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-6 . .E1T14 -LIQ uF..:r • ,...11 ~~. - . i ' t''•." ~ OR THE YEAR ENDED D~C. 31, 1955 ;;.,; r . .. ,, Wtt.t.tAM J. HALLEY . IRVIN H. PEAK . . . . JOSEt'tt J. IIt.AChN,a.t. . OFFSCE RS Presitlcno . . .. . . . . . . . Executive Vice President Vice I'resitlcnt and 1)irector of ldanufacttn'ing LEtivts GRutztaz . . . . . ., . . . . ALDEN JAMES DR. HARRIS 13. hAR\lE1.E. GEORGE Q. DAVIES . . . ANNA F. W2)a'SSNP.R Jt)ttv.l. D,.>its,- Vice President and Director of Sales Vice 1'resicletu and Director of :\clv.crtisin7 Vice I'resiclent and Director of Research 'I i-easurer Secretary Cotupt rctller OTHER CORPORATE 2NFORMAT=ON Getict•al Counsel . . . . . . . . . . . . 1'erl:ins. D:uticls l 1'crkins Audltors . . . . . . : . . . . . . . . . . Haskins \ Sclls Transfcr Agent ...-I'hc New York Trust Comp:uty, New York, N. Y. Kc;{istr:tr ...Thc First N:uional!City 14ank o0Ncw York, Nt•w 1'brk, N. l: Adhrrtisin; Agcncics. ...... Lunucu l R'ewcll. luc.. (Ot.u Gut.u) : Young C RubicaM, Inc., (I:exr) ; Albert Frank-Gucntltcr Law, Inc. (Finctncial) Exccutuve Ot6ccs ....... 119 \1'.est•tl)tlt Street, New York 1S„N: Y. Corporate Ollices ........ 15 GxcLan"c I'larc. Jlersey C:ity, !\'. J. Alanufacturino Plants .. lr rsev City, i'..(.t Lrntisrillr l:y.; Richnuond. Va. Leal-Storage Wareh[)uscs . LOuls\'l1lr. Ky.; Ric6nmuil, V;r.;1'.exington. Ky.; Danville. V:t.; Lancaster. Pa.; Madison. \Visc.: LxCrcissc. 1V'isc.: Evansville. Wisc.: Wiuclsou. Cottn. Stemtneries . ..... Louisville, l:y:: Lcxiitgtou; Ky.: llaneilte: Va. Field and llisisium Salcs Ollices . . . . . . . . . ln :11l l'6nrilra Cities Subsidiary . . . . . . . . Pcdcratl Tin Cunthany. Inc.. Raltimore. Md. CONTENTS Letter to Shareholders - Page 2 Financial I-I i~lilii Jltts Page 4 Sales hage 6 Advcrtisin- Pu~e 8 Manufactttring Page 12 I .ca' Page 13 Research Pa~;c 14 Balance Sheets Page 16 Earnings Page 18 'l he :\trntt:tl \Ivi•ti'n. ufl.nrill:ud .h:nc•It-llli•r, will Iir Itrltl un \Ipnil 3, 1956. :u tltt• 13arhizutr-1'lart I Itttel in New 1'orl. l:it}. llcctiny titnc will ltc l I r1.11. ,tntl iGtuts will Itu (lutietl. promlxly at 11: 1 5 u> kccl) the session free of interruption. \totice of tlte Meeting is cncloscd'• with this 12cluirt, alttttg with I>r<txy aucl Itrcixy stateiotent. 1i>ur proxy is your way to approve ot'r tli.altltrtort• c,l 11:ma~t mt ut's sti•.W:u-tl0til,. limur ct>tt• is thi'rclitn• iutl,nrt:tttt Ixrr.nn- ally to llana;;entent, whether it be for livcsltarc. ()r ri,lllltl shares. lf vou are utt:tblc to attend otrr :Cnnual 1lcetinS on April 3 in New l'urk, ltlt°ase sign ancl t'ctttrn your proxy before )'+ttt put it asitlc. It Iriil let us know of yonr continued interest. {

