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M TO THE STOCKHOLDERS: This Forty-Seventh Annual Report of your Company's operations for 1957 gives you a general over-all picture of its activities, as well as its audited financial statements. Following the trend of the times, there were unavoidable increases in manufacturing costs, including leaf tobacco and other mate- rials, together with increases in selling and promotional expenses, which this year included the heavy initial costs of introducing our new OASIS brand. The results for the year, however, reflect progress. The comparable results of operations for the years ended December 31, 1957 and 1956 indicate net sales for the year 1957 amounted to $570,384,860 the highest reported since 1953. Net income applicable to common stock amounted to $26,812,420, equal to $6.85 per share, compared to $6.39 per share in 1956. The ratio of such income to net sales increased from 4.42% in 1956 to 4.70% in 1957. Notes payable to banks at the end of the year were $53,310,000, representing a reduction of $24,690,000 from the end of the previous year. As compared with the results for 1956, however, interest on bank loans showed an increase of about $1,349,000, reflecting to a considerable extent the much higher interest rates in effect during 1957. It is significant that during the year a number of the most eminent men in medical science and research made important statements about cigarette smoking and lung cancer. The author of the intro- duction to Eric Northrup's book "Science Looks at Smoking" made the following statement: "The evidence from both approaches, statistical and experimental, does not ap- pear sufficiently significant to me to warjant forsaking the pleasure of smoking." HARRY S. N. GREENE, M.C., C.M. Professor, Chairman, Department of Pathology, Yale University School of Medicine TIMN 446242

numbe47 1957 ANNLI AL REPORT LIGGETT & MYERS TOB4CCO CO., INC. TIMN 446241

At a later date, Dr. Greene further stated in his testimony before a Congressional Committee: "My feeling in this business is that there isn't anything in tobacco that is carcinogenic, that isgoing to do the individttal any harm..." Other statements on this subject also made before the Congressional Committee, include those of the following outstanding and impartial medical authorities: "I would finally state then that the total evidence I have tried to review fails to establish any sound basis on which a causative influence can be assigned to cigarette smoking in the production of cancer of the lung." IAN G. MACDONALD, M.D. Cancer specialist, Professor of Surgery, Radiolo- gist, University of Southern California Medical School; National Director, American Cancer So- ciety; Chairman on Cancer, American Medical Association. "I find no reason to modify my previous opinion that the evidence, taken as a whole, does not establish, on any reasonable scientific basis, that cigarette smoking causes htng cancer. Ott the contrary, I have found more and stronger reasons to doubt this conclusion." JOSEPH BERKSON, M.D. Head of Biometry and Medical Statistics, Mayo Clinic As recently as December 27, 1957, Sir Ronald Fisher, internationally known as the "father of modern statistics" and professor of genetics at Cambridge University, England, in an address at Indianapolis, before the American Association for the Advancement of Science said that evidence linking cigarette smoking with lung eancer is decidedly "inconclusive." He was quoted in the New York Herald Tribune on December 28, 1957, as having further stated that warnings that cigarettes may cause cancer are "terrorist" propaganda. Meanwhile, in the laboratories of our great medical centers and universities, the search goes on for the all-important unknown of medical science - the cure for all forms of cancer. If the past history of medical research repeats itself, the answer will be found. Y The Board of Directors joins me in expressing appreciation for the cooperation and loyal support of stockholders and employees. Respectfully, i" February 3, 1958 TIMN 446243

