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i "Nothing seems to reflect [Loews'] moral outlook more than the belief that good management is a responsibility to society." Fortune Magazine, May 1971 Contents 1 Ten-Year Financial Review 2 Letter to Shareholders 4 Review of Operations 12 Consolidated Balance Sheet 14 Statement of Consolidated Earnings and Earnings Retained in the Business 15 Statement of Changes in Consolidated Financial Position 16 Notes to Financial Statements 19 Accountants' Opinion 20 Directors and Officers Gross Revenues by Major Business Activities 1970 .53% 1970 totat:3700,488,000 Theatres Hotels Residential Development 1971 1971 total: $777,081,000

Ten-Year Financial Review 1962-1971 (Dollar Amounts in Thousands Except Per Share Data) Resuitsforthe Year 1971 1970 1969 1968 1967 1966 1965 1964 1963 1962 Sales and Operating Revenues ... Operating Earnings ............. Security Gains (Losses) ........ Extraordinary Item .............. Net Earnings ................ $ 777,081 700,488 550,582 156,692 127,021 114,260 95,554 81,976 66,567 41,732 $ 46,331 34,270 24,617 12,659 8,641 5,819 5,600 3,167 933 2,045 $ 18,596 (5,624) 1,722 7,364 7,114 989 $ 5,283 15,165 (3,247) 1,581 7,648 $ 64,927 28,646 31,622 35,188 15,755 5,819 6,589 (80) 2,514 9,693 Earnings per Share: Operating Earnings ............. $ 3.20 Security Gains (Losses) ........ $ 1.28 Extraordinary Item .............. $ Net Earnings ................ $ 4.48 Earnings per Share Assuming Full Dilution: Operating Earnings ............. $ 2.61 Security Gains (Losses) ........ $ .89 Extraordinary Item ............. $ 2.37 1.71 .89 .60 .39 .34 .17 .05 .10 (.39) .12 .51 .49 .06 .37 1.06 (.18) .08 .38 1.98 2.20 2.46 1.09 .39 .40 (.01) .13 .48 2.02 1.62 (.27) .09 .30 Net Earnings ................ $ 3.50 1.75 2.01 Year-End Position Current Assets and Investment in Securities ................... Current Liabilities .............. Excess (Deficit) ............. Property, Plant and Equip. - net .. Total Assets ................... Shareholders' Equity ............ $ 676,714 542,649 471,514 93,509 44,413 38,780 28,526 32,690 $ 241,398 171,972 150,813 30,390 23,992 19,726 24,765 18,576 $ 435,316 370,677 320,701 (53,119 20,421 19,054 3,761 14,114 $ 206,648 207,344 203,113 160,207 146,489 141,305 135,207 130,316 $1,153,959 1,025,264 969,778 272,575 209,726 195,035 182,388 179,493 $ 337,554 286,098 259,726 124,185 90,855 76,795 71,136 72,744 18,872 22,125 14,508 26,334 4,364 (4,209) 129,055 107,889 158,879 136,423 73,581 74,681 Note: Data for 1969 include Lorillard Corporation from November 30, 1968. See also Note I to the Consolidated Financial Statements for reference to certain reclassifications and changes from amounts previously reported. Sales and Operating Current Assets & Securities Total Assets Net Earnings Revenues Less Current Liabilities Per Share (in $ millions) (in $ millions) (in $ millions) (in $) 800 . . _ . ___ _ 500 - .. 1,250 -. 5.00 300 100 i 2501 1.00 0 1962 '63 '64 '65 '66 '67 '68 '69 '70 '71 -A 0 0 1962 '63 '64 '65 '66 '67 '88 '69 '70 71 1962 '63 '64 '65 '86 '87 '68 '69 '70 '71 1

I 2 Laurence Alan Tisch To Our Shareholders and Employees: We are pleased to submit this report for the fiscal year ended August 31, 1971. Fiscal 1971 was a successful and gratifying year of record results and of substantial growth. Net earnings increased 127 percent. Earnings from operations increased 35 percent, and revenues increased 11 percent. Net earnings for the fiscal year ended August 31, 1971, rose to $64,927,490, equal to $4.48 per share, compared with $28,646,338, or $1.98 per share, for the previous fiscal year. Earnings from operations were $46,330,871, equal to $3.20 per share, compared with earnings from operations for fiscal 1970 of $34,270,790, or $2.37 per share. Security gains were $18,596,619, equal to $1.28 per share, compared to security losses of $5,624,452, or $.39 per share, last year. Our gross revenues for fiscal 1971 increased to $777,080,963, up from $700,488,247 in fiscal 1970. Dividend Policy During this fiscal year we continued to declare dividends at the annual rate of $1.00 per share. Our dividend policy remains constantly under review in the light of our strong cash flow and liquidity and our continuing confidence in the profitability and earnings of our Company. However, as most other large companies have been requested to do, we have advised the President of our compliance with his program of economic controls, which includes a restraint on dividend increases atthe present time. Preston Robert Tisch