r.~ i t_:3 To My Fellow,Shareholders : The year 1955 for Lorillard, while one of the most competitively challenging in our history, was marked with many constructive accomplishments which are summarized in~this Annual Report of your Company's operations. Shareholders will- be pleased to know that, despite the in- creased competition of more than a dozen new brands, or types and sizes of cigarette-s, following the recent controversial dis- cussion about smoking,- most of the established name brands, such as Old Gold, continued to demonstrate their leadership. .Sales of Old Gold enjoyed a 6%o increase in 1955. However, while Lorillard's 1955 sales were reassuring, to maintain our position against enterprising new challengers required certain strategies which have resulted in somewhat smaller earnings. Total dollar sales of all Lorillard prod- ucts were $228, 268, 392, off only 1% from 1954, but earnings before special credit were off 11%. Net earnings of $6,596,000, or $2.07 per common share, compared with 1954 earnings of $6,342,143, or $1.98 a share, but as shareholders will note from a review of our statement of consolidated earnings on Page 18 this figure reflects a profit from the sale of a faaility no longer needed. The Board of Directors declared four interim dividend pay- ments of $.30 each, and a year-end extra of $.15, for a total of $1.35 per common share, based on earnings before the special 2

credit mentioned above, thus continuing the policy of making the percentage of earnings to be distributed as dividends as liberal as current and projected operations permit. In the last ten years Lorillard has paid out an average of 72% of earn- ings as dividends. The year 1955 was also a year of consolidation, growth~and progress. It was a year in which your Company witnessed the advancement of its modernization program, improved production efficiency, new accomplishments in research, and a strengthen- ing of our corporate structure. These phases are more fully discussed on the following pages of this Report. Shareholders will be particularly interested to know that we completed financing of construction of our new Greensboro plant which is expected to be in operation by early Summer. Your Management negotiated a series of notes for $10,000,000, cov- ering an eight-year period, at the advantageous rate of 3% per annum on maturities falling due within the first five years, and 3Y4% per annum on the remaining maturities. In 1955 we negotiated for the sale of our cigar business, which had not contributed greatly to the Company's earnings, and shortly after the first of the year we disposed of it under what we consider favorable terms. Lorillard's aim in the months ahead iill be to continue our program for a strong and vigorous corporate economy. Looking further ahead to when current planning, which competitive logic prevents our-revealing here, becomes a reality, we see expanding markets ahead and a future bright with promise and opportunity. Respectfully, ( President 3 ~

... J'~".._ ..i:`. ._. ..~~ ~__, 1 _. ~ .. .. . 1955 1954 Sales . . . . Net Earnings . Resulls per Co»tinion Slrare: $228,268,392 $ (i ,5'.-(i,(100 $211.0•1li,G95 $ .342,14:1 (i Net Barnings . . ~.07 5 1.98 Dividends . . . 1.35 1.60 Book Value . . 224.97 24.25 Current Assets . $158,294,64:3 5 1(i:3,11 6,505 Current Liabilities 45,843,067 54,239,799 IT'orking Capital 112,451,576 103,876,796 Ratio . . • • .- 3.45 3.01 Long-Term Debt . . . . $ '59,375,000 $ 51,000,000 Shareholders' Investment 81,028,497 78,969,754 Number of Stockholders 28,231 28,453 NrimLer_ of Employees 5,578 I 6,126 F:;c ~ ti r tu ~7;;tl+t~slt:tr , INCOME AND OTHER TAXES 3.87¢ ';:;:::.:?::::;:;;;<'~;:~ ;;..;;-; _. ..... & DEPRECIATION 40.11¢ PREFERRED & COMMON' DIVIDENDS 1.99¢ TOBACCO, OTHER PURCHASES 4

