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AN 10TUAL REPORT--1J 5 6 Liggett & Mjrers Tobacco Co., Inc.

$pur , Cigarettes These are YOUR PRODUGTS: Because of regional tastes, you may not know all these brands, the 25 most active of your Company. But wherever sold, they have thousands of loyal friends, because the Liggett & Myers name has come to mean superior quality in tobacco products. Liggett & Myers currently makes 63 ~ different kinds of cigarettes, smoking, and chewing tobacco. Almost 100 brand names have been registered. Red Man, Red Horse and Pay Car, the principal brands of The Pinkerton Tobacco Co., an unconsolidated subsidiary, are not illustrated.

V TO THE STOCKHOLDERS: You will find in the twenty-one pages of this Report an illustrated description of the Company's cigarette and tobacco brands, and an interesting pictorial description of "a cigarette from plan- tation to package."" Also you will find the comparative results of the financial details of the Company's operations for the years ended December 31, 1956 and 1955, story pictures of valuable information about distribution and_sales promotion, pictures and descriptions of the Company's thirty-five-year-old research program, and a cordial invitation to visit our factories. Both dollar sales and unit cigarette sales showed a steady increase throughout the year-the largest increase occurring in the last quarter. Earnings per share of Common Stock amounted to $6.39. This compares with $5.97 a share for 1955, after deducting the non-recurring items of income for that year. Filter-tip cigarettes continued their increase at the expense of all others to a point where they probably have more than 30% of the total market. This trend meant an investment of approximately $5,000,000 added to our manufacturing facilities during the year. There were no important additions to land and buildings. The book value of our Common Stock rose from $60.85 per share to $62.24 at the end of the year. The number of Common and Preferred stockholders increased_by 1,700 during the year. Holders of stock ranged from a few shares in the hands of thousands of individuals to many hundi•eds _ of shares owned by investment corporations, educational institutions, insurance companies, trusts, estates and banks. An authoritative analysis of basic data from the U. S. Census Bureau predicts a population increase of fourteen million in the next five years and a total increase of sixty million by 197, 5. Your Company is optimistic about the future, and with the finest tobacco products its entire resources can produce, expects to get its full share of this e,ver increasing market. The Board of Directors joins me in expressing sincere appreciation for the cooperation and loyal support of stockholders and employees. Respectfully, January 28, 1957 TIMN 446271

TRANSPLANTING SEEDLINGB Growing fine tobacco is truly an art, calling for the highest degree of judgment and skill. In spite of constantly improving farming methods, the quality of the crop still depends entirely on the farmer. The picture shows the care with which the seedlings are transplanted, one at a time, to the field where the tobacco will grow and ripen. 3 TOBACCO GROWING This is a typical field of tobacco, shortly before harvest. Now the farmer spends more and more time watching his plants, for the better he tends his crop, the finer the tobacco, and the higher the price he % ill get for it. At this time Liggett & Myers tobacco buyers pay him a visit, to size up the crop they will later be buying at the auction sales. SEED AND THE SEED BED To the tobacco farmer, the seed bed is his most important plot of land. With infinite care, and using skill and knowledge gained from years of working with tobacco, the farmer grows seed- lings for later transplanting. Inset shows tobacco seeds-so small that a single spoonful grown to seedlings could cover 6 or 7 acres with set-out plants.

from plantation to package... AROMATIC TURKISH TOBACCO For spice and aroma in the various Liggett & Myers blends, millions of pounds of various Turkish tobaccos are imported each year. The picture shows Turkish tobacco leaves alongside their American cousins, "Bright" tobacco. These small leaves require skillful and careful handling. S READY FOR CURING After harvest, this scene is typical of thousands of farmers. They tie the tobacco into "hands" and place them on sticks. These sticks are then placed in the curing barn as the picture shows.

