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1958 Operations A SUMMARY OF THE HIGHLIGHTS OF THE YEAR 1958 1958 1957 Net sales . . . . . . . . . . . . . . . . . . . . . . Earnings before taxes . . . . . . . . . . . . . . . . Income and franchise taxes . . . . . . . . . . . . . . Earnings before preferred dividends . . . . . . . . . . Net earnings after preferred dividends . . . . . . . . . Percentage of net sales . . . . . . . . . . . . . . Net earnings per share of common stock . . . . . . . . Dividends per share of common stock . . . . . . . . . $556,045,710 67, 912, 008 36,689,000 31,223,008 29,761,821 _ 5.35°0 $7.60 $5.00 $570,384,860 61,894,607 33,621,000 28,273,607 26,812,420 4.70% $6.85 $5.00 Current assets . . . . . . . . . . . . . . . . . . . . $369,974,311 $416,457,954 Current liabilities . . . . . . . . . . . . . . . . . . 36, 920, 586 89,040,853 Ratio . . . . . . . . . . . . . . . . . . . . . . . 10.0 to 1 4.7 to 1 Funded debt . . . : . . . . . . . . . . . . . . . . 90, 000, 000 95,750,000 Capital stock . . . . . . . . . . . . . . . . . . . . 118, 820,150 118,693,125 Additional paid-in capital . . . . . . . . . . . . . . 19, 632, 691 19, 417, 405 Retained earnings . . . . . . . . . . . . . . . . . . 143, 729, 281 133,538,415 Approximate number of stockholders . . . . . . . . . . .l I- 46, 800 46,600 ~ Annual Stockliolders' Meeting The Annual Stockholders' Meeting will be held at 91 Sip Avenue, Jersey City, New Jersey, at 2:30 P.M., Tuesday, March 31, 1959. Proxies will be mailed to stockholders February 27, 1959. Stockholders who are unable to attend the meeting are urged to sign their proxies and return them promptly to the Company so that the stock of the Company will be represented as fully as possible at the meeting. Abotd Stockholders Today your Company is owned by about 46,800 stock- holders. Holdings range from a few shares in the hands of thousands ofstockholders to many hundreds of shares owned by in%estmrnt groups, educational institutions, insurance companirs, trusts, estates and banks. About 79°~'0 of the total Common and Preferred Stock was voted by person or proxy at the last annual stockholders' meeting, March 25, 1958. TIMN 446215 1

4 0i Factories and plants of Liggett & M}•ers * Countries where Liggett & Myers firoducts are sold. Your Company today TIMN 446218

This report gives a picture of the Company today -a worldwide organization with hundreds of millions of dollars in assets producing billions of cigarettes for distribution and sale in America and over 105 foreign countries. Behind every cigarette your Company makes is quality of tobacco product and integrity of manufacture. The billions of cigarettes produced this year continued to measure up to our standard of giving the public the very best products of their kind. The following pages summarize how this is done. TIMN 446219 5 ,

6 Employees Many of our employees have started and grown up with the Company-their average length of service is well over 10 years. Their life work is the Liggett & Myers tobacco business. Here friendships are made and continue both on and off the job. The turnover of our employees is minor, for nowhere in the tobacco industry is there a more comprehensive benefit, health and retirement program. TIMN 446220

To the Stockholders A comprehensive, illustrated story of your Company's extensive operations during 1958, together with audited financial statements comparing 1958 results with those of 1957, are presented in this 48th Annual Report of Liggett & Myers Tobacco Company. Net earnings compared to 1957 were up 10% to $31,223,008, the highest in the Company's history. Earnings per share of common stock increased from $6.85 last year to $7.60, the highest for any year for the number of shares now outstanding. Net sales declined 2%% to $556,045,710. For the final quarter they were $144,062,495, up 6% over the final quarter of 1957. Fourth quarter net earnings of 88.637,586, equal to $2.11 per share of common stock, were 21% higher than the same period in 1957. There were increased economies and more efficient operation in all departments of the Company. For example, the Turkish Leaf Department was moved from Staten Island, N. Y., where rent and labor costs have increased from year to year, to our leaf handling plant in Durham, N. C., where ample storage space was made available. Turkish leaf is now handled more efficiently because of its proximity to the blending department and cigarette factories. For part of the year, the Company benefited from the higher selling price of Chesterfield cigarettes. Earnings were also helped by increased sales of smoking tobaccos and miscellaneous brands. There was a substantial saving in interest costs resulting from lower bank interest rates in effect during the year, and from continued reduction in notes payable to banks from $53,310,000 at the end of 1957 to $3,000,000 at the end of 1958, the lowest since 1940. There was also a further reduction in funded debt this year from $95,750,000 to $90,000,000. Looking ahead, the sales trend is up for our leading cigarette brands and for our principal brands of smoking tobacco. The only significant capital expenditure planned for 1959 is an addition to the Company's modern Research Laboratories in Durham, N. C.;'at a cost of approximately $1,000,000. No other capital expenditures of consequence appear necessary or likely in the foresee- able future. The Company's major plant facilities, as well as machinery and equipment, are either new or have been extensively modernized in recent years. Management commends the employees for their dedication and industry, and sincerely appre- ciates the continuing loyal support of stockholders. Respectfully, February 2, 1959 President TIMN 446217 3

