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To Our Shareholders and Ernpl The fiscal year ended August 31, 1972' was successful andd significant. Records were set in net earnings, earnings from op- erations and revenues: Net earnings this year rose to $69,621,097, equal to $4178'per share, compared with $64,927,- 490, or $4.48 per share last year. Earnings from operations reached $53,169;623, or, $3.65 per, share, against the $46,330,- 871, or $3.20 per share re- ported lasty;ear, while security gains were $13,522,133, equal to $93' per share, comparedl with $18',596,6'19; or $1.28' per share last year. Extraordinary items, which occurredl during the liastquarterof thisyear,s were $2;929I,34!1, equal'to $.20 per share resulting principally from the sale to General Cin- ema Corporation of 47 of our theatres in Florida, Arizona and California, and the sale of sub- stantially all of our investment in Franklin New York Corpora- tion. There were no extraordi- nary items in fiscal 1971. Our record results were achieved through growth ofiour various divisions withi Lorillard, our tobacco Division, serving as a principal contributor to increased revenues and profits. Lorillard! Division Lorillard experienced sales increases in its domestic marr kets and in the rapidly expand- ing international markets. Our two leading brands, Kent and True, and' ourlittle and smadl! cigar products contributed to the increases~ Emphasis for the fiscal year just ended was, and for the future will be, placed on the saie oflquality products, cost controls and cost savings, new product development and expansion in both existing and new international markets.. Hotel Division Our hotel division continues I its worldwide development ac- tivities. Constructioni of our Frankfurt and Monte Carlb hotell projects began during, the fiscal year. Construction proceeded oni schedule for Loews L'Enfant Plaza Hotel ini Washington, D.C. scheduled to open May 31, 1973, andl for Loews Hamburg Plaza Hot'eli scheduled to open March 31, 1973, Our association with Air France began with the1100-room Meridien Hotel, which opened during the year in Paris, and was extended to two new hotels under construction on the Caribbean islands of Guadeloupe and Martinique. The new Caribbean hotels are scheduled to open late in1973. Caurence~Afan~Tisch~, In addition, we have just con- cluded arrangements to oper- ate a deluxe 500-room conven+ tion hotel in Quebec City, Canaday opening early in11974. While we intensively seekk new opportunities, we db not hesitate to dispose ofl those properties which no longer suit our profile, or which do not show the long-range prom- ise of' profitability we project for our hotels. Applying, these criteria, we soldl our interests in the Hotel Mark Hopkins in San Francisco, and the Hotel Ambassador in Chicago:. In the fiscal year, just ended, we leased four hotels to, the hotel division of'AmericaniAir- lines: the three Americanas in New York, Bal Harbour, Flor- ida and San Juan, and the City Squire Motor Inn in New York City. Ini addition to the eco- nomic values to Loews, the transaction permits the Com- pany to direct the thrust ofl its sales andl marketing efforts too the new hotels coming on streamias well as our present hotel pnoperties Theatre Division The successfull results of our Theatre Division last year once . again prove that' the public will be attracted to motion pic- ture theatres when those thea- tres are supplied by the pro- ducers with, high impact' films of artistic quaiity. Forexample; we were fortunate to exhibit the worid premiere of' The. Godfather in New York and to license the film for exhibition at key Loews Theatres around the country. As is the case with our Hote15 Division, the Thea- tre Division continues to, seekk new theatre locations. At the same time, it willl consider a disposition, of properties when that is advantageous to Loews. Residential Development Our residential development joint venture continues its growth im sales, profit and geographicexpansion: In addi- tion to California, and New York, we are now developing, residential communities in sub- urbs of Chicago and ini Ari- zona. With established loca- tions andl projects across the country, which include a di- versified project mix and sales prices geared to the economics of the locality, the Loews/ Snyder joint venture, after only. three and a half years, has become a national builder. Finance The disposition of most of our investment in Franklin New York Corporation was concluded when continuedl holding of the investment was no longer in our best