GRADING TOBACCO After curing, the tobacco leaves are graded by color, texture and aroma. Here the farmer and his helpers patiently examine each and every leaf, sorting out the fine, mild tobacco which brings premium prices at the auction. : BEFORE THE AUCTION : ~ Before the auction, Liggett & Myers tobacco ~ buyers move up and down the rows in the ; warehouse, examining the tobacco to be offered. : When the bidding starts, they know which ' ; are the mild, ripe tobaccos, so vital to the ~ famous Liggett & Myers blends. ; . i . . . . . . . . . : AGING Now the tobacco has been prepared by the Company's leaf department and packed into great hogsheads. In the picture, it is on the way to rest and age for dozens of months. As the time slowly passes, the tobacco grows sweeter and milder, until judged just right to meet Liggett & Myers quality standards. TIMN 446274

, 11 9 MODERN STORAGE WAREHOUSES Stretching for 52 z miles, these warehouses are scientifically designed to properly age the tobacco, using only natural temperature changes. MAKING L&M FILTER CIGARETTES Here is a close-up of the machine that processes the L & M exclusive Miracle Tip. Faster than the eye can follow, tips and cigarettes meet, are joined, and flow out of the machine as perfectly formed L & b'I Filter Cigarettes. L6M CRUSH-PROOF BOX MACHINE The flat sheets of printed packages enter this machine at one end; from the other end flows a continuous stream of perfectly formed L & M Crush-Proof boxes, ready to be filled Hith L & M Cigarettes. It makes hundreds of boxes per minute. T,1MN 446275 --- S

12 I THE ACCU-RAY PROCESS ~ The Accu-Ray was developed ~ by the Industrial I Nucleonics Corporation. It is really a nuclear gauge which passes a continuous- stream of electrons through the cigarette and analyzes it while it is actually being made. This nuclear stream transmits what it sees to the electronic brain which adjusts the pro- duction machinery down to millionths of a pound. Accu-Ray controls are now used by such industrial giants as: U. S. Steel, International and St. Regis Paper Companies; Goodrich, Firestone and Goodyear Rubber Companies; the Du Pont Company and a host of others. Illustrated is the Accu-Ray quality control as used by Liggett & Myers. G ,J3 MAKING CIGARETTES From this machine fto w 20 cigarettes every single second ... each one a true representative of the quality, smoothness, flavor, and mildness which have made your Company's cigarettes world-wide favorites. Tending these machines are key men, many of whom have spent their entire working life with the Company. The Liggett & Myers Research Department has made many important contributions to the development and design of the cigarette-making machines.

1956 OPERATIONS A SUMMARY OF THE HIGHLIGHTS OF THE YEAR 1956 Net sales Profit from operations Percentage of net sales Profit before taxes Income and franchise taxes Profit before preferred dividends Net income after preferred dividends Percentage of net sales Net income per share of common stock Dividends paid per share of common stock Current assets Current liabilities Ratio Funded debt Capital stock Paid-in surplus end of year Earned surplus end of year Approximat = ber of stockholders 1956 $564,965,808 63,226,445 11.19% 58,366,750 31,916,000 26,450,750 24,989,563 4.42% $6.39 $5.00 $444,693,169 115,771,006 3.8 to 1 101,500,000 118,693,125 19,417,405 126,289,800 45,400 ANNUAL STOCKHOLDERS' MEETING The Annual Stockholders' Meeting will be held at 43 Park Avenue, Flemington, New Jersey, at 2:00 P.M., Monday, March 11, 1957. Proxies will be mailed to stockholders February 8, 1957. 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. 43,700 - TIMN 446277 1955 $546,964,616 60,134,062 10.99% 56,677,972 29,957,000 26,720,972 25,259,785 4.62% $6.46 $4.00 $425,252,089 92,453,907 4.6 to 1 107,250,000 118,662,125 19,364,550 120,861,562 . 7

iffiffim EARNINGS 0 ~ N ~ s!' cD ^' p N p N "' N ip N ~ M t0 ~y• Lq CP N 64 N C! n! c0• O~O M N ~ Lep O N cn o ^ t~ Op N N ~ ~ N N d N p n ~ lf! e!~ N N N N 47 1948 1949 1950 1951 1952 1953 1954 1955 19! Millions DIVIDENDS 1947 Millions 1948 1949 1950 1951 1952 1953 1954 1955 1956 1947 1948 1949 1950 195fk 1952 1953 1954 1955 1956