Lorillard Fiscal 1971 was a year of great achievement for our Lorillard Division. Despite the cessation of cigarette advertising on broadcast media, sales of Lorillard products showed a marked increase. The dramatic increase in Lorillard's position is a direct result of significant innovations in marketing, leaf purchasing, manufacturing, and research and development. In addition, we are vigorously pursuing opportunities in the ever-expanding overseas market. Loews Theatres Our theatre division opened three new Loews properties during the year, and planning, building, and acquisition activities point to nine more theatre openings by the spring of 1972. New Loews theatres are generally located in suburban shopping centers with adequate parking facilities. Our aggressive theatre division remains at the forefront of the motion picture exhibition industry. Loews Hotels Once again, Loews Hotels led the entire industry in dollar volume per room. Among the highlights of the year in our hotel division were the spectacular first year of The Churchill in London; the on-schedule construction of our 32-story hotel in Hamburg, West Germany, to open in 1973; the announcement of the new luxury Loews hotel and convention center to be constructed in Monte Carlo, Monaco; further development of negotiations and plans for a number of other luxury hotels in leading European cities; and the completion of an agreement by which Loews will operate and manage the new Loews L'Enfant Plaza Hotel, presently under construction in Washington, D. C., and scheduled to open in 1973. In addition, we have expanded our very fine association with Air France, announced lastyear in connection with Hotel Meridien in Paris, to include two new resort hotels to be built in the Caribbean on Guadeloupe and Martinique. We will continue to pursue other management arrangements in the United States and to seek additional hotel sites in other cities throughbut the world. We have great confidence in our ability to share successfully in the dynamics of expanded international air travel. Loews/ Snyder Loews' newest enterprise, our joint venture with the J. H. Snyder Company of Los Angeles in residential housing and environmental community development, has now matured to a significant proportion. New projects were begun in California and New York during the year, and an entirely new base of operations was established in the Chicago area. Single-family homes in the $20,000- $30,000 price range continue to constitute a major segment of Loews/Snyder sales. We are increasingly broadening our operations to include townhouses, garden apartment condominiums and high rise apartments. Loews has made a major commitment in the housing field, and we are pleased to report that we are now a significant part of this large and important industry. Reed Candy Reed Candy Company has been expanding its operations with wider distribution and accelerated new product development. A number of new Reed Candy products are presently in test markets with the expectation that they will be introduced nationally before the end of 1971. In summary, the results of the past yearwere most satisfactory for Loews, reflecting the advantages of consolidated management programs and orderly expansion of our efforts in our four major areas of involvement: entertainment, travel, consumer products and home building. Investments During this past fiscal year we increased our investment in Franklin New York Corporation, the parent of the Franklin National Bank, to approximately 20 percent of the outstanding voting shares. Net gains on sales of marketable securities contributed $1.28 per share to our net earnings this past year. We will continue our marketable securities investments pending the application of funds so invested to our development, expansion and growth program. Once again, we wish to express our appreciation for the loyalty and effectiveness of the more than 16,000 Loews employees, whose efforts have resulted in the achievements we have reported here. We are also grateful to our shareholders for their continuing support. Laurence Alan Tisch Chairman of the Board and Chief Executive Officer Preston Robert Tisch President and Chairman of the Executive Committee -4 October 22, 1971 N 14 .p 03 CA -4 CA 3

Review of Operations Lorillard The nearly three-year association of Loews and Lorillard has resulted in a successful blend of management philosophies and techniques leading our tobacco products division to a new position of dynamic strength and growth. Symbolic of the division's aggressive management and marketing approach during fiscal 1971 were the launching of a number of new products into market or test market: Kent king-sized menthol cigarettes; Stag natural and menthol cigars; and Big Red chewing tobacco. We are greatly encouraged by the market acceptability evidenced by these new products. As this Report goes to press, we have announced the introduction of a new Lorillard cigarette. The new brand- Maverick-has been blended