2011 Tobacco Shareholder Meetings

A front-page article in the May 7, 2011 edition of the Winston-Salem Journal, entitled “Reynolds American Takes Step,” quoted [the] Rev. Michael Crosby of the Interfaith Center for Corporate Responsibility: “I see a glimmer of hope on an issue we have been raising for a number of years. For your willingness to participate with stakeholders, I sprinkle holy water on you. Yet, because these discussions are going on at the highest levels with Altria and Philip Morris International, I would urge you to take the same level here.”

Mr. Delen’s promises, which will be put to the test in the upcoming weeks and months, stand in contrast to the public position of previous C.E.O. Susan Ivey, who insisted that RAI had no responsibility to take steps to improve working conditions of farm workers who labor under often unsafe working conditions on farms run by Reynolds’ suppliers.

However, on the litigation front, RAI management is as rigid as ever. During the question and answer session, to which RAI allotted all of 25 minutes – fully ten minutes more than at the 2010 Annual Shareholders Meeting – I [Edward L. Sweda, Jr.] addressed the major legal problems that R.J. Reynolds Tobacco Co. is facing in the Engle Progeny litigation in Florida. Shareholders are allowed up to two minutes to ask a question (a video board at the front of the meeting room featured a large numeric countdown from “2:00” once a shareholder began to speak); I mentioned that since February 2009, there have been 43 Engle Progeny trials that have reached a verdict and that 30 out of those 43 have been plaintiff verdicts. Just a week before the shareholders meeting, a jury in Jacksonville, where a disproportionately large number of the remaining 8,000 to 9,000 lawsuits yet to be tried are located, hit RAI with a $17 million punitive damages award. Furthermore, the company is appealing its multi-million dollar loss in the Martin case and must prevail in an uphill climb to convince the Florida Supreme Court to reverse its own 2006 landmark ruling in the Engle class-action case.

I concluded my remarks by asking whether the company, for the good of its shareholders, would move away from its current policy of refusing to settle these Engle Progeny cases.

Mark Holton, RAI’s Executive Vice President and General Counsel, responded by reiterating the company’s stated opposition to settling any of these cases and said that he was “confident that the Engle process violates due process” and that the company’s legal arguments are strong and would ultimately prevail. Though no follow-up questions are allowed, I commented that “the risk [for the company] is there.”

Two important shareholder resolutions called on the company to address concerns regarding tobacco flavoring and to create human rights protocols for the company and its suppliers.

Noting that the U.S. Food and Drug Administration has found that the smoking of flavored cigarettes is more popular among youth than among adults, the proponents offered this resolution “that, because youth initiation of tobacco products is influenced by the flavoring, shareholders request that, within six months of Reynolds American Inc.’s annual meeting, the Board of Directors move to ensure that RAI stops the production of any of its tobacco products with such flavoring added, as well as their distribution and their marketing, unless and until it can be proven by independent and evidence-based research that such added flavors do not contribute to youth initiation of tobacco use.” Father Michael Crosby introduced the resolution while Anne Morrow Donley of Virginia seconded it (their remarks were limited to two minutes each).

RAI management, of course, opposed the resolution, falling back on the contention that the “flavorings utilized on our operating companies’ tobacco products are legally permitted.” The resolution was defeated with 3 million shares being voted “Yes” with 397 million “No.”

A major threat to the health of tobacco farm workers is Green Tobacco Sickness (GTS), which occurs when the skin absorbs nicotine after touching the tobacco plants. Another significant concern regarding Reynolds American, Inc. is that it receives leaf from Malawi, a country in which child labor in tobacco fields takes place.

This resolution stated that “shareholders request Reynolds American Tobacco Inc. Board of Directors to commit itself to create effective procedures to implement protocols ensuring basic worker rights consistent with internationally agreed-upon human rights conventions in the countries which supply its tobacco and to find ways to ensure, through truly independent monitoring, that its varied suppliers are enforcing these protocols as well as all other pertinent laws of the nations in which its suppliers operate.”

Father Crosby introduced the resolution while I seconded it. RAI’s opposition to this resolution attempted to pass off any responsibility on this issue onto the already overburdened regulatory apparatus of state and federal governments in the United States. Management also claimed that “RAI and its operating companies strive to comply with all laws and regulations.” In my allotted two minutes, I noted that, as an individual, I do not “strive to comply with laws, I comply with laws.” I noted that, while there would be serious consequences for me if I failed to comply with laws, there seem to be no consequences for RAI or its suppliers failing to comply with basic laws and regulations governing worker health and safety.

Stop All Further Sales of Tobacco Products with Added Flavorings
Until Independent Research Proves They Are Not Significant Factors in Youth Use

WHEREAS Reynolds American Inc., unlike its main U.S. competitor, regularly advertises its tobacco products in media outlets that are not directly oriented to youth but are read by many. Among these are magazines like Sports Illustrated and Entertainment. It also places inserts in weekly newspapers that are freely available and feature material attractive to youth. Some of these feature Camel tobacco products (especially SNUS) that come in different flavors such as “frost,” “mellow,” “robust” and “winterchill.”

Flavorings and other additives are widely used in cigarettes and other tobacco products to increase the palatability or attractiveness of tobacco smoke and usage, particularly for young people.

The United States Food and Drug Administration has shown that the smoking of flavored cigarettes is far more popular among younger people than among older people. It also noted that a March, 2008 poll that found that one in five youngsters between 12-17 had seen flavored tobacco products or ads, while only one in 10 adults reported having seen them. It also showed evidence that youth between 13-18, 52% of smokers who had heard of flavored cigarettes reported interest in trying them and nearly 60% thought that flavored cigarettes would taste better than regular cigarettes.”