interest. We also sold the Reed Candy Company during the year. Following,the close of fiscal 1972 and predicated on the re- sults of that! year, your Board of Directors declared an in- creased quarterly dividend of $.28 per share payable Nbvem- ber 1, 1972, and an additional dividend of $:.06 per share, to bring the annual dividend rate to $1.12'per share. The declar- ation represented the maxi- mum permissible dividends payable under the Phase II guidelines established pursu- ant to the Economic Stabiliza- tion, Act of 1970. Pending application, of funds to our expansion and devel- opment activities in present'' divisions, and to acquisition opportunities in other fields ' whichwe are seeking, we con- tinue to invest in marketable securities to secure a return on those funds, With record fiscal results, continuing expansion in all di- visions, disposition of proper- ties no longer suited to our growth plans and an increasedl annual dividend rate, fiscall year 1972 marked another pe- riod of great progress for Loews. We are exceedingly grateful for the dedication, cooperation and effectiveness of our em- ployees and the continuing, confidence of ourshareholders. LAURENCE ALAN TISCH Chairman of the Board PRESTON ROBERT TISCH President October 26,1972 U O 1

TenYear Fiinanciat Review 1972 1971 1970 Results for the Year Sales andlOperating Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings Before Security Gains (Losses) and Extraordinary Items Security Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .: . . . Extraordinary Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per Share: Earnings Before Security Gains (Losses) andlExtraordinary Items Security Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Extraordinary Iltems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Earnings per Share Assuming,FulllDilution:, Earnings Before Security Gains (Losses) andlExtraordinary Items Security Gains (Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Extraordinary Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Net Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Year=End Position, Current Assets and [nvestment', in Securities . . . . . . . . . . . . . . . . . Current Liabilities ... . ... . ... . ... . .. ... . .. .. .... .. . .... . Excess ............................................... Property, Plant and Equipment-net . . . . . . . . . . . . . . . . . . . . . . . Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Note: Data for 1969 include Lorillard Corporation from November30; 1968. $ 806;771 777,081 700;488 $ 53;170 46,331 34,270 $ 13,522' 18,596 (5,624) $ 2,929, $ 69;621 64,927 28,646 $ 3.65 3.20 2.37 $ .93 1.28 (39) $ .20, $ 4.78 4.48 1.98 $ 2.92 2.61 2.02 $ .64 .89 (:27) $ .14 $ 3.70, 150 1.75 $ 795,858 676,714 542,649 $ 216,456 241,398 171,972 $ 579;402 435,316 370,677 $ 195,934 206,648 207,344 $1'~,260;378 1,153,959 1 ,025,264 $ 397,267 337,554 286,098 Gross Revenues by Major Busiiness Activiitiies i 1972 1'972total: $806,771,000, Manufactured tobacco, and candy products other revenues - Dividends, rent and Hotels Theatres- Residential Development 1971 .6 70.85% 1971 total: $777;081,000i 2

1969 19681967 196~6 1965 1964 1963 (©vllanA'mounts iin, Thousands Except PerShare ©ata) 550;582 156;692' 127,021 114,260 95,554 81,976 66i567' 24,617 12,659, 8,641 5,819 5,600: 3,167 933 1,722 5,283 7,364' 15,165. 7;114 989 (3,247) 1,581 31,622 35,188 15,755 5,819'. 6,589 (80) 2',514 1.71 .89 .60' .39 .34 .17 .05 .1i2 .51 .49 .06 .37' 1.06 (18)' .08'. 2:20 2.46 1.09 .39 .4'0' (:01) .13 1.62 .09 .30! 2.01 471,514 93;509 44,413 38,780 28,526 32;690 18,872 150,81'3 30,390 23,992 19,726 24,765 18,576 14,508 3'20,701 63,119 20;42'1 19,054 4 3,761 14,114 4,364 203,113 160,207 146,489 1411,305 135,207 130,316 129,055 969;778 272,575 209,726 195,035 182,388 179,493 158,879 259,726 124,185 90,855 76,795 71,136 72,744 73,581 Total' Assets Current Assets & Securities Earnings Before Security Net Earnings- Less Current Liabilities: t;aiins (ILosses):and Extra- Per Share. (in $ millions) $1„260,378' (in $' millions) 1i,500 625 1i 200 , 500 900 375 i 250 ~ , 300 125 ~ ' 63'.'64 '65 '66 '67'68 '69 70 71 '72 '6 3'.'64 '65 '66 $579!,41D2' '67''68 '69'70 '71 '72' ord'~inaryItem~s-Peri Share (in $) $3.65 (in $)$4.78 5600 5.00 11.90 0 '631'64 I'65 '66 '67 '68 '69 70 71' 72'. '63 '641'65 '66''67 '681''69'70 71 '72' 3

Re. ~ew of 0peratiia ns, Micronite filter. Milid, smooth taste. For alll the right reosons. Kent Anedcar's qur.my uqar ene. Think about it:~Shouldn'tyour next agarette be True?' Get away from the crowrd! , YGetahe flavor you want in Old GldiFlt ,oers. 4

