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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

ZJlre Principal Pj^odzccts of Liggett & 3Iyers Tobacco G'ojjzpany [x,n. Niiu GARETtfs 0 y/~.~ z R I IGAF~ETTES 4GGE1T 5 MViRS TO©ACCO CO. WITH 1Ylrn~finC_ Il~t FILTERS 1I4rti5 -~3ati.C.) ..Y, ,day the Company makes 63 different kinds of cigarettes ind •nio~king and chewing tobacco. Leaders are Lesterfield, L&M and Oasis cigarettes and Velvet and Gr.in-,cr '1nf,l.inq tobaccos. Not shown are Red Man. d Horse and Pay Car, principal products of a subsicliar.. I lu• E'inkcrton Tobacco Company. Non-filter inds account for over 50% of all cigarette sales and Cfu•,tcrtu•Id mntinues to be one of the most popular. :esterfie].d is showing added strength. L&M, a leader in the tiltcr tirIcl. is also among the top-selling brands :all cigarettes. Oasis, more recently introduced, meets the demand for menthol-type cigarettes. .j F 1 LT E R C I G A R E T T E S THE MIRACLE TIP ® THE MIRACLE TaP I d I1 TIMN 446227 13

ONE OF TOBACCO'S MOST RESPECTED NAMES 1911-195 S TIMN 446240

Closing the cartons is one of the factay operations seen by risitors fron< every state and many foreign countries as well. NTAINER PACKIN6 MACHINE The most modern machinery, like this container packing machine, is used throughout all de,bartments for the utmost efficiency and economy. Erery_year billions of cigarettes leave the factory in these newly designed cases to be shipped to the four corners of the world. TIMN 446224 10

LIGGETT 8c MYERS TOBACCO COMPANY Consolidated Balance Slref ASSETS CURRENT ASSETS : Cash. . . . . .. . . . . . . . . . . . . . . . . . Accounts receivable, customers . . . . . . . . , , , Accounts receivable, others . . . . . . . . . . . . . Leaf tobacco, at average cost . . . . . . . . . , . . Manufactured stock and operating supplies, at average cost TOTAL CL: RRE\T ASSETS . . . . . . . . . , PROPERTI', PLANT AND EQ:IPME\'T-AT COST: Land and buildings . . .. . . . . . . .. . . . . . . Machinerv and equipment . . . . . . . . . . . . . Total . . . . . Less accumulated depreciation. . . NET PROPERTY. PLANT AND EQUIPMENT OTHER ASSETS: Brands, trade-marks and good will . . . . . . . , . . Investments in unconsolidated subsidiary companies, at cost . . . . . . . . . . . . . . . . . . . . . Investment in foreign tobacco compan~-, at cost .... Foreign currency deposits subject to withdrawal restrictions . . . . . . . . . . . . . Prepaid expenses and deferred charges . . . . . . . . TOTAL OTHER ASSETS. . . . . . . . . . , . TOTAL . . . . . . . . . . . . . . . . 1957 S 11.308.688 23.089.890 1.030.079 346.471.691 3-1,557,606 -F16.-157,954 19,421,927 53,355,351 72,777,278 36,562,302 36,214,976 1 829,004 4,000 ')54,265 1,979,598 3,766,868 5-156,439,798 TIMN 446234 20

Research J 1* Liggett & Myers has been a pioneer and leader in the field of tobacco research for over 40 years. Our Research Department, working with the U. S. Department of Agriculture and State Agriculture departments, has helped make significant im- provements in tobacco growing, harvesting and curing of great benefit to the tobacco farmer, as well as the entire industry. At our central Research Laboratories, in Durham, every major improvement in our products is tested and approved before adopted for use in manufacture. \Iany improvements in the efficiency and economy of our factory operation were also cleweloped from discoveries in our laboratories. Today our products enjoy the brne•tit, of every major advance in the growing, processing, blending and pack,i,',in- ut' tobacco. Examples are the first U. S. Government patented filter, `'The NIiracle Tip" used on L&M and Oasis, and Accu-Ray quality control, a nuclear gauge that assures uniformity of product. TIMN 446225 11

Our Durham and Richmond factories are looked up to as the finest and most modern in the industrr. Again, thisyear, you are invited to tour our factories when_l'on're "in the neighborhood."