The FDA also has stated that an important way to reduce the death and disease caused by smoking is to prevent children and adolescents from starting to smoke. Studies have shown that 17 year old smokers are three times as likely to use flavored cigarettes as are smokers over the age of 25. In addition to being more attractive to young people, flavored products make it easier for new smokers to start smoking by masking the unpleasant flavor of tobacco. Studies have also demonstrated that young people believe that flavored tobacco products are safer than unflavored tobacco products.

RESOLVED, that, because youth initiation of tobacco products is influenced by their flavoring, shareholders request that, within six months of Reynolds American Inc.’s annual meeting, the Board of Directors move to ensure that RAI stops the production of any of its tobacco products with such flavoring added, as well as their distribution and their marketing, unless and until it can be proven by independent and evidence-based research that such added flavors do not contribute to youth initiation of tobacco use.

Flavored tobacco products are just as addictive and have the same types of harmful effects as regular tobacco products. Removing these flavored products from the market is important because it removes an avenue that young people can use to begin regular tobacco use. Reynolds American Inc. management says it does not want to influence young people to use its tobacco products. The FDA has said that the removal from the market of tobacco products that contain certain characterizing flavors is an important step in our Nation’s efforts to reduce the burden of illness and death caused by tobacco products. Support for this resolution will be an important step in ensuring that this goal can be achieved.

RAI and its operating companies strive to operate in a responsible manner that best balances the desires of our many stakeholders. Our Guiding Principles and Beliefs (available at www.reynoldsamerican.com/values.cfm) seek to reflect the interest of shareholders, consumers, employees, and other stakeholders.

This proposal would prohibit production of tobacco products with "flavoring added" until "it can be proven by independent and evidence-based research that such added flavors do not contribute to youth initiation of tobacco use." Most U.S. cigarettes and smokeless tobacco products use flavorings. The flavorings utilized in our operating companies' tobacco products are legally permitted. Moreover, the ability to manufacture and market tobacco products with taste profiles that appeal to adult tobacco consumers is central to our operating companies' businesses.

This proposal should be rejected for several reasons. First, this proposal is unnecessary. The Family Smoking Prevention and Tobacco Control Act of 2009 bans the manufacture and sale of cigarettes that have a characterizing flavor other than tobacco or menthol and gives the U.S. Food and Drug Administration, referred to as the FDA, ongoing legal authority over the use of flavorings in other tobacco products as well. This proposal thus ignores the fact that the issue of flavorings added to tobacco products was recently considered by Congress and is currently subject to ongoing oversight by the FDA. Our operating companies' practices with respect to tobacco flavorings fully conform to that congressional judgment and agency oversight.

Second, since most tobacco products contain some flavoring added to the tobacco, this proposal would affect most of the tobacco products sold by certain of our operating companies. The proposal would require those operating companies to stop selling those tobacco products until an indeterminate future date based on an indeterminate standard. Thus, this proposal would have an extreme adverse impact on those operating companies' current business operations and an extraordinary adverse impact on their future competitive posture resulting from having to withdraw those products from the marketplace for an unknown period of time.

Third, this proposal is predicated on an assumption that tobacco products with "flavoring added" appeal to youth -- a claim for which there is no evidence cited in the proposal. Importantly, this proposal ignores the fact that adults consume more than 98% of all tobacco products sold in the United States.

Finally, the proposal effectively asks RAI to prove a negative (i.e., "that such added flavors do not contribute to youth initiation of tobacco use") and, given the numerous and complex factors associated with youth tobacco use, thereby imposes a standard that is likely impossible to achieve.

The second resolution had been presented in the past, encompassing Green Tobacco Sickness (GTS), an acute nicotine poisoning where the nicotine directly enters the skin and body of the harvester, worsened when the tobacco leaves are wet, and can cause severe nausea, vomiting, and death; encompassing shameful treatment of migrant workers. This was prepared by The Province of St. Joseph of the Capuchin Order and supported by Trinity Health. At the May 6 meeting, The Rev. Michael Crosby put the resolution, and it was seconded by Edward L. Sweda, Jr.

Whereas, corporations have a responsibility to ensure their total “supply chain” is uncorrupted by practices that deny basic human rights for workers, especially corporations with global sourcing like ours.

Corporations incur a reputational risk when their suppliers undermine workers’ basic human rights, such as the right to health (see the Universal Declaration of Human Rights [25], the Covenant on Economic, Social and Cultural Rights [Art. 12] and the ILO Convention [155]).

In the United States, while RAI doesn’t directly hire farm workers, it contracts with suppliers who do. When their farm workers are not organized, basic worker rights can be easily violated. This abuse is aggravated when they are undocumented.

In the USA, "many farm workers believe they will be fired and lose their income if they get sick or work too slowly. Green tobacco sickness is an environmental justice issue, part of the growing concern that poor, minority and medically underserved populations bear a disproportionate share of environmental and occupational health risks” (Sara A. Quandt, Ph.D., Science Daily, 02.24.00).

A key problem of tobacco harvesters for RAI is acute nicotine poisoning, Green Tobacco Sickness (GTS). This occurs when the skin absorbs nicotine from touching tobacco plants (McKnight, Spiller: Public Health Rep. 2005; 120.6). GTS threatens 33 million+ tobacco farm workers globally (WHO, 1999 World Bank).

Malawi is a key leaf supplier for our products. Besides being highly susceptible to forms of GTS, countless children are being forced unwillingly into slave-like situations to provide leaf for RAI products.

Despite RAI’s statement that it has hired “independent” monitors to ensure that it is not violating U.S. laws and human rights, its U.S. suppliers continue to hire undocumented workers and, in places like Malawi, forced child labor persists, so much so that the U.S. Department of Labor has listed Malawi’s tobacco production as particularly egregious.

