respe0tivement enregistre une hausse de 12,7% at 23.1 % par rapport a 1974. Le carnet de commandes des nouvelles habitations de Mission Viejo Company a fin 1975 etait superieur de 76,2% par rapport a I'annee precedente at I'inventaire des logements invendus etait le plus bas atteint depuis septembre 1971. Le plus important programme de Ia societe, a Mission Viejo en California du Sud, a connu un succes de vente tout particu!ier en 1975. Cette nouvelle communaute offre a sea 32.000 residents un vaste choix d'installations destinees aux loisirs et a I'education, des centres commerciaux, 1'ensemb!e situe dans un environne- ment beneficiant d'un style de vie de haute qualite. La construction d'un lac de plus de 50 hectares, a Mission Viejo, a commence en 1975, devant encore ajouter au prestige de cette communaute en expansion. Le developpement de deux programmes moins importants, a'Denver at a Fresno, s'est poursuivi de fapon satisfaisante en 1975. Mais la recession de I'industrie s'est fait ressenlir d'une maniere plus sensible pour ces deux sites; d'autre part, Ia societe n'est plus impliquee activement dans le chantier de Phoenix. Les Taxes sur les Cigarettes Parmi les problhmes qua l'industrie a du affronter en 1975 il faut relever I'intensification des efforts des etats et des instances locales pour augmenter leurs revenus a travers Ies impBts indi- rects qui frappent les cigarettes. En 1975, quatre etats ont promulgue une loi pour rehausser les impots indirects sur lea cigarettes, contre deux seulement an 1974. Des projets de loi dans le meme sens ont ete deposes dans 30 etats at dans de nombreuses municipa!ites I'annee derniere. Dans plusieurs etats ces propositions de loi ont ete rejetees. Un grand nombre de projets de loi presentes aussi bien au niveau de I'etat qu'au niveau communal indiquent une reponse automatique aux problemes de budget qui surgissent dans les secteurs fisca!ement perturbes. Les administrateurs d'etat et locaux proposent de telles augmentations car elles representent une source supplementaire de revenus, immediatement dispo- nibles. Cependant, ces taxes constituent des mesures regressives at discriminatoires a I'encontre des consommateurs a faib!es revenus. Les variations de taxation d'un endroit a I'autre encoura- gent la contrebande aux depens du revenu fiscal. En 1975, le montant total des revenus de I'impdt indirect sur les cigarettes s'est eleve a$5,7 milliards, dont $2,2 milliards de taxes federa!es, $3,4 milliards au niveau des etats et $0,1 milliard de taxes communales. Ces taxes indirectes representent approxi- mativement 42% du prix de vente moyen d'un paquet de cigarettes aux Etats-Unis. De nouveau en 1975, les impots indirects ont augmente dans plusieurs pays. Comme aux Etats-Unis, de telles hauses se reve!ent contreproductives. Dans certains marches inter- nationaux ou il existe des categories de prix differentes, pareils relevements encouragent les consommateurs a se rabattre vers des marques de cigarettes de prix inferieur, moins taxees, ce qui reduit le montant du revenu potential pour lea autorites perceptrices. Ce Tabac et la Sante La controverse concernant la pretendue relation de cause a effet entre le tabac et la sante s'est poursuivie an 1975, bien qua les attaques dirigees contre I'industrie de Is cigarette se soient considerablement modifiees. Comme I'a fait observer un chroniqueur medical: "It est rare qu'il ne se passe une semaine sans qu'un nouveau rapport nous devoile qu'une substance, jusqu'alors insoupGonnee, se revele etre a Is base du cancer. Jusqu'ici, les scientifiques ont re!eve plus de mille agents definis ou suspectes d'etre generateurs du cancer humain. Au cours des derni8res annees, de tels agents, appeles "cancerigenes", ont ete decouverts dans I'air qua nous respirons, I'eau qua nous buvons, Ia nourriture que nous absorbons, les vetements qua ncus portons, les produits pharma- ceutiques que nous prenons, lea activites qua nous exerGons, les habitudes qua nous poursuivons". De telles decouvertes ne font que confirmer la comp!exite du problame du cancer at dramatiser Ies equivoques qui entourent Ies informations du type de celles qui ont ete utilisees a la base des allegations a I'encontre des cigarettes. A notre avis, de telles informations tendent a placer la question de la relation tabac- sante dans une plus vaste perspective at peuvent conduire'a .. la conclusion que, non seulement I'environnement tout entier, mais egalement une predisposition genetique de I'individu, age, sexe, son degre de sensibi!ite d'immunisaticn at m@me peut-etre son etat psychologique, peuvent etre des facteurs determinants affectant Ia vulnerabilite ou Is resistance au cancer. Durant I'annee ecoulee, les principales activites des milieux anti-tabac se sont concentrees an vue d'essayer de limiter severement ou de supprimer lea droits des fumeurs dans de nombreux lieux publics. Aujourd'hui, aucune evidence scien- tifique n'est en mesure de demontrer qua la fumee de cigarette nuise aux non-fumeurs. Philip Morris at I'ensemble de I'industrie de Ia cigarette ont maintenu leurs engageinents a long terme pour recherches a travers le "Council for Tobacco Research-USA" (Conseil americain pour la recherche sur le tabac) at a I'aide de subven- tions aux chercheurs. Acfivites d'lnteret Public Philip Morris a encore amplifie son programme social en faveur de ses employes, des collectivites srtuees aux alentours des lieux de travail, at des habitants des pays-h6tes. Aux Etats-Unis, notre societe a augmente la proportion d'embauche at I'empfoi a des postes de responsabilites des minorites ethniques et des femmes. En 1975, 10,5% des postes de cadres administratifs et techniques ont ete attribues a des minorites contre 9,6% en 1974. Les femmes ont represente 15,4% de ce groupe compare a 14,4% I'annee precedente. Dans le domaine de I'education, Philip Morris a plus qua double ses bourses d'etudes depuis 1971. En fait, I'aide a I'enseignement a represente plus de 50%de nos oeuvres sociales I'annee derniere, une grande partie de cette augmentation ayant ete destinee a des institutions privees at independantes. Nous avons ete Is premiere societe aux Etats-Unis a offrir aux enfants de nos employes des bourses d'etudes pour Is formation profes- sionnelle at technique, en plus de notre programme de bourses universitaires, et les premiers a encourager la mise a disposition de bourses d'etudes pour lea femmes desireuses de s'elever dans Ia hierarchie ou de reprendre une activite professionnelle. L'annee derniere, nous avons ete I'une des premieres societes a contribuer au centre commun des etudes po!itiques de I'univer- site Howard, un centre d'infor_mation reserve aux noirs e!us a des postes de la fonction publique. Les engagements sociaux de Philip Morris International, sont determihes par les besoins des pays-hotes at s'etendent de I'assistance sanitaire de base et deve!oppement de I'instruction a Is protection des especes sauvages at programmes culturels. Pendant plus de dix ans, Philip Morris s'est revele un pre- curseur du mecenat artistique at d'importantes expositions ont effectue des tournees aux Etats-Unis sous son patronage. Au cours de 1975, "Frontier America: The Far West" a ete inauguree au musee des beaux-arts de Boston, pour se rendre ensuite a Denver, San Diego at Milwaukee. Cette exposition etait patronee conjointement par la Fondation Nationale pour les Arts et Philip Morris sous I'egide de Marlboro, at se rendra en Europe en 1976. Nous avons ete profondement affliges par la mort de Buford A. Tynes, survenue an decembre a!ors qu'il occupait la fonction de Tresorier de Philip Morris depuis 1973. Au cours de I'annee 1975, John S. Reed, Vice-President Executif de la First National City Bank, a ete elu membre du conseil d'administration de Philip Morris. Nous aimerions rendre hommage at remercier nos 48.000 employes dans le monde antler, pour leur devouement at Ieur merite. Informe Anual Nos es grato informar que 1975 fue otro ano excelente para nuestra compania. Consideramos que el ejercicio de 1975 de nuestra compania fue particularmente satisfactorio en vista de la recesion eco- n6mica mundial qua tuvo un impacto adverso en muchos de los paises en qua operamos. Afortunadamente, la demanda por nuestros dos productos principales-cigarrillos y cerveza-no se resintio mucho por los cambios economicos reinantes. Las dos industries obtuvieron un nivel de ventas en unidades jamas alcanzado, aunque la tasa de crecimiento fue mas lenta en 1975 qua en anos anteriores. Las ventas en unidades de Philip Morris U.S.A. y de Philip Morris International,.asi como la del volumen de ventas en barriles de Miller Brewing, lograron niveles sin precedentes. Nuestros resultados financieros esten destacados an la primera pagina. Por 22 anos consecutivos, el ingreso de operaci6n, el beneficio neto y Is ganancia por accion han establecido topes sin precedentes. En 1975 el ingreso de opera- cion aument621,0%, at beneficio neto subio 20,6% y la ganancia poracci6n, incluyendo bonos convertib!es, crecio 17,9%. Para Is industria del cigarrillo de EUA, 1975 fue el sexto ano consecutivo con aumento en el volumen de ventas. El total de ventas fue de 599 mil millones de cigarrillos, o sea 1,3% mas que en 1974. Philip Morris U.S.A. continu6 sobrepasando a la industria con un aumento de sus ventas an unidades de 6,1 %- un total de 141 mil millones de cigarrillos. Se estima que en el Oltimo trimestre del ano Marlboro Ileg6 a ser la marca de mayor venta en el pa1s; posici6n Iograda mundialmente en 1972. El mercedo del cigarrillo afuera de EUA tambien sigui6 creciendo en 1975, estimandose un total de ventas de 3,2 billo- nes, o sea un 3,2°1°. Philip Morris International aument6 sus ventas en 9,7%-155 mil millones de cigarrillos. En 1975, y por 18 anos consecutivos, la industria cervecera de EUA aument6 la venta en barriles, con un total aproximado de 148,5 millones de barriles vendidos-un aumento de 2,1 %. Por el tercer ano consecutivo Miller Brewing fue la cerveceria de mayor crecimiento en EUA, con un total de ventas de 12.862.000 barriles, o sea un aumento de 41,9%, y 3.796.000 por encima de los 9.066.000 de barriles entregados en 1974. Durante Ios ultimos cinco afios at ingreso de operaci6n conso!idado de Philip Morris aumento a una tasa anual promedio compuesta de 19,3% y la ganancia poraccibn, incluyendo bonos convertibles, aumerit6 a una tasa anual promedlo de 20,4'10. En marzo de 1975, Philip Morris emiti6 $150 millones de deuda a largo plazo y forta!eci6 su capital accionario con la venta ptibtica de dos millones de acciones ordinarias, lo que constituy6 el financiamiento de mayor envergadura de la empresa hasta el momento. Sin bien la oferta de acciones aument6 el nOmero de acciones ordinaries en circulacion, nuestra compania atin registro en relaclon a 1974 un aumento de 17,9% en ganancia poraccidn, incluyendo bonos convertibles. La creciente demanda por nuestros cigarrillos y cerveza y la necesidad de insta!aciones ehcientes adicionales para produccion exigieron un programa continuo de expansion de capital, En 19751as inversiones ascendieron a S244,5 millones. Anticipamos qua durante los proximos cinco anos, 1976-1980, las inversiones seran algo superiores a mil millones de do!ares; aproximada- mente una mitad de estos fondos se invertira an nuestras operaciones de cigarrillos en el mundo y Ia otra mitad en nuestras operaciones cerveceras an EUA. Por 48 anos consecutivos Philip Morris pago dividendos sobre sus acciones ordinaries, y por ocho anos consecutivos aumento su dividendo anual. En 19751a Junta Directiva autoriz6 dos aumentos en el dividendo anual-primero de 80 a 90 centavos de dolar y luego a$1 por accion ordinaria. Philip Morris U.S.A. El crecimiento de Philip Morris U.S.A., nuestra compania opera- tiva de mayor envergadura, continuo an 1975 con un aumento de la participacion an el mercado de Estados Unidos qua Ilego a 23,6%, de 22,5% en 1974. En 1975, el ingreso de operacion aumento en 14,6% y el beneficio de operacion subio un 17,8%. Marlboro Iogro el mayor aumento de venta en unidades dentro de Ia industria; su participacion en el marcado subio a 15,2%, de 14,6% en 1974. Marlboro 100s, Marlboro Lights y Marlboro Menthol incrementaron sus ventas y representaron el 21 % de todos los cigarillos Marlboro vendidos en EUA. Benson & Hedges 100s consolido su posicion como Ia marca sobresa!iente de t00mm. Su nuevo envase en caja dura se introdujo an todo el pais an 1975. Virginia Slims y Parliament 100s tambien lograron an 1975 fuertes ganancias an su volumen de venta. En el segmento de 120mm, Saratoga 120s fue introducido en todo el pais en abril de 1975 y paraiines del ano habia a!canzado una posici6n importante en ese pequeno mercado. Se ha estimado qua los cigarrillos de baja emision de brea representaron en 1975 aproximadamente un 10% de la industria. En esa categoria hemos estado bien representados con Marlboro Lights, Parliament y Benson & Hedges Multifilter. Como culminacion de una investigacion de 12 anos anun- ciamos en diciembre de 1975 un avance cientifico sensacional an la industria del cigarrillo: nuestros investigadores ais!aron los componentes con saborsumamente intenso presentes en el humo. En base a este descubrimiento se Ilego a desarrollar un proceso para enriquecer el sabor ("Enriched Flavor") qua acenttia los sabores naturales en el cigarrillo sin el aumento usual de brea. Este proceso se aplico a un nuevo cigarrilYo, Merit, introducido en todo el pais an enero de 1976. Las dos versiones de Merit, con y sin mentol, solo emiten 9 mg de brea y 0,7 mg de nicotina; su emision de brea as inferior a Is del 98% de todos los cigarrillos vendidos hoy dia en EUA. En Ia prueba mas extensa que haya rea!izado Ia compania para experimentar un producto nuevo entre los consumidores, se comparb a Merit con otras marcas importantes de baja emisidn de brea. Los resultados indicaron qua aun cuando el cigarrillo contenia 60% mas de brea, una mayoria significativa de los fumadores qua partici- paron en Is prueba dijo qua Merit tenia tanto o mas sabor. El aumento de nuestras ventas fue paralelo a un creciente uso de las insta!aciones modernas de nuestro nuevo Centro de Operaciones de Richmond, qua a fines del ano estaba produ- ciendo mas de 300 millones de cigarrillos diarios, o sea escasa- mente encima del 50% de Is capacidad de produccion qua tendra cuando este totalmente equipado en 1977. La eficiencia de esta planta de produccion de cigarrillos pondra a Philip Morris an una posici6n competitiva favorable durante los anos venideros. El nuevo Centro de Operaciones se he convertido en un lugar importante para conferencias donde se Ilevaron a cabo dos simposios cientificos y nuestra Reunion Nacional de Ventas 1975, a Is que asistieron mas de 1.000 miembros de nuestro personal de venta de todo el pais. Cerca de 450 emp!eados de nuestra sede de Nueva York visitaron las nuevas instalaciones durante tres dies del ano, y tambien durante 1975, mas de 22.000 visitantes recorrieron el Centro. Estas visitas ofrecieron a los emp!eados de Philip Morris y al pub!ico an general Is oportunidad de presenciar directamente nuestro control cientifico de calidad y nuestras insta!aciones modernas, de a!ta velocidad y sumamente eficientes. En 1975, phra responder a la creciente demanda de nuestros productos hemos procedido a fortalecer Ia estructura de nuestras oficinas centrales y de las organizaciones regiona!es de ventas. La vitalidad de la American Safety Razor Division se reflej6 en el importante aumento de las ventas de Flicker, la marca de mayorventaen el creciente mercado para maquinillas de afeitar para damas, con un nuevo envase y una publicidad totalmente renovada para Personna Double II. Tambien se introdujo la nueva hoja de afeitar para dames Lady Double II. La compania contribuyo a las utilidades de la empress. Philip Morris International Los ingresos y beneficios de operacion de Philip Morris Interna- tional han marcado en 1975 nuevos nive!es sin precedentes, con un aumento de 17,2% y 20,2'/o respectivamente. Aumentos en impuestos al consumo, costos mas altos y limitaciones gubernamenta!es sobre precios an varios mercados restringieron durante Ia primera mitad del ano los margenes de beneficio de operacion de Philip Morris International. Pero aumen- tos en el volumen de ventas y una mayor eficiencia de operacion, junto con incrementos de precio puestos en vigencia en muchos de nuestros mercados, resultarori an una mejora de los margenes durante la segunda mitad del ano. Como en los 6!timos anos, las f!uctuaciones de la moneda bajo el presente sistema monetario internacional siguen slendo una preocupacion para Philip Morris y para muchas companias internacionales. Sin embargo estos cambios no han tenido en 1975 un efecto significativo netosobre nuestras operaciones. Philip Morris International comercia!iza mas de 175 marcas an mas de 160 paises y territorios a traves de fabricas afi!iadas en 22 pafses, firmas qua operan bajo licancia en 17 paises y territorios y organizaciones de vents para exportacion. La creciente demanda por cigarrillos con filtro de mezc!a "tipo amerioano" contribuyo a nuestro continuo crecimiento. Fuera de EUA, mucho mas de un tercio del total de nuestras L500011247 7

