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A sincere tribute "A smart friendly package" Forbes Magazine called Lorillard Annual Report for 1950, naming it tobacco industry's best. President Kent (right) and Executive Vice President Ganger (left) accept citation for report front publisher of Forbes. `jOUR MANAGEMENT wishes to express its sincere ap- npreciation of the friendly interest shareholders have show in the operations of P Lorillard Company. This concern has manifested itself by constantly increased attendance at Annual Stockholders' Meetings, free exchange of opinion at these meet- ings and prompt return of proxies by those who find it impos- sible to be present. We have been most gratified, also, by the salutary reaction to previous Annual Reports. Both our shareholders and the financial press have commented favorably on their complete- ness and clarity. Management will continue to give you, as clearly and concisely as possible, all of the information you want and require concerning the fiscal health of your Company. And, particularly for those new stockholders who join the ranks of our Company-owners each year, the Report will continue to detail Company operations, management, products, policies and principles. To each Lorillard stockholder, large or small, your Manage- ment wishes to express its appreciation of the confidence you have evidenced in it by investing in our Company. You may be sure your Management will do all in its power to make that in- vestment worthwhile, to prove suitable guardians of that trust. 89300834 President H. A. Kent (left) dis- cusses Company's fine sales rec- ord in past and outlook for future. Shareholder questions Executive Vice President R. M. Ganger re earnings, dividends and financial status. At last year's Annual Stockholders' Meeting, P. Lorillard Company Directors and Officers greeted the largest turnout in Company history. Tax situation evokes rueful smile from Vice PresidentHalleY (center) and stockholderx ....,.:,

P. Lorillard Company Annuai Report 1951 OFFICERS HERBERT A. KENT ROBERT M. GANGER TODD WOOL . . . WILLIAM J. HALLEY FRANK HOPEWELL IRVIN H. PEAK . . GEORGE 0. DAVIES . . . . . . . President . Executive Vice President Vice President and Secretary Vice President Vice President Vice President . . . . . . . . Treasurer DIRECTORS JOSEPH J. BLACKNALL MELVIN E. DAWLEY ROBERT M. GANGER LEWIS GRUBER WILLIAM J. HALLEY DONALD A. HENDERSON FRANK HOPEWELL ALDEN JAMES HERBERT A. KENT HARRIS B. PARMELE IRVIN H. PEAK F. GLADDEN SEARLE TODD WOOL GENEItA1. COUNSEI. - Perkins, Daniels & Perkins TItANSFF.It AGENT -The New York Trust Co., NewYork,N.Y. R EG I STIt A lt -The National City Bank, New York, N. Y. EXECUTIVE OFFICE-II9 West 40th Street, New York 18, N. Y. CORPORATE OFFICE-IS Exchange Place, Jersey City, N. J. ~ ` L.

1951 1950 WE RECEIVED From sale of our products . . . . . $188,447,431 $167,936,931 OUR COSTS WERE Leaf tobacco, wrapping and other materials and services bought from suppliers ... 73,576,722 62,919,093 Wages and salaries paid to employees . . . 16,544,642 15,073,258 Taxes paid to Federal and State Governments 92,383,768 82,502,981 Other miscellaneous costs - net ..... 815,827 703,831 These expenses totaled ... 183,320,959 161,199,163 LEAVING US A NET INCOME OF 5,126,472 6,737,768 Distributed as follows: To shareholders as dividends 4,355,427 4,842,212 Retained for future growth 771,045 1,895,556 PER COMMON SHARE* Net earnings . . . . . . . . . . . . . 1.78 2.69 Cash dividends . . . . . . . . . . . . 1.50 1.85 Reinvested in the business to furnish better facilities and to use as working capital .. .28 .84 Taxes . . . . . . . . . . . . . . . . 37.01 36.72 Book value . . . . . . . . . . . . . . 22.73 22.73 SHAREHOLDERS' INVESTMENT IN T H E B U S I N E S S ......... 66,549,877 60,876,009 Was supplied by: Preferred shareholders . . . 15% 16% Common shareholders . . . . 43% QD 39% Retained earnings . . . . . . 42`Jo (p 45% W 0 ' Based on 2,496,282 shares in 1951 and 2,246,682 shares in 1950. Q X W ~