RESOLVED shareholders request Reynolds American Tobacco Inc. Board of Directors to commit itself to create effective procedures to implement the internationally agreed-upon core human rights conventions in the countries from which it gets its tobacco and to find ways to ensure, through truly independent monitoring, that its varied suppliers are enforcing these as well as pertinent laws of the nations in which its suppliers operate.

This resolution’s sponsors believe RAI cannot dismiss the above problems by saying its suppliers “report” they comply with codes covering farm workers’ basic rights and that no forced child labor takes place in tobacco fields supplying RAI product. Continual data shows such problems are not being redressed here nor abroad. There must be truly independent verification of the kind that has not yet been effective for RAI. Because farm workers continue to make this Company healthy; it has the obligation to ensure their health.

Support for this proposal will help ensure our profits and dividends are not being realized by exploiting “the least” of our brothers and sisters. Please support it so “good news” may come to those who are poor for whom we bear responsibility as shareholders.

RAI and its major operating companies are U.S. companies that conduct business almost exclusively in the United States and Puerto Rico. Over 99% of the companies' total tobacco sales revenue, excluding contract manufacturing for other tobacco companies, is generated from the U.S. market.

The United States has an extensive foundation of federal, state and local laws and regulations that support human rights. In addition, these laws are enforced by federal and state regulatory agencies and through direct access to the courts by individuals. RAI and its operating companies strive to comply with all laws and regulations, we do not believe it is appropriate for RAI and its operating companies to assume the regulatory and enforcement role of the federal, state and local governments.

Reynolds American and its operating companies further support human rights considerations as follows:

* The RAI Board has adopted and reaffirmed a "Statement on Our Efforts to Support Human Rights."

* All employees are required to adhere to the RAI Code of Conduct and certify such on a yearly basis. The Code of Conduct includes clear expectations relating to employment practices, relationships with suppliers and customers, adherence to governmental regulations, and other aspects of how we conduct our businesses which are supportive of fundamental human rights.

* Each operating company conducts Corporate Social Responsibility, referred to as CSR, efforts related to its supply chain and procurement activities intended to reinforce suppliers' respect for human rights.

RAI's Statement on Our Efforts to Support Human Rights, Code of Conduct and annual CSR reports are available for review on our web site at www.reynoldsamerican.com .

RAI's operating companies continue to incorporate human rights principles and considerations in supplier programs to promote continuous improvement in suppliers' performance:

* Beginning with the 2011 growing season, all U.S. contract tobacco growers will be required to participate in a a comprehensive training program being developed and conducted by the Cooperative Extension Services of major public universities in tobacco-growing states. Each grower must certify that he/she has received this training in 2011 before any tobacco will be purchased from them by the operating companies this year. The program will include training on the following topics.

1) State and federal employment regulations on hiring practices, wages and hours, workers' compensation insurance and child labor provisions.

2) Key seasonal/migrant labor regulations on joint employment, use of farm labor contractors, adequate housing for migrant and seasonal workers, and provisions of the Migrant and Seasonal Agricultural Worker Protection Act.

3) Agricultural safety regulations and practices covering the safe use of pesticides and herbicides, farm machinery and equipment, and the prevention of heat stroke and green tobacco sickness.

4) Key record-keeping requirements and best practices related to the application of pesticides and herbicides, farm safety logs and agronomic practices.

RJR Tobacco, pursuant to its service agreement with each operating company, has worked directly with major public universities to develop the training program. RJR Tobacco will also coordinate the provision of this training to contract tobacco growers.

* RJR Tobacco has partnered with the North Carolina Department of Labor, referred to as NCDOL, and North Carolina State University over the past several years to produce training videos that have been distributed to its contract growers and are available to all tobacco growers in North Carolina. The videos focus on farm safety practices, safe use of pesticides and prevention of green tobacco sickness. RJR Tobacco extended this partnership with NCDOL in 2010 by sponsoring a pilot program of face-to-face, on-farm NCDOL training sessions for contract growers and their workers. RJR Tobacco and NCDOL plan to expand these on-site farm safety training sessions in 2011 to reach additional contract growers and their workers in North Carolina.

* RJR Tobacco continues to provide support for NCDOL's Gold Star Grower program. This voluntary program involves NCDOL inspections of farm-worker housing and worker safety conditions and allows growers to be certified as a Gold Star grower.

* RJR Tobacco, ASC and SFNTC also procure tobacco leaf from offshore growing regions through the use of tobacco dealers who purchase and process tobacco leaf from local farmers, FJF Tobacco contracts with LeafTc Ltd., an independent company also utilized by most of the major multinational tobacco companies, to evaluate tobacco dealers on a broad range of leaf-procurement requirements, which includes the impact these suppliers' activities have on the environment and safety conditions on local farms.

* Each major operating company of RAI will continue to communicate their expectations of suppliers to respect fundamental human rights through supplier guides, during site visits and in ongoing activities with suppliers. This expectation is further reinforced in all procurement contracts, which require suppliers to adhere to all applicable federal, state and local laws and regulations.

* RJR Tobacco utilizes the Business Enabler Survey Tool (BEST) to evaluate many suppliers of raw materials other than leaf tobacco. The survey tool evaluates suppliers on a broad range of procurement requirements through onsite visits and written surveys, and includes verifying that the suppler has a commitment to ensure safe workplace conditions and address other relevant human rights issues. RJR Tobacco, pursuant to its service agreement with each operating company, will extend the use of this survey to key suppliers utilized by ASC and SFNTC during 2011.