ventas en unidades to constituyen marcas internacionales como Marlboro, qua sigue incrementando su participacion en el mercado mundial. La presencia de esfas marcas infernacionales Snluyb en un mayor crecimiento de ta exportacion de nuestros cigarrillos desde EUA. Las marcas regionales y nacionales representaron Is mayor parte de Ias ventas en unidades de Philip Morris International y en 1975 siguieron contribuyendo significativamente a nuestra parti- cipacion en el mercado de muchos paises. Philip Morris International continua manteniendo participaciones de mercado de 10% o superiores; en mas de 20 paises. Nuevamente en 1975 todas nuestras regiones administra- tivas internacionales contribuyeron al aumento del volumen de venta de cigarrillos y del ingreso de operacion. Philip Morris Europa/Medio Oriente/Africa registro un volumen de ventas nunca alcanzado. Marlboro as ahora el ciga- rrillo con filtro de mas venta de esta region administrativa. La venta de marcas regionales y nacionales tambien continu6 su curso ascendente. Para poder responder a la creciente demanda por Marlboro y nuestras otras marcas en la Comunidad Economics Europea, hemos iniciado ahi un programs quinquenal para la expansion de nuestras instalaciones de produccion. En Ia primera fase de este programs Philip Morris G.m.b.H. en Alemania esta ampliando su fabrica de cigarrillos de Munich, adquirida en 1974, y ha establecido una plants satelite cerca de su fabrica actual an Berlin Occidental. El ano pasado se introdujo Marlboro en los mercados de Bulgaria y Grecia fabricado bajo licencia en esos paises. Tambien en 1975, bajo las condiciones del acuerdo de cooperaci6n cien- tifica y tecnologica entre Philip Morris y la Uni6n Sovietica, una marca conmemorativa de cigarrillo "tipo americano", at Apollo- Soyuz, fue desarrollado, producido y comercializado en forma conjunta por at Ministerio de Industria de la Alimentacion de la U.R.S.S. y Philip Morris. Nuestra region administrativa America Latina/Peninsula Iberica tambien registr6 en 1975 cifras de ventas sin precedentes. En Brasil, Philip Morris Brasileira S.A. de Cigarros completo una nueva fabrics en Curitiba y hemos adquirido la Companhia de Fumos Santa Cruz, la cual posee una extensa red de distribuci6n y fabrics y comercializa varias marcas de consumo popular. A partir de mediados del ano se Ianz6 Marlboro en las principales dress urbanas de Brasil. El rApido crecimiento del mercado del cigarrillo en Brasil, con unaventa anual de 110 mil millones de cigarrillos, ofrece una gran oportunidad. Uno de los desafios que debemos enfrentar as un competidor fuerte con una participacion dominante en el mercado. Anticipamos tener p8rdidas significativas en Brasil hasta qua Iabremos nuestra participaci6n en el mercado, como to hicimos en otros mercados importantes en situaciones similares. Confiamos en el potencial de rentabilidad a largo plazo de nuestras operaciones brasileras. En Costa Rica adquirimos una participacion sustancial en el capital de la fabrica de cigarrillds Tabacalera Costarricense, S.A. y de la distribuidora Mendiola y Compania. A pesar de las condiciones ecOndmicas desfavorables en la mayoria de los paises asiaticos y de los aumentos de precios en Australia, debidos en gran parte a incrementos en los impuestos, la region administrativa Asia/Pacifico registr6 en 1975 un aumento de sus ventas de cigarrillos• Las marcas mas importantes de Philip Morris (Australia) Limited, Marlboro yAlpine, aumentaron su participaci6n en at mercado como tambien to hicieron los vinos de Lindeman y Leo Buring. Godfrey Phillips, India, Limited ha colocado con exito una nueva emision pOblica de acciones, qua reforzo la base de capita social y a su vez redujo nuestra participacion en el. capital social de acuerdo a la politica del gobierno de Ia India. En Pakistan aumentamos nuestra participacion minoritaria en el capital de Premier Tobacco Industries Limited. En Canada, Benson & Hedges (Canada) Limited, cuyas marcas pnnclpales son Mark Ten, Belvedere y Benson & Hedges 100s, aumento sus ventas de cigarrillos en unidades a niveles nunca alcanzados. Belmont y Viscount, dos marcas livianas ("high-filtration"), tuvieron un aumento particularmente grande, y Plus, el primer cigarrillo de 120mm de Canada, fue introducido con exito. Hacia el final de 1975 el gobierno de Canada anunci6 una politics de control de precios y salarios qua probablemente tendra algun efecto en Is futura rentabilidad en Canada. El ano pasado Philip Morris hizo nuevamente una contribu- cidn positiva a la balanza de pagos y al nivel de empleo de Estados Unidos. Nuestras fabricas afiliadas internacionales y los convenios con los concesionarios se establecieron porque barreras arancelarias y aduaneras impidieron as exportaciones de EUA a muchos mercados• Desde qua iniciamos nuestras operaciones internacionales 20 anos atras, el nilmero de empleados de Philip Morris an EUA, trabajando para nuestras operaciones internacionales, especial- mente exportacidn, aument6 mas de 500%. Durante el mismo periodo, nuestras exportaciones de cigarrillos fabri6a3os en EUA tambien aumentaron por encima de 500% y en los ultimos diez anos nuestra exportaci6n de tabaco cultivado en EUA aument6 mas de300%. Las propuestas en EUA pars incrementar Is carga fiscal sobre los ingresos de fuente extranjera percibidos por corporaciones del pais, incluyendo Is eliminaci6n de acuerdos para evitar la dobte imposicion y el diferimiento del pago fiscal, seran contra- producentes. Ellas restringiran Is expansion de las operaciones internacionales de las companias de EUA, inclusive las exporta- ciones estadounidenses, y finalmente conduciran a una perdida de empleos en el pafs. Philip Morris tambibn ha hecho contribuciones positivas a las condiciones econ6micas y sociales de los paises anfitriones, donde los directivos de nuestras afiliadas son en gran parte ciudadanos de esos paises. Estas contribuciones son de parti- cular significacion en los paises en desarrollo. Hemos propor- cionado capital de inversi6n, introducido tecnologia avanzada, establecido sistemas administrativos modernos y entrenado al personal local para ocupar cargos directivos a la vez qua hemos desarrollado las aptitudes de los operarios. Los ciudadanos de casi todos los palses donde tenemos afiliadas comparten eI exito de esas companras a traves de su participaci6n en el capital de las mismas. Miller Brewing Company E) ingreso de operacion de Miller Brewing experiment6 un aumento de 63,1 % sobre el ejercicio de 1974, y el beneficio de operacidn aumentd a $28,6 millones de $6,3 millones el ano anterior. El aumento del beneficio de Miller as el resultado de Ia combinacion de un mayor volumen de produccion, economias hechas en Is produccion a gran escala, mayor uso de nuevas y eficientes instalaciones para producci6n y precios mas altos. Miller, con un aumento de venta en barriles de 41,9% en 1975 excedio al aumento de 31,0% del ejercicio anterior, y al de 28.8% de 1973, lo qua le permitio ascender al cuarto lugar entre Ias companias cerveceras de EUA. La participacion de Miller en eI mercado aumento aproximadamente a 8,6%, de 6,2% en 1974. La marca Miller High Life siguio creciendo velozmente, aumentando asi su penetracion en Is categoria de cerveza de precio mas alto. Lite, nuestra nueva cerveza, baja en calorias y en contenido de hidratos de carbono, se introdujo con exito an todo el pals en 1975. Tambien en 1975, Miller asumio todos los derechos de distribuci6n en EUA de la cerveza alemana de fama mundial Lowenbrau, bajo un acuerdo multifacetico progresivo firmado con esta cervecerfa establecida hace 600 anos en Munich. Durante la mayor parte del ano la demands por los pro- ductos de Miller excedio a su capacidad de producci6n. Por esta razon, a partir de abril de 1975 fue necesaria una estricta selec- cion de las marcas a producir. Para poder responder a la creciente demands Miller acelerb su programs de expansion de capital. Durante el ano se completo la ampliaci6n de la capacidad nominal de produccion de nuestra cerveceria de Fort Worth de dos millones a cinco millones de barriles. Nuestracerveceria de Milwaukee, la mas grande del estado de Wisconsin con una capacidad nominal de producci6n de siete millones de barriles, fue expandida y modernizada con equipas de alta velocidad. Miller tiene tambien una cervecerfa en Azusa, California, de una capacidad nominal de producci6n de 1,5 millones de barriles. Se estima qua nuestra cuarta cerveceria, en Fulton, Nueva York, entrara en producci6n an 1976, y para fin de ano estara operando con una capacidad nominal de producci6n anual de 3,3 millones de barriles. Para fines de 1976 Millertendra aproximadamente una capacidad nominal de produccion de 17 millones de barriles; casi todas nuestras instalaciones contaran con equipas modernos y haran uso de la tecnologia mas eficiente. Desde 1973 Miller ha invertido mas de $250 millones en proyectos de expansi6n para doblar su capacidad de producci6n. Nuestra primera fabrica de latas de aluminio, qua comenzo a funcionar en 1975, produjo ganancias pese a los costos de iniciacion. Actualmente se estan construyendo otras fabricas de latas en Fort Worth y Fulton con produccion programada para 1976. Philip Morris Industrial Durante 19751a incapacidad de poneren vigencia neceserios aumentos de precios y los costos mas altos de la energia afec- taron adversamente los resultados de operaci6n de Philip Morris Industrial. Esos factores fueron compensados parcialmente por los programas de reduccion de costos de esta compania. El ingreso de operacion decreci6 2,2% y el beneficio de operaci6n baj6 34,4%. Los tres grupos qua integran Philip Morris Industrial- Envases, Papel y Productos Quimicos-han operado con ganan- cia el ano pasado y el Grupo Envases ha producido un nival de utilidades sin precedentes. La recesi6n economica y la disminuci6n de tos inventarios de nuestros clientes tuvieron un efecto sumamente adverso sobre los Grupos Papal y Productos Quimicos. La excesiva capacidad de produccion de la industria del papel y el contfnuo relajamiento de la industria textil redujeron marcadamente la demanda y no se pudieron mantener niveles de operaci6n eficientes. Sin embargo en el ultimo trimestre mejoraron los resultados de operaci6n de los dos grupos. En 1975 Philip Morris Industrial fortaleci6 su capacidad de investigaci6n y continuo dedicandose al desarrolto de nuevos productos y de nuevas aplicaciones manteniendo asi su estra- tegia de concentrarse an mercados de especiafidad. Mission VieJo Company En 1975, Mission Viejo, nuestra compania de urbanizaci6n y construcclon de viviendas aument6 sus ingresos y ganancias a niveles nunca alcanzados pese a la gran depresi6n en ese sector de la industria. El ingreso y el beneficio de operaci6n de la compar3ia subieron, respectivamente, en 12,7% y 23,1 % sobre los niveles del ejercicio de 1974. A fines del 1975 el total de 6rdenes pendientes para casas nuevas subi6 76,2'/o sobre el ano anterior y su inventario de casas no vendidas fue el mas bajo desde septiembre de 1971. La operaci6n mas importante de Mission Viejo, an California del Sur, registr6 un ritmo de ventas particularmente acelerado durante 1975. Eats nueva comunidad ofrece a sus 32.000 resi- dentes una amplia variedad de instalaciones recreacionales, educativas y comerciales, a la vez qua un alto estilo de vida. Un lago de mas de 50 hectareas cuya construcci6n se inici6 en 1975 en Mission Viejo, California, promete acrecentar aun mas el prestfgio de esta comunidad en desarrollo. La urbanizaci6n de dos pequenas comunidades-en Denver y en Fresno-continuo en 1975, aunque en estos mercados se sinti6 mucho mas el efecto de la recesion en la construcci6n de viviendas. En Phoenix Is compania ya no participa activa- mente en el mercado de la vivienda. lmpuestos sobre los cigarrillos Entre los problemas qua tuvo qua enfrentar en 1975 la industria del tabaco de EUA ha de menoionarse la intensificaci6n de los esfuerzos estatales y locales para promover ingresos adicionales a traves de impuestos al consumo de cfgarrillos. En 1975 cuatro estados promulgaron legislaci6n destinada a aumentar el impuesto al consumo de cigarrillos, mientras que an 1974 s61o lo hicieron dos estados. Durante el mismo ano se introdujeron an 30 estados y muchos municipios de EUA proyec- tos de legislacion similares. Por otra parte, en varios estados se rechazaron propuestas para aumentar el impuesto sobre los cigarrillos. Muchas de las leyes propuestas. tanto a nivel estatal como municipal, representan una respuesta directa a problemas presupuestarios en areas con dificultades fiscales. Oficiales estatales y locales proponen tales aumentos como fuentes de ingreso adicionales de facil acceso. No obstante estos impuestos son regresivos y descriminan directamente contra el consumidor de mas bajos ingresos. La diversidad en los valores de impuestos al consumo entre una area y otra foments el contrabando, lo qua resulta en un total manor de ingresos fiscales. En 1975 el ingreso fiscal por Is venta de cigarrillos en EUA fue de un total de 95,7 mil millones, de los cuales 82,2 mil millones fueron a nivel federal, 53,4 mil millones a nivel estatal y 3100 millones a nivel municipal. Estos impuestos al consumo representan, sobre un precio basico nacional, aproximadamente 42% del precio promedio al consumidor de una cajetilla de cigarrillos. Nuevamente en 1975 se aumentaron los impuestos al con- sumo de cigarrillos en muchos de nuestros mercados interna- cionales. AI igual que en EUA, tales aumentos por lo general prueban sercontraproducentes. En algunos mercados interna- cionales donde hay varias categorias de precios, tales aumentos an los impuestos tienden a fomentar un traslado de la demanda del consumidor hacia cigarrillos mas baratos y menos grava- dos, reduciendo asi los ingresos fiscales. El tumar y /a salud Durante 1975 coniinuo la controversia acerca de la supuesta relacidn entre el fumar y la salud, aunque la naturaleza de los ataques contra la industria cambiaron considerablemente. Como observ6 un escritor de temas de medicina: "Es dificil qua pase una semana sin qua aparezca algGn informe nuevo diciendo qua se ha encontrado qua ciertas sustancias insospe- chadas hasta el momento producen cancer. Hasta ahora los investigadores han senalado mas de 1.000 agentes como cau- santes ciertos o sospechosos de oancer an el hombre. En anos recientes, tales agentes-Ilamados carcin6genes-han sido identificados en el aire qua respiramos, el agua que tomamos, los alimentos qua comemos, la ropa qua usamos, las drogas qua ingerimos, Ios trabajos qua realizamos, los habitos que perseguimos." Estos hallazgos sirven para confirmar la complejidad del problems del cancer y pars dramatizar la incertidumbre circuns- tante a Ios datos usados como base pars las alegaciones contra el cigarrillo. Opinamos qua tales resultados solo tienden a dar al tema de el fumar y la salud una perspectiva mas grande y pueden conducir al reconocimiento de qua no es solo todo el medio ambiente, sino qua hay otros factores mayores qua pueden afectar Ia ocurrencia o no del cancer: predisposicion genetica del individuo, edad, sexo, reacciones inmunoibgicas ytal vez ailn estados psicol6gicos. Durante el ano pasado las actividades mas importantes en Is campana contra el cigarrillo se concentraron en un intento para limiter severamente o prohibir al fumador de cigarrillos su derecho a hacerlo an muchos lugares publicos. Pero hasta Is fecha no hay una evidencia cientifica valida que indique qua eI humo del cigarrillo cause algOn dano a los no fumadores. La companiay la industria del cigarrillo han continuado un compromiso a largo plazo para la investigacion cientifica a travds del "Council forTobacco Research" (Consejo Estadounidense para la Investigacion del Tabaco) y de donaciones hechas para investigaci6n. Responsibilidad social Philip Morris continua ampliando sus compromisos sociales con sus empleados, con Ia gente de las comunidades donde estan sus plantas y con los ciudadanos de los paises en donde opera. En Estados Unidos nuestra compania logro nuevos progre- sos dando trabajo y elevando la categoria de empleos a grupos minoritarios y mujeres. En 1975, 10,5% de nuestros empleos a • nivel directivo, profesional y tecnico fueron ocupados por miem- bros de grupos minoritarios, an comparacion con 9,6% en 1974. Las mujeres ocuparon 15,4% de estos trabajos, contra 14,4% del afio anterior. En elcampo educativo, Philip Morris aument6 a mas del doble el ntimero de becas otorgadas desde 1971. Como resultado, mas del 50% de las contribuciones def ano pasado fueron pars fines educativos; Ia mayor parte del aumento de estas contribu- ciones se destin6 a universidades privadas independientes. En EUA fuimos la primera corporacion en ofrecer becas para entrenamiento tecnico y vocacional a hijos de empleados, ademas de nuestros programas de becas universitarias, y la primera en promover becas pars mujeres qua aspiran a empleos en posiciones mas altas o desean entrar nuevamente an las filas laborales. El ano pasado fuimos una de las primeras corpora- ciones qua contribuyeron al programs de Estudios Politicos del Joint Center de la Howard University, una fuente de informaci6n para ejecutivos de raza negra electos pars cargos guber- namentales. Los compromisos sociales de Philip Morris International, que estdn determinados por las necesidades del pais anfitrion, varian desde pregramas para el cuidado basico de la salud y educativos a Ios de preservacion de la fauna y patrocinio cultural. Por mas de una decade Philip Morris ha sido una de las primeras corporaciones en patrocinar at arte. Importantes exhibi- ciones han recorrido Estados Unidos casi cada ano bajo los auspicios de nuestra corporaci6n. Durante 1975, "Frontier America: The Far West" se inauguro en el Museo de Bellas Artes de Boston con subsiguientes viajes a Denver, San Diego y Milwaukee. La exhibicion fue auspiciada conjuntamente por Is Fundaci6n Nacional pars el Arte y Philip Morris en nombre de Marlboro, y en 1976 hard una gira por Europa. Lamentamos mucho at fallecimiento ocurrido en dfciembre de Buford A. Tynes, quidn fue Tesorero de Philip Morris desde 1973. Durante 1975 John S. Reed, vicepresidente ejecutivo del First National City Bank, fue elegido miembro de la Junta Directivade Philip Morris. Expresamos nuestro agradecimiento a nuestros 48.000 empleados en todo at mundo porsu continua dedicaci6n y destacada colaboraci6n. 2500011248 ~

jahresrtickblick wlr freuen uns, lhnen mitteilen zu konnen, dass das Jahr 1975 wiederum sehr erfolgreich fur unser Unternehmen verlaufen ist. Die Ergebnisse unseres Unternehmens im Jahr 1975 sind umso erfreullcher, wenn man sie angesichts der weltweiten Rezesslon betrachtet, die sich auf viele Markte, in denen wir tatig sind, wlrtschaftlich ungdnstig auswirkte. Wir sind in der gluckhchen Lage, dass die Nachfrage nach unseren zwei wlchtlgsten Produkten-Zigaretten und Bier-relativ wenig von der veranderten Wirtschaftslage betroffen ist. Beide Industriezweige erre1c9~59eeinger waren alsen , denVorlj hrenuwachsratenim Jahr DerZigarettenabsatzvon Philip Morris U.S.A. und Philip Morris International sowie derAbsatz in Barrels der Miller Brewing erreichten Rekordhohen. Unsere Finanzergebnisse sind auf der ersten Seite zusam- mengefasst. Zum 22. Mal in ununterbrochener Reihenfolge wurden neue Rekorde in Umsatzerldsen, Jahresuberschussen und Gewinnen je Aktie aufgestellt. Die Umsatzerlose lagen 1975 urn 21,0% hdher, der Reingewinn stieg um 20,6%, und der Gewinn je Aktie unter voller Berucksichtigung aller Umtausch- rechte stieg um 17,9%. Im Jahr 1975 stiegen die Absatzzahlen der amerikanischen Zigarettenindustrie zum sechsten Mal in ununterbrochener Folge. Der Gesamtabsatz betrug 599 Milliarden Stuck-eine Steigerung um 1,3% gegenuber dem Jahr 1974. Philip Morris USA hatte wiederum ein schnelleres Wachstum aIs des der Gesamtindustrie. DerZigarettenabsatz stieg um 6,1 % auf 141 Milliarden StOck. Im letzten Cuartal des vergangenen Jahres wurde Marlboro als die fuhrende Marke der Vereinigten Staaten eingeschatzt, eine Rolle, die sie weitweit im Jahr 1972 erreichte. Der Zigarettenmarkt ausserhalb der Vereinigten Staaten stieg auch im Jahr 1975 weiter an. Der Gesamtabsatz wird auf 3,200 Milliarden StOck geschatzt, und dies stellt einen Zuwachs um 3,2% dar. Philip Morris International verzeichnete einen Absatzzuwachs von 9,7% auf 155 Milliarden Stuck. Die amerikanische Brauindustrie steigerte im Jahr 1975 zum 18. Mal in ununterbrochener Folge ihren Absatz in Barrels um 2,1 %, mit einem Gesamtabsatz von ungefahr 148,5 Millionen Barrels. Zum dritten Mal in ununterbrochener Folge war Miller Brewing des am schnellsten wachsende Brauunternehmen der Vereinigten Staaten; mit einem Gesamtabsatz von 12.862.000 Barrels erzielte es einen Zuwachs von 41,9% oder 3.796.000 Barrels mehr als der Absatz von 9.066.000 Barrels im Jahr 1974. In den letzten funf Jahren verzeichneten die konsolidierten Umsatzerldse von Philip Morris eine durchschnittlich zusammen- gesetzte jahrliche Zuwachsrate von 19,3%; der Gewinn je Aktie untervoller BerOcksichtigung der Umtauschrechte erhdhte sich um eine durchschnittlich zusammengesetzte jahrliche Zuwachsrate von 20,4%. Im Marz 1975 unternahm Philip Morris die grdsste Finanzierung des Unternehmens mit der Ausgabe einer lang- fristigen Anlelhe von $150 Millionen und verstarkte die Eigen- kapitalbasis mit derdffenftichen Ausgabe von zwei Millionen Stammaktien. Obwohl die aufgelegten Aktien die Anzahl der sich im Umlauf befindlichen Stammaktien erhohte, konnte unser Unternehmen trotzdem einen Anstieg des Gewinns per Aktie, unter voller BerOcksichtigung der Umtauschrechte um 17,9% gegenOber dem Jahr 1974 verzeichnen. Die wachsende Nachfrage nach unseren Zigaretten und unserem Bier sowie der Bedarf an zusatzlichen leistungsfahigen Betrieben bedingten ein fortgesetztes Investitionsprogramm. Die Sachinvestitionen im Jahr 1975 beliefen sich auf $244,5 Millionen. Wahrend der kommenden fiinf Jahre-von 1976 bis 1980-sehen wir Sachinvestitionen von etwas mehrals $1 Milliarde voraus. Ungefahr die Halffte dieser Betrage wird in unsere weltweite Zigarettentatlgkeit investiert, wahrend die andere Halfte fOrunsere amerikanischen Brauereibetriebe benotigt wird. Es war des 48. Geschaftsjahr in ununterbrochener Folge, in dem Philip Morris eine Dividende auf die Stammaktien ausge- schuttet hat, und zum achten Mal in ununterbrochener Folge wurde die Jahresdividende erhdht. Wahrend des Jahres 1975 genehmigte der Verwaltungsrat zwei Erhdhungen der Jahres- dividende-zuerst von einerJahresrate von 80 Cents auf eine Jahresrate von 90 Cents und schliesslich auf $1.00 je Stammaktie. Philip Morris U.S.A. Im Jahr 1975 setzte sich des Wachstum der Philip Morris U.S.A., unserem grossten Konzernunternehmen, welter fort. Unser Marktanteil in den U.S.A. stieg von 22,5 % im Vorjahr auf 23,6% in Jahre 1975. Im Jahr 1975 stiegen die Umsatzerldse um 14,6%, der Betriebsgewinn erhohte sich um 17,8%. . Marlboro verzeichnete den grossten Absatzzuwachs der gesamten Industrie, und ihr Marktanteil stieg von 14,6% im Jahr 1974 auf 15,2% im vergangenen Jahr. Marlboro t 00s, Marlboro Lights und Marlboro Menthol steigerten ihren Absatz und machten 21 % des Gesamtabsatzes von Marlboro in den Vereinigten Staaten aus. - Benson & Hedges 100s verstarkte ihre Stellung als die fOhrende 100 mm Marke. Die nationale Einftihrung ihrer neuen Flip Top Boxpackung wurde im Jahr 1975 vollendet. Virginia Slims und Parliament 100s verzeichneten im Jahr 1975 ebenfalls einen starken Absatuuwachs. Im April 1975 wurde Saratoga 120s in dem 120 mm Segment national eingefOhrt und erreichte zurn Jahresende eine bedeu- tende Stellung in diesem kleinen Segment. Der Marktanteil der teerarmen Zigaretten wurde im Jahr 1975 auf ungefahr 10% der Gesamtindustrie eingeschatzt. Wir sind in diesem Segment mit Marken wie Marlboro Lights, Parliament und Benson & Hedges Multifiltergut vertreten. Im Dezember 1975 verkundeten wir aIs Hdhepunkt einer zwolfjahrigen Forschung einen bedeutenden wissenschaftlichen Durchbruch der Zigarettenindustrie. Unsere Forscher isolierten die hochintensiven Geschmackskomponenten im Rauch. Die Anwendung dieser Entdeckung fOhrte zu der Entwicklung des "Enriched Flavor" Verfahrens, das den naturlichen Geschmack der Zigarette erhdht, ohne dabei-wie Oblich-den Teergehalt zu steigern. Dieses Verfahren wurde an einer neuen Zigarettenmarke-Merit-angewendet, die im Januar 1976 national eingefuhrt wurde. Merit hat als Normalfilter- und Mentholziga- rette nur 9 mg Teer- und 0.7 mg Nikotingehalt und hat einen niedrigeren Teergehait als 98% aller Zigaretten, die heute in den Vereinigten Staaten verkauftwerden. Meritwurde in dem umfas- sendsten Verbraucherprodukttest, der je von dem Unter- nehmen durchgefOhrt wurde, gegen die fuhrenden teerarmen Zigarettenmarken getestet. Selbst wenn diese 60% mehr Teer- gehalt hatten, zeigten die Ergebnisse, dass eine slgnrfikante Mehrheit aller getesteten Raucher angab, dass Merit so viel oder mehr Geschmack als these hatte. Unser Absatzzuwachs war mit einer zunehmenden Aus- nutzung der modernen Anlagen in unserem neuen Betriebs- komplex in Richmond verbunden. Am Ende des Jahres stellte die Betriebsanlage mehr ais 300 Millionen Zigaretten am Tag her, d.h. etwas uber 50 % ihrer geplanten Kapazitat, die bei Fertigstellung im Jahr 1977 erreicht warden soil. Durch die Leistungsfahigkeit dieser Zigarettenherstellungsanlage wird Philip Morris in den kommen- den Jahren eine vorteilhafte Wettbewerbsstellung einnehmen. Derneue Betriebskomplex wurde ein wichtiger Konferenzort und diente bereits als Austragungsstatte furzwei wissenschaft- liche Tagungen und fur unsere nationale Vertreterbesprechung im Jahr 1975, an der mehr als 1000 Personen unseres Aussen- dienstes aus dem ganzen Lande teilnahmen. Wahrend des Jahres besichtigten an drei verschiedenen Tagen ungefahr 450 Ange- stellte unseres Hauptgeschaftssitzes in New York die neuen Betriebsanlagen. Wahrend des Jahres 1975 besichtigten ebenfalls Ober22.000 Personen die Betriebsanlagen. Diese Besichtigungen ermoglichten es den Philip Morris Angestellten und der Offent- lichkeit aus erster Hand unsere wissenschaftliche Oualitats- kontrolle und unsere modernen, schnellen und sehr leistungs- fahigen Anlagen zu sehen. Um mit der steigenden Nachfrage nach unseren Produkten Schritt zu halten, verstarkten wir im Jahr 1975 unsere Haupt- geschafts-und Verkaufsorganisationen. Die Dynamik des American Safety Razor Unternehmens spie- gelten sich in einem betrachtlichen Absatzzuwachs des Damen- rasierers Flicker wider, der meistverkauften Marke in diesem wachsenden Segment, aber auch von Personna Double II, des eine neue Verpackung und eine veranderte Werbung erhielt. Ein neuer Rasierapparat fur Damen-The Lady Double II-wurde ebenfalls eingefuhrt. Das Unternehmen trug zurn Konzern- gewinn bei. Philip Morris International Im Jahr 1975 stiegen die Umsatzerldse und der Betriebsgewinn auf eine Rekordhohe. Die Umsatzerldse erhdhten sich um 17,2% und der Betriebsgewinn stieg um 20,2%. Verbrauchssteuererhohungen,hohere Kosten und Preis- beschrankungen durch die Regierungen in vielen Markten waren die Ursache, dass Im ersten Halbjahr die Betriegsgewinnspannen von Philip Morris International eingeschranktwaren. Absatz- zunahmen und grossere Betriebsleistungsfahigkeiten verbunden mit Preisanpassungen, die in vielen unserer Markte gewahrt wurden, trugen zu verbesserten Gewinnspannen im zweiten Haibjahr bei. Wie in den vergangenen Jahren blieben die Wechsel- kursanderungen im gegenwartigen internationalen Wahrungs- system eine standige Sorge fur Philip Morris und viele internationale Unternehmen. Diese Kursanderungen hatten jedoch im Jahr 1975 keine wesentlichen Endauswirkungen auf unsere Tatigkeiten. Durch Herstellungsfilialen in 22 Landern, Lizenznehmern in 17 L'andern und Territorien und Exportabsatzorganisationen verkauft Philip Morris International mehr als 175 Zigarettenmarken in mehr als 160 Landern und Territcrien. Die wachsende Nachfrage nach "Blend-" Filterzigaretten amerikanischer Geschmacksrichtung trug zu unserem fort- gesetzten Wachstum bei. Internationale Marken wie Marlboro, die weltweit weiterhin ihren Marktanteil erhoht, machen gut Ober ein Drittel unseres Gesamtabsatzes ausserhalb der Vereinigten Staaten aus. Die Prasenz dieser internationalen Zigarettenmarken hat das weltere Wachstum unseres Zigarettenexports aus den Vereinigten Staaten beeinflusst. Regionale und nationale Marken machten den grossten Teil des Absatzes von Philip Morris International aus, und sie trugen im Jahr 1975 in vielen Markten weiterhin betrachtlich zu unseren Marktanteilen bei. Philip Morris International hat weiterhin in i]ber 20 Landern einen Marktanteil von 10% oder mehr. Im Jahr 1975 trugen wiederum alle unsere internationalen Regionen zu dem Absatzzuwachs und dem Anstieg unserer • Umsatzerldse bei. Philip Morris Europa/Mittlerer Osten/Afrika verzeichnete einen Rekordabsatz. Marlboro ist jetzt die meistver- kaufte Filterzigarette in dieser Region. Der Verkauf von regionalen und nationalen Zigarettenmarken wies weiterhin eine aufwartssteigende Tendenz auf. Um mit derwachsenden Nachfrage nach Marlboro und unseren anderen Marken in der Europaischen Wirtschafts- gemelnschaft Schritt zu halten, haben wir mit einem FOnf- jahresprogramm fOrdie Erweiterung unsererHerstellungsanlagen in der EWG begonnen. Im ersten Abschnitt dieses Programms enveitert Philip Morris G.m.b.H. in Deutschland die im Jahr 1974 erworbene Zigarettenfabrik in MOnchen und hat eine Zweigfabrik nahe der bestehenden Anlage in West Berlin erstellt. Im vergangenen Jahr wurde Marlboro unter Lizenz in Bulgarian und Griechenland eingefuhrt. Ebenfalls im Jahr 1975 wurde im Rahmen des wissenschaftlichen und technischen Zusammen- arbeitsvertrages zwischen Philip Morris und der Sowjetunion eine Erinnerungszigarettenmarke amerikanischer Geschmacks- richtung, die Apollo Soyuz heisst, gemeinsam entwickelt, die von dem UdSSR Ministerium fOr Ernahrungsindustrie und von Philip Morris hergestellt und vertrieben wurde. Unsere Region Lateinamerika/Iberische Halbinsel verzeich- nete im Jahr 1975 ebenfalls Rekordabsatzzahlen. In Brasilien vollendete Philip Morris Brasileira S.A. de Cigarros die neue Fabrikanlage in Curitiba und erwarb die Companhia de Fumos Santa Cruz, die ein umfassendes Vertriebssystem hat und eine Anzahl von weitverbreiteten nationalen Marken herstellt und vertreibt. Mitte vergangenen Jahres wurde Marlboro in den wichtigsten Grossstadtgebieten Brasiliens eingefuhrt. Derschnetl wachsende brasilianische Zigarettenmarkt, mit einem Gesamtabsatzvon 110 Milliarden Stuck, bietet grosse Mdglichkeiten. Eine der Herausforderungen, denen wir gegen- Oberstehen, ist ein starker Konkurrent mit einem beherrschenden Marktanteil. Fur die Zeit, in der wir unseren Marktanteil ausbauen, erwarten wir wesentliche Verluste in Brasilien, so wie es in ahnlichen Situationen in anderen wichtigen Markten war. Wir vertrauen euf die langfristigen Gewinnmoglichkeiten unserer Tatigkeiten in Brasilien. In Costa Rica envarben wir einen west?ntlichen Anteil am Grundkapital des Zigarettenherstellerunternehmens Tabacalera Costarricense S.A. und des Vertriebsunternehmens Mendiola & Company. , Trotz der geschwachten Wirtschaftsbedingungen in den meisten asiatischen Landern und Preiserhohungen in Austrafien, die zum grdssten Teil durch Verbrauchssteuer-und andere Steuererhohungen verursacht wurden, verzeichnete die Region Asien/Pazifik im Jahr 1975 Rekordabsatzzahlen an Zigaretten. Marlboro und Alpine, die wichtigsten Zigarettenmarken von Philip Morris (Australia) Limited, steigerten ihren Marktanteil. Lindeman und Leo Buring Weine verzeichneten ebenfalls einen Anstieg.ihrer Marktanteile. Godfrey Phillips, India, Limited legte erfolgreich eine neue iiffentliche Aktienausgabe auf, durc.h die sowohl die Grund- kapitalbasis unseres Unternehmens verstarkt und gleichzeitig unser Anfeil am Grundkapital entsprechend der indischen Regierungspolitik vermindertwurde. In Pakistan erhdhten wir unseren Anteil der Minoritatsbeteiligung an der Premier Tobacco Industries Limited. In Kaneda hat Benson & Hedges (Canada) Limited, deren wichtigste Marken Mark Ten, 8elvedere und Benson & Hedges 100's sind, den Zigarettenabsatz auf eine Rekordhohe gebracht. Belmont und Viscount, zwei leichte ("High-Filtration") Marken, verzeichneten ein besonders starkes Wachstum, und Plus, die erate 120 mm Zigarette in Kanada, wurde erfolgreich eingefuhrt. Gegen Ende des Jahres 1975 kundigte die kanadische Regierung eine Lohn- und Preiskontrollpolitik an, die Auswirkungen auf unsere zukiinftige Rentabiiitat in Kanada haben kdnnte. Im vergangenen Jahr IeistetA Philip Morris wiederum einen positiven Beitrag zur amerikanischen Zahlungsbilanz und zur amerikanischen Beschaftigung. Unsere internationalen Herstellungsabkommen durch Niederlassungen und Lizenzen wurden errichtet, da Zolle und andere Handelsschranken den amerikanischen Export in viele Markte ausschliessen. Seit wir mit unserer internationalen Herstellungstatigkeit vor 20 Jahren begannen, hat sich die Anzahl der Philip Morris Ange- stellten in den Vereinigten Staaten, die fur unser internationales Geschaft tatig sind, insbe5ondere im Export, um mehr ale 500% erhoht. Wahrend desselben Zeitabschnittes stiegen die Exporte von Zigaretten, die in den Vereinigten Staaten hergestellt wurden, ebenfalls um mehr als 500%. In den vergangenen zehn Jahren ist der Export unserer amerikanischen Tabake um mehr als 300% gestiegen. Die in den Vereinigten Staaten eingebrachten Vorschlage fOr eine erhdhte Besteuerung derAuslandsgewinne amerika- nischer Unternehmen, einschliesslich der Abschaffung der Anrechnung geleisteter auslandischer Steuern und der Steuer- stundung, wurde gegen die wirtschaftliche Leistungsfahigkeit gerichtet sein. Sie wurden die Ausweitung der internationalen Tatigkeit einschliesslich des Exports amerikanischer Unter- nehmen einschranken und schliesslich zu einem Verlust an Arbeitsstellen in den Vereinigten Staaten fuhren. Philip Morris hat such positive Beitrage zur wirtschaftlichen und sozialen Lage der Gastlander geleistet, in denen die fuhrenden Angestellten unserer Niederlassungen vor allem Staatsbtirgerdieser Lander sind. Diese Beitrage sind besonders bedeutend in Entwicklungslandern. Wir stellten das Aniagekapital zur Verfugung, fiihrten fortschrittliche7echnologie ein, erstellten moderne Managementmethoden, schulten einheimische Staatsblirger fur fuhrende Stellungen und entwickelten die Fachkenntnisse derArbeite[. Im Grunde genommen nehmen in allen Entwicklungslandern, in denen wir Niederlassungen haben, die einheimischen Staatsburgerdurch Beteiligung am Grund- kapital am Erfolg dieser Unternehmen teil. Miller Brewing Company Die Umsatzerldse der Miller Brewing stiegen urn 63,1 % gegen- uber dem Jahr 1974, der Betriebsgewinn sueg von $6,3 Millionen im Vorjahrauf $28,6 Millionen. Der Zuwachs des Betriebsgewinns von Miller Brewing ist das Ergebnis des grbsseren Barrelausstosses, der grbsseren Wirtschaftlichkeit durch Massenproduktion, der erhdhten Anwendung leistungs- fahiger neuer Produktionsanlagen und der hdheren Praise. Millers Zuwachsrate in Barrels von 41,9% im Jahr 1975 ubertraf sowohl den Zuwachs von 31,0% im Jahr 1974 und den Anstieg von 28,8 % im Jahr 1973, und dadurch rOckte Miller auf den vierten Platz unter den amerikanischen Brauereien. Millers Marktanteil stieg von 6,2% im Jahr 1974 auf unsefahr 8,6%. Die Marke Miller High Life setzte weiterhin Ihr schnelles Wachstum fort und konnte weiter in des Segment der hoher- preisigen Blare eindringen. Im Jahr 1975 wurde "Lite", unser neues kalorien- und kohlenhydratarmes Bier, erfolgreich national eingefuhrt. Im Jahr 1975 ubemahm Miller ebenfalls die vollen amerikanischen Vertriebsrechte fOr Lowenbrau, dem weltbekann- ten deutschen Bier, im Rahmen eines mehrstufigen Abkommens, das mit der 600 Jahre alten Brauerei abgeschlossen wurde. Wahrend des grossten Teil des Jahres Oberstieg die Nach- frage von Millers Produkten die Hersteliungsmoglichkeiten. Salt April 1975 wurden dadurch genaue Vertriebszuweisungen furalle unsere Marken erforderiich. Miller hat sein Investitionsprogramm beschleunigt, um mit der wachsenden Nachfrage Schritt zu halten. Wahrend des Jahres 1975 wurde die Erweiterung unserer Brauerei in Fort Worth von zwei Millionen auf ftinf Millionen Barrels Kapazitat vollendet. Unsere Brauerei in Milwaukee, dergrossten Brauerei des Staates Wisconsin, mit einem Ausstoss von sieben Millionen Barrels, wurde erweitert und mit modemen Hochleistungs- maschinen ausgeriistet. Miller besitzt ebenfalls eine Brauerei in Azusa, Kalifornien, die einen Asstoss von 1,5 Miilionen Barrels hat. Unsere Vierte Brauerei, in Fulton, New York, wird in diesem Jahr mit der Produktion beginnen und sollte zum Ende des Jahres mit einer jahrliohen Ausstosskapazitat von 3,3 Millionen Barrels einsatzfahig sein. Am Ende des Jahres 1976 wird Miller eine Ausstosskapazitat von ungefahr 17 Millionen Barrels haben, und die meisten unserer Anlagen warden die Ieistungsfahigste Technologie und modeme Einrichtungen benutzen. Seit 1973 hat Miller Ober $250 Millionen investlert, um die Ausstosskapazitat zu verdoppeln. Trotz der Anlaufkosten war unsere erste Aluminiumdosenfabrik in Milwaukee, die im Jahre 1975 in Betrieb genommen wurde, gewinnbringend. In Fort Worth und Fulton sind andere Bierdosen- fabrikanlagen gegenwartig im Bau, deren Inbetriebnahme fOr 1976 vorgesehen ist. Philip Morris Industrial Wahrend des Jahres 1975 wurden die Umsatzerlbse der Philip Morris Industrial, durch die Unmoglichkeit, notwendige Preiser- hohungen durchzufuhren und durch hohere Energiekosten, ungiinstig beeinflusst. Diese Faktoren wurden teilweise durch das Kostenersparnisprogrammder Philip Morris Industrial ausgeglichen. 2500011249 9 i