Lorillard The Lorillard Division pro- duced outstanding results in fiscall 1972. Sales in, both units andl dollars increased signifi- cantly oni a world wide basis in all of'Lonllard. s major prod4 uct categories-cigarettes, little andl small cigars andl chewing tobaccos. Domestic Operations P'articularly significant sales volume gains were realizedlfor Kent1i00's, True BIue and True. Green(rnentholY brands. Oldl Goldl our oldest brandl name; with new emphasi's on market' research, sales promotion and! advertising in key markets, pro- duced increases in unit salesofl Filter, King size and 1170's. Lorillard's little cigar sales gained almost18'per cent over fiscal 1971, with alllbrands con- tributing to: the increase- Madiison; Between the Acts andlOmega. The Omega brand has been broadened with na- tional distribution of Omega 100's in Cherry and Menthol flavors. Erik cigars againi showedl an outstanding sales growth. Erik plastic-tipped' cigars have re- cently gone~ into~ test markets and shouldl provide a greater share of: the growing, small I ci- gar marka in the comingyear. Lorilllard chewing tobacco sales also showed a gain in fis- cal 1972 due to the wider ac- ceptance~of'our long-standing, product, Beechnut, and to the national introduction of a new product; Big Red. Adl+ertising and Promotion Continued innovation in ad- vertising; promotion andlrigor- ous test marketing contributed substantially to the Division's resu l ts . Kentts new advertising,cam- paigo, introduced'. in July, high- lights Kent as "America's quality cigarette" with a mild,, smooth taste and the exclusive lv1'icronite filter. True, the leading, low tar and'' nicotine cigarette, continues to emphasize its low tar and nico~ R.7 ~Id~e~~.{.; ~ . r ~ Pr~U~' S,125 AG GRM' PW .. a..®isInd.0" sr..i.ia.we.. ~r sree. PRLZFS kENT KFNT ~ ~:'~tl~~A ~r-,;~ sdd .., j,4 0 0 ® 0 ® ® ® 0 5

tine characteristics, and its ad- vertising invites consumers to compare it withi competitive products. Newport's new ibnproved' mentholated blend is now being, offered in a redesignedl package supported by a new national advertising campaign, Dramatic andl diverse sales promotion techniques have been, utilized to gain the at- tention of' the consumer at thepoinU of' sale.. These include consumer premiums, sweep- stakes and Iconsumer sampling:. Through the combined ef- forts of manufacturing opera+ tions, leaf purchasing, andl re- search and devefopmentt departments, Lorillard has con- tinued to improve its products and to partiallyoffset increased costs. Lorillard, as well as other cigarette manufacturers, has not yet been able to further offset increasedl labor and to- bacco costs with a cigarette price increase. During the year leaf'process- ing, facilities in Danviille; Vir- ginia, ginia, andl Greensboro, North Carolina, were expanded and ci~garmanufactwriing capacity was increased at Louisville, Kentucky. I hternational I Operations Last year Ilorillard's world- wide operations, consisting of' export shipments, overseas manufacturing and licensed manufacturing; continued to produce substantial growth.. The results can beattributede primarily to the,following fac- tOrs: • World-wide coordination of' advert'ising, and sales pro- motion activities, • Utilization of localizedd marketing strategies: • Better supervisioni of dis- ttibution efforts and'training,of distributor's sales staffs. It is significant to note that the Internationall Division's sales increase was due primar- ily, to expansion of its share of' existing, markets. Ezportl s'hi'pments, of' cigar- S BEST SELL'INfG:BEST'TASTLN Fes'/e,- 11ongor' , Lasl~, F/a~ol. ettes increased' by a significant 15.7 per cent. Overseas cigar- ette production by our licens- ees and jointwenture showed a. 2'8per centincreaseoveri the, previous yean This avenue of' approach reflects our effort to make Kentand ourother brands avaifabie to a broader range of consumers-in foreign markets which are closed to export sales by local regulations. We recently embarked on a~ . two-year expansion program: = I EXTRA MIDIS'T TOP QUALITY CHEW of our Luxembourg, jpint ven- ture, P. Lorillard s~a.r.l., which will increase its capacity to meet future demands in its marketing area: The Luxembourg joint ven- ture, with one of' Europe's best known quality cigarette man- ufacturers, was established in 1963; principally to serve the European Common Market countries on a: basis competi- tive with other locally manu- factured cigarettes. Kent, New- port and~ Old Gold! cigarettes are being produced at the modemplaa in~Ettelbruck and supplied to the Benelux coun« tries; Italy andl France, and to markets ini Africa and! in the Caribbean. While Lorillardicontinued to expandl its existing markets,, it also emphasized penetration of. new markets with the addi- tion,of'Iicensees in Venezuela, and! Mexico.. In fiscal! 