H. A. Kent, President, P. Lorillard Company since 1942. IFIear Shareholders: jYTE HAVE prepared a very informative annual report, covering ~/ our operations during 1951 and outlining, in part, the formula for further progress in 1952. By way of comparison, we have taken from our Company archives and are showing here our Annual State- ment covering the year of 1913. In that period, little knowledge of Company inner workings was imparted and no spotlight focused on Management. Those days, we are happy to say, have long since gone, and today constructive thinking and stockholder-enlightenment are the rule. Although it is impossible for us personally to interview each of our stock owners, the report you are reading has been written in a manner that as closely approximates such an interview as possible. The results of our operational program during 1951 make possible Annual report of 1913, folrr-page filldcr typified company statements of the era. On two pages is compressed all infrlrrna- tion early 20th century managements chose to share :cith stockholders of period. this gratifying statement: We have closed the best year in Lorillard history. Old Golds' growth, in percentage terms, was greater than that of any other leading standard size cigarette. Moreover, in the aggregate, Old Gold enjoyed a percentage growth considerably greater than that shown by the entire cigarette industry. The Company's dollar sales of $188,447,430.83 represented a new high record in the Company's history. The net income available for the common stock amounted to $4,440,472.28, equal to $1.78 per share on the 2,496,282 shares of common stock outstanding at December 31, 1951. This compared with $2.69 per share in 1950 and $2.73 per share in 1949 on the 2,246,682 shares of common stock outstanding during those years. Our meeting this year introduces an Amendment to Article XII of the By-laws, "Incentive Compensation for Officers and Key Personnel." The purpose of this change is to provide, under current conditions, substantially the same formula for incentive compensa- tion as was originally adopted by the stockholders four years ago. 3 1P. Pr Crtr, N. 1.. N.:.cll ru, r9~1T........M....1..... .r. TM Tn.wrcr n+P.nfullY roM•ll. ..lalrm~n nf Ihe Rn.n[iJ aqMitlw nf )nur CanPnY u d lh. rbre ur M1unine•. DeremM ~r, i9~} A. rry./ml M IM Trea Indenlere .he C.e...nlr Tn•a Ca.p.nr• Tru.aep. Pu„hued.M..naelYd T'w [:M.I PmA. n, tM1i. ~ror03la' TM diRe.eme~ Eel .n ryr'ra K.nA awl nf II e nwM. ro Wrthuad h.. 4rn .nittm nR .Ln enl.n... The L•hrnun & WII4rorn Tdarm Cunpwr. Lv.nrrlr IM fablAi.rN. M IPI. CmmqnY. hu L.n ..w.d nP n.. p~ r .v4nnllun .rnt I. q.nlN . M IM n..rohe. ~~f Ihi. ~ xnnrcro~ ~•rmm. n~ ni. a i~:rcmmhrn>I> n.>.I The w~ewflheln,nhe• Awhnnl1 rhn~y~. nn.l ex}rnr.nl,h.m.i•n,wnn ....... µY~T.wuq 1'mn~n. nn }~ (LJ•1 14•nl. In~nh.w.l nn•1 ...n..lh.l IT.YMt:.n t':1•ul~•I.II ,,,r~.l flnrnn,n~n}gu.:idn.~d. trr,t.Prnr.n Io11r,.r n µaar/ T.. I~.LI 14•n~l.l^~nha+.lnia In,rm, hn Il,n ,m. ,,. f I IhPI },m n~ IL:L1 I.n.l. 1.IA',NP Y,In,Pi4:a. dUnn r.rydi,nl.nl.,a IL nuh .n I'n4.n.l !c.. TPI ~1'fM Yn}: r19.P Nrt nl'I•li~nl.l•~v. VnrLln. A•..wnr -~- ~ }.v,Y.v:~.I:wI1 !W,I~Iu. IMeml.. YI, IPIY. .,. ITlln~n!'•• Mlvrf:- Ni.i.L,nLn~ .inr an• Trn. . . 'n.1ud.nre sh- i6 hnn.ilh rol.niu..l. 1YNN n 11nCIT, Tn.nrn P. Lorillard Company FINANCIAL 9TATEMENT 1krrwAr)r, rPl/. n.nl 4amr, N.<mn<r,, P'ixl.rr,, ne. _. ,v:/~iP.Pm /P L.ITnlnmx Mnnulrwml •SucP, f),.nlinP 4nl.plien e4~............ Mmn~Pl9 Y SueM. in (hlx•r Caminni.w , Tnxlr~n.rk..ml Nmn.l• .... .......... I9.mP11:•}.41 CMI, ... _ . ........ ........ ..... Ip}I.TYn.Yv Ao.,.m. nnd Nal. w-.nla........... P.wn,leY.n T••Inl Awu }e,l;YV4 jIP2/rl .ununu: ryanl FLnA I'n~l.,n.l ........ . ...il1.Tn},nMm .nnn•m ... .......... 1:,.1'd~MF~M T: Ih.l~l Iu.,nl. ........ .............. In,Tn1WI-16l ;,;/InlAlhnnl. _. ._ ~nIT,,:.,lu A...r.- Inn.na ~n }; rvn.l., Lnrad, Aln~l L IPII . ........... . f1.9n,1AT.lY A-n..l Ini«••.. •,n r N,n„I. L1-nhle Y,iun.r, AAreninlnP, rle }I,tM.I1Pf.a/ Am.nnl.-lllill.l'n,ad n. 4,1?T~InN1 lLn2P,PPe2P T•nnl lenhilni,. µ_ LP6P,fMl.YR snml.. ~uns.d~P.4a