LIGGETT ~, MYERS TOBACCO COMPANY Stcr.tc'1>lent ofG'ojisolidated Eaj'n 2jl0a (f',' V(W,~5 0„(l,-d Dar,,,f,,.r 31) 1957 NET S ALES . . . . . . . . . . . . . . . . . . . . . OTHER EARNINGS: Interest and dividends received . . . . . , . . . , , Profit from sale of land and buildino-s. ...,.,,. Profit from redemption of sinking fund debentures ... Miscellaneous . . . . . . . . . . . . . . . . . . TOT AL EARN I\'GS . . .. . . . . , . . . COSTS AND EXPENSES: Cost of goods sold, selling, administrative and general expenses . . . . . . . . . . . . . . . . . . . Provision for depreciation . . . . . . . . . . . . . . Interest and amortization on funded debt ....... Interest on bank loans . . . . . . . . . . . . . . . Miscellaneous . . . . . . , . . , , , , , , , , , Provision for Federal income tax . . . . . , . , . . , Provision for State income and franchise taxes ..... TOTAL COSTS AND EXPENSES . . . . . NET EARNINGS FOR THE YEAR . . . . . . . . . . . DIVIDENDS ON PREFERRED STOCK . . . . . . . . . NET EARNINGS APPLICABLE TO CO.%i.%1ON STOCK .. S570,38-1,860 191,715 78,757 68.089 570,723,421 499,052,009 3,488,428 2,801,347 3,462,528 24,502 30,855,000 2.766.000 5-12.-1-19,814 28,273,607 I.-161,187 S 26.812,420 TIMN 446236 22

Recoy°cl foj• Fifteen Years SALES / EARNINGS / DIVIDENDS Xet Sales Net Earnings Applicable to Commo n Stock Diridends Paid on Common Stock YEAR AMOUNT A14OUNT PERCENT OF S aLES PER SHARE AMOUNT PER SHARE 1944 $374,032,971 S 13,332,272 3.56 0 $4.25 $10,979,286 $3.50 1945 399,212,620 13,477,648 3.38 4.30 10,979,286 3.50 1946 464,507,825 16, 907, 740 3.64 5.39 12,547,756 4.00 1947 513,771,422 21,439,504 4.17 6.83 14,116,225 4.50 1948 556,506,847 27,799,934 4.99 8.86 15,684,695 5.00 1949 557,733,433 28,105,507 5.04 7.18 18,783,023 5.00 1950 530,547,285 27,597,044 5.20 7.05 19,557,605 5.00 1951 539,947,406 20,292,047 3.76 5.19 19,551,605 5.00 1952 603,080,876 19,987,339 3.31 5.11 19,557,605 5.00 1953 586,498,727 21,517,389 3.67 5.50 19,557,605 5.00 1954 548,861,959 20,740,177 3.78 5.30 19,557,605 5.00 1955 546,964,616 25,259,785 4.62 6.46 15,646,084 4.00 * 1956 564,965,808 24,989,563 4.42 6.39 19,561,325 5.00 1957 570,384,860 26,812,420 4.70 6.85 19,563,805 5.00 1958 556,045,710 29,761,821 5.35 7.60 19,570,955 5.00 *Represents four quarterly payments of S 1.00 each. The payment of the extra dividend of $1.00 per share was deferred until March l, 1956. Similar action has been followed for subsequent years. Earnings per share are based on the nurnlx•r r,('shares of Common Stock (including Common B Stock prior to 1949) outstandinsz .cc thr• end of each year. In addition to the annual dividend of S- 114) l,c r,h,ire on its Preferred Stock, the Company has paid a substantial cash di.rd,•nri r.- h-dcic•rs of its Common Stock in every year since its organization in 1911. Tj[MN 446239

I MEN OF AMERICA: FREIGHTER s CREW ~ r NOTHING SATISFIES 'f!' IIII LIKE THE BIG CLEAN TASTE OFTOP-TOBACCO ~Jatt;p('tl i CIIESTEB FlELO'___?Kn+c I Adeertisements in the leading ma;a;,ines and nezespapers of eeidest circulation remind smokers of Liggett & .th,ers ,broducts. ABOVE: representatine adrertising for L v-'Jf, Chesterfield and Oasis. sELOt~•: this 1958 Christmas adrertisement featured all 3 hrands. Promotion Every proven advertising medium is used to promote the sale of the Company's products. National magazines, newspapers, network television and radio carried our major brands' sales messages to millions of smokers across the nation. Special regional promotions also reached millions through college and armed forces publications, baseball and football hrot-rams and broadcasts, horse-racing pro- grams and other special events. Nft)r<' Inlll)t)ns were reached by the important media of car cards, billboards, poste•r• ,In<i point-of-sale display material. TIMN 446229 ViSR1sP aS liess ta rs ' More taste 15

of DeCe1)1 bej' 31 LIABILITIES CURRENT LIABILITIES: \otes payable to banks . . . . . . . . . . . . . . . Accounts payable . . . . . . . . . . . . . . . . . Dividend payable on preferred stock . . . . . . . . . Accrued interest on debentures . . . . . . . . . . . Funded debt payable within one year (less, for 1958, S1,29-1,000 of debentures redeemed and held by Trus tee) . . . . . . . . . . . . . . . . . . . Taxes payable and accrued . . . . . . . . . . . . . TOTAL CURRENT LIABILITIES . . . . . . . . FUNDED DEBT: 2' /o Sinking Fund Debentures, S5.750,000 payable annuallv durinIg the vears 1960 through 1964. S23,750.000 pavable in 1965, and S37,500,000 pa-Nr- able in 1966 . . . . . . . . . . .- . . . . . . STOCKHOLDERS' EQUITY: Preferred stock 7 o cumulative, par value S 100-author- ized, 341.398 shares; issued, 225,141 shares; in treasurv, 16,400 shares . . . . . . . . . . . C:ommon stock, par value S25-authorized, 5.000.000 shares; issued, 1958, 3,917,8-12 shares, and 1957, 3,912,761 shares (Note 1) . . . . . . . _ Paid-in capital in excess of par values of capital >tocks (Note 2) . . . . . . . . . . . . . . . . ._ . Retained earnings (\ote 3) . . . . . . . . . . . . TOTAL STOCKHOLDERS' EQUIT1' . . . . . TOTAL . . . . . . . . . . 1957 S 53,310,000 3, 808, 567 365,297 814,844 5,750,000 2-1.992, 145 K9,0-10,853 95,750,000 20,874,100 97,819,025 19,-117,-105 133,538.-115 271,648.9-15 5-156.439.798 TIMN 446235 21