FILTER CIGARETTES lks; 11 S TER fGiUARETi6."i ! T H F I l. ^ c R 5 E Nr  R A C L.. E T P i.. *% `1w"' B F 1 L T E R S HE TE~fIELD CHESTERFIEtD

Chesterfield's "Steve Canyon," introduced in the fall of 1958, is one of the great new television shows. Produced with the cooperation of the U. S. Air Force, it brings the highly acclaimed Chesterfield "A1en of America" promotion to life on the TV screen. "Alen of .-lmerica" commercials are the successful result of nationwide consumer research studies. L&.LI's "Gunsmoke" on Saturday nights, is the No. 1 television show in the cotvitry. No other program reached as mary people in 1958. Yust introduced on 1'oirr TI'screen are "Black Saddle" advertising Oasis and "The D..-l.'s .llan" advertising Chesterfield. See your local television listings for day and time. TIMN 446228 14

.Earnings 30 Net earnings for the year were $31,223,008, the highest in the history of the Company. They 28 amounted to $7.60 per share of common stock compared with $6.85 per share in 1957. The 26 ratio of net earnings after preferred dividends to net sales increased from 4.70% in 1957 to 5.35% 24 in 1958. 22 The net earnings for the past seven years are shown on this graph. 20 Sales Net sales for 1958 were $556,045,710, represent- ing a decline of about 2.5% from those of the previous year. All of this reduction took place in the first half of the year. Thereafter the sales trend turned upward, resulting in a very favora- ble showing in the fourth quarter. This chart gives you a record of net sales for the past seven years. Dividends In 1958 four quarterly dividends of $1.00 each per share of common stock were paid in addition to an extra dividend of $1.00 per share which was paid March 1. In line with the current policy of the Company there was declared on January 21, 1959 an extra dividend of $1.00 per share, payable March 1, 1959. The graph shows the amounts paid in dividends on the common stock during the past seven years. Taxes The tax burden continued unabated during the past year. For the year 1958 the Company found it necessary to provide $36,689,000 for Federal and State income and franchise taxes. Such taxes alone were equivalent to $9.36 per share of common stock. This chart gives a graphic comparison of Federal and State income and franchise taxes with net earnings after taxes for the past seven years. 18 1952 Millions 700 600 500 400 300 200 100 0 1952 1953 1953 1954 1954 1955 1955 1952 1953 1954 1955 1956 1956 1957 1957 1958 1956 1957 1958 1952 1953 1954 1955 1956 1957 1958 1958

Factories Air conditioning, superb lighting, excellent cafeterias and fully staffed infirma- ries give our two cigarette factories a_ hi~h standard of efficiency, safety and comfort second to none. A third factory at St. Louis, convenient to the burley tobacco growing belt, manufactures pipe and chewing tobacco,_ All storage and processing plants are strategically located for the most efficient and economical operation. In the Near East we have Turkish tobacco processing plants at Izmir and Samsun in Turkey, and Gavalla and Xanthi in Greece. All are tvelcome to tour our factories and, to date, over half a million people have accepted the invitation.

CiiESTERFtEtD MAKING MACHINE Take the tour and you'll see for joru-self the care used in the mam fac hure and pac kaging of your Companr's products. Guides take you through everr important step in the mamfacture of a cigarette from start to finished packaged product. During 1958 some 60,t)t)t) people learned about Li,a,;rlt c: .t(vers first hand, touring the Durham and Richmond factories. TIMN 446223 9