RAI and its operating companies continue to identify and act on appropriate opportunities to encourage improved human rights conditions in supply chains. RJR Tobacco also continues to seek feedback and insight into contract growers' and their workers' perspective through on-farm surveys. RAI and its operating companies continue to believe that the primary responsibility for ensuring human rights rests with suppliers, governments and regulators in the appropriate countries and that it is not appropriate for RAI and its operating companies to assume the regulatory and enforcement role of these individual companies and governments.

Several activists with The Nightingales Nurses asked questions at the PMI Question and Answer session, as did numerous other activists from several states in the U.S.A. Additionally, a resolution from Trinity Health and from The Province of St. Joseph of the Capuchin Order, and other proponents, was presented on the fact that food insecurity is a growing problem -- people spending money on cigarettes instead of food and health care and education for the children -- and asked that PMI produce cigarettes with non-addictive levels of nicotine and not market in countries with 50% of its citizens living in poverty. PMI's board opposed this resolution as did the majority of the shareholders.

The media coverage however, was on one point only, that CEO Louis Camilleri responded to a nurse's question regarding tobacco products being more addictive than heroin and cocaine, with Camilleri stating that:

Please note his words, "the efforts we make to ensure that there is worldwide regulation of a product that is harmful and that is addictive." He stresses regulation, not making it safer for consumers by not manufacturing and marketing a product which addicts and kills.

One week later, at the Altria meeting [PMI was spun off from Altria in the recent past], CEO Michael E. Szymanczyk stated in his prepared remarks, which were placed on that company's web site, and quoted in The Richmond Times Dispatch :

Since Camilleri speaks with the aide of a prompter, and since it is the experience of activists at past meetings, when he was the CEO of Altria, that he rarely if ever speaks "off the cuff", but has planned points to be made, it is perhaps unlikely that he made his comment without a plan. That Szymanczyk the following week appeared to contradict this statement gives food for thought and discussion, including any ramifications this would have when argued in courts of law in the U.S.A. and worldwide, and any impact either or both of these statements would have in advertising and marketing the products.

Below you will find
-- some excerpts from the Question and Answer session;
-- the text of the resolution on Food Insecurity, and PMI's opposing statement.
Following that is a statement regarding the withdrawing of a continuing resolution on Human Rights and the plight of farm workers worldwide, in response to significant steps taken by PMI to address this issue with external monitoring by a very reputable independent monitoring group, Verite.

Also helpful are the excerpts provided at the 2011 Newest Entries, such as one on marketing by tobacco companies worldwide.

Resolution, 2011 PMI meeting: FOOD INSECURITY AND TOBACCO USE
Trinity Health ... together with seven co-proponents, submitted the proposal set forth below ...

The Philip Morris International response, on pages 67-68 of the proxy statement.

STATEMENT ON BEHALF OF REV. MICHAEL CROSBY, OFMCap. Made by Ms. Cathy Rowan
Re: Positive Movement Regarding PMI’s Commitment to Develop Protocols on Ensuring Human Rights with External Monitoring.

I make this statement in light of the statement the day before yesterday (May 9, 2011) appearing on PMI’s web site that details its commitment to rectify labor abuses on tobacco farms throughout its global supply chain.

Our effort toward this commitment by PMI goes back much further. Even before Human Rights Watch documented the abuse and exploitation of many migrant workers on farms in Kazakhstan supplying tobacco to us, the Capuchin Franciscans, along with my own group, Trinity Health, and other members of the Interfaith Center on Corporate Responsibility, were engaging PMI and other U.S. based tobacco companies on the issue.

It all started with the issue of Green Tobacco Sickness in 1997. You, Mr. Camilleri, took personal interest in this issue raised by the Capuchins. You personally committed PMI to address the problem. While last week’s release of the Oxfam/FLOC Report on tobacco farms in North Carolina show the problem has not yet been eliminated, PMI has taken major steps to remedy it. Again we thank you for this effort.

From GTS we moved in 1998 to address the increasing press reports of cases of egregious violations of human rights in the tobacco fields of developing nations like Kazakhstan and Malawi.

Since we began raising the issue, and then, with the Human Rights Watch report, PMI has taken the lead in trying to find ways to make sure its product is not being produced at the expense of workers’ basic human rights not only here but throughout the world, especially in economically developing nations.

We at the ICCR, along with groups like the ILO and Human Rights Watch, have worked with PMI to develop protocols and procedures, with a very reputable independent monitoring group, Verite, to make sure that, as far as possible, the rights of those human beings producing the leaf for our tobacco products are being treated as we would want to be treated if we were in their shoes in those fields.

Because PMI has evidenced movement toward such a positive direction, the Province of St. Joseph withdrew its shareholder resolution on this topic that had been filed for this 2011 annual meeting.

While we all know much remains to be done, we believe PMI has exhibited the will to address this issue in a very inclusive way, involving all the key stakeholders, including concerned shareholders like us. We also know this is a systemic issue that involves a host of issues, including depressed tobacco prices in many places that negatively impacts the wages of farmworkers. However, we thank you, Mr. Camilleri, for your personal commitment to create what we consider to be a model that deserves to be emulated by other tobacco companies here and around the world.

Everyone here knows that the product this company makes leads to death; old time shareholders will know we’ve been addressing this issue for more than 30 years. However, in this case we think it’s good to balance our challenges with support for what the Company is trying to do to ensure human rights compliance and monitoring within its supply chain. And for this we thank you.

2011 Altria
Richmond, Virginia, U.S.A.
May 19, 2011
No Smoking in the meeting
Altria owns:
Philip Morris USA
US Smokeless Tobacco Co.
John Middleton Co. (Cigars, Pipe tobacco)
Ste. Michelle Wine Estates Ltd.
and Philip Morris Capital Corporation (investments).
The Philip Morris coat of arms has the slogan which translates to "We came, We saw, We conquered".