RELATING TO OPERATIONS t 3enr h:ru-11ieigss l rtcornc and lierdcd rVt't . before 7ir.crs I{XccsS Dcc.31 Sales Or1 IrlcoUrC 1'ro/its liiacs 1955 $228,268,392 $13,098,500 $6,502,500 1954 231,046,695 12,629,143 6,287,000 1953 253,933,462 18,787,571 11,594,000 1952 214,508,482 11,640,942 5,940,000 1951 188',447,430 10,943,472 5,817,000 , 1950 167,936,931 12,632,768 5,895,000 1949 153,500,123 11,211,133 4,387,000 1948 140,279,236 9,143,839 3,498,900 1947 127,919,655 8,946,625 3,430,700 1946 124,047,263 5,661,513 2,149,300 N(°f' Earniir3s $6,596,000 6,342,14:3 7,193,571 5,700,942 5,126,472 6,737,768 ' 6,824,133 5,644,939 5,515,925 3,512,213 RELATING TO BALANCE SHEET liiu rring.s l)irdilcnrls f,cr Pcr (:rmuuure " (:uwrnon Share • Slmre $2.07 $1.35 1.93 11.60 2.28' 1.60 2.01 1.50 1.78 1.50 2.G9 1.85 2.73 1.75 2.21 1.50 ' 2.15 1.50 1.26 I 1.00 I'ropcrtV. Plant and liqrirprucnt At Total Dec.31 httterrtorics 1f i6 Ca rlcin; 1rital Gross dmorcrrt Net rt(Pcr Slra 1)cprccialiorr Irt Ilnnh, lSrlrra rclrolders' pcr Conr- vcsUrlcnl' tuon, Slrarc' 1955 i $140,988,335 ! $1 12, 451,576 $3 4,292,757 ~ $25,488', 7411 $8'.1 ,028,45)7 $24.97 1954 1 144,189,440 1 08, 87 (i,7S1G 2 7,518;0ki5 i 18,675,223 75 ,t.)G!),754 24.25 1953 135,727,170 1 11, 269,498 2 4,392,884 16,218,639 77 ,878,061 23.86 1952 125,008,096 ; 81, 369,651 2 ! 2.fi05,2`~2 ~' 15,085,544 67 ,820,512 23.24 1951 1011,005,679 ! 81, 658,130 2 1,342,441 ~ 14,200,835 66 ,549,877 22.73 1950 84,461,181 ~ (i<.1, 907,552 1 9,433,534 I 12',734.785 G0 ,87G;00S' 22.73 1949 74,9N92,955 70, 4:74, riy5 1 7,707,2 79 11,0i)4,041 58 ,980,453 21.89 O 1948 ~ 7.2,538,27:3 ~ 69, 537,669 1 i G,72G,5G 1 i 10,509,406 56 ,773,869 20.91 O 1947 73,237,247 ~ G9 803' 20:4 1 5 291 608 150 55 9,153 184,829 20.20 lN (i I 77.83.1,711 ! , (i9, , '171i,241 1 , , 4. ri8,l ,7:37 ~ , 8,4 5 G„311) ri:3 , ,724.799 19.55 tr~ • 8ascd on nuuslrcr oC shnres uutsliuc!Ing at cn(l of catar year. LORILLARD SALES OVER 10 YEARS tScole in m,N/on, ol,dolla r) . FIE LORILLARD EARNINGS OVER 10 YEARS (Scnl.Jn mNlionm.o/ doNa,r) LORILLARD NET WORTH OVER', 10 YEARS tScc1e in m,(rion of dollonl

F GROWTH OF LORILLARD FILTER CIGARETTES VS. ALL OTHER INDUSTRY FiLTER, BRANDS %.f 193t l.1.. lO[IlU1RD FIITINS 1 0% 1 slu•inkill~ market. iAII.rAID 3A1/?3 1037 1933 bwa: P. t..ip..d ..1wd fqv.. I...Old 0.1 1/. M. W..Ibs, I., 1.dv.1.9 i..wd.. .u •33 •3. '~/iG.. Ili.y a1.d R-M; ~. •33 Filter cigarettes in 1955 continuecl to gain in hohul.u-ity at alt increas- inogly accelerating r<1tee until today one uut of every five smokers prefers this type of cigarette. As a group, filter brands now account for more than 20°fo of all sal!es as compared with 1'0°Jo in 1954 and 3°fa in 1953. Your Colnpany's filter lyrant'1S'- OLD GOLD 1Pil"t'Lli KINGS ill tlle 1)OI)ul:u- pricefield and KENT iu the higher price prestige field-cun-ently hold approximately 10°Jo of tlie filter cijarette market in.wlticlin more than 20 brands compete fbr consumer acceptance. Early in 1955, when Ot.D Gc1LD FILTER KINGS were available at the counters of the nation's 1„i85;000 retaili outlets, we launched the most intensive sampling campaign in behalf'of this brand that the Sales De- Ixrrtment has ever aUteinptetl. This direct-to-the-smoker promotion was aggressively Jxlshed' tl.iroul;hc)ut the year and ive plan an extension of these efforts in 1956. Such' was the gratifying performance of OLD GOLD FILTER KINGS that althouo-h OLD GOLD kin; size sales held to about the same level as 1954, and OLD GOLD regular followed the Industry trend of declining sales for this size, the brand as a whole showed an increase over the previous year. Introduction of OLD GOLD FILTER KINGS meant a revision of our merchandisinc, fixtures, btu; since this was well planned in advance, all three sizes of OLD GoLD were prominently displayed in the important mass outltts across the country. New and excitinJ eye-trappinb animated counter displays were created to trioaer sales of all three OLD GOt.DS at other retail stores: - Ov.er-alli sales of KENT declined from 1954. Promotionat support of KENT in 1956 will be directed where the potential for preiniurn priced br.utds such as KrtvT esists. While Industry sales of chewing tobacco declined sliglltly, our brand L3LECtt-NuT, the leader in its class, enjoyed a small gain. Lorillard smok- inl; tolru.cn sale•s. like tllnse of tllc• rest of rhe Incllastry. dcc•l'ine•d in a fr