The significance to the national economy of a modern corporation like Liggett & Myers is greater today than ever before in history. Your Company is owned by thousands of individuals, and hundreds of institutions representing many more thousands of people. Directly, your Company is influential in the economic well-being of thou- sands of employees; indirectly, it provides economic opportunity for addi- tional thousands of people at home and abroad. The smokers and others who rely on your Company's products number in the millions. In profits earned, in taxes paid, it contributes significantly to an ever-expanding national economy. In 1957 again, Liggett & Myers has met these responsibilities by con- tinuing to pursue an aggressive policy in all areas of research, manufacture and sales; by employing modern management methods; and by turning out what your Company believes to be the very best products of their kind. 0 wnershi p There are now approximately 46,600 Common and Preferred stockholders of Liggett & Myers. This is an increase of 1,200 stockholders (about 2.6 per cent) over 1956. The stock of your Company is widely held, ranging from a few shares in the hands of thousands of individual stockholders to many hundreds of shares owned by hospitals, educational institutions, profit-sharing trusts, insurance companies, estates, banks and investment groups. Approximately 76 per cent of the total stock of your Company, both Common and Preferred, was voted either by person or proxy, at the last annual stockholders' meeting of Liggett & Myers on March 11, 1957. Employees Liggett & Myers is justly proud of its excellent relations with its 9,000 employees, whose average length of service is well over ten years. Working conditions are unsurpassed. The factories and offices are the most modern in the industry, air-conditioned, superbly lighted, and equipped with every known device to insure safety and guard health. Available to all employees is a complete progressive benefits plan, a medical staff in atten- dance at all times, and cafeterias serving excellent meals at cost. In 1911, when Liggett & Myers was founded, the number of the Company's stockholders was limited. Today, your Company is owned by well over 46,000 individuals and institutions repre- senting a complete cross-section of America. About nine thousand employees work in modern, efficient, pleasant surroundings, turning out your Company's products. TIMN 446245 3

of the many improvements which have been made in the growing, processing and packaging of tobacco. Working closely with our modern factories, these laboratories make constant quality tests to make sure that all Liggett & Myers tobacco products measure up to the most exacting standards. In addition, they constantly seek ways in which your Company's products can be improved. One recent example is the "Miracle Tip" which was developed in our research laboratories and is now used on L&M and Oasis cigarettes. Your Company was the first to announce in September 1957 the granting of a U. S. Government patent for a modern cigarette filter ... The pure white "Miracle Tip." Another example is the new Accu-Ray quality control system, developed at the Company's request by the Industrial Nucleonics Corporation and now widely used in other industries as well. Accu-Ray is one of the greatest ad- vances in the manufacture of cigarettes in the last thirty years. Each and every cigarette made by the Company is perfectly packed ... 14 per cent more so than cigarettes made without Accu-Ray. As a result, all Liggett & Myers cigarettes now burn more evenly, have no "hot spots" or "hard draw," and, therefore, give more smoking pleasure. The Liggett & Myers Research Program is centered in Durham, North Carolina. The laboratories are considered the finest and most advanced in the industry. The program is further implemented by grants to universities for tobacco research, and for major research programs, by the use of scientific organiza- tions including Arthur D. Little, Inc., of Cambridge, Massachusetts. Liggett & Myers Accu-Ray quality control is a nuclear gauge which passes a continuous stream of electrons through the cigarette and analyzes it while it is actually being made. Tobacco TIMN 446248 Liggett & Myers tobacco buyers today cover every important tobacco market, selecting only the choicest tobaccos to meet the exacting standards set for Liggett & Myers products.