The Altria Board of Directors:
Elizabeth E. Bailey, professor emerita of business & public policy Wharton School of Univ. Pennsylvania,
serves as trustee of Natl. Bureau Economic Research, trustee Brookings Inst., trustee TIAA-CREF
Gerald L. Baliles, director Miller Center Public Affairs Univ. Virginia, former governor Virginia,
serves on boards of Nature Conservancy, Norfolk Southern Corp., et al
John T. Casteen III, pres. emeritus Univ. Virginia, formerly Sec. Education in VA,
formerly pres. Univ. Conn., served board of Wachovia
Dinyar S. Devitre, special advisor General Atlantic Partners (equity firm),
formerly with Kraft Foods, on boards for Lincoln Center Perf. Arts, Brooklyn Acad. Music
Thomas F. Farrell II, CEO Dominion Resources Inc. (power co.),
director Institute of Nuclear Power Operations
Thomas W. Jones, sr. partner TWJ Capital LLC (investments),
formerly with Citigroup, formerly pres. & chief operating officer TIAA-CREF, board of TIAA-CREF
George Munoz, principal Munoz Investment Banking Group
serves as board member Marriott Intnl., et al
Nabil Y. Sakkab, retired Sr. VP corporate research Proctor & Gamble Co.
serves on boards of Givaudan SA and Deinove
Michael E. Szymanczyk, CEO Altria,
serves on boards of Univ. Richmond, United Negro College Fund, Richmond Performing Arts Center

An excellent overview of the Altria meeting has been posted by Edward L. Sweda, Jr., on the web site of PHAI -- the Public Health Advocacy Institute in Massachusetts. An excerpt is given here:

Just eight days before the Altria Group, Inc. 2011 Annual Shareholders Meeting in this historic city, Altria Group’s former Chief Executive Officer, Louis Camilleri, complicated matters for his successor. At the Philip Morris International Annual Shareholders Meeting in New York City on May 11, 2011, Camilleri answered a question from a shareholder who is also a nurse who has treated many smokers with serious diseases. While admitting that smoking is addictive, Camilleri added the comment that “it is not that hard to quit” using tobacco products. That comment made international headlines after the Associated Press reported it.

So, when Altria Group’s Szymanczyk gave management’s report at the meeting in Richmond on May 19^th, he specifically, on page 10 of his prepared remarks stated: “Because tobacco use is addictive and it can be very difficult to quit, our tobacco companies help connect adult tobacco consumers who have decided to quit with cessation information from public health authorities.”

During the question and answer session, shareholder Rev. Michael Crosby of the Interfaith Center on Corporate Responsibility and I both pressed Szymanczyk to state whether, as Altria Group’s CEO, he disagreed with Camilleri’s comment and, if so, why. Refusing to do so, he stated that “I would simply say that what I said is on our web site. There is nothing new here.” The juxtaposition between the public statements of two tobacco executives just six days apart was the central focus of the Richmond Times-Dispatch article on the meeting.

I also pressed Szymanczyk on the issue of the ongoing Engle Progeny trials taking place in Florida. Noting that 30 out of 43 (now, as this report is written, 32 out of 46) such trials resulting in verdicts have seen jurors return plaintiff verdicts, I asked whether Altria Group, for the sake of its shareholders, would abandon its no-settlement policy regarding the thousands of Engle Progeny cases remaining throughout Florida. His response was simply to refer shareholders to the company’s 10Q form, which restates its standard policy of refusing to settle these cases.

Virginia shareholder Anne Morrow Donley, citing studies from March 2011 which showed that a fetus subjected to secondhand smoke is at a higher risk of stillbirth, lower birth weight and lower birth length, asked Szymanczyk whether he would publicly advise smokers not to smoke around women of child-bearing age. His response was to acknowledge that pregnant women should not be exposed to secondhand smoke, but he refused to broaden that recommendation to include women of child-bearing age.

Cathy Rowan, representing shareholder Trinity Group, noted Altria Group’s willingness to address concerns about implementing internally agreed upon code upholding the human rights of tobacco farm workers and about ensuring that the company’s suppliers are enforcing those rules. Altria Group’s cooperation with shareholders following a 2009 vote of shareholders where 25% supported a resolution to protect the human rights of farm workers stands in contrast to the rigid opposition by the management of Reynolds American, Inc. to similarly worded resolutions.

Michael Szymanczyk (in opening remarks): A common thread that runs across all our tobacco businesses is that the majority of adult tobacco consumers make tobacco purchase decisions based in significant part on flavor preferences. Whether it is a complex tobacco flavor like Marlboro Red, a classic smokeless tobacco flavor like Copenhagen Wintergreen, or historical pipe-tobacco flavors like those found in Middleton's cigars, adult tobacco consumers want a wide variety of flavors in their tobacco products.

[Please Note, Text of resolution on flavorings and Altria's opposing statement given below ]

Our tobacco companies have taken a number of actions, which I previously described, designed to responsibly offer adult tobacco consumers the products they want, while also seeking to limit underage reach. In addition, our tobacco companies also supported enactment of the bill granting FDA regulatory authority over tobacco products; communicate about the health effects of their products; and because tobacco use is addictive and it can be very difficult to quit, our tobacco companies help connect adult tobacco consumers who have decided to quit with cessation information from public health authorities.
...

QUESTIONS and ANSWERS
Michael Szymanczyk: We will now transition to our 30 minute question-and-answer session. We have placed two microphones in the aisles for use in asking questions. We will alternate between the microphones until the time is up, or we have run out of questions. The ushers will assist you in getting to the microphones. We ask that each speaker limit his or her question to 2 minutes, so that all who wish to ask a question may have the opportunity to do so.