Die Umsatzerlose sanken um 2,2% und der Betriebsgewinn ging um 34,4% zuruck. Philip Morris Industrial besleht aus einer Verpackungs-, Papier- und Chemiegruppe; alle drei Einheiten arbeiteten im ver- gangenen Jahr gewinnbringend, wobei die Verpackungs- gruppe eine Rekordgewinnhdhe erzielite. . Die Rezession und der Lagerabbau unserer Kunden hatten einen schweren Einfluss sowohl auf die Papier-als auch auf die Chemiegruppe. Die Uberkapazitat der Papierindustrie und ein standiges Nachiassen der Textilindustrie verringerten die Nachfrage, und leistungsfahige Betriebsausnutzungen konnten nicht aufrechterhalten werden. Im vierten Quartal verbesserten sich jedoch die Umsatzerlose dieser beiden Gruppen. Im Jahr 1975 verstarkte Philip Morris Industrial seine Forschungamoglichkeiten und setzte weiterhin die Entwicklung neuer Produkte und neuer Produktanwendungen durch, wobei es die Strategie beibehielt, sich auf Spezialmarkte zu konzentrieren. Mission Viejo Company Obwohl die nationale Wohnungsbauindustrie in einer tiefen Rezession ist, konnte Mission Viejo, unser Siedlungs- und Eigenheimbauunternehmen, im Jahr 1975 die Umsatzerlose und den Betriebsgewinn auf eine Rekordhohe bringen. Gegenuber dem Jahr 1974 stiegen die Umsatzerlose um 12,7 % und der Betriebsgewinn nahm um 23,1 % zu. Am Ende des Jahres 1975 war der Gesamtauftragsbestand an neuen Eigenheimen um 76,2% hoher als im Vorjahr, und der Bestand an unverkauften Eigenheimen erreichte seinen tiefsten Stand seit September 1971. Wahrend des ganzen Jahres 1975 hatte das wichtigate Unternehmen der Mission Viejo in Sudkalifornien einen besonders starken Verkaufserfolg zu verzeichnen. Diese neue Siedlung bietet ihren 32.000 Einwohnern eine grosse Anzahl von Erholungs-, Erziehungs- und Geschaftseinrichtungen sowie einen sehr reizvollen Wohnstil. Im Jahr 1975 begann die Anlage sines uber 50 Hektar grossen Sees in Mission Viejo Kalifornien. Der See wird weiter zum Ansehen dieses wachsenden, geplanten Siedlungsgebiets beitragen. Die Entwicklung der zwei kleineren Siedlungsgebiete in Denver und Fresno machte im Jahr 1975 weitere Fortschritte. In diesen Gebieten waren die Auswirkungen der Wohnungsrezes- sion jedoch mehr spurbar. Das Unternehmen ist nicht mehr auf dem Eigenheimbaumarkt von Phoenix tatig. Zigarettensteuer Im Jahr 1975 waren unter anderen Problemen der amerika- nischen Tabakindustrie die verstarkten staatlichen und ortlichen Anstrengungen, zusatzliche Einnahmen durch eine Erhohung der Zigarettenverbrauchssteuer zu schaffen. Im Laufe des Jahres 1975 wurden in vier Staaten Gesetze zur Erhohung derVerbrauchssteuern auf Zigaretten erlassen, im Jahr 1974 waren as vergleichsweise zwei Staaten. In 30 Staaten und in vielen Gemeinden wurden im vergangenen Jahr Gesetzentwurfe eingebracht, die auf eine Erhdhung der Ver- brauchssteuern auf Zigaretten abzielten. Im Jahr 1975 wurden in mehreren amerikanischen Staaten Vorschlage fur eine Erhohung der Zigarettenverbrauchssteuer abgelehnt. Viele der von den Staats- und Gemeindebehbrden vorgeschlagenen Gesetzentwurfe spiegeln im direkten Zusam- menhang die finanziellen Schwierigkeiten finanzschwacher Gebiete wider. Staats- und Gemeindebeamte schlagen diese Erhohungen als schnellzugangliche, zusatzliche Einnahmequelle vor. Diese Steuern sind jedoch regressiv und wirken diskriminie- rend auf Verbraucher mit kleineren Einkommen. Die unter- schiedlichen Betrage an Verbrauchssteuern von einem Gebiet zum anderen fordern ausserdem den gesetzwidrigen Zigaretten- schmuggel, der fur die lokale Steuerbehdrde zu einem geringeren Gesamtzigarettensteueraufkommen fuhrt. Im Jahr 1975 betrugen die gesamten amerikanischen Einnahmen aus den Zigarettenverbrauchssteuern $5,7 Milliarden, wovon $2,2 Milliarden fur den Bund, 53,4 Milliarden fur die Bundesstaaten und 50,1 Milliarde fur die Gemeinden waren. Im nationalen Durchschnitt entfielen ungefahr 42% des Einzelverkaufspreises von Zigaretten auf Verbrauchssteuern. Im Jahr 1975 wurden wiederum die Verbrauchssteuern auf Zigaretten in vielen unserer internationalen Markte angehoben. Diese Erhohungen sind wie in den Vereinigten Staaten wenig ertragreich. In einigen internationalen Markten, in denen as mehrere Preiskategorien furZigaretten gibt, fdrdern diese Steuererh6hungen einen Wechsel der Verbraucher zu billigeren und weniger besteuerten Marken und vermindern damit die Einnahmemdglichkeiten der Steuerbehdrden. Rauchen und Gesundheit Im Laufe des Jahres 1975 ging die Auseinandersetzung um den angeblichen Zusammenhang zwischen Rauchen und Gesundheit weiter, obwohl die Art derAngriffe gegen die Industrie sich . betrachtlich geandert haben. Wie ein medizinischerAutor bemerkte: "Es ver,geht kaum eine Woche ohne einen neuen Bericht, in dem festgestellt wird, dass eine bisher unverdachtige Substanz Krebs verursacht. Bisher haben die Wissenschaftler mehr als 1000 Substanzen als endgultige oder verdachtigte Krebsursachen beim Menschen ausgemacht. In den letzten Jahren wurden diese Substanzen, sogenannte Carcinogens, in der Luft, die wir atmen, im Wasser, das wir tringen, in den Nahrungsmitteln, die wir essen, der Kleidung, die wirtragen, den Medikamenten, die wir einnehmen, den Arbeiten, die wir verrichten, den Gewohnheiten, denen wir nachgehen, entdeckt." Diese Befunde untermauern die Vielfaltigkeit des Krebs- problems und veranschaulichen auf eindrucksvolle Weisedie Unsicherheiten, die Forschungsergebnissen, wie sie als Grundlage fOr noch immer unbewiesene Behauptungen gegen die Zigaretten verwendet wurden, anhaftet. Unserer Meinung nach erlauben diese Angaben, auch die Frage des Rauchens und der Gesundheit in eine breitere Perspektive zu versetzen und konnten zu der Erkenntnis fuhren, dass nicht nur die gesamte Umwelt, sondern auch die genetische Anlage des Individuums, sein Alter, Geschlecht, seine immunologische Empfanglichkeit und vielleicht sogar der psychologische Zustand, ausschlaggebende Faktoren furdas Auftreten oder Nichtauftreten von Krebs sein konnten. In den letzten Jahren erstreckten sich die Bemuhungen der Antiraucherkrafte hauptsachlich auf den Versuch, die Rechte der Zigarettenraucher in bestimmten bffentlichen Platzen stark einzuschranken odervollkommen zu verbieten. Zur Zeit gibt es keine stichhaltige wissenschaftliche Erkenntnis, die beweist, dass Zigarettenrauch den Nichtrauchern in irgendeiner Weise schadet. . Das Unternehmen und die gesamte Zigarettenindustrie haben ihre langfristige Verpflichtung der Forschung durch den "Council for Tobacco Research USA" (Ausschuss der Tabakfor- schung USA) und durch direkte Unterstutzungen fortgesetzt. Unser Beitrag zum VJohl der Allgemeinheit Philip Morris hat seine sozialen Verpflichtungen gegenuber seinen Angestellten, den Einwohnern der Orte, an denen Fabrikations- statten sind und gegenuber den Burgern der Lander, in denen Philip Morrns tatig ist, weiterhin ausgedehnt. In den Vereinigten Staaten erzielte unser Unternehmen einen weiteren Fortschritt in der Beschaftigung und Beforderung von Minderheitsgruppen und Frauen. Im Jahr 1975 waren 10,5% der Stellen unserer leitenden, qualifizierten und technischen Berufe durch Minderheitsgruppen besetzt im Vergleich zu 9,6% im Jahr 1974. Frauen hatten 15,4% dieser Berufe im Vergleich zu 14,4% im Vorjahr. Seit 1971 hat Philip Morris auf dem Erziehungssektor seine Stipendien mehr als verdoppelt. Im vergangenen Jahr gingen mehr als 50% unsererAufwendungen dem Erziehungswesen zu, wobei din grosserTeil der Beitragserhbhungen an private, unabhangige Hochschulen ging. Wirwaren das erste Unterneh- men in den Vereinigten Staaten, des den Kindern unserer Angestellten Stipendien fur die Berufs- und Fachschulausbildung zusatzlich zu dem Studienprogramm an Hochschulen anbot. Wirwaren ebenso das erste Unternehmen, das Stipendien den Frauen anbot, die ihre Stellung im Unternehmen verbessern oder an ihre Arbeitsstelle zuruckkehren wollen. Im vergangenen Jahr leisteten wir als eines der ersten Untemehmen einen Beitrag an das Politische Studienzentrum der Howard Universitat, das eine Unterrichtsstatte fur die in den dffentlichen Dienst gewahlte Neger ist. Die sozialen Verpflichtungen von Philip Morris International, welche durch die Bedurfnisse der Gastlander bestimmt werden, reichen von grundsatzlicher Gesundheitsvorsorge und Erzie- hungsentwicklung bis zum Naturschutz und der Unterstutzung von Kulturprogrammen. Seit mehr als einem Jahrzehnt ist Philip Morris ein Unterneh- men, das bahnbrechend als Forderer der Kunste wirkt, und fast jades Jahr gingen bedeutende Kunstausstellungen unter der Schirmherrschaft des Unternehmens durch die Vereinigten Staaten. Wahrend des Jahres 1975 wurde die Ausstellung "Frontier America: Far West" in dem Museum der Schonen Kiinste in Boston eroffnet; diese Ausstellung ging anschliessend nach Denver, San Diego und Milwaukee. Die Ausstellung wurde von der Nationalen Stiftung der Schonen Kunste und Philip Morris im Namen von Marlboro gemeinsam unterstutzt und wird im Jahr 1976 durch Europa gehen. Im Dezember waren wir alle besturzt uber den Tod von Buford A. Tynes, derselt 1973 Finanzvorstand von Philip Morris war. Wahrend des Jahres 1975 wurde John S. Reed, Geschafts- fuhrender Vizeprasident der First National City Bank, in den Verwaltungsrat von Philip Morris gewahlt. Wir sprechen unseren 48.000 Angestellten in der ganzen Welt unsere Anerkennung und unseren Dank fur ihre Hingabe und ausgezeichneten Leistungen aus. Rassegna Annuale Siamo lieti di annunciare che nel 1975 la societa ha avuto un altro anno eccellente. I risultati conseguiti dalla societa nel 1975 sono particolar- mente soddisfacenti aila luce della recessione mondiale, che ha avuto riflessi economici negativi in molti paesi in cui opera Ia societa. Fortunatamente, la domanda di sigarette e birra, nostri prodotti principali, ha risentito ben poco del deterioramento del clima economico ed in ambo i settori sono stati raggiunti nuovi livelli di vendite unitarie, anche se il ritmo di sviluppo 8 atato piu lento degli anni precedenti. I risultati finanziari della societa sono evidenziati alla prima pagina di questa rassegna: per il ventiduesimo anno consecutivo il fatturato, I'utile netto e 1'utile per azione hanno raggiunto nuovi Iiveili: il fatturato ha registrato un aumento del 21,0%, il reddito netto del 20,6%, ed il reddito per azione (tenendo conto del titoli convertibili) del 17,9%. Le vendite unitarie della Philip Morris U.S.A. e della Philip Morris International e il volume di vendite unitavie della Miller Brewing hanno registrato nuovi livelli. Nei 1975, it volume di vendite unitarie dell'industria delle sigarette negli Stati Uniti e aumentato per il sesto anno consecu- tivo, con un volume totale di 599 miliardi di pezzi ed un aumento dell'1,3 % rispetto al 1974. La Philip Morris U.S.A. ha ulteriormente distanziato il Ifvello medio del settore, con un aumento del volume di vendite del 6,1 % ed un volume totale di 141 miliardi di pezzi. Si ritiene ohe, nell'ultimo trimestre dell'anno, la Marlboro sia diventata la marca pi0 venduta nel paese, posizione che essa aveva gia raggiunto su scala mondiale nel 1972. Nel 1975, ii mercato deL'e sigarette ha continuato a espan- dersi anche fuori degli Stati Uniti, con un volume totale di vendite valutato pari a 3.200 miliardi tli pezzi, ed un aumento del 3,2qo. La Philip Morris International ha accresciuto invece il proprio volume di vendite del 9,7%, fino a raggiungere i 155 miliartli di pezzi. Per il diciottesimo anno conseoutivo, si a confermata I'espansione dell'industria birraria statunitense, che nel 1975 ha raggiunto un volume totale di vendite di circa 148,5 milioni di barili, ad un aumento del 2,1%. Per il terzo anno consecutivo, Ia Miller Brewing 8 stata la societa produttrice di birra pi0 dinamica del paese, con un volume totale di vendite di 12.862.000 barili, pari ad un aumento del 41,9%, a con 3.796.000 barili in piu dei 9.066.000 venduti nel 1974. Nello scorso quinquennio il fatturato consolidato della Philip Morris e aumentato al saggio annuo medlo composto di 19,3% ad il reddito per azione (tenendo conto dei titoli convertibili) zl tasso annuo medio composto de120,4%. NeI marzo 1975, col finanziamento piu massiccio che mai abbia ricevuto Ia societa, Ia Philip Morris Incorporated ha emesso un prestito a lungo termine di $150 milioni, e rafforzato il capitale azionario mediante I'offerta al pubblico di due milioni di azioni ordinarie. Sebbene I'offena di azioni abbia aumentato ii numerodi azioni ordinarie in circolazione, il reddito per azione (tenendo conto del titoli convertibili) e aumentato del 17,9% rispetto a11974 La crescente richiesta di sigarette e birra e la necessita di ulteriori efficienti impianti di lavorazione hanno reso necessario un sostenuto programma di investimenti: nel 19751e spese per investimenti sono statepari a S244,5 milioni. Nei prossimi cinque anni, dal 1976 al 1980, sono prewsti investimenti per un ammontare di un po' piu di un miliardo di dollari, di cui circa Ia met8 sara destinata ai centri di produzione di sigarette in tutto il mondo, I'altra meta agli impianti birrari all'interno degli Stati Uniti. La Philip Morris ha remunerato il capitale ordinario per il quarantottesimo anno consecutivo, ed elevato il dividendo annuo per I'ottavo anno consecutivo. Nell'anno, il Consiglio di Ammini- strazione ha autorizzato due aumenti del dividendo: dapprima da 80 a 90 cents, quindi a $1 per azione del capitale ordinario. Philip Morris U.S.A. La maggiore delle nostre societa operative ha continuato a espandersi, e la sua quota di mercato negli Stall Uniti 8 salita daI 22,5% dell'anno precedente, al 23,6%. II fatturato e aumentato del 14,6%, I'utile d'esercizio del 17,8%. La Marlboro ha registrato ii massimo aumento di vendite unitarie del settore, estenderido la sua quota di mercato dal 14,6% del 1974, al 15,2%. Sono aumentate anche le vendite delle Marlboro 100s, Marlboro Lights a Marlboro Menthol, ohe costi- tuiscono il 21 % di tutte le marche Marlboro vendute negli Stati Uniti. Le Benson & Hedges 100s hanno rafforzato Is Ioro posizione di testa fra le marche da 100 mm; nel 1975, .inoltre, a stata completata I'introduzione su scala nazionale della nuova con- fezione in pacchetto rigido. Virginia Siims e Parliament 100s hanno anch'esse conseguito rilevanti aumenti di vendite unitarie nel 1975. Nei segmento del 120 mm, I'aprile 1975 ha visto il Iancio nazionale della Saratoga 120, che a fine anno aveva conquistato una posizione di rilievo su quel ristretto mercato. Si valuta che nel 1975Ie sigarette a basso tenore di catrame abbiano rappresentato il 10% circa del mercato; in questa categoria, siamo stati degnamente rappresentati dalle Marlboro Lights, Parliament, e Benson & Hedges Multifilter. Nel dicembre del 1975, a coronamento di dodici anni di ricerche, Is societa ha annunciato una grande scoperta scientifica per I'industria delle sigarette: i suoi laboratori sono riusciti ad isolare nel fumo I componenti dell'alta intensita di aroma. L'applicazione di tale scoperta ha portato a aviluppare un procedimento ("Enriched Flavor") che intensifica il gusto naturale della sigaretta, senza comportare il consueto aumento di catrame; esso e stato applicato ad una nuova sigaretta, la Merit, lanciata su scala nazionale nel gennaio 1976. La Merit, nelle due versioni'normale' e 'mentolata', contiene soltanto 9 mg di catrame e 0,7 mg di nicotine, ed ha un tenore di catrame inferiore a quello del 98 % delle sigarette vendute oggi negli Stati Uniti. Nella piu estesa prova di consumo che sia mai stata condotta dalla societa, la Merit e stata confrontata con le principali marche a basso tenore di catrame: 8 risultato che anche se le sigarette di confronto contenevano 60% di catrame in piu, una congrua maggioranza di fumatori ha dichiarato che la Merit possiede un aroma pari o superiore. L'espansione del fatturato e stata accompagnata da un crescente utilizzo del moderni impianti del nuovo Centro Operativo di Richmond, ohe, a fine anno, produceva oltre 300 milioni di sigarette al giorno, livello pari a un po' piu del 50% delta capacita produttiva ad attrezzature completate, nel 1977. Tale efficienza produttiva porra la Philip Morris in una favorevole posizione concorrenziale per gli anni a venire. II Centro Operativo e divenulo sede affermata di conferenze, avendo ospitato due simposi scientifici, oltre al congresso nazionale vendite della societa nel 1975 a cui parteciparono piu di 1000 addetti alle vendite provenienti da ogni parte del passe. Nell'anno, il nuovo impianto A stato visitato da circa 450 dipen- denti della sede di New York, nelle tre giornate riservate a tale visita, oltre che da un pubblico di piu di 22.000 persons. Queste visite hanno fornito ai dipendenti della Philip Morris ed al vasto pubblico la possibilita di apprezzare di persona I'impostazfonescientifica del controllo di qualitA e i moderni, efficienti impianti ad alta velocita. Per soddisfare la crescente richiesta dei prodotti, la societa ha rafforzato Is strutture organizzative della sede centrale a della rete di vendita. La vitalita della Divisione "American Safety Razor" A con- fermata dalla marcata espansione delle vendite del Flicker, la marca piu venduta nel dinamico segmento del rasoi per signora, nonche dal nuovo imballaggio del Personna Double II con pubblicita ristrutturata. Sul mercato dei rasoi per signora A stato inoltre introdotto un nuovo rasoio, il Lady Double II. La divisions ha contribuito all'utile socials.