1973, Lorillard ex- pects to continue its aggressive marketing, both in the United States and abroad. It wiill test~ new products and offer them in, carefully selected domestic markets where there is a: suffi- cient' consumer cross section to, allbw for evaPuation ofi ap- propriate introductory cam- paigns. Ilt' is now four years since Loews acquired Lorillard. Dur- ing that period the tobacco inr dustry has passed through eventful times. For example, the prohibition of broadcastt advertising of cigarettes. The associationof Loews andllloril- lard has proved to be fruitfull again this past year as a svc- cessfui' blend of' management pliilosophies and techniques, resulting, in enhancedl market- ing flexibility and ilncreasedl opportunities for effective im- novatiorn The success achieved by Lo- rillardl during the past four, years, ampiy demonstrates that the division is well equippedd to meet the diverse challenges confronting it-both from com- petition, in the United States and abroad.. 6

Loews Thecatres Lastyearwas a very success- ful period for Loews Theatres.. A new generation of fiim-goers with increased leisure time and' sophisticated' tastes in enter- tainment; and a new cycle of high impact fiims cornbined to produce excell'ent resuit's. Loews was the first in the U.S: m show the record-breaking fiimy The Godfather. The fiim was premiered at five Loews Theatres ini IV'ewYorkCity simultaneously: The Godfather established new records at all' Loews Theatres in which it has thus far, been showrn The audiences who came day after day to see The Godfather and other successful films such as The french Connect'ion and The Last Picture Show, repre- sented'a broad cross section of the American public. The Company expects the newexcitement in fiinns to con- tinue. During fiscal year 1973 Loews Theatres expects to pre- miere an impressive array of' films such as Lost Horizon; Get' Away, Deliverance, Day of'the Jackal; The Poseidon Adventure and the newest' James Bond movie, Live and Let Die. The Theatre Division is es- pecially pleasedlthat it will pre- miere The Godfather, Part: !l, in all five Loews New York City theatres starting Ivtarch 27;1974. In fiscal 1972, the Division opened new twin theatres' in H'ouston;, Texas; Ihdianapolis, Indl; andl Rochester, N.Y. Con- struction pianswere compieted for another popular twin-style cinema in Suffolk County,l'id.Y., which is expectedl to, open by lune, 1973. Thet'heatre bu iidingprogram wi Il continue intheyears ahead. Manyof the new theatreswilll be of'e the twin and triplex the- atre concept-two and ofrten, three theaties under one roof- located'in shopping,centers too take advantage of the ample parking, and high traffic such compl'exes generate. The new theatres are smaller and: simpler than the gigantic ffiizz,;wa GOT, ® J' V The Olofa~er, ® and often ornate movie "palr aces" of' yesteryear. But they, are designed to caten to thee new requirementsof the movie- going public: ample and con- venient parking, and easy access to and from seats. In- novations ini the operating technofogy as well as the man- ner in which theatres are being, constructed I are important fac- tors in the improved efficiencyy of theatre operations today.. While many of, the theatres involved in the building pro- gram will be new from the ground up, in some instances,. Loews will reconstruct existing theatres, transforming them into twin auditori'ums, each with an automated projection, booth. It is quite possible, for example, to transform an older 1,200-seat theatre ihto two modern and efficient theatres of 600 seats each, similar to the new design of the famous Loews State Theatre in New York. On the other, hand, the Com- pany will not hesitate to divest itself of properties which are marginal or which d'o not fit ini with its long range plans. Promotion and advertising continue to be an essential marketing tool in attracting pa- trons to Loews Theatres. The muchrtaiked about advertising campaign for The Godfather was a combihed: effort with Paramount Pictures. 0 Loews believes that the out- I look for filrn exhibitioniis favor- abie: Film making, has caughtt the interest of many peopie GO starting at' the pre-high school age, and many schools and ~ colleges are offering, serious 0 film-making programs. These ~ factors; along with continued ~' prodluction of high quality ~ films, wiil'.cont'ribute.to a new, exciting andl productive era in the film exhibition business for many years to, come. I 7