to appeal to smokers whose tastes run to full-flavor filter cigarettes. It is designed to strengthen Lorillard's representation in this segment of the cigarette market, which now accounts for nearly half of all domestic sales. Maverick is being test-marketed in three major metropolitan areas. Domestic Sales Up Lorillard's domestic cigarette sales totals showed a substantial increase over the preceding year. The new market strength demonstrated by our two leading brands was particularly noteworthy. Sales growth rates of Kentand True were among the industry's highest as ourfiscal year came to a close. Public demand for smaller cigars continued to rise, and Lorillard products were among the leaders in this growing market, with Erik Natural, Menthol and Burgundy. In the little cigar market, which is also benefiting from rising consumer demand, Lorillard's Omega 85's, Omega Slim 100's, Between the Acts and Madison brands showed impressive sales increases. These highly satisfactory results have been brought about by concentrating on the imperatives of effective competition in today's market place: top-quality product, manufacturing and distribution efficiencies, advanced research and development, and continuing study and evaluation of the marketing goals of each Lorillard brand. Product Improvement Primary to any planning for product improvement in the tobacco business is the quality of raw material used. During 1971 a program of further upgrading in tobacco leaf purchasing and an expanded quality control section were established. In addition, a number of production, packaging and distribution processes were redesigned at our Greensboro, North Carolina plant. Machinery was installed to overwrap export cartons with polypropene film for better moisture retention. Additional equipment was ordered to enclose export cases in polyethylene bags for greater efficiency and lower material cost. New contract carrier arrangements were made that increase the flexibility of transportation resources at our disposal to improve physical distribution of Lorillard products. We believe thatthese innovations will enhance our ability to produce cigarettes more satisfactory to consumers, more efficiently, and at lower cost. Lorillard Research Industry leadership in all phases of research has had a long history at Lorillard, demonstrated by the introduction of the revolutionary Micronite Filter nearly two decades ago. Continuing in this tradition, research and development activities during 1971 were broadened in a number of material and significant areas. Our investigations have led to the adoption of a new process for the required fermenting of tobacco used in the production of our chewing products, and to improvements in the physical quality and shelf-life of cigarettes. As part of the growing utilization of research in new product development, the tobacco pilot plant at the new Lorillard Research Center in Greensboro has been expanded. One important addition is a new computer facility for the reduction and analysis of research data. The expanded Lorillard's cigar brands enjoyed increased sales in 1971. 4

Research and Development Department has been further enlarged to include division responsibility for pollution control and occupational and environmental safety. New Marketing Strategies A major challenge that faces Lorillard-and indeed all cigarette producers in the United States-is the choice of effective marketing strategies now that radio and television advertising are no longer available. During 1971 a detailed market research program was developed to evaluate the effectiveness of our advertising campaigns on a continuing basis. Combining innovation and flexibility, Lorillard's marketing concepts have been designed to reflect both product integrity and the realities of modern consumer demand. Thus Lorillard has prepared for the marketing challenge of the post-television age by returning to basics: in leaf purchase, in manufacturing, in research, and in marketing. Growth in Exports At a time when popular attention is focused on U. S. inter- national trade problems and deficits in the balance of payments, it is significant to note that continuing strength and growth were demonstrated in Lorillard's worldwide operations. For some years, overseas demand for American-type cigarettes has been rising sharply, and the same trend continued during the period covered by this report. Lorillard International more than kept pace with the growth of the international market. The 1970/71 year saw significant increases in our overseas activity as measured in total dollar sales, total cigarette units shipped abrpad, and in our share of total U. S. cigarettes exported. The overseas market still has vast potential. Capturing that potential represents a great