Philip Morris International Nel 1975, il glro d'affari e il reddito della Philip Morris International hanno e~d ii/2~z~oviprimati,aumentandorispettivamentedel 17•2°Nella prima meta dell'anno, aggravate imposte di consumo, Ilevitazione dei costi e restrizioni governative dei prezzi in numerosi mercati hanno ridotto il margine dell'utile d'esercizio della Philip Morris International. Tuttavia l'aumento del volume di vendite unitarie e I'accresciuta efficienza operativa, uniti agli aumenti di prezzo consentiti su molti mercati hanno avuto I'effetto di elevare I'utile d'esercizio nella seconda meta dell'anno. Come gia negli ultimi anni, le fluttuazioni delle parita mone- tarie nell'ambito dell'attuale sistema monetario internazionale restano motivo di preoccupazione per Ia Philip Morris a per molte societa internazionali, anche se nel 1975 esse non hanno avuto un effetto netto di rilievo sulle attivita della societa. In 22 paesi tramite societa affiliate, in 17 paesi a territori lramite licenziatari, oltre che con solide organizzazioni di vendita all'esportazione, la Philip Morris International commercializza oltre 175 marche in piu di 160 paesi e territori. La crescente richiesta di sigarette con filtro di tipo americano ha contribuito al continuo sviluppo del fatturato. Sul totale di vendite unitarie fuori degli Stall Uniti, una quota di molto supe- riore a un terzo e costituita da marche internazionali quali Ia Marfboro, la cui quota di mercato continua ad estendersi in ogni parte del mondo. La presenza di lali marche ha contribuito inoltre ad accrescere il livello delle esportazioni di sigarette dagli Stati UnIU. La maggior parte delle vendite unitarie della Philip Morris International e costituita da marche regionali e nazionali, che nel 1975 hanno continuato ad apportare un significativo contributo alle nostre quote di mercato in molti paesi; in oltre 20 di essi la Philip Morris International detiene una quota di mercato del 10% o piu. NeI 1975, tutte le regioni amministrative internazionali della societ8 hanno contribuito all'aumento di vendite unitarie e del fatturato. La Philip Morris Europa/Medio Oriente/Africa ha registrato nuovi primati dl vendite undane. La Marlboro e oggi Is sigaretta con filtro piu venduta di questa regione amministrativa, oltre ad essere Is pi6 dinamica fra le marche affermate. In ascesa sono anche le vendite delle marche regionali e nazionali. Per far fronte alla crescente nchiesta di Marlboro e delle altre marche all'interno della C.E.E., e stato varato un programma quinquennale di potenziamento degli impianti produttivi cola situatl. In conformita con la prima fase di tale programma, Is Philip Morris G,m.b.H. sta ampliando in Germania il centro per la produzione di sigarette di Monaco, acquistato net 1974, ed ha aperto un centro satellite nelle vicinanze dell'attuale impianto di Berlino Occidentale. Nel 1975 e stata lanciata sui mercati bulgaro a greco la Marlboro prodotta in loco su licenza; sempre nel 1975, in base all'accordo di cooperazione tecnica e scientifica stipulato con I'Unione Sovietica, e stata sviiuppata, prodotta e lanciata sul mercato insieme aI Ministero dell'Industria Alimentare dell'U.R.S.S, una marca commemorativa di sigarette di tipo americano chiamata Apollo-Soyuz• Anche la regione amministrativa America Latina/Penisola Iberica ha raggiunto nell'anno nuovi livelli di vendite unitarie. In Brasile, la Philip Morris Brasileira S.A. de Cigarros ha completato un nuovo impianto a Curitiba a acquistato la Companhia de Fumos Santa Cruz, secieta che possiede un' ampia rete di distri- buzione, a produce a vende molte note marche nazionali. Verso la meta dell'anno, Ia Marlboro e stata lanciata nelle principali area urbane del Brasile. Dotato di grande dinamismo, con un volume di fatturato annuo di 110 miliardi di pezzi, il mercato brasiliano delle sigarette presents possibilita molto estese. Tultavia la presenza di un concorrente awiato, che detiene una quota di mercato pre- ponderante, rappresenta un ostacolo da superare a fa prevedere una fase di sensibill perdite fintantoche si estenda la nostra quota di mercato, come gia accadde in situazioni analoghe su altri vasti mercati. La societa a perd fiduciosa nel potenziale a lungo termine delle attivita brasiliane. A Costarica, la societa ha acquistato una quota rilevante del capitale azionario di una societa produltrice di sigarette, la Tabacalera Costarricense, S.A• oltre a una ditta di distribuzione, Ia Mendiola & Company. Nonostante Ia depressione economica della maggior parte dei paesi asiatici e, in Australia, rialzi di prezzo dovuti in gran parte ad inasprimenti fiscali, nel 1975 Ia regione amministra- tiva dell'Asia/Pacifico ha stabilito nuovi primati nelle vendite unitarie di sigarette. Sono aumentate Ia quota di mercato delle principali marche della Philip Morris (Australia) Limited, Marlboro e Alpine, e quella dei vini della Lindeman e della Leo Buring. La Godfrey Phillips, India, Limited ha effettuato con successo un'emissione di azioni per pubblica sottoscrizione, che ha rafforzato il capitale azionario della societa a ridotto proporzional- mente Ia nostra quota in conformita con le direffiwe del governo indiano. Nel Pakistan, la societa ha esteso Ia propria parteclpa- zione di minoranza alla Premier Tobacco Industries Limited. Nel Canada la Benson & Hedges (Canada) Limited, le cut marche piu importanti sono Mark Ten, Belvedere, e Benson & Hedges 100s, ha conseguito nuovi livelli di vendite unitarie di slgarette; Ie Belmont e le Viscount, due marche leggere ("high filtration") hanno realizzato un'espansione particolarmente vivace, e sono state lanciate con successo sul mercato le Plus, prime sigarette canadesi da 120 mm. Verso Ia fine del 1975, tuttavia, il governo canadese ha annunciato una politica restrittiva di prezzi e salan, che potrebbe aver qualche effetto sulla nostra futura redditivita in quel paese. Nell'anno ora concluso, Is Philip Morris ha nuovamente apportato un contributo positivo alla bilancia del pagamenti ed al livello dell'occupazione negli Stati Uniti. I nostri accordi inter- nazienali di produzione tramite societa affiliate e licenziatarie sono stati stipulati perchA tariffe e barriere doganali vietavano 1'esporrazione verso numerosi mercati. Da quando e cominciata I'attivta produttiva all'estero vent'anni fa, il numero di dipendenti della societa che lavora nell'ambito dell'attivita internazionale (p(incipalmente esportazioni) A aumentato del 500% e piu; nello stesso periodo le esportazioni di sigarette di produzione statunitense sono salite del 500% a piu. Nell'ultimo decennio, le esportazioni di tabacco coltivato negli Stati Uniti sono aumentate del 300% e piu. Le proposte avanzate negli Stati Uniti di inasprire I'onere fiscale sugli introiti esteri delle societA americane, vietando fnoltre gf'r accordi tirlateraii per evitare ia doppia tassazione e le rateazioni fiscali, avrebbero I'effetto controproducente di soffocare I'espanslone delle attivita internazionali suddette e conseguentemente delle esportazioni, provocando in definitiva una diminuzione dei posti di lavoro negli Stati Uniti. La Philip Morris ha apportato inoltre una serie di contributi positivi alle condizioni socioeconomiche dei paesi ospitanti, ove i quadri dirigenti delle societa affiliate sono in gran perte di nazionalita locale. Cio a particolarmente vero nei paesi in via di sviluppo, in cui la societa ha fornito capitali d'investimento e introdotto una tecnologia d'avanguardia e metodi di gestione moderni, addestrando i dipendenti locali a compiti direttivi a sviluppando Ie abilita delle maestranze. In quasi tutti I paesi in via di sviluppo in cui operano nostre societa affiliate, i cittadini condividono i successi della societa mediante partecipazioni al capitale azionario. Miller Brewing Company Rispetto al 1974, il fatturato della Miller Brewing e aumentato del 63,1 %; I'utile d'esercizio e salito a 528,6 milioni, da $6,3 milioni dell'anno precedente. L'accresciuto reddito della Miller e il risultato d'un insieme di fattori: maggior volume di vendite unitarie, economie consentite dalle produzione su larga scala, crescente utilizzo di nuove efficienti attrezzature e rialzo del prezzi. L'aumento del 41,9% nel volume di vendite unitarie della Miller net 1975 ha superato sia l'aumento del 1974 (31,0%) sia quello del 1973 (28,8%), ad ha portato Is Miller al quarto posto fra i produttori di birra statunitensl; Ia quota di mercato e salila dal 6,2% del 1974, all' 8,6% circa. La marca Miller High Life ha avuto un rapido sviluppo, estendendo Ia propria penetrazione nella categoria di prezzo superiore. Nel 1975 e stata lanciata con successo sul mercato nazionale Ia nuova birra a basso contenuto calorico e di carboidrati, Lite. Nell'anno, la Miller si e inoltre assicurata tutti i diritti di distribuzione della famosa birra tedesca L'owenbrau, con un accordo perfasi successive stipulato con Ie seicentenaria ditta di Monaco. - Per la maggior parte dell'anno, Ia richiesta di prodotti Miller ha superato la capacita produttiva: cio ha reso necessaria a partire dall'aprile 1975 una rigorosa ripartizione distributiva di tutte Ie marche di prodotto. Per far fronte alla crescente domanda, inoltre, e stato accelerato il programma di investimenti: nell'anno, e stato portato a termine il previsto potenziamento degli impianti di Fort Worfh da 2 a 5 milioni di barili, e I'impianto di Milwaukee, il massimo impianto del Wisconsin con 7 milioni di barili di capacita produttiva, e stato anch'esso ampliato a dotato di attrezzature ad alta velocita. La Miller possiede inoltre un impianto ad Azusa, California, della capacita produttiva di 1,5 milioni di barili; quest'anno dovrebbe entrare in funzione un quarto impianto, a Fulton, N.Y., per raggiungere a fine anno una capacita produttiva totale di 3,3 milioni di barili• AIIa fine del 1976, Ia Milleravra una capacita produttiva totale di circa 17 milioni di barili, ed impianti per la maggior parte dotati del sistemi tecnologici piu efficienti e delle attrezzature piu moderne. Dal 1973, la societa ha investito oltre $250 milioni in progetti di espansione che ne raddoppieranno la capacita produttiva. - II primo impianto di produzione di barattoli d'alluminio di Milwaukee, entrato in funzione neI 1975, he avuto un andamento positivo, nonostante i costi d'awiamento. Altri barattolifici sono ora in costruzione a Fort Worth e a Fulton, la cui entrata in funzione e prevista nel 1976. Philip Morris Industrial Nel 1975 i risultati operativi della Philip Morris Industrial hanno risentito del blocco del prezzi a dell'aumento nel costo dell'energia, fattori in parte conlrobilanciati dal programma riduzione costi della societa. II fatturato e sceso del 2,2 % e I'utile d'esercizio del 34,4 %• Gruppi Carta, Chimica a Imballaggi che compongono la Philip Morris Industrial hanno avuto tutti un andamento positivo, ad it Gruppo Imballaggi ha stabilito nuovi primati di utile. I Gruppi Carta a Chimica hanno gravemente risentito della recessione e della riduzione delle scorte di magazzino da parte dei clienti. L'eccedenza di capacita produttiva dell'industria cartaria e il lieve ma persistente ristagno del settore tessile hanno determinato una sensibile contrazione della domanda, a reso mpossible mantenere efficienti livelli operativi. Nell'ultimo trimestre, tuttavia, sono migliorati i risultati operativi di ambo i Gruppi. Nell'anno, Ia Philip Morris Industrial ha intensificato le attivita di ricerca, continuando a concentrare la propria azione sullo aviluppo di nuovi prodotti a applicazioni, in aderenza alla strategia prestabilita di specializzazione di mercato. Mission Viejo Company Nel 1975Ia Mission Viejo, societa che opera nel settore dell'edilizia residenziale, ha conseguito nuovi livelli di utile, nonostante la grave recessione che he colpito I'intero settore. Rispetto al 1974, il fatturato e I'utile d'esercizio sono aumentati, rispettivamente, del 12,7% e del 23,1 %. II totale di ordini inevasi di nuovi alloggi era salito a fine anno del 76,2% rispetto all'anno precedente, e I'inventario di alloggi invenduti e stato il piO basso che si sia raggiunto dal settembre 1971. II programma principale della societa, a Mission Viejo, nella California del Sud, ha realizzato un ritmo di vendite particolar- mente serrato per tutto I'anno; il nuovo centro residenziale offre ai 32.000 residenti un'ampia gamma di attrezzature ricreative, educative e commerciali, ed uno stile di vita di grande attrattiva, a cui dovrebbe apportare ulteriore prestigio Ia cosiruzione di un lago con una superficie di oltre 50 ettari, awiata nel 1975. Nell'anno, hanno continuato a svilupparsi due centri resi- denziali piu piccoli, a Denver a a Fresno, ma gli effetti della recessione edilizia sono stall piu marcati in quelle sedi• La societa non e piu attivamente impegnata sul mercato dell'edilizia residenziale di Phoenix. Gravami riscali sulle sigarette Fra i problemi affrontati dall'industria del tabacco statunitense nel 1975 e da annoverare I'intensificarsl del tentativi statall a locali di accrescere it gettito fiscale mediante imposte di consumo sulle sigarette. _ Nel 1975, quattro stall americani hanno approvato misure legislative per elevare tali imposte, contro i due stati del 1974. In 30 stati ed in numerosi comuni sono stati presentati disegni di legge nello stesso senso; in parecchi stati sono state respinte analoghe proposte. Molti dei disegni di legge presentati a livello statale e muni- cipale rappresentano un'automalica risposta ai problemi di bilancio, in zone a fiscalita perturbata. Gli enti statali e locali propongono I'inasprimento fiscale come fonte prontamente disponibile di nuovi introiti: tale strumento e perb regressivo e discriminatorio nei confronti dei consumatori delle fasce di reddito piu basso, senza contare che i diversi livelli d'imoosta da zone a zona incoraggiano il conlrabbando, il quale a sua volta provoca un calo del gettito fiscale. Nel 1975, il gettito fiscale complessivo sulle sigarette negli Stati Uniti e stato di 55,7 miliardi, di cui $2,2 miliardi a livello federale, S3,4 miliardi a livello statale e $0,1 miliardi a livello locale. L'imposta rappresenta il 42% circa del prezzo medio al dettaglio del pacchetto di sigarette nel paese. Nell'anno, si sono avuti inasprimenti dell'imposla su molti mercati internazionali. Anche qui il prowedimento si dimostra generalmente controproducente: in quei mercati in cui esistono varie categorie di prezzo, esso spinge il consumatore verso sigarette di prezzo inferiore e quindi gravate d'imposta in misura inferiore, riducendo cosi il gettito potenziale che percepirebbe I'ente fiscale. ll fumo e /a salute Nel 1975 e proseguita Ia controversia su un preteso rapporto causale fra il fumo a la salute, anche se e alquanto mutata la natura delle accuse rivolte ell'industria. Come osserva un autore di articoli di medicina: "Non passe una settimana, o quasi, senza leggere che qualche sostanza fino al momento insospettata si e dimostrata causa di cancro. Fino ad oggi gli scienziati hanno identificato piu di 1000 agenti nocivi, come causa certa o sospetta di cancro nell'uomo. Negli ultimi anni tali agenti, detti cancerogeni, sono stati identificati nell'aria che si respire, nell'acqua che si beve, nel cibo, negli indumenti, nei prodotti farmaceutici, nei posti di lavoro, nelle abitudini." Tutto cio conferma la complessita del problema del cancro, e mette in Iuce I'equivocita dei dati su cui si fondano Ie respon- sabilita addossate alle sigarette; tali scoperte tendono inoltre a collocare Is questione del rapporto fra fumo a salute in una prospettiva piu ampia, e potranno indurre a riconoscere Che fra I principali fattori che determinano I'insorgere o meno del cancro possano annoverarsi non solo I'ambiente, ma anche la pre- disposizione genetics individuale, I'eta, il sesso, il grado di risposta immunologica e forse perfino lo stato psicologico. II principale obbiettivo degli ambienti ostili alla sigaretta, nell'anno ora concluso, e stato quello di riuscire a limitare rigorosamente o ad escludere I diritti dei fumatori in molti locali pubblici, anche se fino ad oggi non vi e alcuna prova scientifica che dimostri che il fumo di sigaretta arrechi danno ai non-fumatori. La Philip Morris, a in genere 1'industria delle sigarette hanno portato avanti gIi impegni a lungo termine nell'ambito della ncerca scientifica sia attraverso II "Council for Tobacco Research-U.S.A."(Comitato Ricerche sulTabacco), sia mediante sowenzionl dirette ai ricercatori. Attivita d'interesse pubblico La Philip Morris ha continuato ad estendere gli impegni sociali che ha verso I dipendenti, gli abitanti del centri residenziali annessi agli impianti e I cittadini dei paesi in cui opera. Essa ha ulteriormente aumentato il livello di occupazione a I'assunzione a posti direttivi delle minoranze e della mano d'opera femminile nel paese. Nel 1975, 10,5% de posti direttivi, amministrativi a tecnici era affidato a membri di minoranze, contro il 9,6% del 1974; il 15,4% di tale gruppo e costituito da donne, contro it 14,4 % dell'anno prima. Dal 1971Ia societa ha plu che raddoppiato il numero di borse di studio, e nel 1975 la percentuale destinata all'istruzione costituiva eltre 50% del contributo complessivo della societa; Ia maggior parte dell'aumento e destinata a istituti universitari privatl Indlpendenti. La Philip Morris e stata Ia prima societa che abbia aggiunto al programma di borse di studio universitarie, altre borse di studio per I'addestramento professionale e tecnico dei figli del dipendenti, e per quella mano d'opera femminile che desideri migliorare la propria posizione o reinserirsi nel mondo del lavoro. Nell'anno ora concluso la societa e stata fra le prime a contribuire al Centro Comune di Studi Politici dell'Universita Howard, centro d'informazione destinato ai funzionari di colore eletti alle cariche pubbliche. Gil impegni sociali della Philip Morris International dipendono dalle necessita dei paesi ospitanti; essi si estendono dall'assistenza medico-sanitaria di base alld sviluppo dell'istru- zione, dalla conservazione delle specie selvatiche al sostegno a programmi culturali. Peroltre un decennio, la Philip Morris e stata all'avanguardia nel mecenatismo tra Ie societa commerciali, patrocinando quasi ogni anno grandi esposizioni itineranti negli Stall Uniti. Nel 1975 a stata allestita presso il Museo di Belle Arti di Boston una mostra intitolata "L'America della Frontiera: il Far West", esposta in seguito anche a Denver, San Diego a Milwaukee, ed organizzata sotte il comune patrocinio del Fondo Nazionale per le Arti e della Philip Morris sotto I'egida della Marlboro; nel 1976, la mostra verrA esposta anche in Europa. Nel mesa di dicembre ci ha dolorosamente colpito la perdita di Buford A. Tynes, Tesoriere defla Philip Morris dal 1973. Nel corso dell'anno John S. Reed, "executive vice-president" della First National City Bank, e diventato membro del Consiglio d'Amministrazione della Philip Morris. La societa esprime un elogio e un ringraziamento ai 48.000 dipendenti, per Ia dedizione e I'alta qualita del lavoro prestato. r,) ~ O O O F--Y ~ N r-n ~ 11