More than ever today, your Company's promotion must not only be aggressive but continuous in order to reach again and again the present and potentially new customers in every corner of the country. Well over 80 per cent of the nation's homes today have television. It is the only selling medium which permits your Company's products to be shown at the same time they are described. As a result, a major share of the Com- pany's advertising is now concentrated in this greatest of all sales media. CHESTERFIELD - The Chesterfield "Men of America" commercials which you hear and see daily are the result of nationwide consumer research studies. They are the talk of the television industry, including the most critical tele- vision columnists. Combining Chesterfield's sales message with folk ballad music, this series vividly features real people in various industries across the nation. You get the reality of such typical American scenes as a wheat farm in the Northwest, a logging camp in Idaho, a dam site in Montana, and a cattle ranch in Washington. These commercials are bringing the Chesterfield sales messages into millions of homes on the FRANK SINATRA SHOW, the EDDIE FISHER SHOW and the POLLY BERGEN SHOW. L&M - The "Live Modern" promotion behind the L&M brand is one of the most successful in the history of cigarette advertising. "Live Modern" tele- vision commercials won top honors in Billboard Magazine's Fifth Annual TV Commercials Award both as "most effective and convincing" and "most original and imaginative." You see these commercials on GuNSINtoKE, the country's top-rated television show on the air. You also see them on the new GEORGE GOBEL SHOW and on television's award-winning police drama, DRAGNET, which was one of the programs nominated for the Freedoms Foundation Award. OASIS - National distribution of Oasis is backed by promotion in network and spot television. Oasis sponsors one of the most successful new programs on network TV, CLUB OASIS on which you see such popular guest stars as Dean Martin, Jimmy Durante, Eddie Fisher, Fred Waring, and Jo Stafford. TIMN 446254 An estimated ten billion viewer commercial ntinute impressions tivere made in behalf of your Compatn•'.r products on network TV alone durin,; 1957 by TV stars such as Frank Sinatra, Eddie Fisher, George Gobel, James Arness, Jack Webb and Dean Martin.

Liggett & Myers plants are strategically located near the big tobacco markets and are considered the most modern in the industry. "Gunsmoke" star James Arness, comedian Edgar Bergen, Ben Alexander of "Dragnet" and singer Edye Gorme were among the 60 thousand visitors who toured your Company's plants in 1957. Visitors are always welcome. Factories To date, more than a half million people have toured Liggett & Myers fac- tories. Many of these visitors are stockholders in the Company, and have seen for themselves the infinite care used in the manufacture and packaging of the Company's products. The modern, up-to-date machinery used in all departments is the finest equipment money can buy. Your Company extends a cordial invitation to you and your friends to visit the Liggett & Myers cigarette factories whenever you are in the vicinity. Our cigarette factories are located at Durham, North Carolina and Richmond, Virginia. In St. Louis, Missouri, a third main factory makes chewing tobacco and many brands of pipe tobacco. In the bright and burley tobacco-growing states are located conditioning and storage facilities covering hundreds of acres. The Company also has plants in the Near East where Turkish tobaccos grown there are processed for our cigarette blends. These plants are at Izmir and Samsun in Turkey, and Cavalla and Xanthi in Greece. Research Nearly forty years ago your Company recognized that through continuous research, the quality of our tobacco products could not only be controlled, but raised to a point of unmatched excellence. Today, such quality in Liggett & Myers products is an accomplished fact. Through study of our own and competitive products, through analyses of thousands of pounds of tobacco, your Company's products enjoy the benefits TIMN 446246

Hundreds of acres of land in the United States are now producing Turkish tobacco, an agricultural development which your Company helped pioneer. Your Company's cigarettes are available to our Armed Forces all over the world. These buyers have grown up in the tobacco business and their average length of service is greater than the Company average. Through long years of experience they have gained what every Liggett & Myers tobacco buyer must have - an instinctive eye for good tobacco and a thorough knowledge of how to buy it. For years, Liggett & Myers research scientists have contributed important research toward continuing tobacco improvement programs with the U. S. Department of Agriculture and State Agricultural Departments. Your Company helped play an important part in the pioneering of the growth of Turkish tobacco in this country. Ten years ago, Turkish tobacco was raised by only a handful of farmers mostly on an experimental basis. Today, many farmers are raising Turkish-type tobaccos as a profitable crop. In addition to providing a new use for previously unproductive land, growing Turkish tobacco has opened new economic opportunities in this country. In time, the tobacco industry may be assured of a continuing domestic supply of this crop which is so essential in the seasoning of cigarettes. Non-filter cigarettes Despite the rapid growth of filtered and mentholated brands, most people still prefer a non-filtered cigarette. Today, more than half of all cigarette business is still concentrated in non-filter brands, and Chesterfield continues to be one of the most popular in both King and Regular sizes. Its attractive, clean white pack is well known to millions of its friends around the globe. In addition to Chesterfield, the Company continues to produce other non- filter brands that have a loyal following in many areas the world over. Among these are Coupon, Fatima, Home Run, Picayune, Piedmont, Spur and others. ~....~ Filter cigarettes Continual international promotion has made your Company's products known and enjoyed in practically every corner of the world. The continuing success of the L&M Filter brand has advanced it to a posi- tion among the top-selling brands of all types, and the second largest-selling filter brand. The importance to the Company of this continued growth is readily apparent from the gains of the filter segment of the market. From a 30 per cent share of total market in 1956, filters rose above the 40 per cent level before the end of 1957. The demand for the L&M brand was assured of further gains early in 1957 when the national distribution of the L&M crushproof box - com- panion to the L&M King and Regular packs - was completed. In fact, L&M is the only filter cigarette which is now offered for sale in these three sizes in the United States. TIMN 446250 1 g