MILLIONS OF 'GROSS SALES DOLLARS A ten-year comparison of inventory with sales. Federal, state, and local taxes Cost of leaf tobacco, wrapping, and other materials and services (bought from others) Wapes and salaries up to $5000 (directly concerned with production) Saiaries of;5000 and over (manayerial and all offwers) Amount set aside for machines and plants wearing out (i.e., depreciation) I TOTAL INVENTORIES 1942 1943 1944 1945 1946 1947 1948 1949 19 50 1951 Amount paid to the owners of the business (dividends to stockholders) Retained in the busineu for future needs and improvements 101 I oG 1o OQ 07. 54¢ .246¢ .43 2.31 .41 49 02A 39l 054 Distribution of the sales dollar. Since that time a number of key people, all specialists in their fields of scientific management, have joined with us. The incentive compensation, as adopted, proved most helpful in meeting competi- tive compensation challenges-in attracting and retaining the key people of specialized management talents, upon whom the future growth of your Company will depend. However, due to one phase of the original Incentive Compensa- tion Plan, these key personnel are now being seriously penalized. Although their efforts are already reflected in our increased cor- porate strength and increased volume and sales position, their yearly earnings, be/ore taxes, have decreased substantially. Quite a few other corporations, including two of your competitors, facing this same situation, have made the necessary changes in their Incentive Compensation Plans and rectified their situation. The proposed Amendment, therefore, simply brings your Com- pany, in the face of the current corporate tax situation, again into a favorable competitive position on compensation for key people. After taxes, the net cost to the Company would be approximately $27,000. !Vho Owns Lorillard We like to repeat our stock ownership setup. Approximately 73% of the shareholders own 100 shares or less. This means we are financed by Main Street. All across the country the friendly mail carrier delivers our dividend checks at the modest homes located on that famous thoroughfare. We like this situation because it makes small holders important. It makes each proxy, for however few shares, spokesman for an individual who works, saves and invests in his future security. It would be most gratifying if all shareholders could meet and talk freely and frankly about our business at the Annual Meeting. Inasmuch as this is impossible, may we request your proxy, in the event you are unable to be present. It is your way to approve or disapprove of our stewardship. At our meeting just a year ago, an Amendment to the By-laws, permitting the transfer of our Annual Meetings from Jersey City to 4 New York City, was approved. As indicated in the proxy we will meet 89300838

to discuss this report in New York's llotel Astor on April 1st. Join us if possible; if not, by all means please sign and return your proxy before you set it aside. It takes a great deal of capital to meet the growing demands of our Company - to keep it modern and to protect it against the risk ever present in a growing business. We in the tobacco business have a problem peculiar to our industry: Nature and the government are both our partners. The first named, through crop failure, could cause a most devastating hardship. As protection against such an event, sizable sums are invested in storage warehouses where large supplies of leaf are stored and aged. The Government Role Our other partner, the government, really holds the controlling interest and sets a minimum price on leaf which serves as a guarantee to the grower. In the auction sales, this minimum price serves as a base figure and, from there on, competition regulates price. When tobacco, which is a cash crop, is ready for manufacture, we pay our governmental partner for Internal Revenue stamps in advance of production. The finished product is shipped to various warehouses for distribution to wholesale and retail outlets. Usually it is a matter of several weeks before shipments are invoiced and paid for. Thus, in our role as processor and tax collector, we must wait these several weeks to recover our investment, meanwhile acting as banker to the government. Our one regret is that the current tax situation, along with in- creased costs, made impossible the payment of a more substantial year-end dividend. Like others, your Company's normal tax was increased to 52% effective April 1, 1951. The excess profits tax rate of 30% was in effect for the full year of 1951. Then, of course, on the current earnings after taxes you must pay another tax on the dividends you receive. We feel this double taxation on corporation earnings distributed as dividends is unfair - and unless some relief is secured, the induce- ment to invest in business will become increasingly less attractive. If this happens, the foundation