Terugbi7k op het jaar Het doet ons genoegen mee te kunnen delen, dat ons bedrijf in 7 975 opnieuw een urtstekend jaar had. In het licht van de over de gehele wereld heersende cecessle, d1e een nade\19e Irntoed had op de ekonomie van vele landen waarin wij werkzaam zijn, waren de in 1975 behaalde bedrijfsresultaten bevredigend. Gelukkig bleek de vraag naar onze voornaamste produkten-sigaretten en bier-betrekkelijk bestand tegen het veranderde ekonomische klimaat. De afzetcijfers in beide bedrijrstakken bereikten rekordhoogten, hoewel deze afzetlen langzamer stegen dan in voorgaande jaren. De hoogtepunten van onze financiele resultaten worden op de eerste pagina van dit verslag vermeld. Omzet, nettowinst en winst per aandeel bereikten voor het 22ste achtereenvolgende jaar rekordhoogten. De omzet ging in 1975 21,0% omhoog, de nettowinst 20,6% en de winst per aandeel (op basis van volledige konversie) 17,9%. De sigaretlenafzet van Philip Morris U.S.A. en Philip Morris International en de afzet in barrels van Miller Brewing hebben rekordhoogten bereikt. Het afgelopen jaar was het zesde achtereenvolgende jaar, waarin de afzet van de Amerlkaanse sigarettenindustrie toenam. De totale verkoop bedroeg 599 miljard stuks. Dit betekent tegenover 1974 Gen atijging van 1,3%. Philip Morris U.S.A. bleef de gehele bedrijfstak voor door haar afzet met 6,1 % te vergroten tot 141 miljard stuks. In het laatste kwartaal van het jaar werd geraamd, dat Marlboro het best verkochte merk in dit land was geworden; Gen positie die het in 1972 in de wereld had veroverd. De sigarettenmarkt buiten de Verenigde Staten zette ook in 1975 haar groei voort. De totale afzet wordt geraamd op 3.200 miljard stuks, ofwel Gen toename van 3,2%. Philip Morris Inter- national vergrootte haar afzet met 9,7 % tot 155 miljard stuks. De Amerikaanse bierindustrie vergrootte in 1975 voor het achttiende achtereenvolgende jaar haar verkoop in barrels. De totale verkoop bedroeg ongeveer 148,5 miljoen barrels, hetgeen Gen toename van 2,1 % betekent. Miller Brewing was voor het derde achtereenvolgende jaar de snelst groeiende brouwerij in de Verenigde Staten. De totale afzet bedroeg 12.862.000 barrels, ofwel een stijging van 41,9d/o of 3.796.000 barrels tegenover de 9.066.000 in 1974 geproduceerde barrels. In de afgelopen vijf jaar is de gekonsolideerde omzet van Philip Morris gestegen tot Gen samengesteld gemiddelde van 19,3% per jaar, tenvijl de winst per aandeel (op basis van volledige konversie) is toegenomen met Gen samengesteld gemiddelde van 20,4% per laar. In maart 1975 schreef Philip Morris Gen lange termijnlening uit van $150 miljoen-de grootste financiering die het bedrijf ooit plaatste-en werd de basis van haar aandelenkapitaal verstevigd door op de beurs Gen inschrijving van twee miljoen gewone aandelen te plaatsen. Hoewei de aanbieding op de beurs het aantal gewone aandelen uitbreidde, boekte ons bedrijf bij de uitkering van 1974 nog Gen winststijging van 17,9% per eandeel (op basis van volledige konversie). De toenemende vraag naar onze sigaretten en bier en de behoefte aan nieuwe efficidnte produktie-installaties hebben Gen voonzetting van het kapitaalinvesteringsprogramma wenselijk gemaakt. De kapitaalbestedingen bedroegen in 1975 $244,5 miljoen. In de komende vijf jaar-1976 tot 1980-voorzien wij kapi- taalbestedingen tot net over $1 millard. Ongeveer de heift van deze fondsen wordt besteed aan onze over de gehele wereld ver- spreide sigarettenaktiviteiten en de andere heift Gen onze brouwerijen in de Verenigde Staten. Philip Morris keerde voor het 48ste achtereenvolgende jaar -dividenden uit op haar gewone aandelen en voor het achtste achtereenvolgende jaar werd de jaarlijkse dividenduitkering ver- hoogd. In de loop van 1975 keurde de Raad van Bestuur twee jaarlijkse dividendverhogingen goed; de eerste betekende Gen jaarlijkse uitkering van 80 dollarcent naar 90 dollarcent en vervolgens naar $1,00 per gewoon aandeel. Philip Morris U.S.A. De groei van Philip Morris U.S.A., onze grootste werkmaat- schappij, zette zich in 1975 voort met Gen marktaandeel dat in de Verenigde Staten tot 23,6% steeg, tegenover 22,5 % in 1974. In 1975 steeg de omzet met 14,6% en de bedrijfsresultaten namen met 17,8 % toe. Voorts bereikte Marlboro in deze bedrijfstak de grootste afzetstijging en werd haar marktaandeel vergroot tot 15.2%, tegenover 14,6% in 1974. De verkoop van Marlboro 100's, Marlboro Lights en Marlboro Menthol is gestegen en nam daarmee 21 % van alle in de Verenigde Staten verkochte Marlboro-merken voor hear rekening. Benson & Hedges 100's verstevigde haar positie als het leidende 100mm-merk. In 1975 werd de lokale lancering van haar nieuwe "flip-top"-verpakking Gen feit. Virginia Slims en Parliament t00's boekten in 1974 sterke afzetstijgingen. In het 120mm-segment Ianceerden wij in april 1975 Saratoga 120's opde lokale markt.Tegen het eind van het laarhad Saratoga 120's Gen belandijke positie in dit kleine segment verworven. Sigaretten met Gen laag teergehalte namenrraar schatting ongeveer 10% van de bedrijfstakvoor hun rekening. Wij waren in deze kategorie goed vertegenwoordigd met Marlboro Lights, Parliament en Benson & Hedges Muitifilter. In december 1975 kondigden wij-als hoogtepunt van twaalf jaar research-een in de sigarettenindustrie belangrijke weten- schappelijke doorbraak aan. Onze onderzoekers wisten de hoog gekoncentreerde smaakkomponenten uit rook te isoleren. De toepassing van deze ontdekking leidde tot de ontwikkeling van het proces "Enriched Flavor", dat de natuurlijke smaak van de sigaret verrijkt zonder dat de gebruikelijke teerverhoging optreedt. Dit proces was van toepassing op Gen nieuwe sigaret -Merit-die in januari 1976 op de lokale markt werd gelan- ceerd. Merit-in standaard- en mentholuitvoering-geeft slechts 9mg teer af en 0,7mg nicotine en heeft Gen lager teergehalte dan 98% van alle sigaretten die op het ogenblik in de Verenigde Staten worden verkocht. In het uitgebreidste konsumentenonder- zoek dat ooit door het bedrijf is uitgevoerd, werd Merit tegenover de leidende merken met Gen laag teergehalte getest. Het resultaat was dat-ook al bevatten de sigaretten 60% meerteer dan Merit- een aanzienlijke meerderheid van alle rokers die aan de test deelnamen van mening waren, dat Merit dezelfde of Gen betere smaak had. Onze verkoopstijging werd ondersteund dooreen toene- mende gebruikmaking van de geavanceerde installaties in ons nieuwe produktiecentrum te Richmond. Aan het eind van het jaar produceerde dit centrum meer dan 300 miljoen sigaratten per dag, ofwel net over 50% van de kapaciteit wanneer het in 1977 op volle toeren zal draaien. De doelmatigheid van dit sigaretten- produktiebedrijf zal Philip Morris in de komende laren in Gen gunstige konkurrentiepositie plaatsen. Het nieuwe produktiecentrum werd Gen belangrijk konferentie-oord, dat dienst heeft gedaan als de plaats voor twee wetenschappelijke symposia en voor onze nationale verkoopver- gadering 1975, die werd bijgewoond door ruim 1,000 mensen van onze verkoopstaf uit het gehele land. In de loop van het jaar bezochten ongeveer 450 personeelsleden van ons hoofdkantoor te New York op drie verschillende dagen het nieuwe bedrijf. In 1975 maakte meer dan 22.000 bezoekers Gen rondleiding door het bedrijf. Deze bezoeken gaven de personeelsleden van Philip Morris en het grote publiek de gelegenheid uit de eerste hand kennis te nemen van onze wetenschappelijke kwaliteitskontrole en van ons ultra-moderne, snelle en efficiente produktiecentrum. Ten einde Gen de stijgende vraag naar onze produkten tegemoet te komen, versterkten wij in 1975 ons hoofdkantoor en onze verkooporganisaties. De vitaliteit van de divisie "American Safety Razor" leidde tot belangrijke verkoopstijgingen voor Flicker, het best verkochte merk in het groeiende marktsegment van lady-shaves, en tot Gen nieuwe verpakking met aangepaste reklame voor Personna Double II. Tevens werd de Lady Double II, Gen nieuw scheerapparaat voor vrouwen, geintroduceerd. Deze divisie heeft bijgedragen tot de bedrijfswinst. Philip Morris International De omzet en bedrijfsresultaten van Philip Morris International stegen in 1975 met respektievelijk 17,2% en 20,2% tot rekordhoogten. In de eerste heift van het jaar waren accijnsverhogingen, hogere kosten, en overheidsprijsbeperkingen er op Gen aantal markten de oorzaak van dat de marges op de bedrijfsresultaten van Philip Morris International kleinerwerden. Afzetstijgingen en grotere produktiebezuinigingen, gekombineerd met Gen ver- zachting van de prijsbeheersing die op vele van onze markten werd toegepast, leidden in de tweede helft van het jaar tot betere marges. Evenais in voorgaande jaren zullen onder het huidige inter- nationale monetaire atelsel koersschommelingen Gen blijvende zorg zijn voor Philip Mo«is en voorvele internationale bedrijven. Deze schommelingen hadden in 1975 echtergeen veelbetekend eindresultaat op onze aktiviteiten. Philip Morris International verkoopt ruim 175 merken in meer dan 1601anden en gebiedsdelen door geaffilieerde produktie- bedrijven in 22 landen, door licentiehouders in 17 landen en gebiedsdelen en door verkooporganisaties belast met export. De stijgende vraag naar zogenaamde Amerikaanse "blended"-filtersigaretten heeft tot onze blijvende groei bijge- dragen. Wel ruim een-derde van onze totale afzet buiten de Verenigde Staten bestaat uit internationale merken zoals Marlboro, dat nog steeds haar marktaandeel over de gehele wereld blijft vergroten. De aanwezigheid van deze internationale merken is van invloed geweest op de verdere groei van onze sigaretten- export vanuit de Verenigde Staten. Regionale en lokale merken namen het grootste deel van de afzetvan Philip Morris International voor hun rekening en bleven in 1975 in vele landen Gen belangrijke bijdrage leveren tot ons marktaandeel. Philip Morris International handhaafde in ruim 20 landen Gen marktaandeel van 10% of ineer. Eveneens in 1975 droegen al onze internationale regio bij tot Gen verhoging van de sigarettenafzet en bedrijfsresultaten. Philip Morris Europa/Midden-Oosten/Afrika boekte Gen rekordafzet. Marlbor0 is op dit ogenblik de meestverkochte sigaret in deze regio. De verkoop van regionale en lokale merken zette eveneens hun opwaartse trend voort. - Om aan de groeiende vraag naar Marlboro en naar onze andere merken in de EEG tegemoet te komen, hebben wij Gen vijfjarenplan ontwikkeld voor de uitbreiding van de daar gevestigde produktiebedrijven. Tijdens de eerste fase van dit plan is Philip Morris G.m.b.H. in Duitsland de in 1974 verworven sigarettenfabriek te Miinchen aan het uitbreiden en heeft zij naast haar bestaande fabriek in West-Berlijn Gen "satellietfabriek" gevestigd. Vong jaarwerd het merk Marlboro, dat onder licentie in Bulgarije en Griekenland wordt vervaardigd, op deze markten gelanceerd. Eveneens in 1975 werd binnen het kader van de wetenschappelijke en technische samenwerkingsovereenkomst tussen Philip Morris en de Sovjet-Unie, Gen herdenkingssigaret van Gen Amerikaans melange onder de naam Apollo-Soyuz ontwikkeld, geproduceerd en op de markt gebracht door het Russische Ministerie van de Voedselindustrie en Philip Morris. Onze regio Latijns-Amerika/Iberie meldde ook in 1975 Gen rekordafzet. In Brazilie voltooide Philip Morris Brasileira S.A. de Cigarros Gen nieuwe fabriek in Curitiba en verwierven wij Companhia de Fumos Santa Cruz, die over Gen uitgebreid distri- butienet beschikt en een aantal in trek ziinde lokale merken produceert en op de markt brengt. Vanaf midden 1975 werd Marlboro in de belangrijkste stedelijke gebieden van Brazilie gelanceerd. De snel groeiende Braziliaanse sigarettenmarkt met Gen verkoop van 110 miljard stuks per jaar biedt grote mogelijkheden. Een van de interessante aspekten waarmee wij worden gekon- fronteerd, is Gen konkurrent met Gen overheersend marktaandeel. Wij verwaohten dat wij in Brazilie, terwijl wij ons marktaandeel aan het opbouwen zijn, voor enige tijd met aanzienlijke verliezen te kampen zullen hebben. Dit was ook het geval in soortgelijke situaties op andere belangrijke markten. Wij hebben op lange termiin alle vertrouwen in het winstpotentieel van onze Brazili- aanse aktiviteiten. In Costa Rica venvierven wij Gen aanzienlijk aandeel in het sigarettenproduktiebedrijf, Tabacalera Costarricense, S.A. en de distributiefirma, Mendiola & Company. Ondanks de malaise die zich in de ekonomische toestand in de meeste Aziatische landen voordeed en belangrijke prijsver- hogingen in Australie, die voor Gen belangrijk deel worden toegeschreven aan accijns-en andere belastingverhogingen, boekte de sigarettenafzet in de Azie/Pacifio in 1975 Gen rekordhoogte. De belangrijkste sigarettenmerken van Philip Morris (Australia) Limited-Marlboro en Alpine-vergrootten hun marktaandeel, evenals de wijnen van Lindeman en Leo Burning. Godfrey Phillips, India, Limited plaatste met sukses Gen nieuwe inschntving van aandelen op de beurs. Enerzijds werd daardoor het eigen vermogen van het bedrijf.verstevigd, tenvijl het anderzijds ons aandelenpakket overeenkomstig de politiek van de Indische regering verkleinde. In Pakistan vergrootten wij ons minderheidsbelang in Premier Tobacco Industries Limited. In Canada steeg de sigarettenverkoop Benson & Hedges (Canada) Limited tot rekordhoogten. De belangrijkste merken van dit bedrijf zijn Mark Ten, Belvedere en Benson & Hedges 100's. Belmont en Viscount-twee lichte, zogenaamde "high filtration"- merken-boekten Gen bijzonder sterke groei en Plus, de eerste 120mm-sigaret van Canada, werd met sukses gelanceerd. Tegen eind 1975 kondigde de Canadese regering Gen Ioon- en prijskontrolepolitiek aan, die de toekomstige rentabiliteit in Canada enigazins zou kunnen beinvloeden. Vorig jaar leverde Philip Morris opnieuw Gen positieve bijdrage tot de betalingsbalans en de werkvoorziening in de Verenigde Staten. De regelingen met onze internationale geaffileerde maatschappijen en licentie-houders werden tot stand gebracht, omdat tariefgrenzen en andere handelsbelemmeringen de Amerikaanse export naar vele markten belemmerden. Sinds wij twintig jaar geleden met onze internationale produktiebedrijven begonnen, is het aantal personeelsleden dat bij Philip Morris in de Verenigde Staten werkzaam is voor de ondersteuning van onze internationale aktiviteiten-voorname- lijk export-met meer dan 500% toegenomen. Over dezelfde periode ging eveneens onze export van Amerikaanse sigaretten ruim 500% omhoog. In de afgelopen tien jaar is de export van onze Amerikaanse tabak ruim 300 % gestegen. In de Verenigde Staten kunnen voorstellen betreffende de verhoging van betastingheffingen op de door Amerikaanse bedrijven gemaakte winsten overzee, met inbegrip van de stop- zetting van buitenlandse belastingkredieten en uitgestelde belastingclaims, Gen averechtse uitwerking hebben. Het zou de uitbreiding van de internationale aktiviteiten en de export van deze bedrijven kunnen afremmen en uiteindelijk leiden tot Gen verlies aan arbeidsplaatsen in de Verenigde Staten. Zo heeft Philip Morris eveneens de reputatie Gen positieve bijdrage te leveren aan de ekonomie en sociale kondities van de gastlanden, waar de direktieleden van onze geaffilieerde maat- schappijen voornamelijk staatsburgers van deze landen zijn. Deze bijdragen zijn met name van betekenis in ontwikkelingslanden. Wij hebben kapitaalinvesteringen verschaft en geavanceerde technologie ingevoerd, moderne managementmethoden tot stand gebracht en andere staalsburgers opgeleid tot funkties op managementniveau, terwijl onze werkers beter werden getraind. Staatsburgers van praktisch alle ontwikkelingslanden waar wij geaffilieerde maatschappijen hebben, delen in het sukses van deze vestigingen door over onze aandelen te kunnen beschikken. Miller Brewing Company De omzet van-Miller Brewing steeg 63,1 % ten opzichte van 1974 en de bedrijfsresullaten liepen op tot $28,6 miljoen, tegenover $6,3 miljoen vorig jaar. De winststijging van Miller is het gekom- bineerde resuitaat van Gen grotere inhoud per barrel, bezuini- gingen door produktie op grote schaal, Gen verbeterde gebruik- making van doelmatige nieuwe produktie-installaties en hogere prijzen. De door Miller in 1975 geboekteverkoopstijging in barrels van 41.9% overtrof zowet de vooruitgang van 31,0% in 1974 als de stijging van 28,8% in 1973 en stelde Miller in staat op te schuiven naar de vierde plaats tussen de Amerikaanse brouwers. Het marktaandeel van Miller steeg tot ongeveer 8,6% tegenover 6,2%in1974% 12