Brandt, [W. Hildebrandt Surgner, Jr,] our corporate secretary, will help us watch our time with a lighting system. When the speaker has 30 seconds remaining, the light in front of the stage will turn from green to yellow. When a speaker's time has expired the light will turn red, and the speaker should please conclude his or her question. Thank you for your cooperation.

Anne Morrow Donley: I am Anne Morrow Donley, a shareholder from Virginia. You said this morning you believe Altria's work is making a difference. Studies released in March of this year, 2011, revealed that trauma is caused to the fetus by people smoking around nonsmoking pregnant women. One study is Environmental Research, the other is in the International Journal of Obstetrics and Gynecology. They found that in secondhand smoke exposure, certain toxic chemicals are present in higher proportions in secondhand smoke than in mainstream smoke, and this can affect the developing fetal nervous system by reducing oxygen and nutrients flow to the fetus, resulting in significant decreases in cognitive function in six-month infants. Also, that adverse outcomes include lower birth rate, shorter birth length, smaller head circumference, and still birth.

Some years ago, your CEO, Geoffrey Bible, stated twice during a shareholders' meeting that he would advise pregnant women not to smoke. Given this data that has come out this year that secondhand smoke around a non-smoking pregnant woman can significantly harm and even kill the fetus, would you as the current CEO go further and advise people not to smoke around women of child bearing age?

Michael Szymanczyk: Well, thank you very much for your question Anne, and thanks for being here today. I think that we're pretty clear on this subject. And you can find some information about this on the web. For some time our position has been that people should be guided by the public health authorities relative to issues of smoking on health including secondhand smoke. I also think that our position has been clear that pregnant women shouldn't smoke, and that children and pregnant women shouldn't be exposed to smoker's smoke, and that people should be mindful of that when smoking.

So I don't think there is anything new here. I think that we believe that it is appropriate for pregnant women not to be exposed to smoker's smoke. So thanks very much for your question.

We have a question over here.

The Rev. Michael Crosby: Thanks Mr. Szymanczyk. My name is Michael Crosby, and I am with the Midwest Capuchins, thank you. I noticed you saying something pretty quickly that is in contradiction to last week's meeting of PMI. At PMI, what -- I wasn't there, but I read all over in the press -- was that Louis Camilleri said that tobacco use is addictive, but it is not that difficult to quit. And here you, I think I heard you say, it is addictive, but it can be very difficult to quit. So, I'm sure you are going to be asked, does this put you over against Louis Camilleri? Why does he say it is not that difficult to quit, and why do you say it can be very difficult to quit? Would you elaborate on that a little bit please?

Michael Szymanczyk: Well, I would simply say that what I said is on our web site. So there is nothing new here, and this is the Altria Group Shareholders Meeting, and we discuss the business of Altria. But thanks very much for your question.

Over here, we have another question.

Edward L. Sweda, Jr.: Yes, sir. Edward Sweda, a shareholder from Massachusetts. I indeed also was intrigued by the statement from Mr. Camilleri, who of course, was the CEO of this company previously. It is interesting also in the context that as you know, in Florida, since February, 43 of the Engle progeny cases have gone to verdicts down there, and 30 out of the 43 have come back as plaintiff verdicts. So, over two-thirds have come back plaintiff verdicts, and one of the cases on appeal, the case against Reynolds, has been upheld by an Intermediate Court of Appeals, which I think it is fairly a long shot that that would be overturned by the Florida Supreme Court -- they would have to essentially undo what they put forth in the 2006 Florida Supreme Court ruling.

So my question would be in this context, or actually perhaps two parts:
one if you could just clarify -- I got a sense that you said just a moment ago, correct me if I am wrong, is that you disagree with Mr. Camilleri's statement from last week that quitting tobacco use, that it is not that hard to quit. And then secondly, given the situation in Florida, will Altria at some point in the near future change its position of refusing to settle any of those Engle progeny cases? Thank you.

Michael Szymanczyk: Well, thanks very much for your question. I believe I answered the first question relative to Altria Group's position and statement on the subject of addiction, which has been on our web site for some time. Again there is nothing new here, I don't think. And relative to litigation, Engle in particular, you can understand that in great detail by looking at our 10-Q. It will give you the basis for why we believe that it is appropriate to do what we are doing relative to those cases. So thanks very much for your question, and for being here today.

We have a question over there.

Catherine Rowan: Good morning Mr. Szymanczyk. I am Cathy Rowan, representing the shareholder Trinity Health, and I just have a short comment to make. For several years, Altria shareholders and members of the Interfaith Center on Corporate Responsibility filed a proposal asking the Company to create procedures to implement internationally agreed upon core human rights conventions in the countries in which it operates, and to find ways to ensure that suppliers are enforcing those as well. In 2009, that proposal received the support of one quarter of shareholders.

The Company listened to its shareholders, and began to address concerns around the protection of human rights of tobacco farm workers, and we have been pleased to participate in dialogues with Altria, and see the company taking some first positive steps towards communicating its expectations in regards to suppliers, assessing suppliers practices and using third-party organizations to verify the results of those assessments. And based on those actions, we have decided not to refile that proposal this year.

I think everyone here knows that the product that this company makes can lead to death, and old time shareholders will know that my colleagues have been addressing this issue for decades. However, in this case we think it is good to balance our challenges with support for what the Company is trying to do to ensure human rights compliance, and monitoring within its supply chain. So we thank you for that.

Michael Szymanczyk: Well, thank you very much, and most of all thank you for constructively engaging with us. I think there are going to be places where there are disagreements between the Company and various stakeholders, but I also think that we can make progress when we constructively engage, and try and find things that we can do to make this situation better. So, thank you very much for your comments, and for your constructive engagement.
...

[Two questions from Davenport & Company, stockbrokers; another question from someone, about management]

Do I have another question over here?