of our country's strength and growth factor would be weakened considerably. There are organizations, however, dedicated to the elimination of the "double take" on divi- dends. They are doing a most constructive job. When the people affected manifest real interest in such organizations and place more of their support back of them corrective means can be obtained. f'rire f{eliefNeeded On last November 1, in keeping with the government's new tax bill, the Internal Revenue tax on a package of cigarettes was in- creased from seven to eight cents. At that time it was hoped an industry price increase would also be granted. Although this did not materialize, we have high hopes that the O.P.S. will recognize and approve our appeal for relief and permit product repricing at a figure sufficiently high to absorb the ever-mounting costs present in the conduct of a going business. Anyone questioning the need for such action need only consider that the wholesale price of cigarettes, including tax, has increased only 37% since 1939. During the same period, wholesale prices for other commodities rose an average of 131%. We are grateful to all stockholders for their fine support of Man- agement. Some three thousand new names were added to our group of shareholders during 1951, an expression of confidence we greatly appreciate. To new shareholders, and especially those who have joined us since last April, we welcome you into the Lorillard Family and want you to know it is our custom to mail shareholders a post- meeting report containing highlights of the happenings at our Annual Meeting. America is going to continue growing, continue expanding, con- tinue to be the dynamic bulwark of a free world. P Lorillard Com- pany, as the oldest firm in the oldest industry in the country, has weathered all economic disturbances during the past 192 years and looks forward to the future with greater strength than ever before. Respectfullv submitted, 5

General Sales Manager Levis Gruber (seated, behind desk) and sales executives responsible for sales of all Lorillard products except cigars. These were the sales accomplishments IN 1951, your Company's major brands continued to show substantially greater increases than the average for the industry. Old Gold Cigarettes, again this year, continued to grow in sales. In the most highly competitive field, standard size cigarettes (70 mm.), your Company's leading volume brand attained a new record high. Embassy Cigarettes, your Company's brand in the increasingly impor- tant king-size market, increased over 100% in 1951. Embassy's encour- aging growth has led your Company to plan intensified merchandising for this brand in 1952. Muriel Cigars, our leading cigar brand, ran well ahead of the preceding year and showed a much larger percentage of increase than the industry as a whole. Headline Cigars, which late in 1950 were increased in price from 50 to 60, showed a smaller unit volume, but sales results were more satisfactory from a profit standpoint. In the last quarter of 1951, New Currency, an economy cigar brand re- tailing at 50, was introduced in selected markets, for testing purposes. Early reports are encouraging, and a further expansion is planned for 1952. Industry sales of smoking tobacco and loose-leaf chewing tobacco again continued downward in 1951. Your Company's important brands decreased slightly, but at a rate less than the average for the industry. Exports, though continuing relatively small due to currency restriction, took a slight upturn last year. A large percentage of our products exported go to the armed forces, wherever they may be. Our Sales Philosophy From a sales standpoint, 1951 has been a fine year for P Lorillard Corn- pany. It continued to be a period of changing patterns and shifts in mass retailing. We believe our shareholders would like to know that Management is fully cognizant of the powerful trends affecting mass retailing (luring the past decade and has taken steps to meet and make the most of them. Your Company's sales philosophy has been-and is-flexible, based on a clear, straightforward understanding of developments taking place in sell- ing today. 6 Scientific training and merchandising programs have been instituted. 89300840 Cigar Division has four top nten, rvith Vice President Frank Hopewell (scated) in charge as General Manager.