Het merk Miller High Life zette haar snelle groei voort, terwijl h8t in de kategorie van de duurdere prilsklasse beter doordrong. Lite, onze nleuwe bierscort met een laag kalorisch en koolhydraat- gehalte- werd in 1975 met sukses op de lokale markt gelanceerd. Eveneens in 1975 verkreeg Miller voor Lowenbrau, de wereldbe- faamde Duitse biersoort, de volledige distributierechten op de Amerikaanse markt, door met de 600 jaar oude brouwerij uit Munchen een overeenkomst te tekenen die diverse fasen bestrijkt. Bijna net gehele jaar door overtrof de vraag naar Miller- produkten de produktiekapaciteit van het bedrijf. Dit had tot gevolg dat sinds april 1975 een beperkte distributie van al onze produkten noodzakelijk ward. Ten einde aan de stijgende vraag te blilven voldoen, heeft Miller haar kapitaalinvesteringsprogramma versneld. De uilbreiding van onze brouwerij te Fort Worth met een geschatte kapaciteit van twee miljoen naar wlf miljoen barrels werd in de loop van 1975 voltooid. Onze brouwerij te Milwaukee, die met een kapaciteit van zeven miljoen barrels de grootste brouweril in de staat Wisconsin is, werd uitgebreid en gemoder- niseerd met ultra-snelle installaties. Daarnaast heeft Miller een brouweril met naar schatting een kapaciteit van 1,5 miljoen bar- rels te Azusa, Californii3. Onze vierde brouwerij in Fulton, New York, zal volgens plan begin dit jaar in produktie gaan en zou tegen het eind van het jaar met een kapaclteit van naar schatting 3,3 miljoen barrels per jaar op volle toeren draaien. Tegen eind 1976 zal Miller ongeveer 17 miljoen barrels van de geschatte produktiekapaciteit draaien. De meeste van onze bedrijven zullen gebruik maken van de doelmatigste technologie en meest geavanceerde installaties. Sinds 1973 heeft Miller meer dan $250 miljoen besteed aan uitbreidingsprojekten, waardoor haar kapaciteit isverdubbeld. Onze eerste fabriek voor de produktie van aluminium-blikjes te Milwaukee, die in de loop van 1975 in bedrijf werd gesteld, was -ondanks de aanloopkosten-winstgevend. Op dit ogenblik worden te Fort Worth en Fulton andere blikjesfabrieken gebouwd, die volgens plan in 1976 in produktie gaan. philip Morris Industrial In 1975 werd de omzet van Philip Morris Industrial nadelig beinvloed dooropgelegde prijsbeperkingen en door gestegen energiekosten. Deze faktoren werden deels opgevangen door het bezuinigingsprogramma van hat bedrijf. De omzet daalde met 2,2% en de bedrijfsresultaten gingen 34,4% achteruit De Verpakkings-, Papier- en Chemicaliendivisies, die gezamenlijk Philip Morris Industrial vormen, opereerden vorig jaar winstgevend, waarbij de Verpakkingsdivisie een rekordhoogte aan winst wist te bewerkstelligen. De recessie en verkleining van besfaande voorraden bij afnemers hadden een ernstige invloed op de Papier- en Chemicali@ndivisies. Overkapaciteit in de papierindustrie en de blijvende verslapping in de textielindustrie hebben de vraag aanzienlijkverkleind. Doelmatige produktieniveaus konden niet blijven gehandhaafd. In het vierde kwartaal zijn echter de bedrijfsresultaten voor beide divisies vooruitgegaan. Philip Morris Industrial verbeterde in 1975 haar research- mogelijkheden en zette de ontwikkeling van nieuwe, produkten en nieuwe produkttoepassingen voort door haar strategie te blijven koncentreren op de markten van specialites. Mission Vieio Company In 1975 vergrootte onze projektontwikkelingsmaatschappij, Mission Viejo, haar omzet en bedrijfsresultaten tot rekordhoogten, ondanks het feit dat de landelijke woningbouw een diepe recessie doormaakte. De omzet en bedrijfsresultaten gingen ten opzichte van de in 1974 behaalde cijfers respektievelijk 12,7% en 23,1% omhoog. De totale achterstand aan orders voor nieuwe huizen van Mission Viejo Company was eind 1975 76,2% groterdan het voorafgaande jaar en de voorraad onverkochte huizen was het laagst sinds september 1971. De aktiviteiten van de voornaamste maatachappij, Mission Viejo te Zuid-Californie, leidden over heel 1975 tot een sterke verkoopstijging. Deze nieuwe woongemeenschap biedt hear 32.000 inwoners een rijke schakering aan rekreatie-, opleidings- en commerciele mogelijkheden en een woon- en leefgenot dat aan hoge maatstaven beantwoordt. Het afgelopen jaar werd in Mission Viejo, Californie, een begin gemaakt met de aanleg van een ruim 56hectare groot meer, dat naarverwachting het prestige van deze groeiende woongemeenachap zal vergroten. Twee kleinere woongemeenschappen-Denver en Fresno- werden in 1975 verder ontwikkeld. De gevolgen van de recessie in de huizenbouw werden op deze markten echter sterker gevoeld. Het bedrijf is niet langer aktief betrokken bij de huizenmarkt van Phoenix. Accijnzen op sigaretten Een van de problemen waarmee de Amerikaanse tabaksindustrie in 1975 werd gekonfronteerd, was een verscherping van de pogingen, zowel op staats- als gemeentelijk niveau, via accijnzen op sigaretten aan extra inkomsten te komen. .- In 1975 hebben vier sfaten wetten ter verhoging van accijnzen op sigaretten aangenomen; in 1974 waren dat ertwee. Wets- voorstellen ter verhoging van accijnzen op sigaretten werden verleden jaar in 30 staten en in vele gemeenten ingediend. In een aantal Amerikaanse staten werden in 1975 wetsvoorstellen ter verhoging van de accijns op sigaretten verworpen. Velewetsvoorstellen, zowel op staats-als op gemeentelijk niveau, weerspiegelen een automatische reaktie op budgettaire problemen in gebieden met belastingmoeilijkheden. Bestuurders van staat an gemeente stellen dergelijke verhogingen voor als een gemakkelijk beschikbare bron van extra inkomsten. Deze belastingen zijn echter regressief en discriminerend voor konsumenten met lagere inkomens. Bovendien stimuleert de van gebied tot gebied uiteenlopende hoogte van accijnzen de zwarte handel, wat voor het betrokken gebied leidt tot vermin- derde inkomsten van accijnzen op sigaretten. De totale opbrengst aan accijnzen op sigaretten in de Verenigde Staten bedroeg in 1975 $5,7 miljard, waarvan 52,2 miljard aan federale, 53,4 miljard aan staats- en $0,1 miijard aan gemeentetijke heffingen. Gemiddeld vormen deze accijnzen ongeveer 42 % van-de gemiddelde detailhandelsprijs van een pakle sigaretten. in vele van onze internationale markten zijn ook in 1975 de accijnzen op sigaretten verhoogd. Dergelijke verhogingen hebben in het algemeen, evenals in de Verenigde Staten, een averechlse uitwerking. In sommige internationale markten, waarverschillende kategorieen van prijzeh voor sigarettenmerken bestaan, kunnen dergelijke belastingverhogingen een verschuiving van de kon- sumentenvraag naar merken met een Iagere prijs tot gevolg hebben en dus een lagere accijns. Dit zal mogelijk leiden tot een verminderde opbrengst voor de belastingautoriteilen. Roken en gezondheid De kontroverse betreffende het aangevoerde verband tussen roken en gezondheid zette zich ook in 1975 voort, hoewel de aard van de aanvallen op de industrie zich aanzienlijk wijzigden. Een wetenschappelijk auteur publiceerde hat volgende: "Er gaat bijna geen weekvoorbij zonder dat een nieuw rapport melding maaktdatenigetotdusveronverdachte stof is gevonden, die kanker kan veroorzaken. Tot nu toe hebben de wetenschaps- mensen meer dan 1.000 substanties gevonden als uiteindelijke of mogelijke oorzaakvan kanker bij mensen. In recente jaren zijn zulke substanties-zogenaamde carcinogenen-ontdekt in de lucht die wij inademen, het water dat wij drinken, het voedsel dat wij eten, de kferen die wij dragen, de medicijnen die wij innemen, de werkkring die wij hebben, de gewoonten die ons eigen zijn". Dergelijke bevindingen helpen de gekompliceerdheid van het kankerprobleem te bevestigen en verdramatiseren voorts de met onzekerheden omklede gegevens, die worden aangevoerd als basis voorde aantijgingen tegen sigaretten. Naar onze mening hebben deze gegevens de neiging het vraagstuk betreffende de relatie roken en gezondheid in een breder perspektief te plaatsen en kunnen zij leiden tot een erkenning, dat niet alleen het gehele milieu, maar ook de erfelijke aanleg van een individu, leeftijd, sex en immunologische ontvankelijkheid-en misschien zelfs de psychische gesteldheid-hoofdfaktoren kunnen zijn, die van invloed zijn bij de venvekking of niet-venvekking van kanker. De voornaamste aktiviteiten van de tegenstanders van sigaretten koncentreerden zich op een poging de rechten van sigarettenrokers in vele openbare gelegenheden aanzienlijk te beperken of te verbieden. Tot nu toe is er geen enkel wetenschappelijk bewijs geleverd, dat aantoont dat het roken van sigaretten enige schade aan niet-rokers kan veroorzaken. Het bedrijf en de sigarettenindustrie hebben overeenstem- ming bereikt overde voortzetting van een langlopend onderzoek door de "Council for Tobacco Research-U.S.A." (Raad voor Tabaksonderzoek in de Verenigde Staten) en door rechtstreekse researchbijlagen. Maatschappeliike betrokkenheid Philip Morris bleef haar sociale verplichtingen tegenover haar werknemers, de mensen in de plaatsen waar zij produktie- bedrijven heeft en de bevolking van landen waar zij werkzaam is, uitbreiden. Ons bedrijf bereikte in de Verenigde Staten verdere vooruit- gang bij de aanstelling en opleiding vap minderheidsgroepen en vrouwen. In 1975 bestond 10,5% van onze funkties op het niveau van managers, hoger geschoold personeel en technici uit leden van minderheidsgroepen, tegen 9,6% in 1974. Van deze funkties werd 15,4% door vrouwen bekleed, vergeleken met 14,4% een jaar terug. - Op hat gebied van opleidingen heeft Philip Morris sinds 1971 meer dan het dubbele aantal studiebeurzen verstrekt. Het resultaat was, dat vorig jaar opleidingen ruim 50% van onze bijdragen voor hun rekening namen waarbij een groot gedeelte van de verhoging in de bijdragen near partikuliere, onafhankelijke akademische opleidingen ging. Wij waren de eerste maatschappij in de Verenigde Staten, die aan kinderen van werknemers studie- bijlagen voor beroeps- an vakopleidingen verschaften, naast ons programme voor studiebeurzen en de eerste studiebijlagen voor volwassen vrouwen, die hun posities willen verbeteren of opnieuw aan het werk wensen te gaan. Vorig jaarwaren wij een van de eerste donateurs uit het bedrijfsleven van hat Centrum voorPolitieke Studies aan de universiteitvan Howard, een informatiecentrum voor gekozen negerautoriteiten. De sociale verbintenissen van Philip Morris International, die zijn afgestemd op de behoeften van hear gastlanden, varibren van fundamentele gezondheidszorg en het stimuleren van oplei- dingen tot natuurbescherming en de steun aan kulturele aktiviteiten. Meer dan tien jaar heeft Philip Morris gepioneerd aIs kunst- beschermer. Bijna ieder jeer maken belangrijke kunstexposities een rondreis door de Verenigde Staten. In 1975 werd "Frontier America: Far West" in hat Museum of Fine Arts te Boston geopend, waarna de tentoonstelling in Denver en San Diego werd geex- poseerd. Deze tentoonstelling, die mede tot stand is gekomen door de sponsoring van de Nationale Stichting voor Kunstsub- sidies en Philip Morris voor Marlboro, zal in 1976 een rondreis door Europa maken. Wij werden in december allen diep getroffen door het overlijden van Buford A. Tynes, die sinds 1973 bij Philip Morris belast was met het Financiele Beheer. In 1975 werd John S. Reed, Executive Vice President van de First National City Bank, in de Raad van Bestuur van Philip Morris gekozen. Wij drukken onze waardering en dank uit voor de voort- durende toewijding en uitnemendheid van onze 48.000 werknemers over de gehele wereld. Respectfully submitted on behalf of the Board of Directors, Joseph F. Cullman 3rd Chairman of the Board and Chief Executive Officer V`lJt+-dr wa...._ George Weissman Vice Chairman of the Board Ross R. Millhiser President 13

Philip Morris U. S.A. operating Revenues Operating Income 1975 $1 ,721 ,549,000 337,314,000 1974 1973 1972 $1 ,502,267,000 $1,303,629,000 $1,164,550,000 286,225,000 227,282,000 194,072,000 1971 $1,035,178,000 166,734,000 100 Park Avenue Max L. Berkowitz, Fred J. Laux, Richard D. Robertson Richard L Snyder New York, New York 10017 Senior Vice President Vice President, Personnel , Vice President, Ecology & . , Vice President, Finance & Clifford H. Goldsmith, President Benjamin A. Soyars, William G. Longest, Environment and Director Administration John T. Landry, Senior Vice President, Vice President, Leaf of Energy Resources & Dr. Helmut R. R Wakeham Executive Vice President and Manufacturing W. Wallace McDowell Conservation . , Vice President, Science & Director of Marketing Robert H. Cremin, , Vice President, Operations Edward M. Schaaf, Jr., Technology Vice President, Sales James J. Morgan, Vice President, Production Charles H. Wilson, J, Paul Jeb Lee, Vice President and Director of Dr. Robert B. Seligman, Vice President and Vice President, Brand Management Vice President, Research & President, American Marketing Services Frank E. Resnik, Development Safety Razor Vice President, Operations Administration Above: Philip Morris sales representatives, including an increasing number of women, maintain strong supportive ties with retailers all over the U.S. Right: "Marlboro Country" continues as the strongest, most distinctive brand theme in cigarette advertising history. Below: Dr. Helmut R. R. Wakeham (far left), vice president, Science and Technology, Philip Morris U.S.A., shows our Research Center to three Nobel Laureates-Sir Derek H. R. Barton, Lord Todd, and Dr. Melvin Calvin-who participated in the second Philip Morris Science Symposium in Richmond last year. - 14

r iin U.S. Cigarette industry Unit Sales Marlboro Share of f 100mm Cigarette Sard' Re en es g Q pt TotafFitterCigarettes v TotalNon-FllterCl9arettes ~ Total U.S. Industry ? U.S. Industry a Philip Morris Share of U.S. Industry " Marlboro 80-85mm Full Flavor 3 Marlboro Line Extensions z Philip Morris 100mm Shal~ o U.S. Industry- h+i:llons of Dollars 18~0_ 4 a % s 1 100 j 2co ~ " Percentage ~ 26 4 66 67 68 69 70 71 72 73 74 75 66 67 68 69 70 71 72 73 74 75 66 67 68 69 70 71 72 73 74 75 66 67 68 fi9 70 77 72 73 74 75 ' pperziing revenues of PKi!Ip Morris U.S.A. have increased Total U.S. cigarette industry unit seles have grown at an y; yn average annual compounded rate of 13.0°,'o since average annual compounded rate of 1.5°'o cverthe last t966. 10 years, whiie the filtersegment increased at an annual rate of 4,6%. Philip Morrls U.S.A.'s share o1 the U.S. industry was 23.6°'o in 1975 compared to 11.0% in 1966. Af0. PRESSIrAe (D All categories of Marlboro represented t5.2B'a of the U.S. Since 1966, the 100mm segment has increased its share induslry versus 6.0% in 1966. The Mariboro line extensions cf the industry to 25.0%. PhilipMorris U S,A. brands acccunted for21 % of all Marlboros soltl in 1975. accounted for31.9% of this ca(egory, cr xbout 8.0°6 of the tola! U.S. intlustry. Left: Sophisticated machines like this inspection device test each cigarette produced to ensure uniformly high , quality in Philip Morris products. Right: Merit, our new low-tar brand with 'enriched flavor,' is the result of a scientific breakthrough following 12 years of research. Below: Philip Morris's various brands satisfy the full range of smokers' preferences in terms of both taste and tar yield. Far Left: Again in 1975, the Marlboro Cup horse race received enormous attention as one of the most exciting and prestigious sports events of the year. Left: The new Richmond Operations Center provides employees with a gracious, comfortable working environment. Below: Benson & Hedges 100's strengthened its position as the leading brand in the 100mm category. iV Ctl Q O O ~ CIt CSi

Philip Morris International 1975 Operating Revenues $1,040,002,000 Operating Income 112,975,000 1974 $887,077,000 94,017,000 ] 1973 1972 101 $822,907,000 $623,699,000 $517,670,000 ~ 92,150,000 84,095,000 66,968,000 100 Park Avenue Hugh Cullman, President R. William Murray, Vice President, William J. O'Connor, Aleardo G. Buzzi, Vice President New York, New York 10017 Hamish Maxwell Europe/Middle East/Africa Vice President, Australia/ Staftan Gunnarsson, Vice President , ti Vi P id t E S l ero C l E New Zealand and t Vi P id ve ce res en , xecu Europe/Middte EastlAfrica gu , ar os . a Vice President Latin America/ Chief Administrative Officer en ce res Hamilton Hurley, , Canada and Asia , Iberia William H. Webb, Charles F. Lombard, Vice President Vice President, Canada Robert H. Souther, Albert E. Bellot, Vice President Vice President, Finance Above: Belvedere, a major brand of Benson & Hedges (Canada) Limited, recorded increased sales again last year. Above Right: Alpine, Australia's best-selling menthol cigarette, is an important contributor to Philip Morris (Australia) Limited's growth. Right: Philip Morris Brasileira S.A. de Cigarros opened its new factory in 1975 and introduced Marlboro in main urban areas of Brazil. rs Below Right: In Venezuela, C.A. Tabacalera Nacional successfully launched Astor Super Suave. This affiliate maintained its strong leadership-position in the Venezuelan cigarette industry. Above: Our U.S. export sales rose to record levels again last year.

philip Morris International Philip Morris International Total World Cigarette Unit Sales Exports of U.S.-Made ng Revenues ti o per a Cigarette Unit Sales Excluding U.S.A. Cigarettes a ~ ~ ~ Unconsolldated a Export, Aftiliates, Licensees Total Fiiter Cigarettes ~ Total hon-FilterCigarettes M Exportsof U.S.-MadeCigarettes a Philip Morris Share of World Market (%)- Philip Morris Share (%)- Phirip Morris International's operating revenues of conscLdated and unconsolidated affi!iates have grown at an average annual compounded rate of 24.9% since 1966. o•:erthe same period, conso!!dated operating revenues r.ave increased at an average of 23.5% compounded per year. ?Q -7 Since 1966, tolal unit sales of Philip Morris International's affillales, licensees, and exports have increased at an average annual compounded rate of 18.3°fo. ~ I -A 9 9: IL 200 Wor!d cigare:te industry unit sales (exc!uding the U.S.) were about3.2 trillion in 1975, and overthe last 10 years have grown at an average rate of 4,14'0. Philip Morris International's share of the world market reached 4.856 in 1975. 4 Total exports of U.S,-made cigarettes have risen at an average compounded rate of 3.4% peryearsince 1966. Philip Morris's share of these exports has been about 30% over the past fouryears. Above: In Germany, Philip Morris G.m.b.H. is expanding and modernizing its Munich factory and continued to register strong sales gains in 1975. Left: Our Swiss affiliate, whose leading brands are Brunette, Muratti Ambassador, and Marlboro, increased market share in 1975. Above: In the Philippines, rising Marlboro sales contributed to the increase in total sales of our brands which are made under license in this country. rQ U a 0 0 Ir ~ t~? Ut 17

iNii9er Brewing Company 1975 1974 1973 1972 1971 Operating Revenues Operating Income $658,268,000 28,628,000 $403,551,000 $275,860,000 $211,262,000 6,291,000 (2,371,000) 228,000 $204,134,000 1,300,000_. 4000 West State Street William K. Howell, Edward W. Frantel, Thomas B. Shropshire, Lauren S. Williams, Milwaukee, Wisconsin 53201 Executive Vice President and Vice President, Sales Vice President, Market Planning Vice President, Marketing John A. Murphy, President and Treasurer Thomas A. Fulrath, Georgy Tarala, Travis G. Adler, Controller Chief Executive Officer Warren H. Dunn, Vice President, Vice President, Personnel Vice President, Engineering General Counsel and Secretary Clement G. Meyn, Vice President, Master Brewer Pizre fimA i .(~IUilLe%. Above: Creative merchandising programs, such as this "Pizza time is Miller time" in store display, have contributed to the continued growth of Miller High Life in 1975. Above Right: Last year, Miller assumed distribution rights for Lowenbrau for the entire U.S. The addition of this import brand rounds out Miller's product line. 1a Above: Miller's first new aluminum can manufacturing plant began production in Milwaukee in 1975. Self-manufacturing of cans represents significant cost savings for Miller. Right: Due in part to Miller High Life's continued strong growth, Miller Brewing moved up to fourth place in the U.S. brewing industry in 1975.

Miller Brewing Company Miller Brewing Company operatingRevenues 7 MilferUnitSales.~ MflterShare of U.S. Industry (%) - t.talions of Dollars 650 Domestic Beer Industry Unit Sales Beer Pricing Trends 11 Nati Di ona y stributed Premium Beer (est) M Regionaland Non-Premium Beer(est.) X Milllons of Barrels Percen;age Millions of Barrels 13 - i3 160 . '000 - 12 . 2 1 5_0 500 e50 11 _ _ ~ 11 10 . ~ 10 0 120 (19ss=1oo) wholesale Price Index AIICommodities ~ Wholesale Price Index Beer _ 180 150 400 8 _-~ ,~ 8 100 7 7 I 8~ 6 300 250 4 -~ 5 4 2co ± _ 1G0 _ - ' ..3 :4 .3 ~ ~ 3 40 100 4 - _4 -; ~--a. A . _i - 2 140 130 2 N;3 -~ '4 1 ~ ~~t 1 1 J •-.. : 0 =E24 -' _-.- 100 66 67 68 69 70 71 72 73 74 75 66 67 68 69 70 71 72 73 74 75 66 67 68 69 70 71 72 73 74 75 66 67 68 69 70 71 72 73 74 75 Ovzrth.e last 10 years, Pdiller's operating revenues have Since 1966, Miller's barrel volume has risen at an average Total U S, beer industry barrel sales have grovm at an The wholesal=_ price Ind=_x of all co,mmodities has increasetl grown at en average annual compcunded rate of 17.3%. ra;e of 13.5% peryearr htlller's growth in 1975 moved average yearly rate of 4.046 since 1966. During the same an average of 8.4% pzr Year In the last decade, whlle Since 1970, after Millerwss acquired, revenues have the company into fourth place among U.S, brewers with a perled, the premium beer segm,ent, where Mlller High Life the Ihclesa!e price Index for beerhas grown 3.74o.Over in.creasedat an average rate of 22.6°/ . market share of approxlmately 8.6°.'o. and Lite are positioned, has increased at an average rate the past three years, th_ all commodltles Index increased of 11.2`h, at an average annual rate of 14_0%, wnlle 1he beerlndex was up 10.6% annually. Left: Aerial view of Miller's fourth brewery, under construction, in Fulton, New York. Water treatment plant (foreground) will process effluent produced by the brewery when it begins operation in 1976. Aluminum can manufacturing plant (far background) will also begin production this year. Right: In its advertising for Lite, Miller uses sports stars and celebrities (like Mickey Mantle and Whitey Ford, shown here) in an unusual and successful approach that reaches the real beer drinkers. Left: Lite, a low-calorie, low-carbohydrate beer, was successfully introduced nationally in 1975.

Philip Morris Industrial 1975 1974 1973 1972 1971 Operating Revenues Operating Income $151,960,000 8,052,000 $155,390,000 $132,126,000 $113,136,000 $95,513,000 12,280,000 8,300,000 7,735,000 6,135,000 4200 North Holton Street Fred M. Stefan, William D. McCoy, Edward B. Kime Jr. George R Lewis Vice President Milwaukee, Wisconsin 53201 Chairman of the Board President and , , President, Packaging Group . , , Financial and Planning and Chief Executive Officer Chief Operating Officer Ralph J. Becker, Alan G. Wernick, James B. Kurtzweil, Executive Vice President, Purchasing Vice President, Personnel Vice President, Operations Robert G. Etter Vice President, Business Development Right: Milprint's new retortable packaging material won a "Package of the Year" award from Food and Drug Packaging magazine. Far Right: Plainwell Paper Company produces specialty, high-quality papers for technical applications and printing end uses. Above: Nicolet's new electrosensitive papers are being used in the new high-speed computer printers. Below: Armstrong Products was the first to introduce electrostatic powder coatings for applications on glass products. Bottom: Milprint provides important materials for new disposable thermometers. Above: Fred M. Stefan, Chairman of the Board and Chief Executive Officer of Philip Morris Industrial.