Anne Morrow Donley: Thank you, Mike. Anne Morrow Donley again, and I just wanted to clarify what I had asked earlier, or your answer rather because you refer to the statement on the web site, and also you have a statement in the annual report about secondhand smoke, which never really says what you think or what Altria thinks beyond referring everything to public health people. I wondered if you would say whether you yourself as CEO would specifically address this about not smoking around women of childbearing age because of the damage secondhand smoke does to the fetus, including killing it. And whether you would then say that you advise people not to smoke around women of child bearing age?

Michael Szymanczyk: I think the answer to that question is again that people should be guided by what the public health authorities say in this subject. And I think they are pretty clear about smoking and pregnancy, and I think that that is what is important, and that is what people should listen to. So thanks very much for your question.

Is there another question over here?

[Note: The next comment, not recorded here, was from a shareholder who comes each year to express thanks for having a Hispanic on the board.]

I think that completes our time period. Is that correct? Well, well, then thank you, everyone, for your questions. They are very good questions, and I would ask now I think everybody has returned to their seats. Okay, we can move on. So, if you have a question that wasn't answered, that you didn't ask, but you still like to get the answer to it, I will remind you that there again is a comment card that is on your seat. You can return it to an usher. If you don't have a comment card, ask for one and they will give you one.

RESOLUTION Text and Altria's opposing statement given below
Michael Szymanczyk: Okay, well now here is a presentation on the shareholder proposal included in the proxy statement and vote on this proposal. We believe shareholders should vote against this proposal for the reasons set forth fully in the proxy. In the interest of time, I will not elaborate on our views today, but we encourage all shareholders to read the proposal and our response.

As has been our practice, we ask that the proponent limit of his or her presentation to 4 minutes or less and each speaker commenting on the proposal will limit comments to 2 minutes or less. We will devote no more than eight minutes to the proposal. We will use the lighting system to help keep track of time. The light will turn yellow when the speaker has 30 seconds remaining, and the light will turn red when a speaker's time has expired. At this point, the speaker should conclude his or her remarks and allow the next person to speak. Thank you in advance for your cooperation. The proponent for the proposal, please proceed to the microphone. Identify yourself and your proposal.

The Rev. Michael Crosby: Mr. Szymanczyk, as I said before, my name is Michael Crosby from Milwaukee. I am a Capuchin Franciscan brother, and we and other members of the Interfaith Center on Corporate Responsibility move the adoption of our proposal on page 75 that asks the board of directors to ensure that Altria stops the production of any its tobacco products with characterizing flavor added, as well as distribution and their marketing unless it can be proven by independent and evidence based research that this kind of characterizing flavors doesn't contribute to youth initiation.

Way back, I think it was somewhere in a study that I read as early as 1994 I think it was, 1992, Philip Morris then ... acknowledged in its documents that flavoring influences young people to smoke, and we know the Company has made very strong statements about it doesn't want young people to smoke. But we know that flavoring does make an incentive, or offer an incentive to young people, which otherwise wouldn't be there. And by smoking, nicotine is addictive, and addiction as you said is very difficult to quit.

And I would still like you to state why you disagree with Mr. Camilleri, because that part with your disagreement of how hard it is to quit, isn't on the web site. The fact that it is addictive is, but not why and why you disagree with Mr. Camilleri.

When you look at what this company is doing in terms of its competitor, I compliment you. You aren't coming up with all these different types of flavoring, but when you say in your statement and in our position, sir, that the Company's tobacco subsidiaries do not manufacture or sell any cigarettes with characterizing flavors other than tobacco or menthol.

And I haven't constituted it or deconstituted it yet, when you say it is only regular tobacco or menthol, and then you look out in the display booth, first of all, you have got all different degrees like a mint, and winter green or winter mint, and I am wondering, is this how you nuance the flavoring or what, I honestly don't know. It is an honest question, you don't have what is called used to have in terms of some of the flavoring and I compliment you for that at least I haven't found it. But in the old school there are all these like blackberry and cinnamon and things like that that a competitor has.

But I would like you to comment on how you then manipulate the menthol in terms of the flavor to get these different characterizing flavors around the word mint, wintergreen and so on. So with that I move our resolution.

Michael Szymanczyk: Okay. Thank you. Are there any comments on this shareholder proposal?

Anne Morrow Donley: Anne Morrow Donley, yes, and I would be very much interested in hearing your comments in response to what the Rev. Crosby has said. Also mentioning that there is a study that came out this year, the European Journal of Public Health and that noted that in the past, the tobacco companies including this one has looked at adding not only flavorings, and some of them are flavorings and some of them are chemicals that produce thirst, and that are appetite suppressants. Menthol is wrapped around those as well.

And we know that young women, teenagers often are looking at trying to suppress their appetites and lose weight. So I would hope that you would also look into that as well, and we certainly should support this resolution.

Michael Szymanczyk: Okay. Thank you very much. Are there any further comments?

Edward L. Sweda, Jr.: Yes sir. Edward Sweda, again a shareholder from Massachusetts. Certainly I would agree with Father Crosby that Reynolds American has been far more irresponsible in this regard than Altria, in terms of the use and abuse say of flavoring even up to the present time. I would just say nonetheless that it really -- it is a mistake for the Company to oppose this particular resolution. We do have ongoing litigation as you know, particularly the Department of Justice's racketeering law suit against the Company. The Company has already been established as an adjudicated racketeer in that case from a few years ago.

There are health issues involved, including corrected statements, and other issues in that case. I think the unwillingness to support such a very mildly worded reasonable resolution as this one is, I think is something that it can be looked at by the courts, lawyers involved in that case, and put the Company in additional negative light. So I would make that comment and really say that it is, certainly I believe in the shareholders interest to support this resolution. Thank you.