challenge to Loriliard for the Seventies, a challenge for which it is well prepared. The size of the export market and its significance to our sales may be gauged from the simple statistic that 10 percent of our U. S. cigarette production is sold outside the United States in more than 150 overseas markets. In response to the increased foreign demand, our production facilities for export cigarettes are now operating on a two- shift basis throughout the year. Such operation permits more flexible response to the requirements of the military post exchange and international markets, in addition to contributing to lower unit costs. New Licensing Agreements In those parts of the world where direct export is inhibited by legal or logistical considerations, we enter into licensing agreements for the use of our Lorillard trademarks by The Lorillard cigarette line suits every taste, from full flavor to high filtration and menthol. 5 I

both privately owned and state-operated enterprises. Adhering to rigorous blending and packaging specifi- cations, our overseas licensees manufacture and sell Lorillard brands in their market areas. During the past fiscal year, new licensing agreements were reached in Argentina and Peru, and new subsidiaries were established in Rome and Hong Kong to improve distribution. Similar agreements are being explored in other countries. International Expansion The expansion of Lorillard International in recent years has paralleled the international growth of other Loews divisions, especially in Europe. Two years ago, a joint operations center, Loews/Lorillard International Services, S.A., was established in Brussels. With increased activity by Loews Hotels in England and on the Continent, the center has become a key overseas base for our corporate international management. The question facing the entire tobacco industry of the alleged relationship between cigarette smoking and health continues to be highly complex and controversial. Together with all the other major domestic tobacco manufacturers, Lorillard is continuing to contribute to the financial support of an extensive, independent medical research program in p'rogress on this important public health question. Tobacco quality is constantly analyzed by Lorillard Research. 6 We shall continue to support objective research in this area. The results of our nearly three years' operation of Lorillard demonstrate the effectiveness of our new Lorillard manage- ment team in continuing the development of America's oldest tobacco company into a dynamic, growing, efficient division. Significant innovations have been introduced into tobacco leaf purchase, manufacturing, research and development, and distribution. A totally new look has been brought to domestic and international marketing. We fully expect that the Lorillard division will contribute vigorously to Loews' growth through the 1970's. Reed Candy Company Loews' second full year as a manufacturer and marketer of candy through Reed Candy was highlighted by the intro- duction of new products, continuing strength in its estab- lished brands, and a major manufacturing breakthrough which will enable Reed Candy to produce and market a complete new line of candy products. The significant manufacturing breakthrough came in mid- year when Reed was able to produce completely acid-free fruit flavors with a natural fruit taste in crystal-clear hard candy. A Reed package of these assorted new fruit flavors is being made available by Christmas in selected markets across the country, with additional marketing programs scheduled to take place in 1972. New Product Introduction During the past year Reed's Paloop Squares, derived from the lollipop Pal Loops, were introduced in five flavors on a national basis for the first time, following extensive test marketing in key cities. Reed's 1970 product introduction, "Hot Wheels," has been promoted in connection with a well-known toy, and its sales results have demonstrated the value of that identification. Sales of Reed's familiar hard candies-butterscotch, peppermint, root beer, licorice, cinnamon, wintergreen, butter rum, and spearmint-continued to expand during the year as distribution improvements took effect. The Golden Nugget candy bar line-Sir, Big Hunk, and Look -continued to expand market outlets during the year as distribution from the Golden Nugget plant in San Francisco proceeded eastward. Holiday Packaging Proper packaging and an imaginative use of design in candy wrappers are important factors in the successful marketing of candy products, and during 1971 Reed Candy created new packaging for some of its products and rede- signed the packaging of others. Among the new designs introduced during the year were special packaging for Reed's new Halloween and Christmas lines.