Mission Veejo Company Operating Revenues Operating Income 1975 $70,635,000 5,875,000 1974 $62,676,000 4,772,000 1973 197 $67,976,000 $60,824,00 4,122,000 5,714,00 2 1g71 0 $37,812,000 0 2,256,000 26137 La Paz Road Mission Viejo, California 92675 John E. Cookman, Chairman of the Board Philip J. Reilly, President and Chief Executive Officer James G. Toepfer, Executive Vice President James G. Gilleran, Executive Vice President Geurt Henri Lodder, Senior Vice President Roger F. Clark, Vice President Donald B. Schulz, Vice President Robert M. Rodman, Controller William K. Smith, Secretary Above: Mission Viejo attracted national attention as the site of the sports program, "The Challenge of the Sexes," aired by the CBS-TV network early in 1976. Left: Secretary of Housing and Urban Development, Carla Hills, congratulates Philip J. Reilly, president of Mission Viejo, as he was honored with the "Professional Builder of the Year" award by Professional Builder magazine. Left: The planned community of Mission Viejo, California, offers a wide variety of recreational and educational facilities and a highly desirable life style. Below: One of the most popular new homes in Mission Viejo, California, is the company's new Cordova model, introduced last August. It is designed to provide attractive and affordable single-family housing for the first-home buyer. 2500011261 21

Financial Review 5-10-15-Year Growth Record (in thousands except earnings per share) 1975 1970 1965 1960 Operating Revenues $3,642,414 $1,509,540 $704,544 $509,332 Pre-Tax Income 360,810 150,008 52,423 44,578 Net Earnings 211,638 77,498 26,509 20,984 Earnings Per Share Primary 3.62 1,,68 .59 .45 Fully Diluted 3.62 1,43 .59 .45 Compounded Average Annual Growth Rate Operating Revenues 5 Years 19.3% 10 Years 17.9% 15 Years 14.0% Pre-Tax Income 19.2% 21.3% 15.0% Net Earnings 22.3% 23.1 % 16.7% Earnings Per Share Primary 16.6% 19.9% 14.9% Fully Diluted 20.4% 19.9% 14.9% The economic environment of 1975 was marked by the effects of the worldwide recession along with continued inflation. According to several economic surveys, average profits for all U.S. corporations were estimated to have decreased about 15-20% in 1975. As seen in Chart 1, the Standard & Poor's 425 companies recorded an estimated 14% decrease in profits. In sharp contrast, net earnings of Philip Morris increased 20.6% in 1975, exceeding the 18.1 % gain registered in 1974. Other indicators of the financial vitality of the company include maintenance of profit margins, the success of our largest public financing, two common stock dividend increases aggregating 25%, and record capital expenditures. . Pre-tax margins (Chart 2) were maintained at the 9.9% level, as pre-tax income rose slightly faster than operating revenues. Revenue gains resulted from unit sales increases in our U.S. and international cigarette operations and strong gains in Miller's beer volume. Cigarette price increases in the U.S. in 1974 added to our 1975 revenue gain. The U.S, price increase of seventy-five cents per 1,000 cigarettes in mid-November, 1975, had minimal impact on the results for the year. Price increases in major international cigarette markets in late 1974 and during 1975 further augmented our revenue gain. Miller's revenues also benefited from price increases, most of which were instituted in the latter part of 1974. Rising material costs, although less severe than in 1974, continued to pressure margins. Overall prices paid for tobacco purchased last year were roughly equivalent to the record prices paid in 1974. The cost of aged tobacco actually used increased. However, manufacturing cost increases were held in check through increased utilization of modern manufacturing facilities for both cigarettes and beer. Our large capital expansion and modernization program is expected to yield still further benefits in 1976 and beyond. Consolidated marketing expenses were up in 1975, due to inflation and new brand introductions in our cigarette and beer businesses. However, marketing costs as a percent of sales were somewhat lov~rer than in 1974. Start-up costs-primarily experienced at our new Richmond cigarette facilities and at our brewing operations-were about $20 million in 1975. However, we believe that the level of start-up costs has peaked. These start-up costs were offset in part by our investment tax credit of $17,1 million in 1975. Although interest rates generally declined in 1975, our interest expense increased to $99 million due to the higher level of debt outstanding. Dividends per share (Chart 3) were increased for the eighth consecutive year. We continued to maintain a conservative dividend policy during a period of rapid growth and major capital expenditures. About 75% of net earnings-after dividend payments of $54.5 million-was reinvested in the business. Total funds from operations (after dividends) amounted to $206.8 million in 1975. Capital expenditures in 1975 totaled $244.5 million, and we are anticipating about the same level of expenditures in 1976. Chart 4 indicates that capital expenditures exceeded funds from operations after dividends in 1975. This was the case in the previous Primary Earnin9s per Share (1961=100) Philip Morris A Standard & Poor's 425- Chart1 ndex 600 700 i 600 500 400 300 ~ ~ t9_ . -3 g ,~l , 200 a \~3. 100 ~ 1 -1 -1 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 Operating Revenues a Pre-Tax Margins (%)- Chart2 Primary Earnings per Share a Dividends Declared per Share- Chart3 Oollars 3.75 350 3.25 3.00 2.75 ~ 2.50 2 25 200 ~ - 1.75 1.50 ,.25 10 6 63 62 64 65 66 67 68 69 70 Funds from Operations (after Dividends) n Consolidated Capital Expenditures- Chart 4 7 72 2500011262 73 7 75 22

three years. We expect that capital expenditures in 1976 will again exceed funds from operations after dividends with the difference between these two amounts continuing to narrow from the peak reached in 1974. For the five-year period 1976-1980, we project that internally generated funds will exceed capital expenditures of more than $1 billion. This compares with expenditures of $823 million in the five-year period 1971-1975. As a result of these recent expenditures, about 70% of our property, plant, and equipment was less than five years old at year-end 1975, which places us in a favorable competitive position. . In March, 1975, the company successfully completed its largest public financing-two million shares of common stock and $150 million of long-term notes. This strengthened the financial position of Philip Morris through the addition of about $242 million in working capital (Chart 5). Our long-term debt to equity ratio declined in 1975 to 76.0% (Chart 6) as a result of the combination of equity financing and the earnings reinvested in the company. Because of the strength of our financial position, Philip Morris has held an "A" rating on its bonds as well as the highest credit rating on its commercial paper. The latter point is especially important in light of the favorable spread between commercial paper and bank prime rates during 1975. We believe that this rating can be attributed to the special nature of the assets supporting our debt (Chart 7). Inventories alone, made up primarily of aging leaf tobacco, work in process, and finished goods, have consistently exceeded total long-term debt. We expect this to be the case in the future. Net return on average tangible assets in 1970, the year we began our major capital expansion program, was 7.6%. Since that time, assets have more than doubled. For long periods, many of these assets were under construction and thus were not productive. Even after operations began, earnings gains were initially restricted by heavy start-up costs. Despite these burdens of growth, net return on average tangible assets increased to 7,9% in 1975. We expect further improvement in future years. During this period of expansion, pre-tax return on stockholders' equity (Chart 8) has been in the 30% range, above that of the average of the 30 companies composing the Dow Jones Industrial Average. This return has been maintained despite the fact that . stockholders' equity (Chart 5) has nearly tripled in the last five years from $453 million to $1.2 billion. Currency fluctuations during the year did not have a significant net effect on the results of Philip Morris's international operations nor on the consolidated balance sheet. The strengthening of the U.S. dollar resulted in gains from translating foreign currency debt, but these gains were mostly offset when foreign currency assets were translated to U.S. dollars. Various hedging activities during the year also helped to lessen the impact of currency fluctuations. In October, 1975, the Financial Accounting Standards Board (FASB) issued a new policy statement on foreign currency translations. We disagreed with the FASB's position on the grounds that its approach could introduce considerable variability in quarterly earnings that would, in most cases, be furidamentally unrelated to the basic economic condition of a business enterprise. Even though this statement would have increased our reported earnings in 1975, we also disagreed because the FASB's approach did not appear to improve public understanding of the financial results.of an international cigarette company. The new statement requires us to translate foreign currency sales and most costs at current exchange rates, but tobacco at the historical exchange rates that prevailed when it was purchased some two years earlier. This accounting method is mandatory starting January 1, 1976, and Philip Morris will first report results underthis method for the first quarter of 1976. It is important to place the impact of these new accounting rules on currency translation in proper perspective, Quarterly results may well be subject to greater volatility, but the underlying strength of our international operations should not be adversely affected over the long term by this accounting convention. The changing economic environment of the past few years has had a significant impact on almost every type of business enterprise. Philip Morris has been able to move through this period of economic instability and maintain profitable growth. Our principal businesses, U,S. and international cigarettes and U.S. beer, have grown consistently through 1975, and we anticipate continued gains. We are confident that Philip Morris has the financial foundation to support and foster future growth. Stockholders' Equity ~ Working Capital- Chart 5 Millions of Dollars 1300 1200 1100 1a00 900 Long-Term Debt to Equity SeniorLong-Term Debt ~i Subordinated Long-Term Debt  Chart 6 Percentage Long-Term Debtail Total Inventory- Chart 7 Mllllons of Dollars 1600 1400 1200 1000 8 ~ 600 40 ~ ~ I ~~ rill 111flillill 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 200 Pre-Tax Return on Stockholders' Equity Philip Morris S Dow Jones 30 I ndustrials- Chart 8 Percentage 23

i ! ~ j J+ Quarterly Results Per Share of Common Stock Quarters Operating Revenues Net Earnings Earnings, Fully Diluted Dividends Paid Market Price* (High-Low) 1975 Year $3,642.4 $211.6 $3.62 $.875 $59'/4-40~/s IV 971.9 52.6 .90 .225 56'/4-45 III 953.3 60.8 1.04 .225 54~/s-42 I I 917.2 53.6 .92 .225 59'/4 -46'/2 1 800.0 44.6 .78 .20 505/8 -403/s 1974 Year $3,011.0 $175.5 $3.07 $.75 $613/s-341/s I V 782.6 42.2 .74 .20 49'/2 -343/s III 815.7 50.4 .88 .20 557/s-34j/s II 769.1 45.2 .79 .175 613/s-475/s 1 643.6 37.7 .66 .175 583/s-49 *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 in early April without charge by writing to: Eugene J. T. Flanagan, Secretary Philip Morris Incorporated 100 Park Avenue New York, New York 10017 I 24

Management's Discussion and Analysis of the 5umn9ary of Operations The five-yearsummary of operations required by the Securities and Exchange Commission appears in boid face type on page 26 as part of the company's fifteen-year financial review. The following analysis pertains to the last two years of the summary. Revenues Consolidated operating revenues increased $631 million (21.0%) in 1975. Revenues of Philip Morris U.S.A. were $219 million (14.6%) higher than in 1974, including $127 million due to cigarette price increases and $90 million due to increased cigarette unit sales (6.1 % above 1974). Revenues of Philip Morris International were $153 million (17.2%) above 1974 due to price increases and a 9.7% increase in unit cigarette sales partly offset by changes in foreign currency translation rates. Revenues of Miller Brewing Company were $255 million (63.1 %) higher than in 1974, including $172 million due to higher barrel sales (41.9% above 1974), $64 million due to price increases, and $19 million due to changes in product mix. Consolidated operating revenues in 1974 were $408 million (15.7%) higherthan in 1973. Revenues of Philip Morris U.S.A. were $199 million (15.2%) higherthan in 1973, including $106 million due to increased cigarette unit sales (8.4% above 1973) and $90 million due to cigarette price increases. Revenues of Philip Morris International were $64 million (7.8%) higher than in 1973, primarily due to increased cigarette unit sales (13,5% above 1973). Revenues of Miller Brewing Company were $128 million (46.3%) higherthan in 1973, including $87 million due to higher barrel sales (31.0% above 1973), $29 million due to price increases, and $12 million due to changes in product mix. Costs and Expenses Cost of sales as a percentage of revenues has remained fairly constant over the last three years, at approximately 75%, with higher production and raw material costs being offset by operating efficiencies. The_cost of products sold was $367 million higher (28.4%) in 1975 than in 1974 and $230 million higher (21.6%) in 1974 than in 1973. As a percentage of operating revenues, the cost of products sold increased to 45,5% in 1975 from 42.9% in 1974 and 40.8% in 1973. Interest expense increases of $16 million (19.7%) in 1975 and $32 million (62.3%) in 1974 are due to higher levels of debt. Equity in Unconsolidated Subsidiaries and Affiliates Equity in net earnings of partly-owned unconsolidated subsidiaries and affiliates decreased $1.7 million (7.1 %) in 1975 due to start-up expenses in a new foreign market. The 1974 equity was $4.4 million (21.9%) higherthan in 1973 because of increased sales and income of these companies. Income Taxes The $27.2 million increase in income taxes in 1975 and $15.0 million increase in 1974 reflect the applicable tax on the increased income forthe years. r11 ~ 0 a 0 ~ ~ N) o~ CJl 25

Fifteen Year Financial RevieW Philip Morris Incorporated and Consolidated Subsidiaries (dollar amounfs except per-share amounls expressed in thousands) 1975 1974 1973 1972 1971 Summary of Operations: Operating Revenues ........................................................................ $3,642,414 Cost of Sales: Cost of Products Sold .............................................................. 1,656,839 Federal Excise Taxes ................................................................. - 686,276 Foreign Excise Taxes ..........................................................._......-_ 392,127 Operating Income....................................................................................- --.._492,844 Interest Expense ............................................................................. 99,045 Earnings Before Income Taxes ................................................... 360,810 Pre-Tax Profit Margins .................................................................... 9.9% Provision for Income Taxes .......................................................... -- 149,172 Net Earnings ........................................................................................ 211,638 Primary Earnings Per Common Share ....................................... $3.62 Fully Diluted Earnings Per Common Share ............................ 3.62 Dividends Declared Per Common Share .................................... .925 Weighted Average Shares-Primary ......................................... 58,442,362 Weighted Average Shares-Fully Diluted .................................. 58,442,362 3,010,961 1,290,319 619,504 349,363 403,585 82,741 297,502 9.9% 121,986 175,516 3.15 3.07 .775 55,649,417 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 Capital Expenditures ...................................................................... 244,477 Annual Depreciation ....................................................................... 49,853 Property, PJant & Equipment (Gross) .........................._.................. 1,129,838 Property, Plant & Equipment (Net) ................................................... - 851,103 Inventories ........................................................................................... -- 1,448,428 Current Assets ...................................................................................... 1,788,085 Working Capital .................................................................................. 890,797 Total Assets ......................................................................................:..... .-3,134,326 Total Debt .......................................................................................... 1,443,270 Stockholders' Equity ......................................................................... 1,227,781 Net Earnings Reinvested .............................................................. 157,102 Common Dividends Declared as % of Net Earnings 25 7% .................. 215,770 38,006 899,810 659,520 1,269,212 1,557,908 725,000 2,653,263 1,239,312 974,673 131,890 24 8% 174,665 30,245 728,726 510,286 1,009,414 1,245,934 515,347 2,108,403 947,364 815,028 111,376 25 0% 120,034 26,576 571,148 373,372 801,145 989,708 524,791 1,701,494 681,000 695,549 89,894 27 2% . 68,001 21,500 447,075 274,070 670,244 826,453. 417,591 1,392,035 553,900 579,114 69,666 30 6% Book Value Per Common Share ..................................................... .. $20.63 Market Price of Common Share High-Low .................................. 59y/4-40'/s Closing Price Year-End ................................................................... 53 Price/Earnings Ratio ...................................................................... . 14 16.97 613/s -34'/s 48 15 14.66 68 3/a -48 3/4 57 3/a 21 12.55 59 1/s -33'/s 591/8 25 10.72 35'/z -23 3/s 35 1/a 17 No. of Common Shares-Actual Year-End .................................. 59,357,236 57,264,586 55,378,434 54,444,090 52,338,908 / , 2s

1970 1969 1968 1967 1966 1965 1964 1963 1962 1961 1,509,540 1,142,373 1,019,846 904,841 771,975 704,544 641,439 585,059 550,624 529,127 577,106 454,718 409,912 363,115 311,784 292,588 277,522 244,540 228,030 218,122 372,092 319,086 295,903 271,073 234,975 214,128 194,312 193,768 187,133 184,146 147,124 54,247 41,841 39,658 30,057 27,780 22,462 8,276 3,785 203,180 153,237 126,159 101,838 81,867 65,128 55,568 56,634 56,402 52,701 35,425 28,640 15,949 10,205 8,094 6,098 5,919 4,814 3,985 3,080 150,008 115,613 100,107 81,317 65,144 52,423 44,466 46,729 47,464 - 45,985 9.9% 10.1 % 9.8% 9.0% 8.4% 7.4% 6.9% 8.0% 8.6% 8.7% 72,510 57,273 51,241 37,716 30,961 25,914 21,852 24,677 25,518 24,474 77,498 58,340 48,866 43,601 34,183 26,509 22,614 22,052 21,946 21,511 1.68 1.29 1.09 .98 .77 .59 .50 .49 .49 .47 1.43 1.20 1.07 .97 .77 .59 .50 .49 .49 .47 .525 .488 .425 .35 .35 .30 .30 .30 .30 .30 45,613,196 44,538,922 43,857,780 43,349,768 56,596,566 49,558,612 45,069,770 43,982,508 39,595 23,636 26,373 25,688 17,089 12,078 19,366 26,243 11,843 8,733 17,658 13,512 12,139 10,903 9,532 8,857 8,316 6,765 6,293 5,638 394,088 236,962 219,346 193,656 172,593 159,759 153,224 139,595 110,204 99,066 236,697 147,354 138,704 123,555 110,157 104,044 102,417 93,150 68,664 61,560 568,428 447,319 451,922 386,576 297,761 271,823 257,256 235,375 228,088 232,541 728,837 574,988 561,685 485,908 372,895 339,082 318,978 297,295 279,068 277,350 347,682 315,871 312,406 306,172 253,257 213,826 202,810 190,982 179,222 190,859 1,239,424 976,489. 786,578 648,994 512,549 466,277 443,438 412,543 365,024 351,018 557,700 490,400 354,800 256,400 161,000 158,100 159,000 145,200 120,800 110,600 452,849 355,808 314,496 280,186 249,821 230,677 217,783 208,711 201,720 199,685 52,176 35,659 29,189 27,453 18,159 12,670 8,794 8,244 7,947 7,329 31.6% 37.4% 38.4% 34.9% 44.2% 48.6% 56.9% 58.3% 59.4% 61.4% 8.93 7.39 6.56 5.88 5.24 4.81 4.51 4.31 4.13 3.99 25 1/s =14 18 1/s -12 1/2 17 1/a -11 14 3/a-7 ~/s 9-6 1/a 8 1/s -6 1/s 71/s -5 5/s 7 1/2 -5 5/s 9 3/s-51/s 10 1/z -6 1/z 243/4 17'/s 16 111/8 81/2 73/8 6'/s 61/8 61/a 91/8 14 13 14 11 11 12 12 12 12 19 48,317,680 45,130,668 44,400,616 43,661,748 43,226,688 43,043,460 42,916,956 42,858,888 43,052,856 4 3,945,908 27

Consolidated Balance Shee#s Philip Morris Incorporated and Consolidated Subsidiaries December31, 1975 and 1974 1975 1974 Assets: Cash and cash equivalents ................ ................................ ..... .......................................... ....... $ 79,251,000 $ 61,917,000 Receivables ......... ....................................................................... .............._.......-.. .............................. 252,501,000 216,270,000 Inventories: Leaf tobacco ........................................................................................__.......... ................. 1,091,984,000 873,727,000 Other raw materials .................................................................................................... ............... 115,873,000 125,233,000 Work in process and finished goods ..........................................................................._........ 208,111, 000 228,909,000 Housing programs under construction ........................................................................ 32,460,000 41,343,000 1,448,428,000 1,269,212,000 Prepaid expenses ......................................................... _........................... _............__. .............. 7,905,000 10,509,000 Total current assets .......................... ..... .............................................................. ...... 1,788,085,000 1,557,908,000 Investments in and advanoes to unconsolidated foreign subsidiaries and affiliates .................................................................................................... ........................ 189,523,000 146,439,000 Land and offtract improvements........................................ ........................... ..._.................. ._.- 46,223,000 41,213,000 Property, plant and equipment, at cost: Land and land improvements ...................................................................................... 46,326,000 38,546,000 Buildings and building equipment ............................................................................ 330,460,000 264,809,000 Machinery and equipment .......................................................................................... 611,451,0 00 449,019,000 Construction in progress .............................................................................................. 141,6 01,000 147,436,000 1,129,838,000 899,810,000 Less, Accumulated depreciation ............................................................................ 278,735,000 240,290,000 851,103,000 659,520,000 Brands, trademarks, patents and goodwill ...................:.............................................. 206,093,000 201,490,000 Long-term receivables .................................................................................................... .. 31,247,000 27,420,000 Other assets .................................................................................................... .................... 22,052,000 19,273,000 $3,134,326,000 $2,653,263,000 See notes to financial statements. 28

1975 1974 Liabilities: ............._. .. Notes payable ............... .................................................................................................... $ 510,341,000 $ 454,068,000 Current portion of long-term debt .................................................................................. 15,059,000 16,941 ,000 Accounts payable and accrued liabilities ..................................................................... 300,443,000 294,939,000 Federal and other income taxes ............................................................... ...._.......... .......... 56,577,000 55,478,000 Dividends payable ..................................................... .............. :._.:. _... 14,868,000 11,482,000 Total current liabilities ................................................._................................:........_.... - 897,288,000 832,908,000 Long-term debt: Senior .............................. .......................... ........_................ ............................. . . .............. 856,670,000 703,503,000 Subordinated ...... ............ ......... ......................... ........ ..... _.......................... 61,200,000 64,800,000 Deferred income taxes ......................................................... 70,972,000 67,175,000 Other liabilities ............................................................................................... 20,4 15,000 10,204,000 Total liabilities .................................................._. _................................................... _ 1,906,545,000 1,678,590,000 Stockholders' Equity: Cumulative preferred stock, parvalue $100 pershare ................................................ 9,187,000 9,679,000 Common stock, par value $1 per share ........................................................................ 59,360,000 57,267,000 Additional paid-in capital ................... ............... ........ ._.... :.............. ............................. ............ 289,106,000 195,022,000 Earnings reinvested in the business ................................................................................. 874,293,000 717,19 1,000 1,231,946,000 979,159, 000 Less, Cost of treasury-stock ........................................................................................ 4,165,000 4 ,486,000 1,227,781,000 974, 673, 000 $3,134,326,000 $2,653,263,000 29

Consolidated Statements of Earnings Philip Morris Incorporated and Consolidated Subsidiaries for the years ended December 37, 1975 and 1974 1975 1974 Operating revenues .....................................................................:..:..._.....................-. ....:...:.:. _ $3,642,414,000 $3,010,961,000 Cost of sales: Cost of products sold ........................... ................................. ...,...:._:.::.__:......... ._.:............. 1,656,839,000 1,290,319,000 Federal and foreign excise taxes on products sold ................................................ 1,078,403,000 968,867,000 G ross profit .........................................................................:.......................... ...::.......... 907,172,000 751,775,000 Marketing, administration and research costs ............................................................. 437,196,000 372,804,000 469,976,000 378,971,000 Equity in net earnings of unconsolidated foreign subsidiaries and affiliates ........ 22,868,000 24,614,000 Operating income of operating companies ........................................................ 492,844,000 403,585,000 Corporate expense .................................................................................................... ........ 30,270,000 25,292,000 Interest expense (excluding interest capitalized of $8,024,000 in 1975 and $9,427,000 in 1974) .................................... .................. ........................................ . - 99,045,000 82,741,000 Other deductions (income), net ..................................................................................... 2,719,000 (1,9 50,000) Earnings before income taxes ................................................................................ 360,810,000 297,502 ,000 Provision for federal and other income taxes: Current .................................................................................................... ........................ 136,302,000 108,858,000 Deferred ..........................................................................................._..._.._. .....:................ 12,870,000 13,128,000 149,172,000 121,986,000 Net earnings $ 211,638,000 $ 175,516,000 Earnings per common share: Primary .......................... ......................................................................................... ................... $3.62 $3.15 Fully diluted :................................................................................................... ................ $3.62 $3.07 See notes to financial statements. so