Not so long ago, when you went to your grocery or chain store, you had a choice of about 1500 products. In the same stores today, some 3600 different products are competing for your attention. Liggett & Myers, in 1957, intro- duced new kinds of display racks for dealers. These racks, for both carton and individual pack sales, were designed to take up a minimum of space and at the same time offer a maximum of display for your Company's products. The reception of these new racks by dealers across the country has been enthusiastic, many reporting increased sales of all our cigarette brands displayed. Today, carton sales account for about 65 per cent of all cigarette sales. To meet this trend, your Company, in 1957, adopted new carton designs for both the Chesterfield and L&M brands. The cartons were designed to give maximum visibility for the shopper, and to combine certain features wel- come to dealers (pilferage-proof construction, perforated ends). These redesigned cartons, along with the new Oasis carton, are the most modern in the industry, and you can see for yourself how they stand out on the racks and on the dealers' shelves. TIMN 446253 "The Pied Piper," a 90-minute color spectacular In the most widely-circulated national magazines in November, starred Van Johnson and and in leading newspapers in every region, customers are brought the story of your Company's products reminded of Liggett & Myers products with to nearly 30,000,000 viewers. advertisements that have been widely commended. . .. --,..-" ~-- _:. 410Kf FfIR REAC cunKF CHfSjF~fR !p~(~ Newfiker•tip(~~t~s wy _ 500ft n8 menthof mrst! me~~•

1957 OPERATIONS A SUMMARY OF THE HIGHLIGHTS OF THE YEAR 1957 1957 1956 Net sales .......................................................................................... $570,384, 860 $564,965,808 Profit before taxes ............................................................................ 61,894,607 58,366,750 Income and franchise taxes .............................................................. 33,621,000 31,916,000 Profit before preferred dividends ...................................................... 28,273,607 26,450,750 Net income after preferred dividends ................................................ 26,812,420 24,989,563 Percentage of net sales ...................................................................... 4.70% 4.42% Net income per share of common stock ............................................ $6.85 $6.39 Dividends paid per share of common stock ........................................ $5.00 $5.00 Current assets .................................................................................. $417,412,219 $44 4,693,169 Current liabilities ............................................................................ 89,040,853 115,771,006 Ratio ................................................................................................ 4.7 to 1 3.8 to 1 Funded debt .........:............................................................................ 95,750,000 1 01,500,000 Capital stock .................................................................................... 118,693,125 11 8,693,125 Paid-in surplus end of year ......... 19,417,405 19 417 405 ....................................................... Earned surplus end of year ................................................................ .t rR' 133,538,415 , , 126,289,800 Approximate number of stockholders .............................................. 46,600 45,400 ANNUAL STOCKHOLDERS' MEETING The Annual Stockholders' Meeting will be held at 91 Sip Avenue, Jersey City, New Jersey, at 2:30 P.M., Tuesday, March 25, 1958. Proxies will be mailed to stockholders February 21, 1958. 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. TIMN 446259 17