Loews Theatres In 1965 we initiated a long-range development plan in the Theatres division based on three management policies: construction of new theatres in growth areas; modernization of selected existing properties; disposal of marginal proper- ties. As a result of application of these policies, the Loews theatre circuit has nearly doubled over the past six years- from 65 theatres in 1965 to more than 115 facilities at the presenttime. Nine more openings are scheduled by the spring of 1972. Third House in Atlanta Of particular interest is the third Loews house in Atlanta, Twelve Oaks, which opened on February 10, 1971. The largest suburban theatre in Atlanta, Twelve Oaks is a luxurious 1200-seat theatre located in the Buford-Clairmont shopping center, an important marketing crossroads where over 100,000 people pass every week. One of the primary growth areas of the nation, Atlanta has long been a favorite city for the Loews family: it was at Loews Grand that "Gone With the Wind" had its world premiere in 1939. Our second Atlanta theatre, Tara, opened in 1968. In the Back Bay area of Boston, Loews acquired the Abbey I and Abbey II Twin Cinemas, two highly successful theatres adjoining the Charles River Campus of Boston University, in a prime growth area. As the neighborhood changes from brownstones townhouses to upper-income, high rise apartments, so the opportunities for modernization and for quality film exhibition increase. On the West Coast, the thirty-second theatre in the Loews California family became a reality with the acquisition of the Lakewood in fast-growing Long Beach. New Theatres Planned As this Report was in preparation, two 750-seat luxury twins opened in the Northgate Shopping Center in Indianapolis. While these theatres were being added, other older houses were disposed of, in keeping with criteria established in our growth plan for continuing review of marginal operations. Among the openings scheduled by next spring are: 0 A 1200-seat luxury theatre in Danvers, Massachusetts, a suburb of Boston; I] A third Loews house on the outskirts of Columbus, Ohio; El In Rochester, New York, another theatre is contemplated on the same site as our successful property across the street from the Pittsford shopping plaza; El Lauderhill #2 will become the twin of the Loews cinema in Fort Lauderdale; 0 In Redondo Beach, California, South Bay #3 will join the two existing Loews theatres; 0 New twin theatres will open in Fountain Valley, Orange County, California. Evolution of Cinema as Art Form Loews' continued growth program is attuned to a number of dynamic currents in the changing American life style. Leisure time is on the increase, with more and more indus- tries expected to adopt the four-day work week. Popu- lation movement toward the suburbs and beyond continues. At either end of the working person's career-both in youth and in retirement-the span of free time is increasing. These factors point to continued high interest in motion pictures, especially when seen in conjunction with the change that has occurred in public perception of the nalure and role of the film medium. Regarded as essentially escapist fare a generation ago, cinema today is looked upon as a highly regarded art form. Throughout the country there has been a proliferation of courses in film appreci- ation and filmmaking in colleges and high schools. More sophisticated and more demanding new audiences are being developed. Taken together, all these considerations imply continuing evolution of the motion picture in the future, and underscore the challenge accepted by Loews theatre management to insure our position as a leading film exhibitor. Lobby of Loews Twelve Oaks, our third theatre in Atlanta. 7

Loews Hotels For the Hotels division, the year was highlighted by a singular success story at our newest property, substantial progress toward completion of the first Loews hotel on the European mainland, announcements of major undertakings from the Mediterranean to the Caribbean, and the com- mencement of construction of a luxury hotel to be operated by Loews in the nation's capital. The latest addition to the Loews hotel roster-The Churchill in London-completed its first full year of operation with near-capacity occupancy and high ratings from seasoned travelers. We believe that The Churchill offers the facilities and service that make a great luxury hotel. The per- formance of The Churchill, our first hotel property outside of North America, gives support to our belief in the con- tinued growth of the European market with concomitant expansion of travel and travel-related industries over the long run. Our faith in the steady economic growth of a number of other countries also underlies our continuing quest for favorable circumstances under which we can expand our international activities still further. International Growth Moreover, The Churchill's success demonstrates the transferability of Loews' management methods overseas and serves as a background for other international projects in various stages of development: (] Construction of a 32-story hotel in Hamburg, West Germany, announced last year, is ahead of schedule, with opening now projected for 1973. 