. These have given rise to a completely new order of sales representative. Today the Lorillard sales force is composed of merchandising specialists, experts in modern merchandising and promotional techniques. These spe- cialists are equipped to best serve the best interests of 1,300,000 retailers who handle our products, to help them streamline and make more profit- able their handling of packaged goods. During 1951 alone, important innovations and instrumentations added to our sales plans have proved eminently successful. Still others are planned for the future. Through modern selling and merchandising methods, your Management looks confidently to the future, prepared to meet the challenge of future trends, developments and changes. % OF 1941 SALES 400% 300 % RELATIVE GROWTH OF TAX-PAID SALES SINCE 1941 STANDARD SIZE (70mm,) CIGARETTES GG,? O ~~ OTHER 70mm. B RANDS Source: Old Gold, P. Lorillard annual sales figures. Other brands, H. M. Wootten annual published estimates. '41 '42 '43 '44 '45 '46 '47 '48 '49 '50 7en-vcar rnrnprrrnlit•e sales chrrrt s/rou's suLshutlial Frrnrrl/t of Old Gold in relation to olher popular standard-size cigarettes. '51 7 Sampiing activities ONE OF THE MOST PROFITABLE and effective techniques employed by your Company's Sales Department is Consumer Sampling. A tremendous good will and sales builder, sampling is today one of the major functions of all field personnel. More and more of the specialized sampling work is being handled by your Company's 27 talented girl repre- sentatives. Sampling properly done along carefully planned and proved policy lines by these attractive Lorillard salesgirls has proved highly successful, particularly in connection with military installations and service personnel, n ® Sampling emphasis is placed on military personnel, like National Guardsmen, right. Hospitalized vets always accept free Old Golds from girl samplers gratefully, r1 ~~1'-pv\ At Army medical centers, girls supply Old Golds, n touch of world 'butside" to potients, Mess halls welcome Old Gold girls and their wores ot "chow" and all other times. aww~a a- - CH

THE LEAF Department determines your Company's re- quirements for tobacco of all types, based on current and prospective sales, amount of leaf in storage, probable acreage to be planted and trends in prices. It also processes and stores for proper aging all leaf tobacco, always maintain- ing sufficient inventories to fill at least a two-year manufac- 8 turing requirement for all of your Company's products. At tobacco auction, Executive Vice President R. M. Ganger and Director of Leaf Purchases 1. H. Peak study leaf which will next go to Lorillard plants. lie price of leaf went up in 1951 And again the record high is supported by government price maintenance practices Greater quantities of cigarette tobaccos were purchased during 1951, due to the continuous and substantial increase in the sales of your Company's cigarette brands. During 1951, also, tobacco prices paid to growers con- tinued to advance, due primarily to the government policy of maintaining prices according to parity. The government raised average support prices on flue- cured tobaccos 50 per pound, and our costs for best ciga- rette types reached new heights, despite the fact that the 89300842 Giant hogshcads of tobacco roll into Companr s ntanr rrarehouses to age and mellorc tu o tn four rcars. Bright leaf (below) and Burley tobaccos comprise rast bulk of six domestic types bought by Company.