StC1.teIjl('jtt ( f C07tsUlidated Ret«.ijzcd Eaj'nZjZg 4 S (fr,~~rrs errdrd Deccrnbc~ 3l) BALANCE AT BEGINNING OF 1°EAR. . . . . . . . . . ADD-Net earnings for the year .. TOT AL . DEDUCT: Cash di-vidends of $7 per share on preferred stock 1957 S 126,289,800 28,273, 607 154,563,407 . . . Mo Tk~~I ,1~J 1,461,187 19,563,805 21.024.992 Cash dividends of $5 per share on common stock.... TOTAL . . . . . . . . . . . . . . . . BALANCE AT END OF YEAR (Note 3) . . . . . . Notes to Financial Statcnzcnts-December• 31,1958 1. At January 1, 1958, there were outstanding options granted under the Incentive Stock Op tion Plan to officers and key employees to pur- chase, subject to certain limitations, 58,060 shares of the Company's common stock, and 60,700 shares were reserved for the granting of additional options. During 1958 options for 1,500 shares were granted for an aggregate op- tion price of $122,062, options for 5,081 shares were exercised for an aggregate option price oI' $342,311, and options for 1,500 shares were can- celled. At December 31, 1958, options were out- standing with respect to 52,979 shares havinq.ui aggregate option price of $3,588,771, and 6t1,-t tt t shares were reserved for the granting of addi- tional options on or before March 31, 1901 I•i $133,538.415 accordance with the Plan, option prices repre- sent closing quoted market values of the shares on the dates the options were granted. .A 2. Paid-in capital in e:ecess of par values of cap- ital stocks increased in 1958 by $215,286, repre- senting the excess of sales price over par value of common stock sold to officers and employees ttnder the Incentive Stock Option Plan. 3. Under the terms of the Indenture covering the 2%%SinkingFundDebentures,$60,282,541 of retained earnings is restricted as to payment of cash dividends on common stock. This limi- t.uiun does not apply to stock dividends on , ~~innnon stock, nor does it restrict payment of di~ui,nds on preferred stock. TIMN 446237 23

;tnre story of a ett &11%lyers T(r presentative calling tlie trade... } Liggett & Myers representatives called on over a million retail outlets in 1958. ~ !d show how our cigarette racks have ?n used effectively in similar stores. AV~ They discuss locations in the store where our racks would sell the most effectively. C 1 GN~STE~ B: SiER ~F S L .. t M 0 ® A ® 4 ,~r larger carton racks take up As demonstrated by this shopper Our representatives also make regular ;s than 9 sq. ft. of foor space for maximum getting her Chesterfields by the carton on her way calls to see that our products are rotated .,;essibility and display . . . to the checkout counter. 2nd are always in good condition. TIMN 446231 17 They discuss with the manager the advantages of our Company's in-store advertising .. Dealers welcome our 200 carton rack because of its display value and sales efficiency.

.DZStI'1 C711 tlOjl The C:umpan%', products are sold in about a million and a halfretail outletsall over America. You can realize how important the problem of distribution is. This is the job of our 6,000 dis- tributors, supported by our sales representa- tives. Competition for distribution, shelf space and display never lets up. The Company makes everv effort to employ the most modern and effective methods of distribution and promo- tion to win new smokers. I`, ry recentlt, millions of shoppers saw this strikin,; l7rrstmas displat,for Chesterfield, Lv'.lI and Ou,c; in .•rptrmarkets and other stores all orer the c•onntrr. I7cis displaV, with minor changes, effectirelt- tied in re•ith_ ,pecial carton sale promotions such as Father's Dar. Furrrth of _Telr, i"acation Time and other holidays dnring tlceyear.

vsztion of Total Etzrrtiners for 1958 chart showi how the Company used or set aside a total of $556,489,000 received by it from its eustoiners for_ i6s sold and from dividends, interest and miscellaneous sources during 1958. Leaf tobacco, wages, other manufacturing costs and freight $182,622,000 Selling, advertising, administrative, interest and other expenses $66,0t}7,Od0 Federal income and State income and franchise taxes $36,689,000 Dividends to = stockholders $Z.1,032,(1610

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