, Ceiling penrrrrrrls in this lar~e strf~rr-rnrnlirl callrrl' cvcry sJrofifrcr's atterrlion to Or.o Gor.ns. Tliis was unly one of nurny"rlramatically, new ir+-store fn'ourotinrrrrl ideas to tri~,rv sales at major retail stores. Nrtu rrrerchafrrfisirr; fislurrs f,ur cardoru of Ut!u Gus.u regular, hirrg size arrrl' filtcv' kings were devcln(rc•rl for major mass outlets to fncus atleritiort on Grarnl: KENT, irr tJie higlrcr firice prestil;e filter ficld• was rrciiirely provnnicd wGere its fiotcrrLinl seernerb greatest. Pbirrl-ofsulc couurlerr rlisldrrys ai"e 1,•nouru.sales Looslers: In 1955 mrurl^lrew ornes• irnrlrrrlirr$, Rn excilirr~ rrcw ruriurr+trul disfrlhy„ :ur rcrlsr clnfrc rl: II!ider rlish-iLutiorr in autbmatic vending uracliirtc•s for all brrrrids was orrc acrurnf)lisli,ucvrt iir 1935. C .~r

The central task of advertising is to create new cnstontat•s for our products, to prompt more smok- ers to say, "OLD GOLDS, plcase,"' when they step to the counters of the nation's 1,355,000 retail outlets. Cigarette smokers aren't often solel a specific brand at the retail counter. S:tlesninnsltip and selling,are all too rapidly, an(l unfurttutately, passing frotu tlle rc- tail scene. Zoday's consumer increasin,ly is a huy.er: he buys that which lie has been hreconcfitionecl to l)iiy becatise of a Ilc•lcwision c o~~untcrc inl, a niag:tzinc or nmslriper aclvc•rliu'uicrnt (w by a•Iiate'ver nicans the product story I)ec.olncs etched ou his brain. Cctlinw our larc-selling nie,s;ipe across to liiln be- c:oines more c•Ihalilc•ta~iii~ cacli ye:u•. 1)uring nornt;tlly competitive periods a sin~le ad- vertisino" cctttthaig"n tnay sttccessfuilly sl>an two, three or more years - as has often been our experience witlt, the steady jro«•th of OLD GOLD. In abnormttl tnnes - as in this t) lst' year of transition - qualities beyond the art and science of advertising are re- c1iiirecl: a,--ressivc aclaptahiility, an instinct for in- nov:ttion„ and above all tlte quality of remaining constructively cliscontentecl'L 'li) pncajcct Oi.n (:otm Fn:ri•ac Kt.cs onto tlhe scrcc-n of natio~nnl prnilrincurc :u a tinic wlien a clozen conipetitot:c sonrillt to clo tlie same demanded au ;ilcntnc•ss fur nioliiliitl' in cmnr liasic: ;tlplicctl. As 1wlits a tiinc ol"trausitiou We kept our ach•ertisina 8