Michael Szymanczyk: Thank you. So thank you. All the matters to be voted on have now been formally presented for the meeting. If you need to do so, please complete your proxy card. After you have done so, raise your hand and the ushers will collect all cards and deliver them to the inspectors of election. Since all shareholders have had the opportunity to vote, I declare the polls closed. The ushers should now collect all the proxies and they are directed to deliver them to the inspectors of election for counting.

While the inspectors of election count the proxies, let me make a few concluding remarks. Altria historically has been a good investment for shareholders, and we believe the Company will continue to be a quality investment for the foreseeable future. We believe we have a diverse business platform with strong positions in the largest and most profitable tobacco categories, anchored by the best brands. We have a strong balance sheet, which enables us to return a large amount of cash to shareholders through dividends and periodic stock repurchases. We are well-equipped to deal with the changing regulatory environment and challenging legal issues, and most importantly, we have a talented Mission- and Values-driven organization.

Altria's performance is the result of the hard work and dedication of the employees across all of our companies. They work every day to accomplish our Mission, live by our Values, and responsibly execute our business strategies to create value for shareholders. It is a privilege to lead such a talented group of people, and I thank them for their efforts.

I also want to thank the Richmond [Virginia, U.S.A.] community, and all of the communities where our employees live and work, for their support. We will continue working hard to make them better places for all of us to live. Finally, I want to thank you, our shareholders, for your continuing trust and support. I speak for all employees when I say we will continue working hard on your behalf to deliver superior returns.

I now ask that the inspectors of election deliver the report to the corporate secretary.

Okay, Brandt will you please read the report?

Brandt [W. Hildebrandt] Surgner, Jr: The inspectors of election have completed the preliminary count on the vote, which I have received. The preliminary voting results are as follows. Each of the nominees for director has been elected with more than 87% of the shares voting for their election. The selection of PricewaterhouseCoopers as Altria's independent registered public accounting firm has been ratified with more than 98% of the shares voting in favor.

Shareholders have approved on an advisory basis the compensation of the Company's named executive officers with more than 93% of the shares voting in favor. Shareholders have voted on an advisory basis that future advisory votes on the compensation of our named executive officers should be considered annually. Of the shares voting, 69% voted for an annual frequency, 2% voted for a 2 year frequency, and 27% voted for a 3 year frequency. The shareholder proposal has been defeated, 97.5% of the shares voting on the proposal voted against the proposal, and 2.5% voted in favor. That concludes the report.

Michael Szymanczyk: Thank you Brandt. Please file the inspectors report, the oath of the inspectors of election, their certificate and the proxies with the records of the meeting. We will post voting results on our web site with a press release following the meeting and final voting results. it will also be filed in a Form 8-K. after the board reviews and considers the results of the shareholder advisory votes, we will file a Form 8-K later this year reporting our decision on how frequently we will include a vote on the compensation of our named executive officers and future proxy materials.

I want to thank everyone for coming today. Please travel safely on your way home. I declare the meeting adjourned.

Resolution -- Address concerns regarding tobacco flavoring
The Province of St. Joseph of the Capuchin Order ... together with five co-proponents, submitted the proposal set forth below. ...

WHEREAS, in November, 2010 the Conference of the Parties (COP) to the WHO [World Health Organization] Framework Convention on Tobacco Control met. This included representatives of Altria. A key element for discussion involved Article 9 involving regulation of the contents of tobacco products. According to Taco Tunisian, Editor-in-Chief of the industry magazine, Tobacco Reporter, "the term 'contents of tobacco products' is generally understood to refer to tobacco flavors." He adds "Disturbingly, many in the public health community appear unable to [or] unwilling to distinguish between characterizing and noncharacterizing flavors."

His editorial seems to support the banning of certain additional characterizing flavors that "make cigarettes more attractive to children and thus contribute to smoking uptake."

The United States Food and Drug Administration has shown that the smoking of flavored cigarettes is far more popular among younger people than among older people. It also noted that a March, 2008 poll that found that one in five youngsters between 12-17 had seen flavored tobacco products or ads, while only one in 10 adults reported having seen them. It also showed evidence that youth between 13-18, 52% of smokers who had heard of flavored cigarettes reported interest in trying them and nearly 60% thought that flavored cigarettes would taste better than regular cigarettes.”

The FDA also has stated that an important way to reduce the death and disease caused by smoking is to prevent children and adolescents from starting to smoke. Studies have shown that 17 year old smokers are three times as likely to use flavored cigarettes as are smokers over the age of 25. In addition to being more attractive to young people, flavored products make it easier for new smokers to start smoking by masking the unpleasant flavor of tobacco. Studies have also demonstrated that young people believe that flavored tobacco products are safer than unflavored tobacco products.

RESOLVED, that, because youth initiation of tobacco products is influenced by their flavoring, shareholders request that, within six months of Altria's annual meeting, the Board of Directors move to ensure that Altria stops the production of any of its tobacco products with characterizing flavoring added, as well as their distribution and their marketing, unless and until it can be proven by independent and evidence-based research that such added characterizing flavors do not contribute significantly to youth initiation of tobacco use.

Supporting Statement

Characterizing flavored tobacco products are just as addictive and have the same types of harmful effects as regular tobacco products. Removing these flavored products from the market is important because it removes an avenue that young people can use to begin regular tobacco use. Altria management says it does not want to influence young people to use its tobacco products. The FDA has said that the removal from the market of tobacco products that contain certain characterizing flavors is an important step in our Nation’s efforts to reduce the burden of illness and death caused by tobacco products. Support for this resolution will be an important step in ensuring that this goal can be achieved.

The Altria Board of Directors response, pages 75-76 of the Proxy statement.
The [Altria] Board recommends a vote AGAINST this proposal.