Consolidated Statements of Stockholders' Equity Philip Morris Incorporated and Consolidated Subsidiaries lor 1he years ended December 31, 7975 arrd 1974 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 Net earnings for the year 1975 $211,638,000 $ 211,638,000 proceeds from public issuance of two million shares of common stock $ 2,000,000 $ 91,375,000 93,375,000 Proceeds from common stock issued upon exercise of stock options 93,000 2,569,000 2,662,000 Preferred stock purchased for treasury ($ 31,000) (31,000) Preferred stock retired ($ 492,000) 140,000 352,000 Cash dividends declared: Preferred stock (117,000) (117,000) Common stock, $.925 per share (54,419,000) (54,419,000) Increase (decrease) during 1975 (492,000) 2,093,000 94,084,000 157,102,000 321,000 253,108,000 Balance, January 1, 1975 9,679,000 57,267,000 195,022,000 717,191,000 (4,486,000) 974,673,000 Balance, December 31, 1975 $ 9,187,000 $59,360,000 . $289,106,000 $874,293,000 ($4,165,000) $1,227,781,000 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) Proceeds from common stock issued upon exercise of stock options 61,000 1,801,000 1,862,000 Common stock issued upon conversion of debentures 1,566,000 23,596,000 $ 857,000 26,019,000 Preferred stock purchased for treasury (126,000) (126,000) Preferred stock retired ($ 590,000) 163,000 427,000 Cash dividends declared: Preferred stock (122,000) (122,000) Common stock, $.775 per share (43,504,000) (43,504,000) Increase (decrease) during 1974 (590,000) 29,513,000 (2,326,000) 131,890,000 1,158,000 159,645,000 Balance, January 1, 1974 10,269,000 27,754,000 197,348,000 585,301,000 (5,644,000) 815,028,000 Balance, December 31, 197_4 - $ 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 Staten'lentso'F Changes in Financial Po51t1017 Philip Morris Incorporated and Consolidated Subsidiaries for the years ended December 31, 1975 and 1974 1975 1974 Additions to Working Capital: Operations: Net earnings ......................................................................_............. .....: .......:...:......... .... $211,638,000 $175,516,000 Add (deduct) items not requiring current use of working capital: Depreciation and amortization ........................... :..........._..........r............................:.. 52,474,000 39,858,000 Deferred income taxes ........ .................................... _................... .................... .............. ....- 12,870,000 13,128,000 Provision for reserve applicable to international operations ............................ 2,500,000 Equity in net earnings of unconsolidated foreign subsidiaries and affiliates.. (22,868,000) (24,614,000) Dividends received from unconsolidated foreign subsidiaries and affiliates .... 7,270,000 4,429,000 From operations ............................................... .-....,-................................ 261,384,000 210,817,000 Financing: Long-term debt: Issued ......................................................................... .... 77,923,000 02,032,000 Prepayments and retirements ....................................................................................... (22,640,000) (20,359,000) From long-term debt ............................................................. ........................... :.. 155,283,000 281,673,000 Stockholders' equity: Sale of common stock ...............................................................:....-............:............._ 93,375,000 Common stock issued under stock options ......................................................... 2,662,000 1,862,000 Preferred stock purchased for treasury ....................._............................................ (31,000) (126,000) From equity transactions ................................................................................... 96,006,000 1,736 ,000 From financing .................................................................................... 251,289,000 283 ,409,000 Land and offtract improvements transferred to housing programs under construction ................................................... ......._.._.,::.................._................:........... 2,934,000 2,513,000 Disposal of property, plant and equipment .............. ............................ .................................... .. 3,041,000 7,025,000 Net unrealized exchange gains (losses), resulting from translation of working cap ital .................................................................................................... ....:....:....................... (13,205,000) 11,065,000 Additions to working capital ...................................................................... 505,443,000 514,829,000 Uses of Working Capital: Dividends ................................. ....... ................................................ ...::....._ ...,T.._:..:.:::.::............ 54,536,000 43,626,000 Expansion and modernization of property, plant and equipment ............................ 244,477,000 215,770,000 Land and offtract improvements .............................................. ..................... .......:.......... 7,944,000 16,849,000 Long-term receivables .................................................................................................... ..... 3,827,000 831,000 Investments in and advances to unconsolidated foreign subsidiaries and affiliates ...................................:.......................................................... . ............................ 27,486,000 22,552,000 Investments in consolidated subsidiaries ..................................................................... 2,322,000 1,768,000 Other, net ................................................................................. ....._... ..............._.................... (946,000) 3,780,000 Working capital used .................................................................................. 339,646,000 305,1 76,000 Increase in working capital $165,797,000 $209,653,000 Changes in components of working capital: Cash and receivables ........ :.................................................................................... .......................... $ 53,565,000 $ 50,440,000 Inventories ......................................:............................................................. ........................ 179,216,000 259,798,000 Notes payable and long-term debt currently payable ............................................ (54,391,000) (23,480,000) Accrued liabilities and other payables ......................................................................... ( 6,603,000) (77,081,000) Other, net .................................................................................................... ...................... ( 5,990,000) (24,000) $165,797,000 $209,653,000 uzner signiricant cnanges in tinanciai position not attecting working capital: - Increase (decrease) in foreign currency long-term liabilities resulting from translation at year-end rates with a corresponding decrease (increase) in N) ~ 0 other liabilities and deferred taxes where applicable ........................................ ($ 7 000) 0 167 $ 21 667 000 , , 0 , , Increase in common stock and additional paid-in capital resulting from ~ ~ conversions of debentures with a corresponding decrease in long-term debt .......................................................... . . . v $ 26 634 000 .. ...................... .......... ................................. ~ , , Sale of net noncurrent assets of a consolidated subsidiary in exchange for a long-term note ................................................ ............................ .:.................................. $ 21,505,000 See notes to financial statements. .32

Notes to Consolidated Financial5taternents 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 a 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. To the extent such losses exceed accumulated unrealized gains and provisions the net losses are 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. The reserve is included in other liabilities. The Financial Accounting Standards Board statement on translation of foreign currency transactions and foreign currency financial statements is effective January 1, 1976. As a result, the Company will translate its foreign currency inventories into U.S. dollars at historical rates and will include translation gains and losses in income in the period in which they occur. 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, and 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 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 only as cash is received. 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. 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. In order to present more realistically the economic cost of a constructed facility, whenever the construction period of a facility exceeds one year, the capitalized cost of the facility includes interest and real estate taxes incurred during the construction period. The interest capitalized on construction of facilities is determined by applying the Company's average short-term borrowing rates to the 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 thirty years, and accrued pension costs are funded with independent trustees. Translation of Foreign Currency: In October, 1975, the Financial Accounting Standards Board issued a Statement on accounting principles to be used for the translation of foreign currency transactions and foreign currency financial statements. This Statement, which is effective January 1, 1976, requires that financial statements for the periods prior to 1976 be restated to reflect retroactive application of these principles. If the provisions of this Statement had been applied as of December 31, 1975, net earnings and primary and fully diluted earnings per share for the year ended December 31, 1975, would have increased by $4,315,000, $.07 and $.07, respectively, and for the year ended 1974 would have decreased by $14,923,000, $.27 and $.26, respectively. 34

Foreign Subsidiaries: Principal financial data of foreign subsidiaries and affiliates are as follows: Consolidated (Wholly Owned)• Unconsolidated (Partially Owned) 1975: Assets .............. . $618 462 000 $512 914 000 ............. ....................................:............._......... ~ :...........:..............,...,....... , , , , Liabilities ..................................................................................... .............. 362,576,000 254,997,000 Net assets ..........................................................................................._........ ..........._... -. ................ . 255,886,000 257,917,000 Company's equity and advances .................................................................................. 255,886,000 174,8 52,000 Operating revenues .................................................................................................... .......... 865,154,000 903,384,000 Net earnings .................................................................................................... -............:.............. :.......... 29,874,000 35,752,000 Company's equity ........................................................... ...................... ................... ._........ 29,874,000 22,868,000 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.................................................................................,.... 227,5 81,000 127,239,000 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 At December3l, 1975, investments in unconsolidated foreign subsidiaries and affiliates exceeded equity in net assets by approximately $14,700,000, including $10,500,000 which arose subsequent to November 1, 1970 and is being amortized. Federal income tax has not been provided on approximately $260,000,000 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 $115,000,000 at December 31, 1975. Cash and Cash Equivalents: Included are $5,212,000 and $6,098,000 of short-term time deposits at December 31, 1975 and 1974, respectively. Brands, Trademarks, Patents and Goodwill: At December 31, 1975, this account included approximately $18,000,000 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 1975, both domestic and foreign, were $150,000,000 and $315,000,000, respectively, on which the weighted average interest rates were 7.9% and 7.1 %, respectively. At December 31, 1975, notes payable consisted of bank loans of $243,758,000 and commercial paper obligations of $266,583,000 on which the average rates of interest were 7.3% and 6.2%, respectively. At that date, lines of credit for bank and commercial paper short-term financing amounted to approximately $755,000,000. During 1975, the Company and its consolidated subsidiaries maintained average demand deposit book balances of approximately $46,000,000 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. Cti 35

Long-Term Debt: 81/2 % Notes, payable rn 1985 ................. ................. :.......................................................... 8'/s% Sinking Fund Debentures, payable $6,250,000 annually from 1984 to 2003 and $25,000,000 in 2004 8.85% Notes, payable in 1982 ......... ......... ....................... ..................... ....................... ............ . 61/2 % 80,000,000 Swiss Franc Loan, due 1988 ...................... .................. ....::................. 180,000,000 Eurodollar revolving credit, maturing on September 15, 1979. December 31 1975 1974 --$150,000,000 150,000,000 $150,000,000 50,000,000 50,000,000 30,189,000 31,373,000 Interest on current notes is 7.1 % to 7.6% ............................ .,-......... ............. ................. . 90,000,000 63/4% Loan 100,000,000 Deutsche mark, payable 10,000,000 Deutsche mark 90,000,000 annually from 1978 to 1987 .......... ............................... .._.......... -..,:................. ..................... 37,736,000 40,816,000 Bank Term Loan Agreement, maturing in 1980. Interest is at 1/2 % above the bank prime rate (totaling 73/4% as of December 31, 1975), but not more than an average effective rate of 7.9% per annum if outstanding to maturity ...................... 150,000,000 150,000,000 71/z % Dutch guilder Notes, payable 15,000,000 Dutch guilders annually to 1978.. 16,667,000 23,529,000 8% Notes, payable in 1978 ................ ........................... :................................ .... ..... ............. 15,000,000 15,000,000 8y/2 % Sinking Fund Debentures, payable $600,000 annually to 1979, $1,500,000 annually 1980 through 1985 and $3,000,000 in 1986 ................................................. ..~ 14,400,000 15,000,000 65/s% Sinking Fund Debentures, payable $3,500,000 annually from 1978 to 1992 -and $15,500,000 in 1993 .......................................:....................,.......,.......:.:......:.............. ... 4.90% Notes, payable $2,600,000 annually to 1988 and $16,000,000 in 1989.......... Purchase money obligations ............................................. .............._..............:.....::....:....,,..... Other notes and debentures ...... ..................................... :............................................. ..:..... Less, Portion currently payable ................................ ........:............ ..:.:....... :....... :................. Senior debt ................ ........................ ...................... ....................................................... ., 10% Subordinated Notes, payable $3,600,000 annually to 1976, $5,760,000 annually from 1977 to 1981 and $32,400,000 in 1982. Callable at no premium.... Less, Portion currently payable ....................... :...................... ......_::..:...,.::..... .::.:............ ...... .. Subordinated debt ...... .......................................... ...................... ..:................................. 68,000,000 71,500,000 49,800,00,0 52,400,000 35,130,000 15,750,000 11,207,000 11,476,000 868,129,000 716,844,000 11,459,000 13,341,000 $856,670,000 $703,503,000 $ 64,800,000 $ 68,400,000 3,600,000 3,600,000 $ 61,200,000 $ 64,800,000 Foreign currency long-term debt is translated at year-end rates. Generally, the long-term debt is callable, at annually decreasing premiums. Expenses incurred in securing long-term loans are included in other assets and are being amortized on the straight-line method over the respective lives of the issues giving rise thereto. Aggregate maturities of long-term debt in each of the following years are: 1976, $15,059,000; 1977, $17,220,000;. 1978, $39,493,000; 1979, $109,411,000; 1980, $170,400,000. r,) cn 0 0 0 ~ ~ rv v m 36

C - Capitalized Interest: The effect of the policy to capitalize interest relating to major facilities was an increase in pre-tax income of $2,928,000 in 1975 and $4,842,000 in 1974; the effect relating to real estate operations was an increase in pre-tax income of $1,577,000 in 1975 and $2,398,000 in 1974. The combined effect on net income was an increase of $2,176,000 in 1975 and $3,499,000 in 1974. Capital Shares: Authorized Issued Treasury Outstanding Preferred: At December 31,1974 ............................................. 96,786 96,786 (66,771) 30,015 Purchased .................................................................- (438) (438) Retired ........................................................................_ (4,923) (4,923) 4,923 At December 31,1975 ............................................ 91,863 91,863 (62,286) 29,577 Common, $1 par value: At December 31, 1974 ..............................................._ 10,0,000,000 57,266,810 (2,224) 57,264,586 Sale.of shares ................................................................. .. 2,000,000 2,000,000 Exercise of stock options ......................................... . 92,650 92,650 At December 31,1975 ............................................ 100,000,000 59,359,460 (2,224) 59,357,236 As of December 31, 1975, 811,291 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 employees at market prices on the dates granted. 1975 1974 Shares under option, beginning of year ............................................................_...................... 732,306 645,344 Options granted .........................................................._......................................... ................. 203,000 181,000 Options exercised .................................................................................................... .............. (92,650) (77,528) Options canceled ..................................................... .......... .............. ......... ........................... (31,365) (16,510) Shares under option, end of year .................................................................................. 811,291 * 732,306 Shares available for option, end of year ............... .................................. .......................... .._ 245,279 416,914 *At prices ranging from $29.75 to $59.72. r•) ts 0 0 0 ~ ~ ~ ~ ~ 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, 1975, approximately $280,000,000 of consolidated earnings reinvested in the business was free of such restrictions. Other debt agreements specify minimum amounts of working capital and limit the amount of senior debt which may be issued. At December 31, 1975, the Company was in compl iance with these agreements. Earnings Per Share: Primary earnings per common share for 1975 and 1974 are calculated on the weighted average number of shares of common stock outstanding for each year, which was 58,442,362 and 55,649,417, respectively. Fully diluted earnings per common share for 1975 and 1974 give 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. The number of shares of common stock used in this computation for 1975 was the same as that used for primary earnings; for 1974, it was 57,339,255. Incentive Compensation Plan: In accordance with the Company's Incentive Compensation Plan, a provision of $3,100,000 was made against 1975 earnings for awards that may be made to officers and other key employees. A provision of $2,400,000 was made against 1974 earnings. These amounts were less than the maximum amounts that could be provided under the plan. Provision for Federal and Other Income Taxes: Federal Foreign State and Local Total The 1975 provision includes: Currently payable .................................................... .- $100,889,000 $17,483,000 $17,930,000 $136,302,000 Deferred ......................................................:............. 13,325,000 (455,000) 12,870,00 0 $114,214,000 $17,028,000 $17,930,000 $149,172,000 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 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: 1975 1974 Excess of tax over book depreciation ................................................................................ $13,200,000 $ 6,852,000 Provisions charged to expense on books, deductible in future years for tax purposes, net ......................................................... ...................................,.........:. (3,260,000) 2,114,000 Additional taxes provided on unremitted earnings of foreign subsidiaries and affiliates .............................................................................................. 2,142,000 2,200,000 Carrying costs of real estate operations deferred on books, deductible currently for tax purposes ................................................................. ............. .............. 813,000 1,5.94,000 Decrease (increase) in intercompany profit in inventory deferred on books............ (363,000) 295,000 Other .........................................................................:.......................... ..........:....:................... 338,000 73,000 $12,870,000 $13,128,000 i 38

Reconciliation of the provision for income taxes computed at the federal statutory rate to the reported provision for federal and otner income taxes is: 1975 1974 i Amount Percent to Pre-tax _ Amount Percent to Pre-tax Provision computed at 48% of reported pre-tax earnings ................ $173,189,000 48.0% $142,801,000 48.0% Increases (decreases) in the provision resulting from: Inclusion of equity in net earnings of unconsolidated subsidiaries and affiliates in pre-tax earnings ............................. (10,976,000) (3.0) (11,815,000) (4.0) Investment tax credit .....................:....................................................:.............. (17,136,00 0) (4.8) (9,863,000) (3.3) Foreign income taxed at less than 48% and not expected to be subject to U.S. tax in the foreseeable future ............................ (4,560,000) (1.3) (3,479,000) (1.2) State and local income taxes, net of federal tax benefit .................. . 9,324,000 2.6 6,525,000 2.2 Other ............................................................... ........................... (669,000) (.2) (2,183,000) (.7) Provision as reported ........................:......................................................... $149,172,000 41.3 % $121,986,000 41.0% Litigation: Three purported class actions by tobacco growers are pending against the six major United States cigarette manufacturers, including the Company, and others alleging violations of the United States antitrust laws. In two of the actions, the plaintiffs seek damages for the years 1970-1974 of approximately $2,500,000,000 in the aggregate; no specific amount of damages is claimed in the third action. The Company has denied any violation of law, is vigorously contesting the actions and has been advised by counsel that in their opinion these actions 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. A court order has been entered in one of the three actions determining that the action cannot be maintained as a class action. Plaintiffs have filed a notice of appeal from this determination. No adjustments or provisions have been made on account of the litigation. Additional Information: 1975 1974 Working capital at year end .............. ................................................ .......__......................... $890,797,000 $725,000,000 Depreciation expense ..........:......................................................................................... .............. $ 49,853,000 $ 38,006,000 Rental expense ............:........................................................:....................._........ ........................... $ 17,982,000 $ 14,590,000 Pension expense .................................................................................................... ..................... $ 24,812,000 $ 19,549,000 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, 1975, 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 standardsand, 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, 1974. In our opinion, the financial statements mentioned above present fairly the financial position of Philip Morris Incorporated and consolidated subsidiaries at December 31, 1975 and 1974 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 27, 1976 Coopers & Lybrand r1) cn c 0 a ~ ~ N ~ ~ 39

Directors and Officers r Edward Lasker John E. Cookman George V. Comfort Jacques G. Maisonrouge John S. Reed John A. Murphy T. Justin Moore, Jr.

Directors Ross R. Millhiser Charles F. Lombard Executive Committee James C. Bowling President Vice President and Vice President, J. F. Cullman 3rd, Chairman Vice President and Director of T. Justin Moore, Jr. Philip Morris International A. Brittain III Corporate Affairs President of Virginia Electric and Hamish Maxwell J. E. Cookman Alfred Brittain III Power Company, Richmond, Va. Vice President and H. Cullman Chairman of the Board of Bankers John A. Murphy Executive Vice President, R. W. Dammann Trust Company, New York, N.Y. Vice President and President of Philip Morris International C. H. Goldsmith George V. Comfort Miller Brewing Company W. Wallace McDowell T. N. Lawler president of George Comfort & Sons John S. Reed* Vice President and Vice President,• H. R. Marschalk Company, Inc., New York, N.Y., Executive Vice President Operations, Philip Morris U.S.A. R. R. Milihiser real estate management , First National City Bank, John A. Murphy G. Weissman John E. Cookman New York, N.Y. Vice President and President and Finance Commiltee Chairman of the George Weissman Chief Executive Officer, J. E. Cookman, Chairman Finance Committee Vice Chairman of the Board Miller Brewing Company A. Brittain III Dr. Jose Antonio Cordido-Freytes Margaret B. Young R. William Murray H. Cullman Member of Arismendi, Betancourt, Chairman, Whitney M. Young, Jr. Vice President and Vice President, E. Lasker Cordido and Associates, Memorial Foundation, Philip Morris International H. R. Marschalk Caracas, Venezuela, New York, N. Y. William J. O'Connor R. R. Millhiser Attorneys and President of T J Moore Jr , Andrew C. Britton Vice President and Vice President . . , . C. A. Tabacalera Nacional Director Emeritus and Chief Administrative Officer, G. Weissman Hugh Cullman J. Harvie Wilkinson Jr. Philip Morris International Audit Committee Executive Vice President and , Director Emeritus Shepard P. Pollack H. R. Marschalk, Chairman President of Ray Jones Vice President, Finance R. W. Dammann Philip Morris International Member Advisory Board Philip J. Reilly E. Lasker Joseph F. Cullman 3rd , Vice President and President J. G. Maisonrouge Chairman of the Board and Chandler H. Kibbee , Mission Viejo Compan T. J. Moore, Jr. Chief Executive Officer Member, Advisory Board *Newly elected director y Carlos E. Salguero Management Committee Richard W. Dammann Vice President and Vice President, J. F. Cullman 3rd, Chairman Member of Dammann & Heming, Philip Morris International T. F. Ahrensfeld New York, N.Y., Attorneys Edward M. Schaaf Jr. J. C. Bowling , , J E Cookman Clifford H. Goldsmith Vice President and Vice President . . Executive Vice President and , Production, Philip Morris U. S. A. H. Cullman President of Philip Morris U. S.A. Officers Benjamin A. Soyars C. H. Goldsmith R R Millhiser T Joseph F. Cullman 3rd Vice President and . . . Landry John Chairman of the Board and J. A. Murphy Vice President and Executive Vice Senior Vice President, P J Reilly President of Philip Morris U. S. A. Chief Executive Officer Manufacturing, Philip Morris U. S. A. . . F. M. Stefan Edward Lasker George Weissman Walter F. Sperber G. Weissman Counsel, McKenna & Fitting, Vice Chairman of the Board Vice President and Controller Office of the Chairman Los Angeles, Calif., Attorneys Ross R. Millhiser Fred M. Stefan J F Cullman 3rd Chairman T. Newman Lawler President Vice President and Chairman of . . , J. E. Cookman Member of Hall, Dickler, Lawler, Hugh Cullmab the Board and Chief Executive H. Cullman Kent & Howley, New York, N.Y., Executive Vice President and Officer, Philip Morris Industrial C. H, Goldsmith Attorneys President, Dr. Helmut R. R. Wakeham R. R. Millhiser Jacques G. Maisonrouge Philip Morris International Vice President and Vice President, J. A. Murphy Chairman of IBM World Trade Clifford H. Goldsmith Science and Technology, G. Weissman Europe/Middle East/Africa Executive Vice President and Philip Morris U. S. A. Corporation, White Plains, N.Y. President, Philip Morris U. S. A. Eugene J. T. Flanagan H. Robert Marschalk Thomas F, Ahrensfeld Associate General Counsel, Vice Chairman of the Board of Vice President and General Counsel Secretary Richardson-Merrell Incorporated Albert E. Bellot Alexander Holtzman Wilton, Conn., Vice President and Vice President, Associate General Counsel pharmaceuticals manufacturer • Philip Morris International F. Harrison Poole Hamish Maxwell James C. Bowling Treasurer Vice President and Vice President, Assistant to the George P. Hibbard Executive Vice President of Chairman of the Board, and Assistant Treasurer Philip Morris International Director of Corporate Affairs Norman J. Treisman Russell N. Freund Assistant Treasurer Vice President, Personnel John C. Lino William K. Howell Assistant Controller Vice President and Executive Vfce President and Treasurer, Horace W. Pierpoint Miller Brewing Company Assistant Controller Robert A. White John T. Landry Vice President and Executive Vice Assistant Controller President and Director of Marketing, Mary E. Russell Philip Morris U. S. A. Assistant Secretary fV Jetson E. Lincoln Anthony W. Giraldi Clt O Vice President, Planning Assistant Secretary 0 O ~ a ~ E N 0 tA ~ ~

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