0 A major hotel-convention center-apartment complex is to be built in Monaco at the foot of the Casino de Monte Carlo. Upon completion, anticipated for 1974, Loews will operate the 650-room luxury hotel, which will be constructed as an integral part of the "Spelugues" luxury development. The entire structure will rest on a con- crete platform cantilevered out over the Mediterranean. 0 An agreement has been reached for the construction of a new 600-room Loews hotel in Frankfurt, West Germany, to be located directly adjacent to the important Frankfurt Trade Mart Center. We are awaiting official authorization to begin building. C3 Construction of a second Loews hotel in London-a project that was announced during fiscal 1969/70- awaits approval of the plan by the appropriate govern- mental agencies. EI Negotiations continue for the development of prime hotel sites in a number of other cities, including Paris, Amsterdam, Copenhagen, Rome, Athens; Istanbul, and New Delhi. 8 0 Collaboration with Neue Heimat International of Ham- burg and Manera, S.A., of Paris has led to the construc- tion under way in Hamburg and to the Monaco and Frankfurt projects. These associates will also be involved with Loews in other European activities. 0 We are participating in ownership and advising on the development and operation of Hotel France Interna- tional's 1,000-room hotel in Paris, the Meridien, which is scheduled to open in April, 1972. Hotel France - International is the hotel affiliate of Air France, and during the year our collaboration was enlarged to include the planning of two resort hotels to be built in Guadeloupe and Martinique. We look forward to positive results from this association and to further expansion into other areas. The co-venture agreements with these important European organizations are a reflection of Loews' reputation for efficient and profitable hotel development and management techniques. Our association with these firms enables us to apply these skills on a broad international scale. New Loews Hotel in Washington In our domestic operations, we have entered into a man- agement agreement to operate a new 378-room Loews Loews Hamburg Plaza, now under construction, will open in 1973. e"

hotel that is scheduled to open in the spring of 1973 as part of the remarkable L'Enfant Plaza Development in Wash- ington, D. C. Loews L'Enfant Plaza Hotel will occupy the top four floors of the Plaza's 12-story East Building. Floors 2 through 8, served by separate elevator cores, will contain 380,000 square feet of office space. The hotel lobby, ball- room, cocktail lounge, bar, coffee shop, restaurant and retail shops will be on the plaza level. L'Enfant Plaza is named for the brilliant French-born engi- neer and architect who drew up the city plan of our nation's capital. It is a complex of four groups of buildings framing a four-acre square, with the L'Enfant Fountain at its center. The development, located only ten minutes from National Airport, is within easy walking distance of Washington Monument, the Smithsonian Institution, and the U. S. Capitol. Our new hotel will be part of the Plaza's Phase III, now under construction. Computerized Reservation Service Loews Reservations provides computerized booking and immediate confirmation of room reservations. With offices in cities throughout North America and overseas, and offering toll-free telephone access nationwide, Loews Reservations has made a significant contribution to our hotel occupancy. This highly efficient organization represents Loews Hotels as well as a number of other hotels located throughout continental United States and in Mexico,Hawaii and the Caribbean. Convention Sales Leadership Major new efforts were also exerted to insure the continua- tion of Loews' reputation as one of the most effective convention and meeting sales forces in the history of the industry. And in calendaryear 1970, Loews once again led the United States hotel industry in dollar volume per room, as reported by Institutions Magazine. Reflecting the general economic climate, all travel-related industries experienced a decline during the year. Never- theless, the main thrust of Loews Hotels activities con- tinued in the direction of expansion. Moreover, the impact of the decline was effectively blunted through application of cost control methods developed during the last half- dozen years in anticipation of the eventual necessity to employ them. With further expansion of overseas operations and intensive exploration of additional management operating contracts similar to our L'Enfant Plaza agreement, Loews Hotels looks forward to a continuing period of growth to meet the demands of the business and personal travel markets of the Seventies, both in the United States and abroad. The Churchill, in London, enjoyed near-capacity occupancy during its first full year of operation. 9