Loews H'otels The Loews Hotels Division is expanding in, both the United States and' abroad. Ih, the Unitedl States the Division will open the d'eluxe. Loews L'Enfant Plaza H'otel' in Washington, D.C. inithe springg of 1973. The 378-room hotel,, representing a major~ advance in hotel design, will be,located in the~ L'Enfant PI'azacomplex,a a magnificenty cosmopolitan center composed of four dra~ matic buildings framing a beau- tifully landscaped outdoormall. L'Enfant Plazaisconveniently close to busy centers of federal government, yet it offers.guests the privacy and luxury of' a country estate. The hotel will' feature ai roof-top swimming, pool and sun deck. The view from L'Enfanu Plaza inclhdes a sweeping view of the Potomac to: the south, the Smithsonian Institution to the northi and the Capitol to the eastt During the year, Loews putt great effort into upgrading its hotel properties in the Uhited States to provide its guests with the most modern conveniences andl services. For example, a $2 millioni refurbishing, and renovation program was com+ pleted at the Drake Hotel, which maintains its reputation as a leading, Park Avenue lux- ury hotel. Anew franchise arrangement was completed with Ramada Ihns for the Midtown Motor Inn. Loews will now be able to use Ramada's national reser- vation system as well as the Loews' system for this facility. In February of' 1972, Loews sold the Ambassadors East and West in Chicago, andlthe Mark Hopkins in Sanl,Franciscm : Internationall Eanpansion, After two highly successful years of operating the Church- hill Hotel in London, the Divi- sion moved vigorously across the Channel': to: the European continent. In April', 1973: Loews will open its 600-room Ham- burg Plaza Hotel adjoining the Hamburg: Convention Center and overlooking the Botanical Gardens. This willl be the first Loews Hotel on the Continent and the Company is proud that itwill operate this magnificent facility. Ground was broken during the yearfor a spectacular Loews Hotel infrankfurt.There, Loews willl operate a 600-room hotel in what will be WestGermany's tallest building, a 45-story of'- fice and lodging,tower near the Frankfurt Trade Mart. In Monaco;work was started on a! 650-room hotel which, when completed, will be part of the largest hotel, convention and luxury apartment house complex on the Rivierai This extraordinary effort in archi- tectural engineering, is taking, shape on the shore of the Med- iterranean; just lielow the 19th Century casino for whichiMon- aco is world famous. The seven- tiered Loews structure will rise over Boulevard Louis 11, which forms part of' the Monaco Grand Prix race course. The hotel's rooms will be built in a variety of setbacks to provide guests with spectacular views of' the Mediterranean. The Monaco complex will in- clude, a, nighUt club; pool, res-taurants, shops and gaming, rooms. The entire complex is scheduled to be completed in late 1975. The Company's relationship with Air France was further developed during the year. The Air France subsidiary; Hotel France Ilnternationall, opened the 1,0001roomiMeridien Hotel in, Paris in April, 1972. Loews has a consulting, contract to~ assist with its operations. Two additionaliprojects, under sim- ilar arrangements, are now under construction, in Guade- foupe and Martinique, and are scheduled to begin operationss at the end lof' calendar 1973. Loews is continuing, to seek other properties for hotel de- velopment abroad, and the Hotels Division currently has under intensive study several sites on major travel routes, Throughout, the year, the Hotels Division continued to take aniactive part in the totall life of'f the communities in which it operates. President Preston Robert Tischi contin- ued his prominent role in the. Association for a Better New York and'in the F1ewYork Con- vention and Business Bureau. Also, as Chairman of the New York City Convention and Exhibition CenterCorporation,. Mr. Tisch has successfully led the effort to build a major con- vention and exhibition center in New York City. Loews Hotels are under con- struction in many parts of' the world.' Loew's Hamburg Plaza is shown at left. On the oppo- site paSe are (upper left) Que- bec City, (upper right) L'oews L'Enfant Plaza in Washington, D.C., (Jower left) lW}onaco; and (lower right)' Frankfurt, West Germany. 8930138'7

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